2024 (1) TMI 1252 - HC - Income Tax

Deduction u/s 80IA(8) - computation of the market value of electricity supplied by the captive power plants of the assessee to its industrial units - Scope of expression market value in relation to any goods - profits of eligible business of captive power generation plants - HELD THAT - As decided in M/S JINDAL STEEL POWER LIMITED THROUGH ITS MANAGING DIRECTOR 2023 (12) TMI 417 - SUPREME COURT the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under Section 80 IA of the Act. We hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e. the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore the High Court was fully justified in deciding the appeal against the revenue. Deduct the cost of reject coal and iron ore fine dust for determining the disallowance to be made u/s 80IB - Bearing in mind the aforesaid conclusions and the fact that the plea for rejection of sale proceeds from reject coal and iron ore was taken in the alternative with the assessee claiming that the same if not accepted should be adjusted against the purchase cost and consequently leading to the remand of proceedings to the Assessing Officer we find no justification to entertain the instant appeal.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Whether the Income Tax Appellate Tribunal was justified in deleting the addition made on account of disallowance of deduction under Section 80IA(8) of the Income Tax Act, 1961?
2. Whether the ITAT was justified in directing to deduct the cost of reject coal and iron ore fine dust for determining the disallowance under section 80IB of the Income Tax Act, 1961?

Issue 1: Disallowance of Deduction under Section 80IA(8):
The High Court referred to the conclusions made by the Supreme Court in a previous case regarding the computation of the market value of electricity supplied by the assessee to its industrial units. The Court emphasized that the market value should be based on the rate at which the State Electricity Board supplied power to industrial consumers, not the rate at which power was sold to a supplier. It was held that the Tribunal had rightly computed the market value, and the High Court's decision was justified. The Court noted that reliance on a specific provision inserted after the assessment year in question was misplaced.

Issue 2: Deduction for Reject Coal and Iron Ore:
Regarding the deduction for reject coal and iron ore, the ITAT had considered the submissions and previous decisions. A coordinate bench of the Tribunal had accepted the assessee's alternative plea and directed the Assessing Officer to deduct the sale proceeds of these items from the cost of raw materials used in the manufacturing process. The matter was remanded for compliance with this direction. The High Court found no justification to entertain the appeal, as the plea for rejection of sale proceeds was taken in the alternative, leading to the remand of proceedings to the Assessing Officer. Consequently, the appeal was dismissed as no substantial question of law arose, and there was no justification to interfere with the ITAT's order.

The judgment concluded that the appeal failed and stood dismissed based on the above considerations.