2021 (7) TMI 63 - AT - Income Tax

Disallowance u/s.80IA in respect of electricity generated in power plant in Rajasthan - claim was denied by the ld. AO on the ground that the claim does not match with the amount actually realized by the assessee by way of sale proceeds from Rajasthan State Electricity Board - HELD THAT - Though the deduction u/s.80IA of the Act is granted for generation of electricity i.e. 378208 units, for the purpose of computation of claim of deduction u/s.80IA of the Act, what is relevant is the number of units that were supplied by the assessee to the grid of RSEB. Admittedly, the assessee had entered into an agreement with RSEB wherein the price per unit was pre-fixed at ₹ 4.28 per unit. Hence, for the purpose of computing the profit from that eligible unit, the assessee had received sale proceeds from RSEB only @₹ 4.28 per unit. Hence, profit derived from such eligible unit had to be worked out taking into account sale consideration of ₹ 4.28 per unit, which has been rightly granted by the ld. AO to the assessee. It is totally irrelevant as to at what rate the RSEB sells power to ultimate retail consumers. That rate is absolutely not relevant for the purpose of computation of profit derived from eligible unit for the purpose of computing deduction u/s.80IA of the Act in the hands of assessee herein. Hence, we find that the ld. CIT(A) had rightly denied the claim of the assessee. We also find that the case laws relied upon by the ld. AR which are also mentioned in the order of the ld. CIT(A) are rendered in the context of captive power units and since, assessee is not a captive power unit, those case laws are not applicable to the assessee herein and distinguishable on facts. Accordingly, the grounds raised by the assessee are dismissed.

Summary

Issues involved:
Interpretation of Section 80IA of the Income Tax Act regarding the disallowance made in relation to electricity generated in a power plant in Rajasthan by the assessee.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai concerned the disallowance made under Section 80IA of the Income Tax Act in relation to electricity generated in a power plant in Rajasthan by the assessee. The primary issue to be decided was whether the Commissioner of Income Tax (Appeals) was justified in confirming the disallowance. The assessee, engaged in textile manufacturing, had ventured into electricity generation and claimed a deduction under Section 80IA(4)(iv) of the Act. The Assessing Officer (AO) observed discrepancies in the claimed deduction as the assessee had adopted a higher rate for the sale of electricity compared to the actual rate realized from the sale to the Rajasthan State Electricity Board (RSEB).

Upon review, the Tribunal found that the assessee, owning a windmill in Rajasthan, sold all power units generated to the RSEB at a pre-determined rate of ?4.28 per unit. The Tribunal noted that the price paid by RSEB to the assessee was lower than what it charged its consumers. As the assessee did not consume any electricity generated for its own use, the relevant factor for computing the deduction under Section 80IA was the number of units supplied to the RSEB grid. The Tribunal emphasized that the rate at which RSEB sold power to consumers was irrelevant for determining the profit derived from the eligible unit for the deduction calculation. Therefore, the Tribunal upheld the decision of the CIT(A) in denying the claim of the assessee.

The Tribunal also highlighted that the case laws cited by the assessee, pertaining to captive power units, were not applicable as the assessee was not a captive power unit. Consequently, the grounds raised by the assessee were dismissed, and the appeal was ultimately rejected. The judgment was pronounced on 1st July 2021 by the Appellate Tribunal ITAT Mumbai.