2023 (10) TMI 654 - AT - Income Tax

TP adjustment - specified domestic transaction of inter-unit transfer of power from the eligible undertaking u/s. 80-IA to other manufacturing undertaking of the assessee which are non-eligible units - price charged by the eligible unit has been compared with the prices charged by Gujarat Electricity Board (GEB) - whether the market value in the price charged by the eligible unit for the sale of electricity to another unit can be benchmarked with the price on which GEB is supplying to the customers? - case of the department is that since assessee is generating electricity and supplying it to the manufacturing unit, therefore, functionally it is similar to entities which are generating electricity and not which are into distribution of electricity. HELD THAT - Once the market value of such price on which electricity is sold to another unit of the assessee, the same can be compared with the electricity distribution entities for supplying to the customers in the open market. Accordingly, there is no infirmity in the contention of the assessee that per unit electricity sold to the non-eligible unit at Rs. 6.90 per unit is the market value. DRP has taken M/s. Torrent Power Ltd. (TPL) which is the electricity generation entity supplying electricity to GEB - The price fixed for purchasing the electricity by GEB from M/s. Torrent Power Ltd. (TPL) cannot be compared with the prices on which eligible unit of the assessee is selling it to the other. Thus, once only comparable as chosen by the ld. DRP fails, then same loses the comparability for determining the ALP. In view of aforesaid discussion, we hold that the price on which eligible unit is selling the power, i.e., at Rs. 6.90 per unit which is the price available in the open market and also the same manufacturing unit is purchasing it from GEB at the same price, then it can be said to be the market value of the price. Accordingly, addition / disallowance of deduction made by the ld. CIT (A) is deleted and the ground Nos. 1-4 raised by the assessee are allowed. Taxing income under the head income from business and profession thereby levying additional tax in the computation sheet when there is no such additions in the assessment order - Before us the ld. Counsel has submitted a chart pointing out the discrepancy in the computation sheet of the ld. AO. Accordingly, we direct the ld. AO to verify the facts and if there is such error, same should be rectified and relief should be given. Accordingly, this ground is allowed for statistical purposes. Levy of interest u/s. 234B - Counsel submitted that there is no short fall and in fact assessee has paid extra tax more than assessed income. On this issue also we direct the AO to verify the payment of tax and to grant consequential relief in the computation of interest u/s. 234B. Accordingly, appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Transfer pricing adjustment for specified domestic transactions.
2. Unwarranted addition under the head "income from Business and Profession."
3. Levy of interest under Section 234B.

Summary:

1. Transfer Pricing Adjustment for Specified Domestic Transactions:
The assessee challenged a transfer pricing adjustment of Rs. 15,23,15,220/- for inter-unit transfer of power from an eligible undertaking under Section 80-IA to non-eligible units. The assessee justified the arm's length price (ALP) using the Comparable Uncontrolled Price (CUP) method, comparing the price with Gujarat Electricity Board (GEB). The Transfer Pricing Officer (TPO) rejected this, citing differences in functions, assets, and risks between GEB and the assessee's unit, and proposed an adjustment based on the power purchase cost from Gujarat Electricity Regulatory Commission (GERC). The Dispute Resolution Panel (DRP) adjusted the ALP to Rs. 3.99 per unit based on M/s Torrent Power Ltd. The Tribunal held that the market value should be the price at which the manufacturing unit buys electricity from GEB (Rs. 6.90 per unit), as supported by various judicial precedents, and deleted the addition.

2. Unwarranted Addition Under the Head "Income from Business and Profession":
The assessee contested an additional tax levy on Rs. 21.02 Crores, arguing it was not reflected in the assessment order but only in the computation sheet. The Tribunal directed the Assessing Officer (AO) to verify the facts and rectify any errors, allowing this ground for statistical purposes.

3. Levy of Interest Under Section 234B:
The assessee argued there was no shortfall in tax payment, claiming an overpayment. The Tribunal directed the AO to verify the payment and grant consequential relief, allowing this ground for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for verification and rectification by the AO.