2023 (11) TMI 120 - AT - Income Tax

Value of electricity supplied for the purpose ALP and claim of deduction u/s. 80IA - Determination of value of electricity supplied by the Captive Power Plant for the purpose of deduction - HELD THAT - Value of electricity supplied by the Captive Power Plant for the purpose of deduction u/s. 80IA is to be computed on the market value of power supply or the rate of power charged by State electricity Board, the same is no more res integra by case of PCIT-Vs-Gujarat Alkalies Chemicals Ltd 2016 (10) TMI 1111 - GUJARAT HIGH COURT AND Meghmani Finechem Ltd.-Vs-National E Assessment Centre 2023 (6) TMI 337 - ITAT AHMEDABAD as held it is a well settled principle that where an assessee, being a captive power plant provided electricity to its associated enterprises and claimed deduction u/s. 80-IA, then for the purpose of deduction, market value of power, supplied by the assessee to its associated enterprises should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers and and thus, assessee was justified in adopting ALP of electricity supply to its AES at rate charged by State Electricity Board and Revenue was not justified in excluding certain heads of charges out of it. The assessee has rightly computed the sale of electricity generated through its CPP by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd. for the purpose ALP and claim of deduction u/s. 80IA of the Act. The same does not require any interference. Decided against revenue. ITAT discretion to a new ground - Nature of receipt - TUFF Subsidy - issue not emanate from the assessment records - Whether capital receipt and not taxable? - HELD THAT - This issue of TUFF subsidy received by the assessee as capital receipt is not a subject matter of discussions and disallowance by the Assessing Officer in the assessment order. This TUFF Subsidy is not an issue arising from the record of the assessment proceedings. As decided in the case of National Thermal Power Corporation Ltd. 1996 (12) TMI 7 - SUPREME COURT wherein it was held that undoubtedly, the ITAT has the discretion to allow or not to allow a new ground to be raised but where the ITAT is only required to consider the question of law arising from the facts which are on record in the assessment proceedings , in order to correctly assess the tax liability of an assessee. In our considered view this issue of TUFF Subsidy does not arise from the record of the assessment proceedings of the Assessing Officer. The Ld. Counsel also not drawn our attention to the claim in Return of Income and other records. When this issue does not emanate from the assessment records, we do not have power to adjudicate the same. Decided against assessee.

Summary

Issues Involved:
1. Deduction under section 80IA for the value of electricity supplied by the Captive Power Plant (CPP).
2. Charging of interest under sections 234A, 234B, and 234C.
3. Initiation of penalty proceedings under section 271(1)(c).
4. Consideration of TUFF Subsidy as a capital receipt.

Summary:

1. Deduction under section 80IA for the value of electricity supplied by the Captive Power Plant (CPP):

The assessee, engaged in manufacturing and trading of fabrics, claimed a deduction under section 80IA for the electricity generated by its Captive Power Plant (CPP) and supplied to its manufacturing unit and associated enterprise. The assessee used the internal Comparable Uncontrolled Price (CUP) method, adopting the rate of Rs. 5.50 per unit charged by Torrent Power Ltd.

The Transfer Pricing Officer (TPO) disagreed and used external CUPs from Uttar Gujarat Vij Company Ltd (UGVCL) and Indian Exchange Ltd (IEL), determining a lower rate of Rs. 3.35 per unit, leading to a reduction in the claimed deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] sided with the assessee, referencing the Gujarat High Court's decision in CIT vs Gujarat Alkalis and Chemicals Ltd., which supported using the rate charged by the State Electricity Board as the market value for such transactions.

The Tribunal upheld CIT(A)'s decision, affirming that the assessee correctly computed the sale of electricity using the rate charged by Torrent Power Ltd. The Tribunal dismissed the Revenue's appeal, citing consistent judicial precedents supporting the assessee's method.

2. Charging of interest under sections 234A, 234B, and 234C:

The assessee contested the mandatory nature of interest charged under sections 234A, 234B, and 234C. The Tribunal held that since the assessee received relief on all additions made by the Assessing Officer, the charging of interest is automatic and consequential. Thus, the ground was dismissed.

3. Initiation of penalty proceedings under section 271(1)(c):

The assessee argued against the initiation of penalty proceedings under section 271(1)(c), stating there was no concealment of income or furnishing of inaccurate particulars as full details were disclosed. The Tribunal found this ground infructuous since the assessee had already received relief before CIT(A).

4. Consideration of TUFF Subsidy as a capital receipt:

The assessee claimed that the TUFF Subsidy of Rs. 9.82 crores credited to the Profit & Loss Account should be considered a capital receipt and not taxable. The Tribunal noted that this issue was not part of the assessment proceedings or the appeal before CIT(A). Citing the Supreme Court's decision in National Thermal Power Corporation Ltd. vs. CIT, the Tribunal held that it could not adjudicate on issues not arising from the assessment records. Consequently, the ground was dismissed.

Conclusion:

The appeals filed by the Revenue were dismissed, and the cross-objections filed by the assessee were also dismissed. The Tribunal upheld the CIT(A)'s decision to grant the deduction under section 80IA based on the rate charged by Torrent Power Ltd. and dismissed the grounds related to interest, penalty, and TUFF Subsidy.