2024 (6) TMI 870 - AT - Income Tax

Transfer Pricing adjustment - upward addition u/s. 92 in respect of specified domestic transaction of inter-unit transfer of power from the eligible undertaking u/s 80-IA to Other Manufacturing undertaking of the Appellant - TPO did not accept the TP report by holding that the comparison to sale price charged by eligible unit of the assessee with that of GEB is not correct considering the fact that functions performed, asset employed and the risk assumed by GEB is completely different from the eligible unit. The TPO further held that in the case of GEB huge distribution cost are involved whereas in assessee's case no such cost are involved as the transfer is an inter-unit transfer of power. HELD THAT - We notice that the co-ordinate bench has considered the similar issue in assessee's own case for AY 2017-18 2023 (10) TMI 654 - ITAT MUMBAI held the issue in favour of the assessee stating that the rate charged by GEB to the assessee i.e. the price at which the electricity is procured by the assessee in the open market is the right comparison as per explanation (i) to section 80IA(8) of the Act. We also notice that the coordination bench for AY 2017-18 has also held that TPL is not the correct comparison for CUP since the transaction of TPL which exclusively supplies to GEB is not an uncontrolled transaction. However the arguments of the ld DR is that if TPL is to be rejected then GEB also should be rejected since both are not un-controlled transactions and that the rate adopted in independent platform such as rates of Indian energy exchange needs to be considered. In assessee's case CUP method is applied where rate at which GEB supplies electricity to the non-eligible unit is compared with rate which the eligible unit supplies electricity. These facts being similar to the above decision of the Tribunal we are of the considered view that GEB is the right comparison for external CUP and that there is no reason to hold that rates of Indian energy exchange need to be considered in assessee's case even in case where explanation (ii) to section 8-0IA is applicable in assessee's case. Accordingly on that count also we hold that no further adjustment is necessary and that the addition done in this regard is hereby deleted. Admission of additional ground - Profits eligible for deduction u/s 80-IA in respect of transfer of steam from the 80-IA eligible undertaking ought to have been computed by taking its market value instead of cost - HELD THAT - In the given case, the issue raised in additional ground i.e. the claim of deduction under section 80IA towards transfer of steam on the basis of market value is legal issue and that relevant facts pertaining to the same except how to determine the market value of steam are already part of the records. Whether there is any bona fide reason for raising this additional ground before the Tribunal? - The assessee in the submissions has stated that the additional ground is raised based on the decision of the Tribunal which the assessee was not aware of at the time of assessment or at the time of appellate proceeding before DRP. We are of the considered view that the assessee has a reasonable cause for not raising the issue before the lower authorities and therefore we are inclined to admit the additional ground for adjudication by placing reliance on the decisions of the Apex Court in the case of National Thermal Power Co. Ltd 1996 (12) TMI 7 - SUPREME COURT and Jute Corpn. of India Ltd 1990 (9) TMI 6 - SUPREME COURT On the merits of the issue, since the issue has not been examined by the lower authorities on merits, we deem it fit to remit the same to the AO for a denovo consideration. The additional evidence now submitted goes to the root of the issue of whether the market value of steam should be considered for the purpose of determining deduction under section 80IA of the Act.

Summary

Issues Involved:

1. Transfer Pricing Adjustment for Inter-Unit Transfer of Power.
2. Determination of Market Value for Deduction u/s 80-IA.
3. Admission of Additional Ground for Transfer of Steam at Market Value.

Summary:

1. Transfer Pricing Adjustment for Inter-Unit Transfer of Power:

The assessee challenged the upward transfer pricing adjustment of Rs. 12.99 Cr. u/s 92 of the Act for the inter-unit transfer of power from an eligible undertaking u/s 80-IA to a non-eligible unit. The AO/TPO, following DRP directions, used the rate from Torrent Power Ltd. (TPL) as a comparable for the CUP method, which the assessee argued was inappropriate. The assessee contended that the rate charged by the Gujarat Electricity Board (GEB) should be used as it reflects the arm's length price. The Tribunal referred to its decision in the assessee's own case for AY 2017-18 and the Supreme Court's decision in CIT vs. Jindal Steel & Power Limited, affirming that the market value should be the rate at which the State Electricity Board supplies power to consumers in the open market. The Tribunal held that the TP adjustment was not sustainable and deleted the addition.

2. Determination of Market Value for Deduction u/s 80-IA:

The Tribunal emphasized that the market value for power supplied by the assessee should be computed based on the rate at which the State Electricity Board supplies power to consumers, not the rate at which power is sold to a supplier. The Tribunal rejected the TPO's comparison with TPL, stating that TPL's transactions with GEB were not uncontrolled. The Tribunal also dismissed the argument for using Indian Energy Exchange rates, citing significant differences and lack of comparability with the rates at which SEBs supply power.

3. Admission of Additional Ground for Transfer of Steam at Market Value:

The assessee sought to claim 80-IA deduction for the transfer of steam at market value through an additional ground. The Tribunal admitted the additional ground, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which allows raising new legal issues before the Tribunal if relevant facts are on record. The Tribunal remitted the issue to the AO for a de novo consideration, directing the AO to consider additional evidence and case laws while deciding the matter.

Conclusion:

The Tribunal allowed the appeal, deleting the TP adjustment for the inter-unit transfer of power and admitting the additional ground for the transfer of steam at market value, remitting the latter issue to the AO for fresh consideration.