2012 (8) TMI 425 - AT - Income Tax

Disallowance of deduction claimed u/s 80IA - AO considered the sale price of the wind power sold by the Assessee to the TNEB at the rate of Rs.2.70 per unit through an agreement for calculating the deduction as against Rs.3.50 per unit as taken by assessee - Held that - The rate at which the State Electricity Board supplies power to its consumers is to be considered to be the market value for transfer of power by the assessee s electricity generating undertaking for captive consumption for the purposes of section 80IA(8) and not the price at which power is supplied by the assessee to the Board as decided in Additional Commissioner of Income-tax, Hisar Range, Hisar Versus Jindal Steel & Power Ltd. 2007 (6) TMI 308 - ITAT DELHI - Thus the value of the power generated and consumed by the assessee will be that value that should have been paid by the assessee if the power was bought from open market. As Tamil Nadu Electricity Board sells power to the assessee in the usual course of its business and the assessee buys the power like any other consumer in the market the question of market price arises & in such a scenario the price collected by the Tamil Nadu Electricity Board is Rs.3.50 per unit and it is obvious that the market price of the power generated by the assessee is Rs.3.50 per unit as opted by assessee - in favour of assessee.

Summary

Issues:
Disallowance of deduction claimed under sec.80IA of the Act.

Analysis:
The case involved an appeal by the Assessee against the order of the CIT(Appeals) regarding the disallowance of a deduction claimed under sec.80IA of the Act. The Assessee, a firm producing wind mill energy, had claimed a deduction of Rs.69.90 lakhs under sec.80IA for income derived from the generation and sale of electricity to the Tamilnadu Electricity Board. The Assessing Officer restricted the deduction to Rs.53,87,918/-, resulting in a disallowance of Rs.16,02,235/-. The Assessee argued that the deduction should be computed at Rs.3.60 per unit, as it had been paying electricity charges to the TNEB at that rate. However, the CIT(Appeals) upheld the Assessing Officer's decision, leading to the appeal before the ITAT.

The main issue for adjudication was whether the rate per unit for the deduction claimed under sec.80IA should be Rs.2.70 as claimed by the Revenue or Rs.3.60 as adopted by the Assessee. The Assessee contended that the market value of the power generated should be considered as Rs.3.50 per unit based on the price the Assessee would have paid if the power was bought from the open market. The ITAT referred to relevant case law and held that the market value should indeed be treated as Rs.3.50 per unit, directing the Assessing Officer to recompute the profit and gains for the purpose of deduction under sec.80IA at the rate of Rs.3.60 per unit. The ITAT allowed the Assessee's appeal based on this analysis.

In conclusion, the ITAT accepted the Assessee's appeal, directing the Assessing Officer to recompute the profit and gains for the purpose of deduction under sec.80IA at the rate of Rs.3.60 per unit. The judgment was pronounced on a specific date in Chennai.