2024 (2) TMI 696 - AT - Income Tax

Deduction u/s 80IA in respect of profits of captive power plants ('CPPs') - acceptance of the rate per unit for selling electricity in CPP - assessee had entered into specific domestic transaction during the relevant financial year. And the case was transferred to TPO for determination of the Arms Length Price (ALP) as per provision of Section 92CA of the Act wherein observed and compared that eligible unit of the assessee with same companies amount to Rs. 3.23 per unit has been adopted as ALP and in the way the transfer price of power for eligible unit was reduced HELD THAT - As per Hon ble Apex Court in the case of CIT vs. Jindal Steel Power Ltd 2023 (12) TMI 417 - SUPREME COURT electricity unit would be charged as per the rate prevail by the WBSEB in case of selling to the consumer without any further conditions. The assessee has taken the calculation in CUP method the Ld. CIT(A) has taken the issue in external CUP method and accordingly deleted the addition. TPO has considered the comparable who are not generating thermal power which the assessee dealt in. Here, the supply power in between eligible unit to non-eligible unit. The assessee had adopted the power tariff which is said to be ALP and the WBSEB was maintain this rate by selling the consumer. The rate was adopted by the ld. TPO in CUP method cannot be accepted as the WBSEB is not tested party. The assessee has only transactions with AE, not any other party. The fair market value is clearly covered in order of Jindal Steel and power Ltd. 2023 (12) TMI 417 - SUPREME COURT and Birla Corporation Ltd. 2023 (2) TMI 341 - ITAT KOLKATA . We respectfully relied on both the orders. We are not interfering in the appeal order in this issue. The assessment order is unjustified in this issue. Accordingly, the grounds of the revenue for ground nos. 1 and 3 are dismissed. Addition u/s 14A r.w.r.8D - HELD THAT - We find that both Ld. AO and the Ld. CIT(A) had added back under Rule 8D(2)(iii) of the Rules 0.5% on average investment of Rs. 296.17 Lakh which works out amount to Rs. 1,48,085/-. But all the investments are not dividend yielding as a result only amount to Rs. 25,000/- was earned dividend by the assessee during the impugned assessment year. We relied on the argument of Appellant and accordingly the addition should be restricted to Rs. 3,131/-.

Summary

Issues Involved:
1. Deduction under Section 80IA of the Income Tax Act.
2. Addition under Section 14A and Rule 8D.
3. Education Cess as an allowable expenditure.
4. Procedural delay in filing the appeal.

Summary:

1. Deduction under Section 80IA of the Act:
The primary issue was whether the Ld. CIT(A) erred in allowing the deduction under Section 80IA as claimed by the assessee. The assessee, engaged in diverse businesses including power generation for captive consumption, had set up a Captive Power Plant (CPP). The Transfer Pricing Officer (TPO) had reduced the transfer price of power generated by the CPP, leading to a reduced deduction claim under Section 80IA. The Ld. CIT(A) held that the rate adopted by the appellant at Rs. 8.48 per unit was justified, following the internal Comparable Uncontrolled Price (CUP) method, and directed the deletion of the transfer pricing adjustment. This decision was upheld by the tribunal, referencing consistent views from previous cases and the Supreme Court's ruling in CIT vs. Jindal Steel & Power Ltd., which supported the use of the State Electricity Board's rate as the market value for computing deductions under Section 80IA.

2. Addition under Section 14A and Rule 8D:
The second issue was whether the Ld. CIT(A) erred in deleting the addition made by the AO under Section 14A read with Rule 8D. The AO had added Rs. 1,48,085/- to the total income of the assessee, calculated as 0.5% of the average investment. The tribunal found that the disallowance should be limited to the dividend-yielding investments only, which amounted to Rs. 4.72 lakh, resulting in a reduced disallowance of Rs. 3,131/-. Consequently, the addition of Rs. 25,000/- was deleted, and the disallowance was restricted to Rs. 3,131/-.

3. Education Cess as an Allowable Expenditure:
The third issue was whether the Ld. CIT(A) erred in holding that the Education Cess paid on Income Tax is an allowable expenditure under the head "Business & Profession." This issue was not pressed by any of the parties during the hearing.

4. Procedural Delay in Filing the Appeal:
The appeal was filed with a delay of two days. The assessee provided reasons for the delay, which were accepted by the bench, and the delay was condoned.

Conclusion:
The tribunal dismissed the revenue's appeal on the grounds related to the deduction under Section 80IA and the addition under Section 14A, while partly allowing the appeal to the extent of restricting the disallowance under Section 14A. The appeal for the subsequent assessment year 2014-15 was dismissed, following the same reasoning as for the assessment year 2013-14.