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TMI Blog2015 (7) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer held that the question of any benefit being derived by the assessee under Section 80 IA would not arise because the assessee did not earn any profit from out of the power-generating plant. He was also of the opinion that the assessee did not also qualify for the benefit under Section 80IA. The reasoning advanced by the assessing officer to show that the assessee did not make any profit from out of the power-generating plant is as follows:- "Without prejudice to the above discussion, the market rate taken by the assessee for determining the revenue of the claimed power undertaking is highly illogical. In the original return the assessee has taken the average rate of power purchased by it during the financial year 2001-02 but in the revised return only the rate charged by APSEB has been taken ignoring the rate charged by APGPCL. As per Section 80IA the market value in relation to any goods or services transferred by the assessee to any other business means the price that such goods or services would ordinarily fetch in the open market. In the instant case, the assessee has not taken the rate which would have been received by it, had it sold the power to outsiders. The purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing considering the expenses determined by the assessee and no deduction U/s.80IA of the Income Tax Act 1961 was available to the appellant. The appellant - on the other hand - has pleaded that the Assessing Officer's view regarding the unusually low Indian Aluminium rate of Rs. 0.77 per unit could not be applied to the appellant's case because of the special arrangements between Indian Aluminium and Orissa State Electricity Board for sale of surplus power beyond the captive power consumption because of the special arrangement between Indian Aluminium and Orissa State Electricity Board which the assessee did not have with the Andhra Pradesh State Electricity Board. Placing reliance on the decision of the Hon'ble Supreme Court in Thiru Aruran Sugars Ltd. vs. CIT (223 ITR 432), the appellant has pleaded that the market price should imply the price the appellant would have to pay for getting the power requirement from an unrelated supplier at that particular place. Based on these observations the appellant has pleaded that the market value would have to be computed @4.45 per unit being the rate at which power was supplied by the Andhra Pradesh State Electricity Board. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA." The aforesaid provision contemplates or does not militate against supply of electricity by the eligible unit to any other business of the assessee. Therefore the contention that the unit is not eligible because "the assesse has not sold power generated by the power undertaking to any outsider but has consumed 100% generated by its unit" does not appear to be logical. The premise for claiming the benefit according to Clause IV of Sub-section 4 of Section 80 IA is a setting up of an undertaking for the generation of power during the specified period. The fact that the unit was set up within the specified period is not in dispute. The mere fact that the power generated by the undertaking was in its entirety consumed by the other business of the assessee does not detract from the fact that the demand for power to that extent was reduced and the surplus to that extent could be supplied by the existing distribution undertakings to the public at large. The object of the legislature was to promote infrastructure for generating power, if the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to that activity and what is attributable to the further processes which result in the manufacture of the finished product. This apportionment does not involve disintegration of the business of the taxpayer, and the principle that a person cannot trade with himself does not apply to such an apportionment." Reference may also be made to the judgement in the case of Textile Machinery Corporation Limited -Vs- CIT reported in (1977) 107 ITR 195 (SC) where the question arose whether exemption under Section 15C of the Income Tax Act, 1922 could be claimed by the units established by the assessee, major parts of whose production were consumed by the existing business of the assessee. The Apex Court held that the benefit under Section 15C was available to the new businesses for the reasoning given, inter alia as follows:- "The principal business of the assessee can be carried on even if the said two additional undertakings cease to function. Again, the converse is also true. The fact that the articles produced by the two undertakings are used by the boiler division of the assessee will not weigh against holding that these are new and separate undertakings. On the other hand, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... canes and the following views were expressed:- "Held, affirming the decision of the High Court, that it was not disputed that the asesseee utilized sugarcane grown by it in its own field for its factory and also purchased a considerable amount of sugarcane from outside. Therefore, it was not the case of the assessee that sugarcane growers did not sell sugarcane in the ordinary course of their business in the region where the assessee carried on business. The assessee-company actually bought sugarcane from a large number of growers year after year in the ordinary course of business. The price at which it bought sugarcane must be taken to be the market price. If the price was controlled by the Sugarcane Control Order the controlled price would be taken as the market price because it was at this price that a willing buyer and a willing seller were expected to transact business." Mr. Khaitan also drew our attention to an unreported judgment of the Madras High Court in Tax Case (Appeal) Nos.68 to 70 of 2010, wherein the following views were taken:- "9. Therefore, there is no difficulty in holding that captive consumption of the power generated by the assessee from its own power plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value of the power supplied to the Steel- Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel-Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer. " The last point urged by Mr. Khaitan was that the point as regards computation has not been raised by the appellant and therefore Court should not extend the scope of appeal by bringing in the question not put forward in the appeal. We have considered the submission advanced by Mr. Khaitan but we are unable to agree with him. The benefit under Section 80IA was intended to encourage the business of generating power. An entrepreneur who wants to avail the benefit of Section 80IA cannot hope to get any benefit more than what has been contemplated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sugar mill at the same rate at which sugar cane was purchased by the sugar mill. That obviously is correct because if the sugarcane grown at home had not been sold to the sugar mill of the assessee itself, the sugarcane would have been sold in the open market. The rate of sale in the open market would be the same at which sugarcane was purchased by the sugar mill of the assessee. But in the case before us the electricity generated by the assessee could not be sold to anyone other than a distribution company or a company which is engaged both in generation and distribution. The rate at which electricity could have been sold to any such company is not the same at which such companies sale electricity to the consumers. The rate at which electricity can be supplied to a consumer by the distribution licensee and the rate at which the generating companies can sell electricity to the distribution licensee are governed respectively by Sections 61 and 62 of the Electricity Act 2003. There is tariff regulatory commission which fixes both the rates for sale and purchase of electricity by the distribution licensee. There are provisions in Section 62 so that the generating companies can recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gupta, J.). That judgment was rendered on concession. Therefore, that judgment also does not constitute a precedent. The last submission, advanced by Mr. Khaitan that this point was not taken by the appellant, has not impressed us. The point is certainly involved in the appeal because the CIT (A) reversed the finding of the assessing officer that the rate at which electricity was supplied by the Andhra Pradesh State Electricity Board "cannot be taken as the market rate within the meaning of Section 80IA". The learned Tribunal has upheld that finding. The revenue is in appeal. The decision to reverse the finding is based on a wrong determination of a substantial question of law and is therefore amenable under Sub-Section (6) of Section 260A of the I. T. Act, 1961. Moreover when this Court is satisfied that the case involves the aforesaid question, it has a corresponding duty to decide the same. Reference in this regard may also be made to the proviso to Sub-Section 4 of Section 260A of the I. T. Act. The assessee, in such a case is entitled to notice that a further substantial question of law is involved. Such notice has duly been given and the assessee has made its submission rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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