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TMI Blog2012 (12) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in assessee's own case for assessment year 2006-07, where it was held that assessee was eligible for claiming deduction under Section 80-IA(10) of the Act for captive consumption of power. In any case, whether an assessee was entitled to deduction under Section 80-IA, in respect of notional profits on account of power generated from its own captive power plant and utilized by itself, is no more an issue which is res integra. Hon'ble jurisdictional High Court in the case of Tamilnadu Petro Products Ltd. v. ACIT (338 ITR 643) has held that benefit under Section 80-IA(10) could be given even in respect of electricity generated by an assessee on captive basis. There is no necessity that power generated should be wheeled through an Electricity Board grid, before it is consumed. Further, we also find that this Tribunal in assessee's own case for assessment year 2006-07 in I.T.A. No. 1014/Mds/10 dated 3rd June, 2011, had held as under at paras 12 to 16 of this order:- 12. Short facts apropos are that assessee had sold to M/s OPG Metals P. Ltd. directly without wheeling the electricity through TNEB Grid. Out of the total power generated 39% was sold by as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegra insofar as this Tribunal falling within the jurisdiction of Hon ble Madras High Court, is concerned. It is for the reason that Hon'ble jurisdictional High Court has dealt with this matter elaborately in the case of CIT v. Thiagarajar Mills Ltd. (TCA 68 to 70 of 2010 dated 07-06-2010). Relevant paras 8 and 9 of the judgment of the Hon'ble jurisdictional High Court in the above case are reproduced below:- 8. The contention that only whatever power generated from the sale to an outsider of the electricity board, and the profit or gain derived by such sale alone can be taken as profit or gains derived by the assessee as mentioned in Sec. 80IA(1) of the Act, has been rejected by the Tribunal in the order impugned. In our considered view, the Tribunal was well justified in having rejected such a stand of the appellant. Having referred to sec. 80IA(1) of the Act, we are also convinced that what are all to be satisfied in order to be eligible for the deduction as provided under sub-sec.(1) of Sec.80IA, the assessee should have set up an undertaking or an enterprise and from and out of such an undertaking or an enterprise set up, any profit or gain is derived, falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dismissed. 4. Accordingly, we do not find any merit in these appeals of the Revenue, which stand dismissed. 5. Coming to the cross-objection of the assessee, its grievance is that CIT(Appeals) confirmed partial denial of deduction claimed by the assessee under Section 80-IA(10) of the Act, for a reason that assessee had sold power at inflated prices. 6. When the matter came up, learned A.R. submitted that the same issue was before the Tribunal in assessee's own case cited supra. According to him, there also disallowance was made for a reason that assessee had agreed to sell surplus power to Tamil Nadu Electricity Board (TNEB) at ₹ 3.16 per unit, whereas, it had sold power at much higher rate to its sister concerns. Relying on the decision of the Tribunal dated 3rd June, 2011 (supra), learned A.R. submitted that rates at which assessee had agreed to sell its surplus power to TNEB could not be considered as a yardstick for judging the fairness of prices at which it had sold the power to its sister concern. 7. Per contra, learned D.R. strongly supported the order of CIT(Appeals). 8. We have perused the orders and heard the rival submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Electricity (supply) Act, 1948, as amended by the Government of Tamilnadu 1948, a constituent State of the Union of India with its capital at Chennai hereinafter referred as 'TNEB' which expression shall under unless repugnant to the context of meaning hereof be deemed to include its successors and assigns as party of the first part. AND M/s OPG Energy (P) Ltd., registered under the Companies Act, 1956 and having its registered office at 17, Mooker Nallamuthu St., Chennai-01 hereinafter referred to as the company the party of the second part which expression unless repugnant to the context of meaning hereof deemed to include its successors and assigns. WITNESSTH WHEREAS. Tne Company was given approval to set up a Natural gas based Captive Power Plant of 17.5 MW capacity at Maruthur Village in Mayiladuthurai Taluk of Nagapattinam District to' generate power to meet the requirements of the companieas who are under Joint venture of its own/sister concern/Joint venture companies situated else where ;in Tamil Nadu and subsequently was given approval to accept their offer of sale of surplus power of 2.5 MW approximately to TNEB The rate accepted fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opolitan area and ₹ 3.20 per unit for Non metropolitan areas. If we consider 20% extra that is to be charged for energy used during peak hour then average rate of ₹ 3.45 per unit billed by assessee to its sister concerns cannot be considered as above market rate. Assessee s contention that the consumers of High Tension categories were charged by TNEB at ₹ 3.675 per unit has not been rebutted by the ld. DR. Had the consumers of the assessee bought power from TNEB it would have been necessary for them to pay the tariff rate of the TNEB and there is no case for the Revenue that such tariff rate was less than ₹ 3.45 per unit. Delhi Bench in the case of Jindal Steel Power Ltd. (supra) with regard to the issue of working out the market price in relation to power generation, held as under in paras 12 to 18 of its order as under: 12. We have carefully considered the submissions of both the parties on this aspect. The crux of the dispute before us relates to the manner of computing profits of the undertakings of the assessee engaged in the generation of power for the purposes of relief under section 80- lA of the Act. The difference between the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer and seller neither in a competitive environment and nor in the ordinary course of trade and business. It is an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of present statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Therefore, the price determined as per the Power Purchase Agreement cannot be equated with market value as understood in common parlance . We see no reason for not holding so for the purposes of section 80-lA(8) also. 17. In this background, we may make a gainful reference to the decision of the Hon'ble Calcutta High Court in the case of CAIT v. Manmatha Nath Mukherjee (1958) 34 ITR 567, which has been relied on by the assessee before us. The issue before the Hon'ble Calcutta High Court was in the context of the Bengal Agricultural Income-tax Act, 1944. Shorn of other details, the question considered by the Hon'ble High Court, relevant for the present, was whether the procurement rate of paddy off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o procure the power. We may consider hypothetical situation as well. Had the assessee not been saddled with restrictions of supplying surplus power to the State Electricity Board, it would have supplied power to the ultimate consumer at rates similar to those of the Board or such other, competitive rates, meaning thereby that price received by the assessee would be in the vicinity of ₹ 3.72 per unit i.e. charged by the Board from its industrial consumers/users. Thus, under the given circumstances, it would be in the fitness of things to hold that the consideration recorded by the assessee s undertaking generating electric power for transfer of power for captive consumption at the rate of ₹ 3.72 per unit corresponds to the market value of power. Therefore, on this aspect, we uphold the stand of the assessee and set aside order of the CIT(A) and direct the A.O. to allow relief to the assessee under Section 80-IA as claimed. Assessee succeeds on this ground. Thus, we are of the opinion that the A.O. had fell in error in considering the power purchase agreement with TNEB, which was only a standby arrangement, as the basis for arriving at the market rate of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X
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