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TMI Blog2021 (11) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... nd brokerage disallowance -Decided against revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As decided in own case [ 2018 (5) TMI 420 - ITAT KOLKATA] we remand this issue to the file of A.O. with the direction to consider only the investment which yielded dividend income to the assessee for computing the disallowance under section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Transfer pricing adjustment made by the TPO to the claim of deduction u/s 80-IA - arm s length price of power transferred by the three CPPs at Vasavdatta, Karnataka to the cement unit - HELD THAT:- Even if the Ld. CIT, DR s contention is accepted at its face value and the eligible unit is taken as the tested party , we still find that there was reliable internal CUP data available to benchmark the transfer price of power supplied by the CPPs to the cement unit. If the rates at which the CPPs sold power to IEX, GEPL (₹ 6.24/unit) is taken as the benchmark ALP rate, even then the transfer price of power adopted by the assessee (₹ 5.96 - ₹ 6.23/unit) was comparable and accordingly no adjustment was permissible in this regard. We find that, on same set of facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late to Assessment Years - 2012-13, 2014-15 2015-16. Since the issues involved are common, all the appeals were heard together. Both the parties also argued them together raising similar arguments on these issues. Accordingly, for the sake of brevity, we dispose all the appeals by this consolidated order. 2. First, we take up the appeal for AY 2012-13 in ITA No.1777/Kol/2019 arising out of the order of the Ld. CIT(A) -7, Kolkata [herein after referred to as Ld. CIT(A) ] dated 29.03.2019 passed against the assessment order passed under section 143(3) passed by the A.O. dated 20.03.2015. 3. Ground No. 1 of the appeal of the Revenue is directed against the Ld. CIT(A) s action of deleting the addition of ₹ 67,16,882/- made by the AO on account of delayed deposit of employees contribution to PF and ESI u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) despite the assessee contributing/depositing the same before the due date of filing of return of income u/s 139(1) of the Act. 4. We have heard both the parties and perused the material available before us. It is noted that although there was a delay in some paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 16-07-2021 has dealt with this issue by holding as follows:- 4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. CIT(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon'ble High Court will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon'ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon'ble Calcutta High Court has taken note of the Hon'ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon'ble Calcutta High Court's decision in Vijayshree Ltd. supra is reproduced as under: . In the light of the aforesaid discussion we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision of the Hon'ble High Court in Vijayshree Ltd. (supra) u/s 36(1)(va) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing aggrieved by the Ld. CIT(A) s order, the Revenue is now in appeal before us. 9. We have heard both the parties and perused the records. We note that the issue in dispute before us, is squarely covered by the decision of this Tribunal in assessee s own case in ITA No. 1781/Kol/2017 dated 30.11.2018, wherein on identical facts and circumstances, it was held as under: 2. The Revenue's sole substantive ground pleaded in the instant appeal seeks to revive the Assessing Officer's action disallowing / adding this taxpayer's discount and brokerage claim of ₹ 21,83,16,311/- during the course of assessment as reversed in lower appellate proceedings as follows:- Decision: In this case the AO has made the addition on the ground that discounts offered by the assessee have been netted from the sales so there cannot be an admissible claim for additional discount. It is the contention of the AO that once the discount has been deducted from the gross sales the assessee cannot claim further ITA No.1781/Kol/2017 A.Y. 2008-09 DCIT, Cir-5(1), Kol. Vs. M/s Kesoram Industries Ltd. Page 2 discount under the accounting head Brokerage and Discount . Accordingly, the order po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted off against sales and are debited separately in the P/L Account. Like prompt payment discount of 0.5% is offered by the assessee to its customer if the payment is realized within 30-32 days. Turnover discou9ntof 1.5% is offered if the dealer of the assessee exceed the net billing limit by 3-4 times. Moreover, on identical facts the claim of the assessee in the A.Yr. 2005- 06 to 2007-08 in scrutiny assessments passed under section 143(3). The AO has not brought any new material facts on record which would necessitate a change in the stand taken as regard the accounting method with respect to treatment of post-sale discounts earlier accepted by the department. This accounting method has been continuously followed by the assessee and accepted by the department in scrutiny assessments. Respectfully following the decision of the Apex Court in RadhasoamiSatsang (supra) I am of the opinion that the AO has taken an entirely contrary stand in this year on the treatment of post-sale discounts which is not supported by any change in material facts which is not correct. Accordingly, the disallowance is hereby deleted. 3. Learned CIT-DR vehemently contends that CIT(A) has erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8D(2)(iii). Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who deleted the interest disallowance of ₹ 89,07,240/- made under Rule 8D(2)(ii) and restricted the computation of disallowance under Rule 8D(2)(iii) only with reference to those investments which actually yielded dividend income during the year. The relevant findings of the Ld. CIT(A) are as follows: 6. The Ld. AO has further disallowed 0.5% of the average investments amounting to ₹ 33.18 lacs by invoking Rule 8D(2)(iii). It is noted that the Hon ble ITAT, Kolkata in the appellant s own case for AYs 2008-09 2009-10 through its lead order in ITA No. 1722/Kol/2012 has held that 0.5% of dividend bearing investments should be alone be considered i.e. investments from where dividends were actually received by the appellant for the purpose of Rule 8D(2)(ii). Respectfully following the aforesaid decision, the Ld. AO is directed to re-compute the disallowance under the third limb of Rule 8D(2)(iii) by considering the investments which actually yielded dividend income to the appellant for computing disallowance u/s 14A of the Act. In case the disallowance so worked out in the manner as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en above, the A.O. shall reduce the sum of ₹ 10,00,000/- already suo-moto disallowed by the assessee under section 14A and the net sum so computed alone shall be added back to the total income. However, in case the revised disallowance under section 14A work out at a sum lower than the amount of ₹ 10,00,000/- suo-moto disallowed by the assessee, then the A.O. shall restrict the disallowance under section 14A to ₹ 10,00,000/-. Therefore, grounds raised by assessee's appeal are partly allowed for statistical purposes. 15. Since the facts and circumstances involved in the relevant year are similar to that of AYs 2008-09 2009-10, we do not find any infirmity in the order of the Ld. CIT(A) on this issue and therefore uphold the same. This ground of appeal of the assessee is accordingly dismissed, so the assessee s appeal stands dismissed. 16. Now we take up the Revenue s appeal in ITA No. 1778/Kol/2019. Ground Nos. 1 to 3 of the appeal relate to the transfer pricing adjustment made by the TPO to the claim of deduction u/s 80-IA of the Act. Briefly stated, the facts of the case are that, the assessee is a multi-product and multi-locational company which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s 80- IA of the Act in the return of income filed for AY 2014-15. 17. In the course of assessment, the AO referred the case of the assessee to the Transfer Pricing Officer [herein after referred to as TPO ] u/s 92CA(2) of the Act to examine the above referred specified domestic transactions u/s 80-IA(8) of the Act involving intra-unit transfer of power between eligible units and noneligible units. According to the TPO, although CUP Method was the Most Appropriate Method in the given facts of the present case, but the assessee s benchmarking analysis was in contravention to the principles of CUP Method. The TPO held that the ALP should have been arrived at by following the order of the Hon ble Calcutta High Court in the case of CIT vs ITC Ltd. (64 taxmann.com 214). The TPO observed that there were similar power generating companies which were supplying power to distribution companies at the notified tariff issued by the State Electricity Regulatory Commission. According to him, these power generation companies were comparable to the CPPs and therefore the notified Tariff Order was a reliable external CUP for determination of ALP. The TPO accordingly re-computed the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinued to remain NIL, as the assessed Gross Total Income was a loss. 19. Being aggrieved by the aforesaid order, the assessee preferred an appeal before the Ld. CIT(A) who noted that the assessee s computation for claim of deduction u/s 80-IA of the Act had been in dispute in the earlier years as well. Following the decision rendered by this Tribunal in assessee s own case in ITA No. 1722/Kol/2012 for AYs 2008-09 2009-10, the Ld. CIT(A) held that, in order to compute the ALP sale price of power supplied by CPPs to the noneligible units, the most appropriate benchmark rate was the average landed cost of power procured by the same non-eligible units from the SEBs. Accordingly, the Ld. CIT(A) upheld the assessee s benchmarking analysis and deleted the transfer pricing adjustment made by the TPO/AO. Aggrieved, the Revenue is now in appeal before us. 20. We have heard both the parties and perused the records. The Ld. CIT, DR, Shri Gaurav Kanaujia, appearing on behalf of the Revenue, vehemently supported the order of the TPO. He contended that the Ld. CIT(A) had grossly erred in following the order of this Tribunal passed in assessee s own case for earlier years. According to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng guidelines. Inviting our attention to the Guidance Note issued by the IRS of United States of America, relied upon by the Ld. CIT, DR, he submitted that, the Guidance Note clearly stated that ordinarily the fair market valuation standards produces arm s length results and it is only in some instances where the rules and principles of fair valuation standards is inconsistent with the arm s length standards that it may produce a result which may not be same. He submitted that the benchmarking analysis performed in the Transfer Pricing Study Report fulfilled the CUP parameters and therefore it was not a case that the assessee had determined the open market value and not the arm s length price . He further invited our attention to Paras 6.1 6.10 of the Ld. CIT(A) s order wherein, the Ld. CIT(A) had taken due cognizance of the change in law viz., introduction of specified domestic transfer pricing provisions by the Finance Act 2012. He pointed out that the Ld. CIT(A) had categorically held that the ratio laid down by this Tribunal in assessee s own case in the earlier years determining the open market value also met the transfer pricing guidelines and thus the transfer rate, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d power in an uncontrolled transaction from an unrelated entity i.e. SEB, was the right basis for determination of ALP. Hence, the question for our consideration is what should be the most appropriate data and the price to be adopted for applying the CUP Method. 23. Before we proceed further, it is worthwhile to quote here the relevant provisions of Rule 10B of Income Tax Rules. Clause (a) of sub-rule (1) of Rule 10B defines CUP Method as follows: Rule 10B. Determination of arm's length price under section 92C. (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely: (a) comparable uncontrolled price method, by which,-- (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; (ii) such price is adjusted to account for differences, if any, between the international transaction and the comparable uncontrolled transactions or between the enterprises entering into suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It is noted that the TPO had disregarded both these internal comparable rates i.e. the rate at which the same eligible units sold power to unrelated parties and also the rates at which the same non-eligible unit purchased power from SEB. We note that no cogent reasoning was given by the TPO before rejecting this internal CUP data. The TPO instead adopted the average tariff rate of ₹ 3.75 per unit fixed by the Karnataka Electricity Regulatory Commission for sale of electricity by the power generating stations to the State distribution company, BESCOM to be the ALP rate. The Ld. CIT(A) did not agree with this action of the TPO and accordingly deleted the transfer pricing adjustment made in relation to the CPPs at Vasavdatta, by observing as under: 5. In the facts of the present case, the transaction in question involves supply of power by the eligible units at Karnataka West Bengal to the non-eligible units of the appellant in the respective States. From the facts on record, it is noted that the CPPs at Karnataka had generated 22,51,61,246 units out of which 17,57,55,635 units were captively consumed by the non-eligible factory unit and the balance 4,94,05,611 units we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly the adjustment of ₹ 40,03,60,133/- made in respect of the transfer value of power of CPPs at Karnataka is hereby deleted. 26. From the above it is noted that, even if the Ld. CIT, DR s contention is accepted at its face value and the eligible unit is taken as the tested party , we still find that there was reliable internal CUP data available to benchmark the transfer price of power supplied by the CPPs to the cement unit. If the rates at which the CPPs sold power to IEX, GEPL (₹ 6.24/unit) is taken as the benchmark ALP rate, even then the transfer price of power adopted by the assessee (₹ 5.96 - ₹ 6.23/unit) was comparable and accordingly no adjustment was permissible in this regard. We find that, on same set of facts and circumstances, the Revenue had categorically accepted this manner of application of internal CUP Method in respect of power supplied by the CPPs at Karnataka in the immediately preceding AY 2013-14 and accordingly no transfer pricing adjustment was made in relation thereto. When enquired in this regard, the Ld. CIT, DR fairly agreed with the Ld. CIT(A) s above findings qua the CPPs at Vasavdatta, Karnataka. For the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant findings of the Ld. CIT(A) is reproduced below: 6.1 have carefully considered the action of the Ld. TPO, as also equally carefully perused the submissions made by the Ld. A. Rs, and the documents available in the Paper Book filed by the appellant. The claim of the appellant for deduction u/s 80 IA in respect of profits of captive power plant ( CPP ) has been subject matter of dispute in the past as well. In the AYs 2008-09 2009-10, the matter with regard to determination of tariff rate for the purpose of computing profits of the CPP travelled upto the Hon ble ITAT, Kolkata, which vide its order in ITA No. 1722/Kol/2012 accepted the proposition put forth by the assesse that the profits of the eligible undertaking should be computed by adopting power tariff equal to monthly average landed cost of the power supplied to the other undertakings by the State Electricity Boards. The material difference during the year consideration is that in the year decided by the Hon ble ITAT, Kolkata the adjournments were carried out by the Ld. AO in terms of Section 80IA(8) of the Act and there was no transfer pricing provisions contained in Chapter X of the Act became applicable to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the Tariff schedule was for low Tension or for High Tension or for that matter for which class of consumer was tariff rates notified. It is evident from the tariff orders that depending on the class of consumers e.g., Railways, Mines, Seasonal, Industrial/ Non- Industrial, agriculture etc. the rates varied from ₹ 1.80 to ₹ 5.30 per unit. I therefore find merit in the contention of the Ld. AR that the FAR as well as the Economic Analysis performed By Ld. TPO was fundamentally flawed and unsustainable on fact and in law. 6.10 On the other hand, I find that the benchmarking exercise followed by the appellant not only fulfils the internals CUP parameters but reliable data is also available in this regard. Furthermore this benchmarking exercise followed by the appellant and their contention that the ALP of transfer of power by CPP to be equivalent to the landed cost of power at which the non-eligible unit procured power has been judicially approved by the jurisdictional ITAT, Kolkata in its own case for AYs 2008-09 2009-10. I therefore find that even after introduction of domestic transfer pricing provisions to specified domestic transactions and becoming ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party under CUP is not necessary. In that case, the question before the Tribunal was determination of ALP of the INR denominated loan taken by the assessee from its AE. The Revenue had benchmarked the Indian Rupee denominated loan taking the foreign AE as tested party by using the USD denominated Corporate Bond Rate. It is in this factual context that this Tribunal had rejected the bench marking analysis of the Revenue by holding that the key factor under CUP was the product comparability and not tested party and therefore INR denominated debt taken by the assessee from its foreign AE was required to be benchmarked with reference to INR debt issuances in India. For arriving at this conclusion, the Tribunal observed as under: 12. In wake of this background, the first and foremost issue for our adjudication is whether, while applying the CUP Method, it is necessary to identify the tested party . Although Indian TP regulation does not laid down any specific procedure or guidelines for choice of tested party , however, OECD provides that, as a general rule, tested party should be the one to which transfer pricing method can be applied in most reliable manner and for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these rates. The market conditions under which the power generating stations operate are significantly different from that of the captive power units operated by industries. At this juncture, it is first relevant to understand the intent and purpose for setting up of a CPP by any manufacturing industry. As rightly pointed out by the Ld. CIT, DR, the power tariff charged from industrial consumers is different from that of domestic agricultural consumers, as the higher rates of the former subsidize the rates charged from the latter. Further, although India has surplus power generation capacity, it lacks adequate transmission and distribution infrastructure. As a consequence, due to the high power tariffs and unstable supply of power, there are significant cost overruns in the manufacturing unit. The captive power plant is thus set-up with the dominant intent to save power costs, which the manufacturing unit is otherwise required to incur pay to the SEBs, and at the same time, to ensure stable supply of un-interrupted power for smooth production. This results in opportunity cost savings to the assessee company. Accordingly, while drawing up the standalone accounts of the eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket comprises of power sold by SEBs, IEX etc. to different categories of consumers. In the present case, the assessee has adopted the comparable rate to be the landed rate at which the manufacturing unit is purchasing power from an independent SEB, apart from the CPP. As the economic market conditions are similar, this benchmark rate adopted by the assessee is held to be fulfilling the CUP parameters. 21. As regards the Revenue s claim that the CPP and SEB being functionally dissimilar, the benchmarking of sale of CPP at the rate at which non-eligible unit brought electricity from SEB is not reliable, it is noted that this exact same argument has been considered and rejected by the coordinate Bench of this Tribunal in the case of Gujarat Flurochemicals Ltd Vs DCIT (97 taxmann.com 10) . The relevant findings of this Tribunal on this issue, are as under: 29. With regard to the assessment year 2013-14, the ld.DRP has observed that there is a little change in the statutory provision by virtue of section 80IA(8). The arm's length price of the goods sold by the assessee in the alleged captive power plant has to be determined. The ld.DRP thereafter observed that the TPO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate at which manufacturing unit has been purchasing the electricity from the open market. The ld. DR, on the other hand relied upon the order of the DRP, but unable to controvert the contentions raised by the assessee. 32. The Hon'ble High Court has replied this question by recording the following finding: '3. Since both the issues are covered by various judgments of this Court, we do not find it necessary to record facts at any length. Division Bench of this Court by judgment dated 22.11.2011 in Tax Appeal No.2092/2010 in somewhat similar controversy observed as under : . 6. Under sub-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term Market Value is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of ₹ 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged ₹ 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out ₹ 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch ₹ 4.51 per unit but ₹ 5 per unit as was being charged by GEB. Since the excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair indicator to benchmark the transfer value of ₹ 8.30/unit adopted by the appellant. It is noted that the transfer value of ₹ 8.30 / unit was based on the tariff order issued by the SEB in respect of supply of power to units located in the same region as that of the non-eligible unit which procured power from the eligible unit. This tariff order issued by the SEB was available in open market and determined under uncontrolled conditions and is hence a reliable external CUP available in the given facts of the case. On comparing the rates in tariff order with the rates at which other non-eligible units procured power from open market under uncontrolled conditions; it is noted therefore that the transfer value of ₹ 8.30/unit determined by the appellant is fair and reasonable. I therefore find merit in the submissions of the Ld. AR as well as the TPSR that the average landed tariff rate notified by the UPSCB is a fair, reliable and reasonable basis to benchmark the transfer value of power procured by the non-eligible undertaking from the eligible unit. 6. The Ld. TPO's reference to the judgment of the Hon'ble Calcutta High Court in ITC Limited (supra) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PPA is a 20 year agreement. The assessee required to take statutory clearances and approvals. The price is regulated. The sale of power under the terms and conditions of PPA cannot be considered as the market value of the sale of electricity. Such sales cannot be considered as made in uncontrolled conditions . The ld. D/R submitted that the power generating company does not have distribution costs. When a captive power plant in an industry supplies electricity to its own manufacturing unit, there is no power distribution cost. The savings of cost of power can be determined only when the rate at which the manufacturing unit of the company purchases power in the open market from the power distribution companies is considered. Imaginary costs which are not incurred cannot guide our decision. 8.14. Thus while determining the ALP under transfer pricing provisions, in our view the assessee has correctly identified the manufacturing unit as the tested party and CUP as the MAM and the purchase price of electricity in the open market from the State Electricity Board to the manufacturing units in uncontrolled conditions as the ALP. 23. Gainful reference in this regard may also be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ( the Act for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt on the part of the assessee was to claim larger profit under the unit which was eligible for such deduction as against this, attempt of the revenue would be see that the ineligible unit shows greater profit. 6. The Tribunal in the impugned judgment extracted extensively from the order of CIT (Appeals) and independent reasons for confirming the same. In such order CIT (Appeals) had placed reliance on an earlier judgment of the Tribunal in case of Reliance Infrastructure Ltd. v. Addl. CIT [2011] 9 taxmann.com 186 (Mum. - Trib.). Learned counsel for the assessee had placed on record a copy of the judgment of the Tribunal in case of Reliance Infrastructure limited. In such judgment an identical issue came up for consideration. The Tribunal by detailed judgment had held and observed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of CIT v. Godawari Power Ispat Ltd. [2014] 42 taxmann.com 551/223 Taxman 234, in which the Court held and observed as under: 10. Gujarat High Court in case of Pr. CIT v. Gujarat Alkalies Chemicals Ltd. [2017] 395 ITR 247/88 taxmann.com 722 also had occasion to examine such an issue. It referred to earlier order in case of Asstt. CIT v. Pragati Glass Works (P.) Ltd. [Tax Appeal No. 1646 of 2010, dated 30-1-2012] in which following observations were made:- . 11. Judgment of Calcutta High Court in case of CIT v. ITC Ltd. [2016] 236 Taxman 612/[2015] 64 taxmann.com 214 was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court, we see no reason to entertain this question. 12. In the result, Income Tax Appeal is dismissed. 24. The contention of the Ld. CIT, DR that the above referred decisions are not applicable since they were rendered in the context of open market value and not arm s length price is found to be misplaced. We agree with the Ld. AR of the assessee that, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity for the purposes of Section 80IA(8) should be the price at which the assessee procures power from SEBs. The relevant findings are as under: 21. We have considered the rival submissions and perused the documents in the paper book which inter alia contained Electricity Act, 2003, KERC Regulations 2004, copy of KERCs order dated 27.02.2007 approving 'open access' to CPPs for supply of electricity etc. The bone of contention between the parties is the adoption of the most appropriate rate at which sale of electricity would be valued for the purpose of determining the profitability of all the four CPPs. It is not in dispute that during the relevant year, the assessee operated four CPPs in the State of Karnataka, Orissa and West Bengal and the power generated was entirely supplied and consumed by manufacturing undertakings of the assessee. The A.O. per-se did not dispute the fact that the CPPs constituted separate and distinct undertakings and were eligible for claiming the deduction under section 80IA of the Act. However, on perusal of the working of the profitability, the A.O. found that the transfer price for power was considered by the assessee equal to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er producers were necessarily required to sell the power in the regulated market where prices were fixed at the discretion of the State Electricity Boards and / or Regulatory Commissions and the power generating companies had no option or discretion to determine the selling rate. However, in the case in hand there is a change of scenario before us and the learned AR of the assessee in his detailed presentation (supra) has brought out the salient features of the Electricity Act 2003 by which CPPs were granted 'open access' by law. In terms of the 'open access' granted, the power generating companies were free to sell the power to any third party at the prices mutually agreed and in such case, the regulatory commission was required to determine only the 'wheeling charges' which the transmission companies / authorities could levy. In this regard, the useful reference may also be made to KERC's order dated 27.02.2007. In this order, the commission explained the salient features of the National Electricity Policy issued by the Government of India on 12.02.2005 with regard to captive generation. The said order explains that the Electricity Act 2003, put in pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Co-ordinate Bench of this Tribunal in the case of DCIT vs Birla Corporation Ltd. to which one of us was signatory. In the said decision, the Coordinate Bench of this Tribunal, after considering the ratio laid down by the Hon'ble Supreme Court in the case Thiru Arooran Sugar Ltd. held as follows: 5.6. We have heard the rival submissions and perused the materials available on record including the paper book and the relevant provisions of the Electricity Act, 2003 as detailed supra. We find that the main thrust of order of ld CITA was by placing reliance on the decision of this tribunal in the case of ITC Ltd, which was modified by the Hon'ble Jurisdictional High Court. The ld AR fairly brought to our attention the decision of Hon'ble Jurisdictional High Court in the case of ITC Ltd before us and had duly distinguished the same as not applicable to the facts of the instant case , as admittedly, the Asst Year before Hon'ble Calcutta High Court in ITC Ltd was Asst Year 2002-03. The said decision in ITC Ltd for Asst Year 2002-03 was rendered by taking into account the relevant provisions of Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41/unit was justified. The AO/TPO is accordingly directed to delete the transfer pricing adjustment of ₹ 13,71,40,567/-. 30. It was further brought to our notice by the Ld. AR that this Tribunal has dismissed the Revenue s appeal on the same ground in assessee s own case for AY 2013-14, i.e. post introduction of the specified domestic transfer provisions by the Finance Act 2012. In the preceding year, although the TPO had accepted the transfer rate of power supplied by the CPPs at Vasavdatta, Karnataka, but he had made similar transfer pricing adjustment to the transfer rate of power supplied by the CPP at Hooghly, West Bengal to the rayon unit. The reasoning given was identical to that of the relevant AY 2014-15 On first appeal, the Ld. CIT(A) had found merit in the internal CUP analysis of the assessee benchmarking the specified domestic transaction involving transfer of power with the rate at which the rayon unit purchased power from the SEB. The substantive ground taken by the Revenue in appeal before this Tribunal in AY 2013-14, was that the Ld. CIT(A) had erred in accepting the assessee s claim by following the relief allowed by this Tribunal in the earlier AYs 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) s order directing the AO to consider only the opening and closing value of those investments which actually yielded dividend income to the assessee during the relevant year for the purposes of computing the disallowance under section 14A of the Act read with Rule 8D(2)(iii). In case the re-worked disallowance is lower than the sum of ₹ 1,06,159/- voluntarily disallowed by the assessee u/s 14A of the Act, then the AO shall restrict the disallowance to ₹ 1,06,159/-. The appeal of the assessee is allowed for statistical purpose, as directed supra. 36. Now we take up the Revenue s appeal in ITA No. 1864/Kol/2019. Ground Nos. 1 to 5 of the appeal relate to the transfer price adjustment of ₹ 43,73,25,785/- made by the TPO to the transfer price of power supplied by the eligible CPPs u/s 80IA of the Act to the non-eligible units. After considering the rival submissions, we find that all the material facts relevant to the issue involved in the year under consideration as well as the arguments raised by both the sides are similar to Ground No. 1 to 3 of the Departmental Appeal in AY 2014-15. Following our conclusions drawn in AY 2014-15, we dismiss these grounds of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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