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TMI Blog2023 (6) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany is engaged in the business of Steel manufacturing. For the Assessment Year 2014-15, the assessee filed its revised Return of Income declaring a loss of Rs. 82,46,57,050/-. As there were Specified Domestic Transactions, the case was referred to Transfer Pricing Officer (TPO) to determine the Arm s Length Price. The Assessee having its 40 megawatt capacity Power Plant located at Santej near Ahmedabad. The power plant functions based on waste heat recovery boiler and fluidized bed combustion boiler. The assessee also sells surplus power generation through the State Electricity Board Grid. 2.1. The group company namely SAL Steel Ltd. (SSL) is having its Captive Power Plant located at Gandhidham near Kandla Port and supply the same to the assessee through wheeling mechanism as per the group captive policy as under: The total power plant capacity of SSL is around 40MW. The assessee holds 38% of the equity share capital of SSL and therefore as per the said policy SSL can sell upto 13.5MW to the appellant. SSL cannot sell this power to any other company not it can evacuate this power in the grid, if assessee does not buy the same. On the other hand, if assessee does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis done by the assessee company is liable for rejection. The fact that power from the CPP is generated only at 32 KV was conceded by the Appellant before the TPO. It was conceded by the assessee company that to price the market value of power generated at 32KV it has used CUP of power bought at 132KV. This admission by the Appellant Company itself negates its choice of tested party. Because the very fundamental of choice of tested party is based on wrong assumptions. Therefore, for the reasons discussed above, it is held that the Appellant company is not purchasing power from CPP at Arms length and transfer pricing adjustments were rightly done by the TPO and the amount of Rs. 10.75,03,219 by way of the Transfer pricing adjustment made by the TPO as per his order u/s 92CA(3) dated 23/10/2017 by revising down the transaction of sale of electricity by way of the CPP of the group company SAL Steel Ltd. to the appellant company Shah Alloys Ltd by the same amount is here by upheld. This ground of appeal is dismissed. All related grounds of appeal are dismissed. 4. Aggrieved against the same, the assesse is in appeal before us raising the following Grounds of Appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel submitted that the actual rate of power purchased from UGVCL comes to Rs. 11.46 per unit, whereas rate of power purchased from SSL is Rs. 5 per unit. Even assuming the extra levies like electricity duty, fuel surcharge and time of usage charges then also net effective rates of UGVCL comes to Rs. 7.29 per unit which is still higher than rate paid by the assessee to SSL. 5.1. The Ld. Senior Counsel further submitted from para 4 of the appellate order, wherein the Ld. CIT(A) presumed that the entire case was on the ground that the assessee claimed deduction u/s. 80IA of the Act, which was factually incorrect. Thus the Ld. Senior Counsel submitted that the issue is directly covered in favour of the assessee by Co-ordinate Bench of this Tribunal in the case of DCIT Vs. Vishal Fabrics Ltd. reported in [2022] 139 taxmann.com 30 (Ahd-Trib.) and Mumbai Tribunal decision in the case of Jayant Agro Organics Ltd. reported in [2021] 133 taxmann.com 242 (Mumbai Trib.) Thus the Ld. Senior Counsel submitted that for the next Assessment Years 2015-16, the TPO after careful understanding of the facts of the case not made any TP adjustment for the purchase of power by the assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not even admitted the above questions framed by the Revenue observing as follows: ..3. With respect to Question [B], the issue pertains to sub Section (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs. 5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section 80IA restricted the same to Rs. 5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 80IA of the Act. This restriction was primarily on the basis that the rate of Rs. 5.40 ps. charged by Gujarat Electricity Board ( GEB for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asses on 8 paise per unit to the Government in the form of electricity duty, to our mind, would make no difference. This question is, therefore, not required to be considered. 8. In the case of Vishal Fabrics Ltd. cited supra wherein it has been held as follows: 10. We have further considered the judgment passed by the Coordinate Bench in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara reported in, (2018) 97 taxmann.com 10 (Ahmedabad Trib.) on the similar issue pertaining to A.Y. 2012-13 i.e. after the insertion of domestic TP provisions. We find that relying upon the judgment passed by the Hon ble Jurisdictional High Court in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara (supra) the Coordinate Bench was pleased to hold that in case of Captive Power Plant eligible for deduction under Section 80IA, the market rate at which the receiving unit is procuring the electricity can be adopted as the sale price by the CPP. The relevant portion whereof is as follows: ..31. So far as the issue on merit is concerned, the Hon'ble Gujarat High Court in the of Gujarat Alkalies and Chemicals Ltd. has considered the following question: Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Government. He submitted that the market value of the electricity should be reckoned on Rs. 5.32 ps. per unit as was done by the Revenue authority. 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 transfer had been made at the market value of such goods or services, it is in this context that the question of substituting the actual consideration by the market value comes info picture. 7. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section (8) of Section 80IA of the Act. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 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 Rs. 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 Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4,90 to ascertain the market value of electricity generated by the- eligible,' unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed. 5. Issue once again reached the Division Bench of this Court in case of CIT vs Alembic Ltd. in Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IA of the Act. Accordingly, the adjustment and the subsequent additions made by the AO towards sale of electricity by CPP amounting to Rs. 4,78,78,842/- is deleted AO is directed to delete the same. Considering the entire aspect of the matter we find that the judgment particularly passed in the matter of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara passed by the Coordinate Bench on the similar issue, the judgment passed by the Hon ble Jurisdictional High Court in the case of Gujarat Alkalies Chemicals Ltd. (Supra), the Ld. CIT(A) deleted the downward adjustment and subsequent additions made by the TPO/AO holding that in case of Captive Power Plant (CPP) eligible for deduction under Section 80IA the market rate at which the receiving unit is procuring the electricity can be adopted as sale price by the CPP which in our considered opinion is just and proper so as to warrant interference. Thus, the ground of appeal preferred by the Revenue is found to be devoid of any merit and found to be dismissed. 9. Respectfully following the judgment of Jurisdictional High Court and Co-ordinate Bench of this Tribunal, we hereby set aside the order passed by the Lower Authoritie ..... 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