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TMI Blog2023 (11) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers and and thus, assessee was justified in adopting ALP of electricity supply to its AES at rate charged by State Electricity Board and Revenue was not justified in excluding certain heads of charges out of it. The assessee has rightly computed the sale of electricity generated through its CPP by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd. for the purpose ALP and claim of deduction u/s. 80IA of the Act. The same does not require any interference. Decided against revenue. ITAT discretion to a new ground - Nature of receipt - TUFF Subsidy - issue not emanate from the assessment records - Whether capital receipt and not taxable? - HELD THAT:- This issue of TUFF subsidy received by the assessee as capital receipt is not a subject matter of discussions and disallowance by the Assessing Officer in the assessment order. This TUFF Subsidy is not an issue arising from the record of the assessment proceedings. As decided in the case of National Thermal Power Corporation Ltd.[ 1996 (12) TMI 7 - SUPREME COURT] wherein it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be applied for transfer of electricity from its CPP to non-eligible unit and also to its Associated Enterprise namely M/s. Chiripal Industries Ltd. The assessee thus applied the internal Comparable Uncontrolled Price [CUP] method. The assessee also sold steam generated through this CPP of Rs. 10,55,95,210/- making total credit of Rs. 71,26,07,381/-. 2.1. Whereas the Ld. Transfer Pricing Officer [TPO] has worked out the sale price of the electricity by adopting ₹ 3.35 per unit being the supply of electricity rates by adopting First and Second external CUP method of Uttar Gujarat Vij Company Ltd [UGVCL] and Indian Exchange Ltd [IEL]. Thus the TPO has worked out the sale price of the electricity and steam by applying the average formula of Rs. 3.35 per unit and total adjustment of Rs. 44,76,15,240/- was made by the AO by reducing the declared sale of electricity and steam in the profit and loss account of the eligible unit and worked out the deduction u/s.80IA at Rs. Nil. 3. Aggrieved against the assessment order the assessee filed an appeal before Commissioner of Income Tax [Appeals]. After considering the above submissions of the Assessee, the Ld CIT[A] deleted the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA claimed by the appellant is curtailed or not allowed. It has been contended by the appellant that it had correctly selected the manufacturing division who generated the electricity through its CPP as tested party and was noneligible unit for the purpose of section 80IA of the Act and adopted the same rates as were charged by TPL to the manufacturing unit as benchmark. The A.O. rejected this selection with rates so benchmarked by taking two external CUP ie. UGVCL and IEX and both these could not be compared for many factors and business transactions along with the manner in which they carried out. Further, according to the TPO, captive power plant and electricity distributing companies are not comparable. M/s Torrent Power Ltd. is a distribution entity. According to him, there is a material difference between captive power plant as a seller and distribution/transmission entity like M/s Torrent Power Ltd. The differences are both in terms of functions performed as well as asset used. In the case of distribution and transmission entities, apart from assets used for generation of electricity huge investments have gone in laying in transmission and distribution infrastructure. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Chemicals Ltd, observed as under- 33. Respectfully following the authoritative pronouncements of the Hon'ble jurisdictional High Court, we allow these grounds of appeal. We direct the AO to grant deduction under section 80IA(4) on the value of electricity supplied by the CPP to its manufacturing units by adopting the average rate of electricity supplied to the assessee by MGVCL, DGVCL. This judgment of Hon'ble High Court and that of Ahmedabad Bench of ITAT is directly on the issue. Hon'ble Court has considered section 80IA(8). The Hon'ble ITAT has considered the Domestic Transfer Pricing Provisions as well as provisions of section 80IA(8). Therefore, it would not be justifiable to ignore the judgments of Hon'ble jurisdictional High Court and the ITAT. 5.3 Following the ratio laid down in the above decisions, I direct the AO to grant deduction under section 80IA(4) on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at which M/s Torrent Power has supplied the power to the denim manufacturing unit of the appellant. I also direct the AO to use the same value for benchmarking the sale of ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that if the non-eligible unit is taken as tested party there will be need for making multiple adjustments for the charges incorporated in the electricity price paid for functions like distribution and transmission such as STU charges, STU losses, Distribution losses, Distribution Charges, Additional Surcharge, Cross subsidy surcharge, which was not done by the assessee. (7) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s. 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that the decision of the Hon'ble High Court of Gujarat pronounced in the case of Gujarat Alkalies and Chemicals Ltd. is relevant to the claim of deduction u/s. 80IA(4) of the Act and not on ALP of transaction determined by the TPO u/s. 92C of the Act. 8. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer. 9. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs. 540 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 by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion that the market value of the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Appeal No. 1646/2010 in case of ACIT v Pragati Glass Works (P) Ltd. (order dated 30.1.2012), in which following observations were made: 7 To our mind. Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) terms recorded that Rs 451 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 417 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible 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 good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In that view of the matter, we do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of the assessee and against the revenue. 6. Issues are thus considered on number of occasions by the Court and held against the Revenue. Questions are answered against the Revenue. Both the tax appeals are therefore. Dismissed. 8. Further Co-ordinate Bench of this Tribunal in a recent judgment in the case of Meghmani Finechem Ltd.-Vs-National E Assessment Centre [2023] 151 Taxmann.com 440 [AHD ITAT] held as follows: 10. We have heard the rival contentions and perused the material on record. We are of the considered view that in the instant facts, it is a well settled principle that where an assessee, being a captive power plant provided electricity to its associated enterprises and claimed deduction u/s. 80-IA, then for the purpose of deduction, market value of power, supplied by the assessee to its associated enterprises should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers. Further, we observe that the Ahmedabad Tribunal in the case of Gujarat Fluoroc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose ALP and claim of deduction u/s. 80IA of the Act. The same does not require any interference, further the Ld. CIT-DR could not place any judgments in favour of the Revenue and reversing Jurisdictional High Court Judgments by the Hon ble Supreme Court. Therefore the Grounds raised by the Revenue are devoid of merits. Therefore the appeals filed by the Revenue are hereby dismissed. 10. In the result, the appeal filed by the Revenue in ITA No. 1768/Ahd/2019 is hereby dismissed. 11. The assessee is in Cross Objection before us raising the following Grounds of Appeal in C.O. No. 28/Ahd 2019 which reads as follows: 1. Ld. CIT (A) erred in holding that charging of interest u/s 234A, 234B 234C of the Act is mandatory in nature ignoring various judicial precedents. 2. Ld. CIT (A) erred in dismissing ground regarding penalty u/s 271(1)(c) of the Act by holding that AO has merely initiated penalty proceedings ignoring fact that there is neither concealment of income nor furnishing of inaccurate particulars of income as full details and information has been duly disclosed by the appellant. 3. In facts Circumstances of the case, Your Appellant, most respectfully subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee as capital receipt is not a subject matter of discussions and disallowance by the Assessing Officer in the assessment order. Similarly before Ld. CIT(A), the assessee was in appeal against the disallowances made by the Assessing Officer namely (a) u/s. 80IA claim, (b) disallowance u/s. 14A and (c) disallowance on depreciation of vehicles. In our considered view, this TUFF Subsidy is not an issue arising from the record of the assessment proceedings. The Hon ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT reported in [1998] 229 ITR 383 wherein it was held that undoubtedly, the ITAT has the discretion to allow or not to allow a new ground to be raised but where the ITAT is only required to consider the question of law arising from the facts which are on record in the assessment proceedings , in order to correctly assess the tax liability of an assessee. In our considered view this issue of TUFF Subsidy does not arise from the record of the assessment proceedings of the Assessing Officer. The Ld. Counsel also not drawn our attention to the claim in Return of Income and other records. When this issue does not emanate from the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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