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TMI Blog2024 (5) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... the price of a good arrived at between a buyer and a seller in the open market i.e., where the transaction takes place in the normal course of trading. Hon ble Supreme Court held that the market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market, but not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board. Thus, it is clear that the rate at which power was supplied to a supplier could not be a market rate of electricity purchased by a consumer in the open market, but, the rate at which the State Electricity Board supplied power to the industrial consumers is to be taken as market value. AR brought to our notice that the AO allowed the deduction under section 80IA of the Act for the initial year being assessment year 2011-12 - For the assessment year 2020-21, the Assessing Officer allowed deduction u/s 80IA in favour of the assessee. We note that the Revenue allowed the claim of the assessee for computing deduction u/s 80IA of the Act for initial year and the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee as to why the rate fixed by Tariff Regulatory Commission should not be applied The assessee relied on various judicial precedents and supported in adopting the average price of the power purchased other than the captive power. The Assessing Officer found the same as not acceptable and proceeded to restrict the said deduction by following price fixed by Tariff Regulatory Commission of Tamil Nadu at ₹.2.75 per unit as against ₹5.60 per unit as adopted by the assessee. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) discussed the issue in detail, by placing reliance in the cases of Shree Cement Ltd. of Jaipur ITAT Bench, Sri Velayudhaswamy Spinning Mills (P) Ltd. [2012] 19 taxmann.com 28 (Chennai), Sri Matha Spinning Mills (P) Ltd. [2013] 31 taxmann.com 13, Eveready Spinning Mills (P) Ltd. [2012] 17 taxmann.com 254 and in the case of M/s. Saranya Textiles in ITA No. 1294/Chny/2019, allowed the claim of the assessee by holding that the rate on which State Electricity Board or the generation/distribution companies sell power to industrial and consumers should be adopted as the open market value so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the power purchased from the open market. Further she submits the assessee purchases power from the private power producers and Tamilnadu Electricity Board on need base and adopted the average rate at which power is purchased from the private power producers for arriving at the market rate of the power generated from windmills. She argued that the price at which Tamilnadu Electricity Board/private power producers sell electricity to industrial consumers is representative of the price of electricity would ordinarily fetch in the open market, i.e., the price which has been adopted by respondent for the electricity generated by eligible business used for captive consumption for the purpose of computing profits and gains of the eligible business under section 80IA of the Act. She drew our attention to the assessment order and submits that the Assessing Officer observed that the benefit under section 80IA of the Act has to be worked out by taking market value as the rate at which electricity could have been sold to distribution licensee by a generating company. Primarily, placing reliance in the case of CIT v. ITC Ltd. [2015] 64 taxmann.com 214] of Hon ble High Court of Calcutta, she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity Act, 2003. We note that the ld. CIT(A) discussed the same in page No. 14 of the impugned order and was of the opinion that the said decision was rendered while interpreting Income Tax Act as well as the regulation surrounding sale of electricity as they stood before 2003. Further, after 2003, the law relating to generation and sale of electricity have undergone significant amendment, whereby, it is noted that until 2003, the price of electricity was controlled and there was free market price in view of the Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948. 12. Coming to the present case, after coming into existence of new Electricity Act, 2003, the issue in this regard about determining the market value is settled. The ld. CIT(A), in his order, referred to the decision of Hon ble High Court of Chhattisgarh and Gujarat in the case of CIT v. Godawari Power Ispat Ltd. [2014] 42 taxmann.com 551] and PCIT v. Gujarat Alkalies Chemicals Limited [2017] 88 taxmann.com 722] respectively. Further, he also referred to the decision of the Hon ble High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2020] 421 ITR 686 and held that the rate at which the state e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. This price is, therefore, a contracted price. Further, there was no room or any elbow space for negotiation on the part of the assessee. Under the statutory regime in place, the assessee had no other alternative but to sell or supply the surplus electricity to the State Electricity Board. Being in a dominant position, the State Electricity Board could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition. 27. Another way of looking at the issue is, if the industrial units of the assessee did not have the option of obtaining power from the captive power plants of the assessee, then in that case it would have had to purchase electricity from the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market value of power as understood in the common parlance. The price at which the surplus power supplied by the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equated with the market value as is understood for the purpose of Section 80IA (8). On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under Section 80 IA of the Act. 30. Thus on a careful consideration, we are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board s rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under Section 80-IA of the Act. 31. That being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. We find that the facts and circumstances of the present case are similar and identical to the facts and circumstances before the Hon ble Supreme Court in the case of CIT v. M/s. Jindal Steel Power Limited (supra) and the ratio laid down by the Hon ble Supreme Court is applicable to the facts on hand. Therefore, we hold that the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under section 80IA of the Act. By respectfully following the decision of the Hon ble Supreme Court in the case of CIT v. M/s. Jindal Steel Power Ltd. (supra), the claim of the assessee is allowed. The order of the ld. CIT(A) is justified and the grounds raised by the Revenue are dismissed. 17. Now we shall take up appeal in ITA No. 687/Chny/2023 for AY 2017-18: 18. Ground Nos. 1 to 3 raised by the Revenue is general in nature and requires no adjudication. 19. Grounds No. 4 5 raised by the Revenue are similar to the grounds No. 4 5 in I.T.A. No. 686/Chny/2023 for assessment year 2015-16, wherein, we took a view that the rate at which State Electricity Board supplied electricity to the industrial consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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