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TMI Blog2024 (6) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in the open market is the right comparison as per explanation (i) to section 80IA(8) of the Act. We also notice that the coordination bench for AY 2017-18 has also held that TPL is not the correct comparison for CUP since the transaction of TPL which exclusively supplies to GEB is not an uncontrolled transaction. However the arguments of the ld DR is that if TPL is to be rejected then GEB also should be rejected since both are not un-controlled transactions and that the rate adopted in independent platform such as rates of Indian energy exchange needs to be considered. In assessee's case CUP method is applied where rate at which GEB supplies electricity to the non-eligible unit is compared with rate which the eligible unit supplies electricity. These facts being similar to the above decision of the Tribunal we are of the considered view that GEB is the right comparison for external CUP and that there is no reason to hold that rates of Indian energy exchange need to be considered in assessee's case even in case where explanation (ii) to section 8-0IA is applicable in assessee's case. Accordingly on that count also we hold that no further adjustment is nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i ('DRP') under section 144C(5) of the Income-tax Act, 1961 ('Act')] grossly erred, on fact and in law, in making upward transfer pricing addition of Rs. 12,99,46,410/- u/s. 92 of the Act in respect of specified domestic transaction of inter-unit transfer of power from the eligible undertaking u/s 80-IA of the Act namely, Power Plant TT-12 to Other Manufacturing undertaking of the Appellant. In doing so, on the facts and in law, the Ld. AO/Ld. TPO grossly erred: 1.1. in considering the Gujarat Electricity Regulatory Commission's order in case No.1696 of 2018 dated 31.03.2018 in case of M/s Torrent Power Ltd. - Generation, Ahmedabad as a lone suitable comparable instance for the purpose of application of the Comparable Uncontrolled Price Method ('CUP method ) as prescribed in the Income-tax Rules, 1962. 1.2. in not appreciating that the level of market of the comparable transaction adopted by the Ld. AD/Ld. TPO (following the directions of DRP under section 144C (5) of the Act) is different as compared with the level of market in which the Appellant operates being transaction of power supply between power producer and end consumer. 1.3. in rejecting the econo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price (ALP) of the impugned transactions. The assessee, in the Transfer Pricing Report has bench marked the transaction using Comparable Uncontrolled Method (CUP) in which the rate at which Gujarat Electricity Board supplies electricity to the assessee is compared with the rate of Rs. 6.58/Kwh at which the eligible unit supplies electricity to non-eligible unit to conclude that the same is at arm's length. However the TPO did not accept the bench marking done by the assessee and passed an order making an adjustment of Rs. 15,10,08,540/- by adopting the power purchase cost charged by Gujarat Urja Vikas Nigam Ltd. (GUVNL) while purchasing power from coal based thermal power generating units in Gujarat i.e. Rs. 4.09 / Kwh. Aggrieved assessee filed its objection before the DRP. The DRP directed the TPO to adopt the rate at which electricity is supplied by Torrent Power Ltd (TPL) and accordingly the TP Adjustment was revised to Rs. 14,37,31,020. The AO in the final assessment order restricted the disallowance to Rs. 12,99,46,410/- being the amount claimed by the assessee under section 80IA of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,020 which got restricted to Rs. 12,99,46,410/- being the amount claimed as deduction under section 80IA(8) of the Act. 5. Before us the ld. AR submitted that the identical issue for AY 2017-18 has been considered by the co-ordinate bench in assessee's own case wherein the Tribunal has held in favour of the assessee. The ld AR drew our attention to the decision of the Hon'ble Supreme Court in the case of CIT vs Jindal Steel Power Limited ([2023] 157 taxmann.com 207 (SC)) where it has been held that the market value of power supplied by assessee to its industrial units should be computed by considering rate at which State Electricity Board supplied power to consumers in open market for the purpose of deduction under section 80IA(8) of the Act. The ld AR also submitted that the rate at which TPL as held by the DRP is not the correct comparable since many factors which the revenue raised while comparing rate charged by GEB are applicable to TPL also. 6. The ld. DR on the other hand argued that if the comparison with rate charged by TPL is to be rejected then the rate charged by GEB also needs to be rejected since both are not charging purely un-controlled pricing. The ld DR f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unals as well as the High Courts, and particularly the judgement of (i) Hon ble Chhattisgarh High Court in CIT vs. Godawari Power Ispat Ltd (2014) 42 taxmann.com 551; (ii) PCIT vs. Gujarat Alkalies Chemicals Ltd. reported in 395 ITR 247 (Guj), wherein the Hon ble Gujarat High Court specifically said that generation of power for captive consumption has to be computed considering the rate of power at each electricity board supplied power to its customers. He further referred to the decision of another Jurisdictional High Court in the case of CIT vs. ITA No.468/Mum/2022 M/s. Tata Chemicals Ltd. 12 Reliance Industries Ltd., reported in 421 ITR 686 (Bom), wherein the Hon ble High Court held that, if assessee had set up a captive power generating unit and provided electricity to its another unit and claimed deduction under section 80-IA in respect of profits arising out of such activity then the valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers. Besides this, catena of decisions of the Coordinate Bench has also been filed wherein similar view has been taken. 11. The entire contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market value of the transaction of sale of electricity. Section 80 IA provides that gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4), then while computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such ITA No.468/Mum/2022 M/s. Tata Chemicals Ltd. 14 business for ten consecutive assessment years. However, subsection (8) provides 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, the consideration, if any, for such transfer of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction, the profits and gains of such eligible business shall be computed as if the transfer had been made at the market value of such goods or services. The relevant specimen reads as under:- 8) Where any goods for services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction between the persons other than associated enterprises in uncontrolled conditions. Thus, the second option for determining the market value is the mechanism of transfer pricing provision for determining the arm s length price. ITA No.468/Mum/2022 M/s. Tata Chemicals Ltd. 16 14. The entire case of the department is that, since it is SDT in term of Section 80I (8), therefore, the market value has to be in accordance with the determination of arm s length price u/s. 92C r.w.r. 10BA. In other words, once any transaction is hit by 80IA (8), then compulsorily, the market value has to be determined in accordance with the arm s length principle and not otherwise. If the TPO s contention and the opinion is accepted, then under all the transactions which are covered u/s. 80IA(8) would compulsorily be determined as per transfer pricing provision as all the transactions falling u/s. 80IA(8) will be specified domestic transactions only. If that is the only opinion which is to be upheld, then, ostensibly the entire exercise of ld. TPO is justified, that is, the whole process of determining, who is the tested party, what should be the FAR analysis of the tested party vis- -vis the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post introduction of SDT in Section 92BA w.e.f. 01/04/2013, then statute would have provided that for the purpose of Sub-section (8) to Section 80IA, market value in relation to goods or services means the arm s length price as defined in clause (ii) of Section 92F. If both the clauses exist then one has to see if the market value is discernable from the price for such goods would ordinarily fetch in the open market unless such price is not available, then there is an option for determining the market value as per the arm s length price. 16. Here in this case what is required to be seen is, whether the market value in the price charged by the eligible unit for the sale of electricity to another unit can be benchmarked with the price on which GEB is supplying to the customers. From the records, it is seen that the manufacturing unit of the assessee also buys electricity from GEB at the same price of Rs. 6.90/- per unit and the same price is being paid to the eligible unit also. The case of the department is that since assessee is generating electricity and supplying it to the manufacturing unit, therefore, functionally it is similar to entities which are generating electricity and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulatory Commission (GERC) has fixed tariff of Rs. 3.99 per unit for supplying it to the GEB for F.Y.2016-17. First of all nothing has been brought on record whether, M/s. Torrent Power Ltd. (TPL) was supplying to other entities or industry or it was purely supplying to GEB. What is culled out is that, these power generating entities were manufacturing and supplying 100% to the GEB and the price is influenced by GEB, although fixed by GERC, but if there is only one party to whom sale is made and the prices and other conditions are purely influenced by that entity, then it becomes a tainted transaction. The reason being, Section 92A dealing with the meaning of the associated enterprises stipulates that two enterprises shall be deemed to be associated enterprises if any time during the previous year, the goods or articles manufactured or processed of one enterprise are sold to other enterprise which is specified by the other enterprises and the prices and the conditions are influenced by the other enterprise. This has been specifically provided in 92A (2)(i) which reads as under:- (i) The goods or articles manufactured or processed by one enterprise are sold to the other enterprise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under section 80-IA of the Act. The facts for year under consideration being similar respectfully following the above decision of the co-ordinate bench we hold that the TP Adjustment is not sustainable and the addition made in this regard hereby deleted. 9. We also notice that the coordination bench for AY 2017-18 has also held that TPL is not the correct comparison for CUP since the transaction of TPL which exclusively supplies to GEB is not an uncontrolled transaction. However the arguments of the ld DR is that if TPL is to be rejected then GEB also should be rejected since both are not un-controlled transactions and that the rate adopted in independent platform such as rates of Indian energy exchange needs to be considered. In this regard, we notice that Delhi Bench of the Tribunal while considering a similar issue in the case of DCM Shriram Ltd vs Addl.CIT (ITA No.7362/Del/2018 dated 28.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng factors also which could materially affect the price in uncontrolled transaction i. quality of the product ii. contractual terms (i.e. scope and terms of warranties provided, sales are purchased volume, credit terms, transport terms) iii. level of market (i.e. whole sale or retail etc) iv. geographic market in which the transaction takes place v. date of the transaction vi. intangible property associated with the sale, foreign currency risks and alternatives realistically available to the buyer and seller the learned transfer pricing officer has used the average sale price for the financial year 2013 14 available at the Indian energy exchange. Therefore there cannot be much of the grievance when the assessee also charges the same rate for the whole year. However the claim made by the assessee before us which remains uncontroverted is that Indian energy exchange is not the main exchange where the power is traded. As per the Indian power market journey so far and way forward June 2014 report published by Indian energy exchange which is available in public domain has categorically stated that the size of power exchange-based market has grown to 3% approximately of the total electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wide disparity between the rates of Indian energy exchange which is a spot exchange compared with the rates at which the energy is actually consumed in that geographical region. This does not mean that the quoted price cannot be used for the comparability analysis in cup method. But if the prices are so divergent and the difference between the two external cup becomes irreconcilable, the external cup price which is more reliable should be used. Therefore, in our view, IEX rates for these reasons cannot be said to be an external cup available for invoking the provisions of first proviso to Section 92C (2) of the act. 10. In assessee's case CUP method is applied where rate at which GEB supplies electricity to the non-eligible unit is compared with rate which the eligible unit supplies electricity. These facts being similar to the above decision of the Tribunal we are of the considered view that GEB is the right comparison for external CUP and that there is no reason to hold that rates of Indian energy exchange need to be considered in assessee's case even in case where explanation (ii) to section 8-0IA is applicable in assessee's case. Accordingly on that count also we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atech Cements Ltd vs ACIT ([2017] 81 taxmann.com 74 (Bom)). The ld AR also submitted additional evidence of Report on determination of market value of Steam and prayed for the admission of the additional evidence also. 13. The ld DR on the other hand vehemently objected to the admission of additional ground. The ld DR submitted that the assessee is making a fresh claim of deduction before the Tribunal through additional ground and the same should not be entertained. The ld DR further submitted that the issue is not arising out of the order of the CIT(A) and that the assessee does not have any grievance arising out of the orders of lower authorities on this issue. The ld DR also brought on record the objections of the AO in admitting the additional ground vide letter dated 01.03.2024. The ld DR also submitted that in the case laws relied on by the assessee, the issue raised through additional ground was already before the AO/CIT(A) whereas in the present case this is a fresh claim made for the first time before the Tribunal. Therefore the ld DR submitted that the facts in the present case are distinguishable. The ld DR relied on the following decisions in this regard (i) Jay Bharat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's length by stating that the market value steam cannot be determined as there is no open market for steam. Accordingly we see merit in the contention that the claim made through additional ground is a not fresh one but is only an incremental claim towards transfer at market value instead of cost. Now coming to the issue of whether a claim which was not made before the lower authorities can be made for the first time before the Tribunal through additional ground we rely on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT ([1998] 97 Taxman 358 (SC)) where it has been held that 4. The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on the merits, we do not propose to answer the questions relating to the merits of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows : Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal - vide, e.g., CIT v. Anand Prasad [1981] 128 ITR 388/ 5 Taxman 308 (Delhi), CIT v. Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254 (Guj.) and CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499/[1984] 19 Taxman 278 (Guj.) (FB). Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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