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TMI Blog2025 (1) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 417 - SUPREME COURT] as held 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. Thus, Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. In the present case before us, the market value is Rs 4.05 per unit being the rate charged by CSEB on the industrial consumers, whereas the transfer price between two units of the assessee was Rs 4 per unit. The same is well within the market rate of Rs 4.05 per unit and hence the price of Rs 4 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 4. The assessee has two different eligible units for claiming deduction under section 80 IA of the Act. These included a 15MW Windmill unit and a 30MW thermal power plant. The assessee claimed deduction of Rs 8,98,46,843/- under section 80IA(4) of the Act only for the Windmill unit as it had suffered losses in the thermal power plant. Accordingly, thus no deduction under section 80 IA of the Act was claimed by the assessee for thermal power plant during the year under consideration. The assessee has had transferred electricity at the rate of Rs 4 per unit to its Washeries division. As per the rates published by Chhattisgarh State Electricity Board (CSEB) for the mines and cement industry , the published rate was Rs 4.05 per unit. Accordingly, the assessee claimed that the transfer of electricity from thermal unit to washeries division at Rs 4 per unit was at Arm's Length Price (ALP) thereby satisfying the TP regulations. 5. The Learned TPO did not accept the contention of the assessee. The Learned TPO applied an average of the rate published by CSEB (as adjusted by transmission and distribution cost but not adjusted for transmission and distribution losses) and the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of CIT vs Jindal Steel Power Ltd reported in 157 taxmann.com 207 (SC), wherein it was held as under:- 22. Reverting back to sub-section (8) of Section 80-IA, it is seen that if the assessing officer disputes the consideration for supply of any goods by the assessee as recorded in the accounts of the eligible business on the ground that it does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under section 80-IA, the profits and gains of such eligible business shall be computed by adopting arm's length pricing. In other words, if the assessing officer rejects the price as not corresponding to the market value of such good, then he has to compute the sale price of the good at the market value as per his determination. The explanation below the proviso defines market value in relation to any goods to mean the price that such goods would ordinarily fetch on sale in the open market. Thus, as per this definition, the market value of any goods would mean the price that such goods would ordinarily fetch on sale in the open market. 23. This brings to the fore as to what do we mean by the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... former to the latter. The price for supply 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 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase agreement cannot be equated with 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its and gains on the basis of the rate chargeable by the distribution licensee from the consumer and that the benefit could only be claimed on the basis of the rates fixed by the tariff regulatory commission for sale of electricity by the generating company. Facts being clearly distinguishable, this decision can be of no assistance to the revenue. 33. Before parting with this issue, we may mention that reliance placed by Mr. Rupesh Kumar, learned counsel for the revenue on the definition of the expression market value as defined in the explanation below sub-section (6) of section 80 A of the Act is totally misplaced inasmuch as sub-section (6) was inserted in the statute with effect from 1-4-2009 whereas in the present case we are dealing with the assessment year 2001-2002 when this provision was note even borne. 34. That being the position, we have no hesitation in answering this issue in favour of the assessee and against the revenue. (emphasis supplied by us) 7. Though this decision was rendered in the context of claim of deduction under section 80IA of the Act, but the principle laid down thereon as to what would be the market value is to be applied to the facts of the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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