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Issues: Whether, for computing deduction under section 80-IA, the electricity generated by the assessee's windmills and transferred for captive consumption in its manufacturing unit was to be valued at the rate at which the assessee sold power to the Electricity Board or at the rate at which the Board supplied power to the assessee for industrial consumption.
Analysis: The eligible business and the manufacturing business were separate, and the transfer had to be valued at the market value under section 80-IA(8). The rate at which the assessee sold electricity to the Electricity Board was not treated as true market value because the tariff was fixed in a regulated environment under the Electricity (Supply) Act, 1948 and was not the result of competitive pricing. By contrast, the rate at which the Board supplied electricity to the assessee's industrial unit represented the price applicable to industrial consumers. On the facts, that higher rate reflected the appropriate market value for the transfer to the captive-consuming unit.
Conclusion: The electricity transferred for captive consumption had to be valued at the rate charged by the Electricity Board to the assessee for industrial supply, not at the lower rate at which the Board purchased power from the windmills.
Ratio Decidendi: For section 80-IA(8), where a captive transfer of electricity occurs in a regulated tariff regime and the sale price to the electricity board is not a competitive-market price, the market value is the price applicable to the assessee as an industrial consumer.
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