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of <h1>ITAT favors yarn manufacturer in dispute over deduction under Section 80-IA of Income-tax Act.</h1> <h3>M/s Viking Textiles (P) Ltd. Versus The Deputy Commissioner of Income Tax</h3> M/s Viking Textiles (P) Ltd. Versus The Deputy Commissioner of Income Tax - TMI Issues:Claim for deduction under Section 80-IA of Income-tax Act, 1961 regarding captive consumption of electricity generated by windmills.Analysis:1. The appellant, engaged in yarn manufacturing, installed windmills for generating electricity. The dispute arose when the Assessing Officer (A.O.) adopted the rate at which the electricity was sold to the Electricity Board, rather than the rate at which it was purchased for consumption, for calculating deduction under Section 80-IA of the Act. The A.O. contended that the cost reduction due to electricity production benefited the yarn manufacturing units, not the windmills. The A.O. relied on the decision in Liberty India v. CIT and fixed the transfer price at Rs. 2.70 per unit, leading to a substantial reduction in the deduction claimed by the appellant.2. The CIT(Appeals) allowed set-off of notional carried forward losses and depreciation but upheld the A.O.'s approach in determining the transfer price. The appellant's appeal was presented before the ITAT, where no representation was made on behalf of the appellant. The Departmental Representative (D.R.) argued that the profits of the windmills should be calculated based on the price at which the electricity was sold to the Electricity Board, i.e., Rs. 2.70 per unit.3. The ITAT analyzed the situation and concluded that the consideration recorded by the appellant for purchasing power at Rs. 3.50 per unit corresponded to the market value of the power supplied for captive consumption. The Tribunal disagreed with the decisions cited by the D.R. and supported the appellant's case based on the annual landing cost of electricity purchased from the Tamil Nadu Electricity Board. Consequently, the ITAT allowed the appeal filed by the appellant, emphasizing that the profits of the eligible undertaking should be determined based on the actual cost of electricity purchased.This detailed analysis of the legal judgment highlights the key issues, arguments presented, and the final decision rendered by the ITAT in favor of the appellant regarding the deduction under Section 80-IA of the Income-tax Act, 1961.
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