2016 (10) TMI 1111 - HC - Income Tax

Deduction under Section 80IA(4) requires market value for power transfers within businesses, not actual purchase price

The HC held that for deduction under Section 80IA(4), when power generated for captive consumption is transferred within the assessee's businesses, the ... Deduction u/s 80IA(4) - allowability to the assessee for generation of power for captive consumption - eligibility criteria - claim on the basis of purchase price of power from GEB and substituting the rates of 2.47 per unit adopted by the Assessing Officer - Held that:- As following in SHAH ALLOYS LIMITED case [2011 (11) TMI 762 - GUJARAT HIGH COURT], under similar circumstance under sub- section (8) of Section 80IA of the Act, if it is found 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 or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. Also said Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub- section (8) of Section 80IA of the Act. However, in so far as the Tribunal's reasoning to adopt the market value of the goods at ₹ 5.40 ps. per unit is concerned, we find no error. Decided against revenue Issues:1. Whether deduction u/s 80IA(4) is allowable for power generation for captive consumptionRs.2. Whether the Tribunal was justified in allowing the deduction u/s 80IA(4) based on the purchase price of power from GEB instead of the rate adopted by the Assessing OfficerRs.Analysis:Issue 1: The appeal involved questions regarding the allowance of deduction under section 80IA of the Income Tax Act for power generation for captive consumption. The Tribunal upheld the decision of CIT(A) in allowing the deduction to the assessee. The Court referred to previous judgments where similar issues were discussed. The Tribunal considered the market value of electricity supplied by the CPP Unit to be the same as charged by GEB from consumers. The Court agreed with this reasoning, stating that the market value should be based on the actual price paid by consumers, regardless of any components like electricity duty. The Court emphasized that the market value should be determined based on the price paid by consumers, and upheld the Tribunal's decision to allow the deduction under section 80IA.Issue 2: Another tax appeal raised similar questions regarding the deduction u/s 80IA(4) for the same assessee in a separate assessment year. The Tribunal allowed the deduction based on the purchase price of power from GEB, contrary to the rate adopted by the Assessing Officer. The Court referred to previous judgments where similar issues were discussed. The Court noted that the Assessing Officer had calculated the deduction amount based on a different rate, resulting in a loss instead of a profit shown by the assessee. However, the Tribunal's decision to consider the market value of electricity supplied by the assessee at the rate charged by GEB was upheld by the Court. The Court reiterated that the market value should be determined based on the actual price paid by consumers. The Court dismissed the tax appeals, holding that the questions were considered on multiple occasions and consistently decided against the Revenue.