Section 80-IA valuation of captive windmill power follows the industrial supply tariff, not the Board sale tariff.

For computing deduction under Section 80-IA on windmill power captively used in a manufacturing unit, the transfer price must reflect the market value of the electricity under Section 80-IA(8). Where the windmill undertaking and the manufacturing business are distinct, the value of power transferred for captive consumption is not fixed by the tariff at which electricity is compulsorily sold to the Electricity Board, because that rate is not market-determined in a regulated setting. The relevant commercial value is the rate charged by the Board for supply to the assessee's industrial consumer unit, and that basis was accepted for valuation.

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Issues: Whether, for computing deduction under Section 80-IA on electricity generated by windmills and captively consumed in the assessee's manufacturing business, the transfer price should be taken at the rate at which electricity was sold to the Electricity Board or at the rate charged by the Board for supply to the assessee's industrial unit.

Analysis: The eligible windmill undertaking and the manufacturing unit were distinct businesses, so the value recorded for power transferred for captive use had to correspond to the market value under Section 80-IA(8). The rate at which electricity was compulsorily sold to the Electricity Board was not a market-determined price, because the tariff arose in a regulated setting under the Electricity (Supply) Act, 1948 and not in a competitive market. By contrast, the rate at which the Board supplied electricity to the assessee's industrial consumer unit reflected the relevant commercial value for the power used in the manufacturing business. The Court therefore accepted the assessee's basis of valuation.

Conclusion: The transfer price for captive consumption was to be taken at Rs. 3.50 per unit, and not at Rs. 2.70 per unit, for computing the deduction under Section 80-IA.

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