2015 (6) TMI 1243 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on deduction under section 80IA for inter-unit power transfers

The Tribunal dismissed the Revenue's appeal against the CIT(A)'s decision to disallow a deduction under section 80IA for assessment year 2008-09. The ... Deduction claimed u/s 80IA - Allegation of the AO was that the assessee company has inflated the profit of “Power Division” and correspondingly claimed higher deduction u/s 80IA(4) - HELD THAT:- The issue is squarely covered by the decision of Bilaspur Bench of the Tribunal in the case of ACIT V/s Godavari Power & Ispat Ltd [2011 (11) TMI 107 - ITAT, BILASPUR] - Also in Godavari Power & Ispat Ltd. case [2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] wherein on this very fact that the said assessee was a manufacturer of Iron steel and captive power plant has supplied electricity to its manufacturer unit which was at higher rate than the power supplied to Chhattisgarh State Electricity Board and held that CIT-A and the Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open market namely the price charged by the Board - Decided against revenue. Issues Involved:Appeal against deletion of deduction under section 80IA by the CIT(A) for assessment year 2008-09.Detailed Analysis:1. The appellant, a company engaged in the business of manufacturing and trading of sponge iron, ingots, and power generation, claimed a deduction under section 80IA of the Income Tax Act, 1961. The Assessing Officer (AO) observed that the appellant had inflated profits by selling power to its own division at a higher rate compared to the rate charged to the Electricity Board, leading to higher deduction claimed under section 80IA(4)(iv).2. The CIT(A) analyzed the case in light of section 80IA(8), which requires the value charged for inter-unit transfer to correspond to market value. The CIT(A) noted that the appellant charged Rs.4 per unit to its division, while the Electricity Board's average price was Rs.2.80 per unit. Referring to various judicial precedents, the CIT(A) determined that the market value should be Rs.3.95 per unit, resulting in a disallowance of Rs.11,76,763 instead of the initial disallowance of Rs.2,82,42,302 made by the AO.3. The Tribunal considered the decision of the Bilaspur Bench in a similar case and a judgment of the High Court of Chhattisgarh, which emphasized that the market value should be based on the rate of power available in the open market. The Tribunal upheld the CIT(A)'s decision, noting that the issue had already been settled by the High Court. The Tribunal rejected the Revenue's appeal, highlighting that the CIT(A) had correctly applied the concept of 'market price' and granted partial relief, which was not challenged by the appellant.4. Ultimately, the Tribunal dismissed the Revenue's appeal, relying on the legal principles established by the High Court and the correct application of market value in determining the deduction under section 80IA. The decision was based on the interpretation of market price as per statutory provisions and judicial precedents, leading to the rejection of the Revenue's grounds and upholding the CIT(A)'s order.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the legal interpretations applied, and the final decision rendered by the Tribunal.