Tribunal affirms transfer pricing rules for power units, allows education cess deduction

The Tribunal upheld the Commissioner's decision on the interpretation of Section 80IA(8) of the Income Tax Act, 1961, regarding transfer pricing of power between eligible and non-eligible units. It was determined that the electricity duty component should be included in determining the transfer price of power. Additionally, the Tribunal allowed the deduction of education cess under Section 37 of the Act, citing judicial pronouncements supporting the claim. The Tribunal dismissed the Revenue's appeal and approved the Cross Objection, ultimately affirming the decisions based on legal precedents.

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Issues involved:
1. Interpretation of Section 80IA(8) of the Income Tax Act, 1961 regarding determination of transfer pricing of power between eligible and non-eligible units.
2. Allowability of deduction of education cess under Section 37 of the Act for arriving at taxable income.

Interpretation of Section 80IA(8):
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2006-07. The Commissioner followed the Tribunal's propositions in the assessee's case for the AY 2013-14 and granted relief based on the transfer pricing of power between eligible and non-eligible units. The dispute centered around whether the electricity duty component should be considered in determining the transfer price of power. The Commissioner, supported by various judgments, held that the landed cost, including electricity duty, should be considered as the transfer price. The Tribunal upheld the Commissioner's decision, citing precedents and judicial approvals. Additionally, various High Courts and Tribunals supported the inclusion of electricity duty in the transfer pricing calculation. Thus, the Tribunal upheld the methodology followed by the appellant in determining the transfer rate for Section 80IA(8) at Rs. 4.36/unit.

Allowability of deduction of education cess:
Regarding the Cross Objection filed by the assessee concerning the deduction of education cess under Section 37 of the Act, a delay of 303 days was noted in filing the objection. The assessee attributed the delay to the emergence of judicial pronouncements on the issue post the original filing. The Tribunal, after considering both sides, condoned the delay, noting the genuine cause preventing timely filing. The Cross Objection focused on the claim of deduction of education cess paid, which was supported by the decision of the Rajasthan High Court and the Bombay High Court, stating that education cess is allowable as an expenditure. Following these precedents, the Tribunal allowed the claim of the assessee, dismissing the Revenue's appeal and approving the Cross Objection.

In conclusion, the Tribunal upheld the Commissioner's decision regarding the interpretation of Section 80IA(8) and allowed the deduction of education cess under Section 37 of the Act based on relevant judicial pronouncements and legal precedents.

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