2024 (12) TMI 545 - AT - Income Tax

Assessee wins section 80-IA deduction appeal on captive power transfer pricing using State Electricity Board consumer rates

Bhagwati Power and Steel Limited Versus Assistant Commissioner of Income Tax- Central Circle 2 Raipur

Bhagwati Power and Steel Limited Versus Assistant Commissioner of Income Tax- Central Circle 2 Raipur - TMI Issues Involved:1. Disallowance of deduction under Section 80-IA of the Income Tax Act due to downward adjustment in arm's length price for power transfer.2. Disallowance of deduction under Section 80G of the Income Tax Act.3. Double disallowance of deduction under Section 80G.4. Non-adjustment of brought forward MAT Credit.5. Short grant of interest under Section 244A.6. Difference in total income as per assessment order and computation sheet.7. Initiation of penalty proceedings under Sections 271AA and 270A.8. Jurisdictional validity of the assessment orders and DRP directions.Detailed Analysis:1. Disallowance of Deduction under Section 80-IA:The primary issue concerns the disallowance of the deduction claimed under Section 80-IA due to a downward adjustment in the arm's length price (ALP) for the transfer of power from the captive power unit to the steel manufacturing unit. The Transfer Pricing Officer (TPO) determined the ALP at INR 3.42 per unit, which was lower than the rate of INR 5.77 per unit used by the assessee. The assessee argued that the market value should be the rate at which the State Electricity Board supplies power to consumers, as affirmed by the Supreme Court in CIT vs. Jindal Steel & Power Ltd. The Tribunal agreed with the assessee, citing past decisions and the Supreme Court's ruling that the market value should reflect the rate charged to industrial consumers, not the rate at which power is sold to a supplier like the State Electricity Board.2. Disallowance of Deduction under Section 80G:The assessee claimed a deduction under Section 80G for donations made, which were part of the Corporate Social Responsibility (CSR) expenditure. The AO disallowed this claim, arguing that CSR expenses cannot qualify for Section 80G benefits. However, the Tribunal noted that the Income Tax Act does not restrict deductions for donations forming part of CSR, except for specific funds like the Swachh Bharat Kosh and Clean Ganga Fund. The Tribunal, following precedents, held that the assessee is entitled to the deduction under Section 80G, provided the donations meet the statutory conditions, and remanded the matter to the AO for verification.3. Double Disallowance of Deduction under Section 80G:The assessee contended that there was a double disallowance of the INR 4,00,000 deduction under Section 80G. Since this issue is related to the previous ground, the Tribunal remanded it to the AO for re-evaluation and correction if necessary.4. Non-adjustment of Brought Forward MAT Credit:The assessee claimed that the AO failed to adjust the available MAT Credit against the tax payable under the normal provisions. The Tribunal did not provide a separate adjudication on this issue, indicating it as consequential.5. Short Grant of Interest under Section 244A:The assessee argued that the interest under Section 244A was computed for 15 months instead of 46 months. The Tribunal did not specifically adjudicate this issue, treating it as consequential.6. Difference in Total Income as per Assessment Order and Computation Sheet:The assessee pointed out a discrepancy between the total income figures in the assessment order and the computation sheet. The Tribunal did not provide a separate ruling, considering it a consequential issue.7. Initiation of Penalty Proceedings under Sections 271AA and 270A:The initiation of penalty proceedings was challenged by the assessee. The Tribunal did not address this issue separately, suggesting it was either consequential or premature.8. Jurisdictional Validity of Assessment Orders and DRP Directions:The assessee questioned the jurisdictional validity of the draft and final assessment orders and the DRP's directions. The Tribunal did not specifically rule on this issue, implying it was either not ripe for adjudication or deemed to be without merit.Conclusion:The Tribunal allowed the appeal regarding the deduction under Section 80-IA, aligning with judicial precedents. It also remanded the Section 80G deduction issues for verification. Other grounds were treated as consequential, general, or academic, with no separate adjudication provided. The appeal was thus partly allowed for statistical purposes.