Market value of captive power uses the industrial consumer tariff, increasing eligible profit computation for the deduction.

For computing profits of a captive power-generation undertaking eligible for deduction under Section 80-IA(4), the market value of electricity transferred to the assessee's industrial units is the tariff charged by the electricity board to industrial consumers. The tariff for surplus electricity supplied by a generator to the board is subject to contractual and statutory constraints and does not reflect the price available to an industrial consumer in the open market. Accordingly, eligible profits are to be calculated using the consumer tariff benchmark rather than the surplus-power supply tariff.

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Issues: Whether profits of a captive power-generation undertaking for deduction under Section 80-IA(4) are to be computed using the electricity tariff charged by the electricity board to industrial consumers rather than the tariff at which the undertaking supplies surplus power to the board.

Analysis: For determining the market value of electricity transferred by captive power plants to the assessee's industrial units, the relevant open-market benchmark is the rate charged by the electricity board to industrial consumers. The tariff for surplus power supplied by a generating company to the board is regulated by contractual and statutory constraints and does not represent the price at which an industrial consumer can procure electricity in the open market. The Tribunal's direction to compute eligible profits on the consumer tariff was consistent with the settled position.

Conclusion: The consumer tariff charged by the electricity board is the market value for computing the deduction; the issue is decided in favour of the assessee and against the Revenue.

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