TaxTMI 
TaxTMI 
2011 (11) TMI 683
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....city Board. The issue relates to claim for deduction under Section 80-IA of Income-tax Act, 1961 (in short "the Act") in respect of electricity generated by the assessee from its windmills and captively used by it for its yarn manufacturing business. 2. Short facts apropos are that assessee, which is in the business of manufacturing of yarn, had also installed three windmills for which it had adopted impugned assessment year as the initial assessment year for the purpose of claim of deduction under Section 80-IA of the Act. While making the claim for deduction under Section 80-IA of the Act in respect of the power produced by the windmills, assessee adopted the rate at which the power was sold by M/s Tamil Nadu Electricity Board to it. The....
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....e Apex Court in the case of Liberty India v. CIT (317 ITR 218), A.O. was of the opinion that assessee could not be permitted to inflate the profit from its windmills unit and he, therefore, adopted the price of Rs. 2.70 fixed by the Tamil Nadu Electricity Board for purchase of power from windmills, to be the correct pricing for computing the profits of the windmills. Because of this difference in fixation of transfer price of the electricity, the claim of the assessee for deduction under Section 80-IA came to be substantially reduced. It is also necessary to mention here that Assessing Officer had in fact disallowed the whole of the claim, since there was no profit left according to him, after setting off the notional carry forward losses a....
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....ot be appropriate when the power was regulated by Electricity Board. The most appropriate rate would be the rate at which the electricity was purchased by Tamil Nadu Electricity Board from the assessee. Therefore, according to him, the orders of the authorities below needed to be confirmed. 6. We have perused the orders and heard the contention of learned D.R. The short question arising here is whether the per unit rate of electricity, for the purpose of computing the profits of the windmills of the assessee, has to be taken at Rs. 2.70 or at Rs. 3.50. Rs. 2.70 was the price given by Electricity Board to the assessee for the electricity generated by the windmills but, such electricity when supplied by the Electricity Board to the yarn manu....
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....sessee, in turn, purchased the power from the Electricity Board for its yarn manufacturing unit. In terms of Electricity (Supply) Act, 1948, legislature has put restrictions on establishment of power generating units and their functioning. Power generating concerns are allowed to use power for captive consumption of their other units, and the surplus, if any, has to be supplied or transferred to State Electricity Boards. Section 43 of Electricity (Supply) Act, 1948 authorizes State Electricity Board to enter into arrangements for purchase and sale of electricity under certain conditions mentioned therein. Section 43A of the said Act also lays down rules and conditions for determining tariff for the sale of electricity by a generating compan....