TaxTMI 
TaxTMI 
2022 (1) TMI 588
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.... therefore, the FAR analysis being completely different and thus not comparable at all (ii) The Ld. CIT(A) has erred in facts and in law in ignoring the fact that as per Transfer Pricing guidelines, the functionally least complex entity is to be taken as the tested party for performing the benchmarking analysis of the transactions between Associated Enterprises and the TPO has correctly taken the CPP as the tested party. (iii) The Ld. CIT(A) has erred in facts and in law in allowing the cost of consumption at the hands of the manufacturing unit as a comparable despite the fact the tested party is the CPP and not the manufacturing unit and the comparable ought to be the price at which electricity is sold by the CPP and not cost of consumption in the hands of the manufacturing unit especially in view of the fact that the CPP is considered as an independent unit for all purposes. (iv) The Ld. CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO and allowing deduction u/s. 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s, Torrent Power, whereas, as per the FAR....
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....ite the fact that the decision of the Hon'ble High Court of Gujarat pronounced in the case of Gujarat Alkalies and Chemicals Ltd. did not consider the FAR analysis and therefore, the question of benchmarking of the transactions entered into by the Associated Enterprises to arrive at the ALP as determined by the TPO u/s. 92C of the Act was never before the Hon'ble High Court of Gujarat. (ix) The Ld. CIT(A) has erred in law and on facts in directing to delete the adjustment of Rs. 4,10,81,113/- made by the TPO towards Safe of steam by CPP to Power House relying upon the decision of Hon'ble ITAT in appellant's own case for A.Y. 2012-13, despite the fact that there was no TP reference made in the A.Y. 2012-13. (x) The Ld. CIT(A) has erred in law and on facts in directing to delete the adjustment of Rs. 4,10,81,113A made by the TPO towards Sale of steam by CPP to Power House despite the fact that the assessee has failed to provide the comparable for benchmarking of transaction of Sale of steam. (xi) The Ld. CIT(A) has erred in ignoring the provisions u/s. 80IA of the Act which allows deduction to an undertaking engaged in the generation of powe....
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....M/s. Torrent Power Ltd. from processing house. Therefore, this rate is adopted as market value by the appellant consistently over a period of time (with the charges of rate of Torrent Power). Though, the method of rate was accepted by the Ld. AO in earlier assessment the Ld. AO referred the case for determination for Arms Length Price (ALP) to the TPO who in turn by and under the order under Section 92CA(3) of the Act hold that the rate adopted by the appellant is excessive in as much as the rate charged by Torrent Power is inclusive of transmission cost whereas the CPP bears only the generation cost as the power is generated for captive consumption. On that basis the TPO restricted the sale price charged to CPP to processing house to Rs. 3.08/kwh and resultantly downward adjustment of Rs. 4,78,78,842/- in the hands of the CPP was made. According to the TPO the Torrent Power Ltd. was not an eligible entity for comparing the price and therefore, adopted the cost of generation electricity by the Gujarat State Electricity Corporation Ltd. (GSECL). 5. Apart from that, according to the Revenue even if the manufacturing unit is taken as the tested party there will be a requirement of ....
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....a-1 vs. Gujarat Alkalies & Chemicals Ltd. [2017] 88 taxmann.com 722 (Gujarat) f) Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara [2018] 97 taxmann.com 10 (Ahmedabad - Trib.) 9. We have considered the judgment passed by the Hon'ble Gujarat High Court in the case of Principal Commissioner of Income-tax - Vadodara-1 vs. Gujarat Alkalies & Chemicals Ltd. reported in, (2017) 88 taxmann.com 722 (Gujarat) wherein it has been held that deduction under Section 80IA (4) is allowable to the assessee for generation of power for captive consumption and the steam was to be computed considering rate of power on which the electricity buyer supplied power to its consumer. 10. We have further considered the judgment passed by the Coordinate Bench in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara reported in, (2018) 97 taxmann.com 10 (Ahmedabad - Trib.) on the similar issue pertaining to A.Y. 2012-13 i.e. after the insertion of domestic TP provisions. We find that relying upon the judgment passed by the Hon'ble Jurisdictional High Court in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara (supra) the Coordinate Bench was pleased to hold that in case of Ca....
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....gard to the assessment year 2013-14, the ld. DRP has observed that there is a little change in the statutory provision by virtue of section 80IA(8). The arm's length price of the goods sold by the assessee in the alleged captive power plant has to the determined. The ld. DRP thereafter observed that the TPO has determined value of the goods and services sold by its eligible units. According to the TPO captive power plant and electricity distributing companies are to be ITA No. 805 and 2744/Ahd/2017 pitted at different pedestal. According to the DRP, there is a material difference between captive power plant as a seller and distribution/transmission entity. Thus, differences are both in terms of functions performed as well as asset used. In the case of distribution and transmission entities, apart from assets used for generation of electricity huge investments have gone in laying in transmission and distribution infrastructure. These investments and related transmission and distribution function are totally missing in the CPP. It also observed that sale of electricity is regulated activity, thus, as per the law, CPP could have sold to a distribution licensee (through transmissio....
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....e to the decisions of ITAT, Mumbai and Bangalore Benches have been made: Asian Paints Vs. DOIT, Mumbai 88 taxmann.com 677, and Himalaya Drug Co. Vs. DCIT, Bangalore, 48 taxmann.com 65 (2017). The ld. counsel for the assessee also put reliance upon the decision of the Hon'ble Gujarat High Court in the cases of Mitesh Impex, 270 CTR 66. This decision propounds that when the taxability of the assessee is going to be effected, then it can raise a fresh plea before the appellate authorities. Taking a leaf from this reasoning, ITAT, Mumbai and Bangalore have propounded that fresh claim can be made even before the DRP. Thus, respectfully following these decisions, we uphold that in the assessment year 2012-13, the DRP ought to have entertained the claim of the assessee. ITA No. 805 and 2744/Ahd/2017 31. So far as the issue on merit is concerned, the Hon'ble Gujarat High Court in the of Gujarat Alkalies and Chemicals Ltd. has considered the following question: Whether the Tribunal was right in law in allowing the assessees claim of deduction of Rs. 1954 crores u/s. 80IA(4) of the I.T. Act, 1961, when the assessee had adopted rate power generation at Rs. 4....
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.... by the Revenue authority. 6. Under sub-section (8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services, it is in this context that the question of substituting the actual consideration by the market value comes info picture. 7. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section (8) of Section 80IA of the Act. However, In so far as the Tribunal's reasoning to adopt the market value of the goods at Rs. 5.40 ps, per unit is con....
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....arket value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error, it can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4,90 to ascertain the market value of electricity generated by the eligible,' unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." 5. Issue once again reached the Division Bench of this Court in case of CIT vs Alembic Ltd. in Tax Appeal No. 471/2009 and connected appeals. The Division Bench referring to e....
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....A of the Act. Accordingly, the adjustment and the subsequent additions made by the AO towards sale of electricity by CPP amounting to Rs. 4,78,78,842/- is deleted AO is directed to delete the same." Considering the entire aspect of the matter we find that the judgment particularly passed in the matter of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara passed by the Coordinate Bench on the similar issue, the judgment passed by the Hon'ble Jurisdictional High Court in the case of CIT-Vadodara-1 vs. Gujarat Alkalies & Chemicals Ltd. (Supra), the Ld. CIT(A) deleted the downward adjustment and subsequent additions made by the TPO/AO holding that in case of Captive Power Plant (CPP) eligible for deduction under Section 80IA the market rate at which the receiving unit is procuring the electricity can be adopted as sale price by the CPP which in our considered opinion is just and proper so as to warrant interference. Thus, the ground of appeal preferred by the Revenue is found to be devoid of any merit and found to be dismissed. 11. Ground Nos. 9 & 10 relate to deletion of adjustment of Rs. 4,10,81,113/- made by the TPO towards Sale of steam by CPP to Power House relying upon the....
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.... CIT(A) Copy of the order is enclosed herewith marked as Annx. 2011-12 ITAT Copy of the order is enclosed herewith marked as Annx. 1.3 Therefore, Your Goodself is requested to follow the order of the CIT(A)/ITAT in own case of the Assessee and not to make any addition as has been proposed in the SCN. 1.4 Further to clarify, generated steam having cost at Rs. 1.22 per Kg. assessee is submitting herewith the third party cost certificate. Further to note that same matter is already dealt by the Honourable CIT(A) and ITAT in previous year and it is a covered matter. 1.1 Further to add that the benchmark conversion rate of 4.7 Kg steam = 1 unit of power is well established and part of previous appellate orders. However the certificate for same is enclosed herewith. Further to state that the steam is not sold at Rs. 8.04/unit. Your assessee has submitted the pricing comparison for your better understanding that even after conversion of steam into power and as if sold as power, the sales value of steam sold is much lesser than the power sold value. The same is reproduced below, Steam transfer to Process Total Sale value Conv....
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.... had not carried out proper benchmarking analysis in transfer pricing report Hence, the transfer pricing analysis carried out by the assessee with respect to the above mentioned transaction is faulty. In view of the above, the information as well as the data used in computation of the arms length price is not reliable and correct. The provisions of Sec. 92(3)(c) are invoked and the TP document is proposed to be rejected. As, the assessee has failed to discharge its onus, the TPO proceeds to determine ami's length price of sale of steam as under: 30. Determination of the ALP In view of the above mentioned discussion, the ALP rate of sale of steam is determined by adopting CUP as MAM and the mark up charged is thus disallowed. The assessee failed to provide supporting evidences and proper benchmarking analysis regarding the mark up charged to the cost of generation of steam, Hence, the assessee failed to discharge the onus and thus could not substantiate the mark up charged. Thus, the mark up charged by the assessee for sale of steam remains unsubstantiated- Hence, this office disallows the mark up charged on sale of steam transaction. Particulars ....
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....own case I do not find any justification in the action of AO and accordingly, the adjustments in the value of steam sold by CPP to Power House is deleted. AO is directed to delete the same." 16. We find that the issue has already been considered by the Coordinate Bench in assessee's own case for A.Y. 2011-12 and 2012-13 in ITA No. 125/Ahd/2015 and 1734/Ahd/2016 respectively. While dealing with the issue in assessee's own case for A.Y. 2012-13 the Coordinate Bench was pleased to observe as follows: "4. We have heard the Ld. Counsel appearing for the respective parties, we have also perused the relevant materials available on record and also carefully considered the judgment passed by the Co-ordinate Bench in assessee's own case in appeal preferred by Revenue in ITA No. 125/Ahd/2015 for A.Y. 2011-12. The identical issue has been considered by the Co-ordinate Bench in the said judgment, the relevant whereof is as follows:- "6. In earlier years, on the basis of such valuation, deduction u/s. 80IA (4)(iv) of the Act were allowed from A.Y. 2006-07. In our considered opinion, assessee is therefore on the principle of consistency, eligible for such deductio....
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....NSES INCURRED TOTAL RS/ KC TOTAL RS/ KC TOTAL *S/ KG 1 LIGNITE & COAL RS. 117202086 RS. 111244176 RS. 125388619 88141936 73476124 58649912 2 MAINTENANCE EXPENSES RS. 13569303 RS. 7530700 RS. 11263070 8103337 7048532 625896 3 SALARIES & WAGES RS. 3371517 RS. 3459680 RS. 3096961 3730681 2906145 1977572 4 INTEREST RS. 361661 RS. 859515 RS. 1495029 2321120 2382390 2845500 5 DEPRECIATIO N RS. 11149377 RS. 11149458 RS. 11149556 11149446 11107858 11107858 &n....
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....sp; 7. We have also gone through the assessment order in details in that there is a finding of the AO in Page No. 9 Para ii, wherein she has stated that 80IA(4) is an allowable deduction on steam and there is no dispute on it, steam has already been held to be power within the meaning of Section 80IA(4) of the Act. When on one hand AO herself is accepting the steam is eligible for deduction and on the other hand she is disallowing the deduction, it itself is contradictory, when once the AO is of the opinion that deduction is available on steam then no disallowance should have been made only on assumptions basis. The assessee has submitted several decisions in support of its contention and same are stated therein, the steam was transferred at a higher price. Further assessee has submitted engineering certificate at Page No. 10 of Paper Book in which also the cost of generation of steam can be considered in the range of Rs. 1.16/- to 1.25 per kg of steam. Further the saving in cost due to Captive production....