AI Drafter 
TaxTMI 
TaxTMI 
2023 (11) TMI 120
X X X X Extracts X X X X
X X X X Extracts X X X X
....rief facts of the case that the assessee is a company engaged in the business of manufacturing of denim, bottom wear fabrics, garments & yarn and trading of fabrics. For the assessment year 2013-14 the assessee filed its Return of Income declaring total income of Rs. 60,52,59,370/- and claimed deduction under section 80 IA of Rs. 10,64,57,144/-. The assessee credited the sale of Rs. 60,70,12,171/ on account of sale of electricity power generated through its Captive Power Plant [shortly known as CPP] by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd [hereinafter referred as TPL] as "Tested Party" and applied the same rates for which the electricity was purchased by the manufacturing unit [non eligible unit] for the purpose of benchmarking of the rates to be applied for transfer of electricity from its CPP to non-eligible unit and also to its Associated Enterprise namely M/s. Chiripal Industries Ltd. The assessee thus applied the internal Comparable Uncontrolled Price [CUP] method. The assessee also sold steam generated through this CPP of Rs. 10,55,95,210/- making total credit of Rs. 71,26,07,381/-. 2.1. Whereas the Ld. Transfer Pricing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ufacturing unit by the captive power plant, the appellant has selected the internal comparable transaction of purchase of power by denim manufacturing plant from M/s Torrent Power Limited. The TPO in turn has selected external transactions of UGVCL and IEX for the benchmarking purposes. He has adopted two external comparable entities i.e, the UGVCL and the IEX as explained in detail in the assessment order and also through written submissions reproduced in para 4.3 above. The appellant has explained that the TPO has wrongly taken these two entities for determining the ALP in violation of Rule 10B(2) of the Act. The intention of the TPO and the A.O. was to adopt the reduced sales as against the declared sales by substituting the figures of sale of electricity and steam so that the deduction u/s 80IA claimed by the appellant is curtailed or not allowed. It has been contended by the appellant that it had correctly selected the manufacturing division who generated the electricity through its CPP as tested party and was noneligible unit for the purpose of section 80IA of the Act and adopted the same rates as were charged by TPL to the manufacturing unit as benchmark. The A.O. rejected t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssue has been decided while dealing with question no.2 framed:- PCIT-Vs-Gujarat Alkalies & Chemicals Ltd. [2017] 88 taxman.com 722 (Guj.) "Section 80-1A of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings - Deduction under section 80-IA(4) was allowable to assessee for generation of power for captive consumption and same was to be computed considering rate of power on which Electricity Board supplied power to its consumer [In favour of assessee]" Further, the Ahmedabad Bench of ITAT also dealt with the similar issue in the case of GUJARAT FLUOROCHEMICALS LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX reported at 53 CCH 476 wherein the Hon'ble ITAT has while relying on the decision of Hon'ble Gujarat High Court in the case of Gujarat Alkalies and Chemicals Ltd, observed as under- "33. Respectfully following the authoritative pronouncements of the Hon'ble jurisdictional High Court, we allow these grounds of appeal. We direct the AO to grant deduction under section 80IA(4) on the value of electricity supplied by the CPP to its manufacturing units by adopting the average rate of electricity supplied t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 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, despite the fact that the IPO has consider CPP unit as tested party being less complex than the manufacturing unit and compare the rate of power generation unit decided by GEREC. (5) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s. 80LA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that transmission and distribution functions are totally missing in CPP unit i.e. Torrent Power is functionally different than CPP unit. (6) The Ld. CIT(A) has erred in law and on facts in directing to grant 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, despite the fact that if the non-eligible unit is taken as tested party there will be need for making multiple adjustments for the charges incorporated in the electricity price paid for functions like distribution and transmission such as STU charges, S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appeals though slightly differently worded, the questions concerning the sante assessee are identical and concern the issue of deduction under section 80IA of the Income Tax Act granted to the assessee by the Tribunal on captive power generation plant The second question is with respect to recognising such claim on the basis of purchase price of power from GEB and substituting the rates of 2.47 per unit adopted by the Assessing Officer 3. Since both the issues are covered by various judgments of this Court, we do not find in necessary to record facts at any length. Division Bench of this Court by judgment dated 22.11.2011 in Tax Appeal No.2092/2010 in somewhat similar controversy observed as under "3. With respect to Question [B], the issue pertains to sub Section (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs. 540 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section 80IA restricted the same to Rs. 5.32 ps. per unit and, thereby, restrict....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar as the Tribunal's reasoning to adopt the market value of the goods at Rs 5.40 ps per unit is concerned, we find no error Undisputedly, GEB supplied the electricity to its consumers at the same rate. This, therefore, was a market value of the electricity supplied by the CPP Unit to the general uni The fact that this amount of Rs. 5.40 ps. comprises of a component of 8 paise, which was electricity duty, to our mind, would make no difference in so far as the market value is concerned. To a consumer, the price being paid remains 3.40 ps per unit. The fact that the seller retains only Rs. 5.32 ps. out of the said collection and passes on 8 paise per unit to the Government in the form of electricity duty, to our mind, would make no difference. This question is, therefore not required to be considered." 4. This was followed in case of CIT v Shah Alloys Ltd in Tax Appeal No. 2093/2010 This was reiterated in Tax Appeal No. 1646/2010 in case of ACIT v Pragati Glass Works (P) Ltd. (order dated 30.1.2012), in which following observations were made: "7 To our mind. Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs 4.51 per unit as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 v. Alembic Ltd. in Tax Appeal No.471/2009 and connected appeals. The Division Bench referring to earlier Court held as under: "11. We have considered the submissions made by the learned counsel for the parties. judgments of the We have also considered the case laws cited by the learned counsel for the assessee. Taking into consideration the judements of this court and other High Courts, cited above, we are of the opinion that the Tribunal has rightly allowed the claim of the assessee. In that view of the matter, we do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of the assessee and against the revenue." 6. Issues are thus considered on number of occasions by the Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....charged by State Electricity Board for supply of electricity to industrial consumers and thus, assessee was justified in adopting ALP of electricity supply to its AES at rate charged by State Electricity Board and Revenue was not justified in excluding certain heads of charges out of it. 10.1 Accordingly, respectfully following the aforesaid decision rendered by the jurisdictional Gujarat High Court and ITAT Ahmedabad, we are of the considered view that the assessee has rightly computed the ALP by adopting the rate of Rs. 6.5 per unit as the arms length rate. Accordingly looking into the facts of the instant case, ground no. 2 of assessee's appeal is allowed. 9. Respectfully following the above judicial precedents, in our considered opinion, the assessee has rightly computed the sale of electricity generated through its CPP by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd. for the purpose ALP and claim of deduction u/s. 80IA of the Act. The same does not require any interference, further the Ld. CIT-DR could not place any judgments in favour of the Revenue and reversing Jurisdictional High Court Judgments by the Hon'ble Supreme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igh Court in the case of CIT-Vs-Sham Lal Bansal [2011] 11 taxmann.com 369 wherein it was that Technology Upgradation Fund subsidy and compensation received by the assessee-company on non-performance of energy generation being capital receipts were not liable to be taxed. 14.1. Thus Ld. Counsel relied upon Delhi Tribunal decision in the case of ITO-Vs-Jasjit Singh reported in [2014] 52 taxmann.com 477 wherein it was held that where reasons for not raising legal issues before lower authorities was found to be bona fide, same could be validly raised in objections for first time before Tribunal and Bombay High Court in the case of Peter Vaz-Vs-CIT reported in [2021] 128 taxmann.com 180 wherein the Hon'ble High Court set aside the mater back to the Tribunal to consider the legal issue for first time raised before the Tribunal. 15. We have given our thoughtful consideration and perused the materials available on record. This issue of TUFF subsidy received by the assessee as capital receipt is not a subject matter of discussions and disallowance by the Assessing Officer in the assessment order. Similarly before Ld. CIT(A), the assessee was in appeal against the disallowances made by....