TaxTMI 
TaxTMI 
2024 (5) TMI 1013
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....ssessee under section 80IA of the Income Tax Act, 1961 ["Act" in short] to an extent of Rs..3,40,61,684/- as against Rs..1,33,92,247/- restricted by the Assessing Officer in the given facts and circumstances of the case. 6. Brief facts of the case are that the assessee is a company, engaged in the business of manufacturing of cotton yarn and fabrics. The assessee generated power from Wind Mills, which was captively consumed by the assessee. The assessee claimed profit from the said windmills as deduction under section 80IA of the Act to the extent of Rs..3,40,61,684/-. In the scrutiny proceedings, the Assessing Officer opined that the assessee could not have claimed the benefit at the rate chargeable by the distribution companies but should have claimed on the basis of rates fixed by Tariff Regulatory Commission for sale of electricity by generating companies. Accordingly, a show-cause notice was issued to the assessee as to why the rate fixed by Tariff Regulatory Commission should not be applied The assessee relied on various judicial precedents and supported in adopting the average price of the power purchased other than the captive power. The Assessing Officer found the same as....
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....tion if it wants to sell directly to consumers". He argued that the profits made by such an entity will be much less than the profits computed by the assessee. Further, he vehemently put up that the assessee has artificially increased the profit from these undertakings which is eligible for deduction under section 80IA of the Act. Since the ld. CIT(A) failed to consider all these aspects, the ld. DR prayed to quash the order of the ld. CIT(A). Further, he vehemently supported the order of the Assessing Officer by submitting that adoption of market value as sale price also goes against the principle that "no one can make a profit out of himself" as market price includes profit element. 11. The ld. AR Ms. Sandhyaarthi, C.A. submits for the purpose of computing deduction under section 80IA of the Act, the assessee has determined gross receipts by adopting an average price of Rs..5 to 6 per unit based on the power purchased from the open market. Further she submits the assessee purchases power from the private power producers and Tamilnadu Electricity Board on need base and adopted the average rate at which power is purchased from the private power producers for arriving at the market....
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....f power generated from windmills can alone be taken as market value. Accordingly, the Assessing Officer fixed the rate at Rs..2.75 per unit as against Rs..5.60 per unit as adopted by the assessee. We note that the assessee made claim of Rs..3,40,61,684/- [78,10,153 units x Rs..5.60 per unit] and the Assessing Officer restricted the same to an extent of Rs..1,33,92,247/- [78,10,153 units x Rs..2.75 per unit]. Therefore, we have to decide as to which price as adopted by the assessee or the Assessing Officer really represent the market price. With regard to market price of electricity, the Assessing Officer placed reliance in the case of CIT v. ITC Limited (supra) of Hon'ble High Court of Calcutta. The ld. AR supported the findings of the ld. CIT(A) in holding that the said decision is not applicable to the case on hand as it is prior to coming into existence of new Electricity Act, 2003. We note that the ld. CIT(A) discussed the same in page No. 14 of the impugned order and was of the opinion that the said decision was rendered while interpreting Income Tax Act as well as the regulation surrounding sale of electricity as they stood before 2003. Further, after 2003, the law relating t....
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....ate Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after supplying electricity to its industrial units) to the State Electricity Board only and not to any other authority or person. Therefore, the surplus electricity had to be compulsorily supplied by the assessee to the State Electricity Board and in terms of Sections 43 and 43A of the 1948 Act, a contract was entered into between the assessee and the State Electricity Board for supply of the surplus electricity by the former to the latter. The price for supply of such electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. This price is, therefore, a contracted price. Further, there was no room or any elbow space for negotiation on the part of the assessee. Under the statutory regime in place, the asse....
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....rding determination of tariff at which the power generating unit could supply surplus power to the concerned State Electricity Board. Thus, determination of tariff of the surplus electricity between a power generating company and the State Electricity Board cannot be said to be an exercise between a buyer and a seller under a competitive environment or a transaction carried out in the ordinary course of trade and commerce. It is determined in an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of the extant statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Consequently, the price determined as per the power purchase agreement cannot be equated with the market value of power as understood in the common parlance. The price at which the surplus power supplied by the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equat....
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....umer in the open market, but, the rate at which the State Electricity Board supplied power to the industrial consumers is to be taken as market value. Further, the ld. AR brought to our notice that the Assessing Officer allowed the deduction under section 80IA of the Act for the initial year being assessment year 2011-12. Further, for the assessment year 2020-21, the Assessing Officer allowed deduction under section 80IA of the Act in favour of the assessee. We note that the Revenue allowed the claim of the assessee for computing deduction under section 80IA of the Act for initial year and the assessment year subsequent to the year under consideration. 16. In the present case as discussed above, the assessee adopted price at Rs..5.60 per unit which was arrived at on the total charges paid by the assessee towards electricity purchased from Tamilnadu Electricity Board and other price power purchaser. We find that the facts and circumstances of the present case are similar and identical to the facts and circumstances before the Hon'ble Supreme Court in the case of CIT v. M/s. Jindal Steel & Power Limited (supra) and the ratio laid down by the Hon'ble Supreme Court is applicable to th....