TaxTMI 
TaxTMI 
2026 (4) TMI 477
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....017-18 is treated as lead case. The Revenue in appeal for Assessment year 2017-18 in ITA No. 138/NAG/2025 has raised following grounds of appeal. i. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in the adjustment on inter-unit transfer of power from captive power plant of Rs. 28,22,44,096/-. ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on the decision of Hon'ble Supreme Court in the case of CIT v. Jindal Steel and Power Limited (C. A. No. 13771 of 2015), when the case of the assessee pertains to AY 2017-18 and therefore the judgments of the Hon'ble Supreme Court for years prior to the introduction of Section 80A(6) vide Finance Act, 2009 and the amendments in Section 80A(6) and sec 80-1A(8) vide Finance Act, 2012 are not applicable to the facts of the assessee. iii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on the decision of Hon'ble Supreme Court in the case of CIT v. Jindal Steel and Power Limited (C. A. No. 13771 of 2015), when the Hon'ble Supreme Court has clearly stated that "3....
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....osing the comparable as done by the assessee, but only the power generating unit can be taken as tested party for choosing the matching FAR comparable. vii. The object of section 80IA is to quantify the profits and gains derived by an undertaking that is engaged in the eligible activity of power generation. viii. The SDT for which ALP is required to be determined is the 'supply of power by the eligible power generation unit'. ix. The method chosen to determine the ALP as well as the choice of tested party should be such as to arrive at the best possible approximation of the profits of such eligible power generation unit. x. In view of the above, the power generating unit alone should be considered as the tested party and the FAR of the power generating unit which has a direct impact in the quantum of SDT, should be given precedence over the FAR of the power consuming unit for choosing the matching FAR comparable. xi. Only when the FAR of the power generating unit is tested against a comparable transaction having a similar FAR, will we be able to reach the correct profitability of the power generation activity; only then the object of....
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.... of appeal raised by Revenue in all the orders are identical except variation deleting adjustment on account of inter-unit transfer of buyer from Captive Power Plant. In fact, the grounds of appeal raised by the revenue are covered by the decision of Hon'ble Supreme court in case of CIT Vs Jindal Steel and Power Ltd. in Civil Appeal No. 13771 of 2025dated 06.12.2023. The Ld. CIT(A), while allowing relief to the assessee, followed the decision of Hon'ble Apex Court. The Ld.AR while explaining the facts of his case, submits that Assessee Company is engaged in the business of manufacturing and trading across the power, steel and energy. The assessee is also having Captive Power Plant (CPP) for supplying electricity to its own industrial units. The assessee while following return of income of Assessment Year 2017-18 declared gross total income at Rs. 22.26 Crore. The assessee paid taxes on book profit of Rs. 23.28 Crore under Section 115JB. The assessee in its computation of claim deduction under Section 80-IA of Rs. 22.26 Crore, being first year of claim owing to the availability of eligible profits. The assessee in its transfer pricing study report adopted Comparable Uncontrolled Pri....
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....n the judgment of Hon'ble Supreme Court in CIT (A) v. Jindal Steel & Power Limited (supra) wherein it was held that for the purpose of determining market value under Section 80-IA of the Act, the appropriate benchmark is the rate at which electricity supplied by the Electricity Board to industrial consumers and not the rate at which power is procured from generating companies. The Ld. AR further submits that recently in Aditya Birla Nuvo Ltd. v. DCIT in ITA No. 563/Mum/2018 dated 18.09.2025,third Member Bench (Special Bench) wherein the similar issue was raised by the department. The Special Bench after considering the submission of rival parties and held that price at which assessee (industrial consumer) purchased power from State Distribution Company (GUVNL in that case) can be applied as a valid CUP for determining the arm's length price for sale/supply of power by the Captive Power Plant (CPP) to its other industrial units. The Ld. AR submits that he has placed on record the decision of third Member decision in Aditya Birla Nuvo Ltd v. DCIT (supra) and that latest decision of Mumbai Benches, Mumbai in Gandhi Special Tubes Limited v. ACIT in ITA No. 2421/Mum/2025whereinthe decis....
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....e mutually exclusive and the appellant was entitled to adopt either method.To strengthen his submissions, the ld AR of the assessee also relied on the following decisions; * PCIT Vs Star Paper Mills in Tax Appeal No. 214 of 2024 (Calcutta HC), * PCIT Vs DCM Shriram Limited (2015) 170 taxmann.com 631 Delhi, * IVL Dhunseri Petrochem Industries Pvt Limited Vs DCIT in ITA No. 172/Kol/2024, * CIT Vs Reliance Industries Limited (421 ITR 686 Bom), * PCIT Vs Gujarat Alkalies and Chemical Limited (2017)395 ITR 247 (Guj), * Shah Alloys Limited Vs DCIT in ITA No. 1417/Ahd/2019 5. On the other hand, the ld. Commissioner of Income Tax - Departmental Representative (ld. CIT-DR) for the reason supported the order of assessing officer/TPO. The d. CIT-DR submits that he may be given opportunity to file his written submission within four weeks from the date of hearing. The ld CIT-DR for the revenue was allowed to file his short and brief synopsis. After four weeks, the ld. CIT-DR for the revenue furnished his written submission running into more than twenty-five pages, though, he was directed to file short written synopsis. In the written subm....
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....the mandate under section 92BA. The assessee has taken the rates by said distribution company (MSEDCL) as comparable and rates are benchmarked on their rate of sale of electricity. The said State-owned Electricity Distribution Companies (SEDC) cannot be taken as acceptable comparable for benchmarking as the profit of the CPP are issue in hand and comparable should be are ideally for the point of view of CPP. Thus, the better internal comparable would be rate at which CPP sells power to unrelated consumers directly. In absence of such rate, the rate at which the consumers purchased power from similar unrelated CPPs may be an internal comparable. In view of the provisions of sub-rule (2) & (3) of Rule 10B. A FAR analysis would show that the transactions of purchase of power from a CPP are different from a transaction of purchase of power from a distribution company. The cost of production of CPP is lesser. The adoption of CPPs sale rate of electricity equal to the power distributor's sale rate notionally leads to more than ordinary profits to the eligible unit claiming deduction and at the same time it leads to a lesser taxable profits in the hands of the non-eligible unit due to the....
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..... While applying the rate at Rs. 3.79/- per unit, the TPO proposed downward adjustment of Rs. 28.22 Crore. The TPO suggested such adjustment by rejecting CUP by taking view that MSEDCL's industrial sale tariff on the basis that it reflects a distribution price and not appropriate for a power generation unit. The correct benchmarking should be the purchase price at which the distribution companies procured power from independent generators. The TPO adopted Rs. 3.79 per unit as the arm's length price instead of Rs. 7.07 to 7.21 per unit. He also relied upon Safe Harbor Rules under Rule 10THC and the Electricity Act, 2003. The TPO was of the view that there was a functional difference between power generation and distribution in terms of functions, assets and risk assumed and held that industrial tariffs are inflated due to cross-subsidization and, therefore, do not reflect to market value. The TPO also relied upon Calcutta High Court's decision in ITC Limited (supra). We find that the ld CIT(A) allowed relied to the assessee on the basis of decision of Jindal Steel & Power Limited (supra). 8. The Hon'ble Apex Court in Jindal Steel & Power Limited (supra) held that the market value....