TaxTMI 
TaxTMI 
2026 (4) TMI 1408
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....by the Learned Income Tax Appellate Tribunal (ITAT), Kolkata Bench "B", for the assessment year AY 2002-03, on the substantial questions of law formulated at the time of admission. 2. The facts in a nutshell are that the assessee, a company under the Companies Act, 1956, with its registered office at 31, Chowringhee Road, Kolkata, manufactures and sells graphite electrodes and calcined petroleum coke, while also generating power through three units (PU-I, PU-II hydel, PU-III) at Bangalore and Nashik, mostly for captive use by its electrode division. For AY 2002-03, it claimed Rs. 35,65,09,296 deduction u/s 80-IA on power profits, computed via transfer pricing at KSEB/MSEB purchase rates as per section 80-IA(8) and export profits under se....
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....ht in holding that, for the purpose of quantifying the deduction under section 80-IA of the Act, the transfer price of power had to be computed without taking into account the electricity duty component included in the sale price charged by KSEB and MSEB? 6. We have heard learned Counsel for the appellant/petitioner as well as for the respondent at length. Since the issues involved are pure questions of law and have been settled by binding precedents of the Hon'ble Supreme Court and this Court, we proceed to decide the appeal on merits. 7. Firstly, the assessee is engaged in the manufacture and sale of graphite electrodes and calcined petroleum coke and also in the generation of power through its captive power undertakings at Bang....
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.... should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market..." and "the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under section 80-IA" 11. The tariff payable to SEBs is a composite price and includes statutory levies such as electricity duty. Once the statute requires adoption of the price that electricity would ordinarily fetch in the open market, it is impermissible to artificially exclude components forming an integral part of such price. 12. The Tribunal, therefore, erred in directing exclusion of the electricity duty component while computing the transfer p....
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....same profits and does not authorize reduction where the deductions relate to different sources of income. Similarly, the Gujarat High Court in CIT v. Shah Alloys Ltd. (335 ITR 210) held that profits of an eligible power undertaking cannot be reduced while computing deduction under Section 80HHC when there is no overlap of income. In the present case, the profits derived from generation of power are not export profits at all and are not eligible for deduction under Section 80HHC. Hence, there arise no question of double deduction. We accordingly, answer substantial question (b) in the negative, i.e., in favour of the assessee and against the revenue. c. Whether on the facts and in the circumstances of the case, the Tribunal was just....
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....nded to induce fresh capital investment and expansion of industrial capacity. It was not a subsidy to assist the assessee in carrying on its trade more profitably. 17. The Tribunal, therefore, erred in treating the said subsidy as revenue in nature. We accordingly answer substantial question (c) in the negative, i.e., in favour of the assessee and against the revenue. d. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that sales tax incentive received by the appellant cannot be excluded in computing Book Profits computed u/s 115JB of the Act? 18. Lastly, once the subsidy is held to be capital in nature, the further question is whether it forms part of book profit under S....