TaxTMI 
TaxTMI 
2026 (7) TMI 117
X X X X Extracts X X X X
X X X X Extracts X X X X
....turing of yarn. The assessee filed a return of income for AY 2018-19 on 27.09.2018 declaring total income of Rs. 24,29,38,420/- under the normal provisions of the Act and Rs. 41,93,59,387/- as per the provisions of section 115JB of the Act. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O made a reference to the Transfer Pricing Officer (TPO) to determine the Arms Length Price (ALP) of specified domestic transactions of the assessee towards power purchase from wind mill division and capital consumption by spinning division on which the assessee has claimed deduction us/s. 80IA. The assessee has benchmarked transaction using CUP method whereby the assessee has held the transfer of power made to the internal unit at Rs. 6.35/- per unit is at ALP for the reason that the base rate at which the internal unit purchases from TNEB is in the range of Rs. 6.90/per unit. The TPO rejected the submissions of the assessee and held that the price at which TNEB purchases the power from wind mill units is the rate to be considered for the purpose of determining the ALP. Accordingly, the TPO applied the power purchasing rate of TNEB to arrive at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansaction 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 equated with the market value as is understood for the purpose of Section 80IA (8). On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under Section 80 IA of the Act. 30. Thus on a careful consideration, we are of the view that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the identical issues in the case of ACIT v. Prabhu Spinning Mills Pvt. Ltd. (ITA No. 433 & 435/Chny/2025 has held that - "We have heard the rival contentions perused all the material available on record before us and gone through the orders of the authorities along with the judicial precedents relied on. Before adjudicating on whether the decisions of the Hon'ble Calcutta High Court placed on record by the Ld.AR have taken into consideration the change in law, i.e., the amendment of explanation to section 80IA(8) of the Act, we would like to emphasize on the ratio laid down by the Hon'ble Supreme Court in the case of Jindal Steel & Power Ltd. referred to supra in respect of the issue of quantum of deduction u/s. 80-IA of the Act as regards inter-unit transfer of electricity was concerned: "28. Thus, market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board's rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under section 80-IA of the Act. 31. That being the position, we hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue." 32. From the above decision, it is quite clear that where the price at which surplus power supplied by assessee to State Electricity Board was determined en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or specified domestic transactions for determining the deduction u/s. 80-IA, to say that the usage of the said term in the judgement of the Hon'ble Supreme Court is not in context of section 92F of the Act would be incorrect. Having said so, we are of the view that the usage of the terms Market Value and Arm's Length Price interchangeably in its decision and thereafter arriving at the conclusion that the rate at which State Electricity Board supplied electricity to industrial consumers would have to be taken as market value for computing deduction u/s. 80-IA of the Act would be appropriate for determination of quantum of deduction u/s. 80-IA in the instant case. 36. Further, at this stage, we find it necessary to refer to the decision of the Mumbai Bench of the Tribunal in the case of Tata Chemicals Ltd. relied upon by the Ld.AR wherein in effect it was held that since clauses (i) or (ii) of explanation to section 80-IA(8) are separated by an "or", an interpretation that only clause (ii) of explanation to section 80-IA(8) has to be used for determination of specified domestic transaction would render clause (i) of explanation to section 80-IA(8) otiose and redundant which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y draw reference to the decision of the Hon'ble Calcutta High Court in the case of PCIT v Rungta Mines Ltd. [TS-402-HC-202(CAL)-TP] wherein it was held as under: "14. It is not in dispute that the main business of the assessee is not generating power to sell the same to distribution companies/SEBs. It is also not in dispute that the Captive Power Plants (CPPs) were established by the assessee for its own need, i.e. for supply of uninterrupted power to its manufacturing units as well as to save the cost of power purchased from SEBs. If such be the factual position the Arm's Length Price cannot be determined by taking the average market rates of power supply units to distribution companies as the assessee is not in the business of selling power to distribution companies. Therefore, the Arm's Length Price has to be determined bearing in mind the reason behind establishment of the CPPs namely to ensure uninterrupted power and to save on cost of electricity which otherwise has to be paid to the State Electricity Board." 40. From the above, it is quite clear that the Hon'ble Calcutta High Court has clearly observed that in case of an assessee who is not in the business ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the instant case) to end consumers in open market. Therefore, we direct the AO to recompute the ALP considering the rate adopted by the assessee as per the market price." 7. From the above judicial precedence, it is clear that for the purpose of section 80IA, the rate at which TNEB supplies power with the consumers in the open market is to be considered and not the rare at which the TNEB procures the power. In the present case, the rate charged by the assessee for the purpose of claiming deduction u/s. 80IA of the Act is less than the rate at which TNEB supplies power to its customers and therefore respectfully following the above judicial precedence, we hold that the lower authorities are not correct in restricting the deduction claimed by the assessee u/s. 80IA of the Act. Accordingly we direct the A.O to delete the disallowance made in this regard and allow the deduction u/s. 80IA of the Act as claimed by the assessee in the return of income. 8. One more contention of the ld DR is that the Hon'ble Supreme Court in the case of Jindal Steel (supra) was rendered prior to insertion of subsection (6) to section 80A where "market value" means the price that such goods or ....