TaxTMI 
TaxTMI 
2026 (7) TMI 1096
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....ssessee's claim of deduction under Section 80IA(4) of the Income Tax Act when the assessee had adopted rate on which the GEB supplied power to its consumers ignoring the rate on which power generating company supplied its power to GEB?" 4. The brief facts leading to the filing of the present Tax Appeal are that: 4.1 The respondent-assessee is a Company engaged in the manufacture and trading of chemicals and generation of power. The respondent-assessee filed the return of income under the provisions of the Act for Assessment Year under consideration after claiming deductions. The return filed by the assessee was processed under Section 143(1) of the Act and thereafter, the case of the respondent-assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued to the respondent-assessee. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed deduction under Section 80IA(4)of the Act in respect of 90MW Captive Power Plant amounting to Rs. 30,96,49,300/-. The Assessing Officer declined the claim of deduction by way of Assessment Order dated 13.02.2013. 5. Being aggrieved by the Assessment Order, the asse....
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....s industrial units at the rate of Rs. 3.72 per unit which rate is disputed by the revenue as not being the market value of electricity. 19. While the assessing officer accepted the claim of the assessee for deduction under section 80-IA, he, however, did not accept the profits and gains of the eligible business computed by the assessee on the ground that those were inflated by showing supply of power to its own industrial units for captive consumption at the rate of Rs. 3.72 per unit. Assessing officer took the view that there was no justification on the part of the assessee to claim electricity charge at the rate of Rs. 3.72 for supply to its own industrial units when the assessee was supplying surplus power to the State Electricity Board at the rate of Rs. 2:32 per unit. Finally, the assessing officer held that Rs. 2.32 per unit was the market value of electricity and on that basis, reduced the profits and gains of the assessee thereby restricting the claim of deduction of the assessee under section 80-IA of the Act. 20. We have already analyzed Section 80-IA of the Act. There is no dispute that respondent-assessee is entitled to deduction under section 80-IA of....
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.... market rate of electricity purchased by a consumer in the open market. On the contrary, 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 of the Act. 29. Section 434 of the 1948 Act lays down the terms and conditions for determining the tariff for supply of electricity. The said provision makes it clear that tariff is determined on the basis of various parameters. That apart, it is only upon granting of specific consent that a private entity could set up a power generating unit. However, such a unit would have restrictions not only on the use of the power generated but also regarding 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....
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....r by other business of the assessee. After holding so, the High Court however, answered the question on the point of computation of profits and gains of the eligible business against the assessee. On going through the judgment, we find that facts of that case are clearly distinguishable from the facts of the present batch of appeals. It is noticeable that though an opportunity was granted by the assessing officer to the assessee to adduce evidence to justify the price of electricity sold by it to its paper unit, the same could not be availed of by the assessee. The electricity generated was sold by the assessee entirely to its paper unit. There was no surplus electricity to be supplied to the State Electricity Board and consequently, there was no contract between the assessee and the State Electricity Board determining the rate of tariff for the electricity supplied by the assessee to the State Electricity Board. On the other hand, it was noticed that the Electricity Act, 2003 had come into force whereby and whereunder, the rate at which electricity could be supplied is determined, notably by Sections 21 and 22 thereof. That apart, there is the tariff regulatory commission which ha....