TaxTMI 
TaxTMI 
2023 (9) TMI 1779
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.... order passed u/s 143(3) vide dated 23-11-2019 was erroneous as well as prejudicial to the interest of revenue and that too by recording incorrect facts and findings and in violation of principles of natural justice. 2. That in any case and in any view of the matter, assumption of jurisdiction u/s 263 by Ld. PCIT, is bad in law and against the facts and circumstances of the case. 3. That having regard to facts & circumstances of the case, Ld. PCIT has erred in law and on facts in holding that the capacity charges does not have direct nexus between the profits & gains and industrial undertaking but has only incidental nexus and income by way of capacity charges at Rs.1,32,52,18,572/- does not qualify for deduction under section 80IA of the Income Tax Act, 1961. 4. That having regard to facts & circumstances of the case, Ld. PCIT has erred in law and on facts in holding that the appellant has inflated its income eligible for deduction u/s 80IA by charging total quantity of energy exported @ 1.029/unit as against the approved rate of Rs. 0.805/unit. 5. That having regard to facts & circumstances of the case, Ld. PCIT has erred in law and on facts in....
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....ee had earned capacity charges of Rs. 132,52,18,572/-, which in the opinion of the ld PCIT, would not be eligible for deduction u/s 80IA of the Act. Further, the ld PCIT also noticed that total sale revenue shown by the Assessee include energy charges amounting to Rs. 100,23,09,129/-, which in the opinion of the ld PCIT, would not be eligible for deduction u/s 80IA of the Act. It was observed by the ld PCIT that capacity charges collected by the assessee, which is included in the sale bill, is not directly linked to the sale of energy to UPCL and accordingly, the amount received towards capacity charges would not be considered as profits derived from the eligible business of the Assessee but is only attributable and incidental to it. Further, the ld PCIT also mentioned that sale rate per unit is determined by the tariff of Uttarakhand Electricity Regulatory Commission (UERC) and Assessee is supposed to raise bill only for that amount. He noticed that tariff rate fixed by the UERC for share of electricity to UPCL was at Rs. 0.80 per unit, however, in the invoices raised by the Assessee to UPCL the sale rate has been mentioned @Rs. 1.029 per unit. This amounted to inflation of profit....
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....he months of April to October we would like to state that this relates to shortfall charge calculated as per the regulation of UERC. The total amount charged @ 1.029/ KWH during the months of April to October comprises of regular electricity charge @0.805 plus shortfall electricity charge @0.224/KWH. Apart from this no extra amount has been charged on sale of electricity, thus point no.4, 6 and 7 of your notice regarding disallowance u/s 80IA of the extra amount charged on sale of electricity (other than shortfall) is not relevant. Further we would also like to state that the shortfall charges earned by your assessee are in relation to the business of your assessee eligible for deduction u/s 80IA of the Income Tax Act i.e generation of power." 5. It was specifically pointed out by the Assessee that the shortfall charges earned by the Assessee would also be in relation to the business of the Assessee and accordingly to be construed as profits derived from the eligible business undertaking and consequently eligible for deduction u/s 80IA of the Act. 6. Ld PCIT completely ignored the contentions of the Assessee and proceeded to cancel the assessment order passed u/s 143....
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....AY 2014-15 the claim of deduction was accepted by the ld AO, there was no reason for the ld AO to take a divergent stand for the year under consideration as facts are identical. Hence it would be incorrect on the part of the ld PCIT to state that adequate enquiries with regard to claim of deduction u/s 80IA of the Act were not made by the ld AO warranting revision u/s 263 of the Act. 9. With regard to specific allegation leveled by the ld PCIT in the aspect of capacity charges not having first degree nexus with the sale of energy by the Assessee to UPCL. We find that power purchase agreement entered between Assessee and UPCL on 24.07.2012 is placed on record at page No. 560 of the paper book wherein at page 564 under clause No 6, the expression "tariff to be charged" by the Assessee is mentioned which reads as under:- "6.1 The tariff to be charged and its associated terms and conditions for the energy to be supplied by UJVN Ltd. from the projects shall be as per the Tariff Notifications/orders/directions issued to be issued by UERC from time to time under the Electricity Act, 2003 and/or any other Act/Regulations as may be enacted/substituted by the GoU/Gol in place of ....
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....s of the methods given in Clause 6.2 of the agreement. A reading of the same thus makes it clear that in strict sense, there was no reimbursement of the tax liability by the recipient, but was treated as part of the tariff and whatever was done on the receipt of the statement of the tax payable by the assessee was that the tariff price payable on the electricity sold was finally reckoned with reference to the above said tax payment. In the circumstances, it is clear that by "reimbursement", it does not mean that the tax paid by the assessee was very much part of the tariff and hence, part of the sale price. 7. It is seen from the proceedings of the Commissioner of Income Tax under Section 263 of the Act that the assessment was sought to be revised on the ground that the deduction claimed under Section 80IA was not properly considered by the Assessing Officer. The Commissioner further pointed out that on a perusal of the agreement the income tax liability of the assessee had been paid by the Electricity Boards and the amount received by the assessee was shown as receipt of the income and included for claiming deduction under Section 80IA. The Commissioner of Income Tax view....
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....C on the income streams mentioned at items (i) and (ii) were to be borne by the recipients. viz, the State Electricity Boards. Clause 6.2 clarifies that either the grossed up or the actual tax assessed, whichever is less alone would be the liability for the Recipients to bear. 17. In the context of the direction issued in the notification dated 30.3.1992 and Clause 6 in the agreement, it is clear that tax liability is part of the tariff charged for sale of electricity from Thermal Power Generating Stations and it does not stand independent of the tariff charge. If the contemplation is otherwise, there is absolutely no need at all for anyone to enter into an agreement to make the tax liability of one party viz., the assessee as a liability to be borne by another party to the agreement. When the agreement between the parties is guided by the Notifications issued by the Ministry of Power, Government of India and the deliberations between the parties also pointed out the guidelines, under which the agreement themselves were entered into, we do not think there exists any justification in the contention of the Revenue to treat the tax payment shown under clause 6 of the agreemen....
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....ication thereof. 13. The said regulation also defined "tariff income" as under:- Regulation3(36) Definition 36 "Tariff Income" states that the income of the generating company, transmission, licensee, distribution licensee and SLDC arising out of all the charges determined by the commission for generation, transmission, wheeling and retails supply of electricity, SLDC charges, as the case may be, shall be considered as tariff income. 14. As per regulation 3(16), "Commission" means the Uttrarakhand Electricity regularity commission constituted u/s 82 of the Electricity Act, 2003. 15. Further, the "component of tariff" is also defined in the said regulation as under:- i. The tariff for sale of electricity from a thermal power generating station shall comprise of two parts namely, the recovery of annual fixed charges and energy (variable) charges (for recovery of primary fuel cost). ii. The tariff for sale of electricity from hydro generating station was comprised of two parts namely recovery of annual capacity charges and energy charges. iii. Recovery of capacity charge and incentive by the generating company shall be based on ....