Arm's length pricing of captive electricity follows the distribution licensee's supply rate, while penalty initiation challenges remain premature.

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....For specified domestic transactions, market value constitutes the arm's length price, with the special rule in the Explanation to section 80A(6) prevailing over the general provision. Regulated tariffs at which generating companies supply distribution licensees are not comparable uncontrolled prices because they are not negotiated in uncontrolled conditions. The cement unit's purchase rate from its distribution licensee was the more reliable internal comparable for captive electricity transfers; functional differences did not alter that comparison, and a mark-up on an average price was unsustainable. The transfer-pricing adjustment was deleted and the related deduction allowed. A challenge solely to initiation of penalty proceedings was dismissed as premature.....