Income Tax Appellate Tribunal - Chennai
Eveready Spinning Mills Pirvate ... vs Acit, Central Cricle3, Coimatore, ... on 27 April, 2026
आयकर अपीलीय अिधकरण, 'डी' ायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH: CHENNAI
ी जॉज जॉज के, उपा एवं सु ी पदमावती यस, लेखासद% के सम
BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENTAND
MS. PADMAVATHY.S, ACCOUNTANT MEMBER
आयकर अपील सं ./IT(TP)A Nos.8 & 15/Chny/2026
िनधारण वष /Assessment Years: 2018-19 & 2022-23
Eveready Spinning Mills Pvt. Ltd., The Asst. Commissioner of Income
16/23, 12, Jothi Theatre Road, Vs. Tax,
Tirupur - 641 601. Central Circle-3,
PAN: AAACF 9159Q Coimbatore.
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ) की ओर से/ Appellant by : Mr. N. Arjun Raj, Advocate
+,थ) की ओर से /Respondent by : Ms. H. Kabila, CIT
सुनवाई की तारीख/Date of Hearing : 22.04.2026
घोषणाकी तारीख /Date of Pronouncement : 27.04.2026
आदे श / O R D E R
PER PADMAVATHY.S, A.M:
These appeals by the assessee are against the separate final orders of assessments passed by Asst. Commissioner of Income Tax, Central Circle-3, Coimbatore (in short "ACIT") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 31.12.2025 for Assessment Year (AY) 2018-19 and for AY 2022-23 dated 12.01.2026. The common issue contended by the assessee in both these appeals pertain to the disallowance of deduction claimed u/s. 80IA by the assessee towards supply of electricity consumed by captive spinning division.
IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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2. The facts pertaining to AY 2018-19 are that the assessee is a private limited company engaged in the business of manufacturing 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 an adjustment of Rs.23,04,12,652/-. Aggrieved, the assessee filed its objections before the Disputes Resolution Panel (DRP), who confirmed the TP adjustment. The assessee is in appeal before the Tribunal against the final order of assessment passed by the A.O pursuant to the directions of the DRP.
3. The Ld. Authorized Representative (AR) of the assessee submitted that the impugned issue is no longer res-integra since the Hon'ble Supreme Court in the case of CIT vs. Jindal Steel and Power Ltd. [2023] 157 taxmann.com 207 (SC) has considered the identical issue of the rate to be adopted for the purpose of section 80IA of the Act towards internal supply of power IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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generated. The ld. AR drew our attention to the relevant extracts of Hon'ble Supreme Court as given below:
"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 industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the 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 43A 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 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 market value of the power supplied by the State Electricity Board to the industrial IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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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."
4. The Ld. AR further submitted the Coordinate Bench of the Tribunal has been consistently taking a similar view and in this regard placed reliance on various judicial precedence submitted as part of the paper book. The Ld. AR also submitted that in assessee's own case for AY 2017-18, the Coordinate Bench has deleted the disallowance made by the TPO in this regard and that the DRP for AY 2020-21 has deleted the TP adjustment against objections filed by the assessee. Accordingly, the Ld. AR submitted that the impugned issue is covered by the judicial precedence. The ld AR also drew our attention to the invoice raised by TNEB on the spinning unit in which the rate charged is at Rs.6.90 to submit that the TNEB in the invoice has given credit to the windmill units which supports the fact that the rate charged by the assessee is at par with TNEB rate.
5. The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.
6. We have heard the parties, and perused the material available on record. The issue for our consideration pertain to the rate to be considered for IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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bench marking the transaction of supply of power by the wind mill division to spinning division whether the power purchase price of TNEB or the price at which TNEB supplies to spinning division. We notice in this regard that the Coordinate Bench while considering 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 have2 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 industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the 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 43A 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 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 IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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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 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 entirely by State Electricity Board in terms of statutory regulations and contract, such a price could not be equated with market value as was understood for purpose of section 80-IA(8) and on the contrary, 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.
33. At this stage, it may also be noted that at Para 22 of the said judgment of the Hon'ble Supreme Court, it was held as under:
"22. Reverting back to sub-section (8) of Section 80-IA, it is seen that if the assessing officer disputes the consideration for supply of any goods by the assessee as recorded in the accounts of the eligible business on the ground that it does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under section 80-IA, the profits and gains of such eligible business shall be computed by adopting arm's length pricing. In other words, if the assessing officer rejects the price as not corresponding to the market IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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value of such good, then he has to compute the sale price of the good at the market value as per his determination. The explanation below the proviso defines market value in relation to any goods to mean the price that such goods would ordinarily fetch on sale in the open market. Thus, as per this definition, the market value of any goods would mean the price that such goods would ordinarily fetch on sale in the open market."
34. On the basis of the above observation of the Hon'ble Supreme Court, one may note that as contended by the Ld.AR, the terms "Market Value"
and "Arm's Length Price" have been used interchangeably. As far as the argument of the Ld.DR in this regard to state that since the said judgement relates to A.Y.2001-02, the term ALP used therein was not in the context of section 92F of the Act is concerned, we are not in agreement of the same because the definition of the term "Arm's Length Price" that existed before and post the amendment of explanation to section 80-IA(8) is exactly the same except for the fact the amendment of explanation to section 80IA(8) now brings within its ambit specified domestic transactions.
35. In other words, but for the mere inclusion of applicability of Arm's Length Price mechanism for determining market value for 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 is not a permissible rule of interpretation. It would be relevant to point out that the Tribunal therefore concluded that so long as both clauses exist, one has to see if market value is discernible from the price for such goods which it would ordinarily fetch in the open market and only in a case where such price is not available, the market value has to be determined as per ALP. In doing so, the Mumbai Bench of the Tribunal followed the decision of the Hon'ble Supreme Court in Jindal Steel & Power Ltd referred to supra as also the decision of the Hon'ble Gujarat High Court in the case of PCIT v Gujarat Fluorochemicals Ltd. and the Hon'ble Bombay High Court in CIT v Reliance Industries Ltd. to hold that IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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the selling price of the State Electricity Board to high tension industrial consumers can be taken as market value in accordance with section 80- IA(8) of the Act. Thus, even on this count, we do not find favour with the argument of the Ld.DR that the market value in respect of specified domestic transactions with respect to computation of deduction u/s.80- IA(8) would have to be compulsorily determined by clause (ii) of explanation to section 80-IA(8), i.e., the Arm's Length Price.
37. We further state that the decision relied upon by the Ld.DR in the case of Sanghi Industries Ltd. decided by the Hyderabad Bench of the Tribunal is not applicable in the facts of the instant case for the reason that the assessee herein in the instant case has not undertaken any third-party sale of power as was the facts of that case and that the entire quantum of electricity generated by the windmill units is captively consumed by the assessee's own manufacturing divisions.
38. We also note that the decisions of the Hon'ble Calcutta High Court relied upon by the Ld.AR in the case of Star Paper Mills Ltd. which has been followed in the case of Birla Corporation Ltd. and also Rungta Mines Ltd. are all binding on us since all of these decisions have been rendered by higher courts and have considered the issue in hand, i.e., the determination of quantum of deduction in respect of inter-unit transfer of electricity, after taking into consideration the decision of the Hon'ble Supreme Court in Jindal Steel & Power Ltd., the relevant provisions of the Electricity Act and also the amendment in explanation to section 80-IA(8) of the Act.
39. We may particularly 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 of selling power to distribution companies or State Electricity Board, the Arm's Length Price cannot be determined by taking the average market IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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rates of power supply units to distribution companies but by bearing in mind the reason behind establishment of the captive power plants (CPPs) namely to ensure uninterrupted power and to save on cost of electricity which otherwise has to be paid to the State Electricity Board.
41 It is in this background that the Hon'ble Calcutta High Court after analysing the provisions of the Electricity Act, 2003, the decision in Star Paper Mills Ltd. and the decision of the Hon'ble Supreme Court in Jindal Steel & Power Ltd. concluded as under:
"21. The Hon'ble Supreme Court after taking note of the relevant provisions of the Income Tax Act, and in particular Section 80IA held that the market value of the power supplied by State Electricity Board to the Industrial consumers should be construed to be the market value of electricity and it should not be compared with the rate of power sold to or supply 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. It was further held that the State Electricity Boards rate when it supplies power to the consumer have to be taken as market value for computing the deduction under Section 80IA of the Act. Thus, applying the decision of the Hon'ble Supreme Court in Jindal Steel and Power and in the light of the reasoning given in the preceding paragraphs, we hold that the learned tribunal rightly dismissed the appeals filed by the revenue."
42. Thus, in our considered view, we hold that the decision of the Hon'ble Supreme Court in Jindal Steel & Power Ltd. referred to supra would apply even after the amendment made to Explanation to section 80-IA(8) of the Act. Also, the decision of the Hon'ble Calcutta High Court in Rungta Mines Limited and Star Paper Mills Ltd. referred to supra rendered after considering the decision of the Hon'ble Supreme Court in Jindal Steel & Power Ltd. referred to supra and after taking into account the amendment made to Explanation to section 80-IA(8) of the Act would apply to the facts and circumstances of the instant case. The ALP in the instant case would thus have to be the price at which electricity is supplied by the State Electricity Board (TANGEDCO 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 IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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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 services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market and therefore the ratio of the said judgement cannot be applied. In this regard we notice that on of the questions of law before the Hon'ble Calcutta High Court in the case of Rungta Mines Ltd (supra) was that -
"(b) Whether on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified in law in not considering the provisions of Income Tax Act, 1961 where it has been mandated in cases of transaction between eligible units and non-eligible units of an undertaking, in explanation (iii) of sub section (6) of Section 80A, that the express "market value" in relation to any goods or services solo, supplied or acquired means the "arm's length price" as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in section 92BA?"
9. The Hon'ble High Court while considering the above question of law had followed the decision of the Hon'ble Supreme Court in Para 21 of the order (refer findings of the coordinate bench extracted herein above). Further the DRP on same set of facts has decided the issue in favour in assessee's own case for AY 2020-21. Considering the facts and circumstances and the IT(TP)A Nos.8 & 15/Chny/2026 Eveready Spinning Mills Pvt. Ltd.
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binding precedence, we unable to appreciate the contention of the ld DR in this regard.
10. The A.O while passing the final assessment order has disallowed a sum of Rs.23,454/- towards belated remittance of employee contribution. The issue of disallowance towards belated remittance of employee contribution towards PF is settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. and therefore, we are of the considered view that the disallowance made by the A.O in this regard deserves to be upheld.
11. The facts pertaining to the disallowance of deduction u/s. 80IA of the Act for AY 2022-23 is identical to the facts in AY 2018-19. Therefore, our decision on the impugned issue in AY 2018-19 is mutatis mutandis applicable to AY 2022-23 also. Accordingly, we direct the TPO to delete the TP adjustment made in this regard.
12. In the result, the appeal of the assessee for AY 2018-19 is partly allowed and appeal for AY 2022-23 is allowed.
Order pronounced on 27th day of April, 2026 at Chennai.
Sd/- Sd/-
(जॉज जॉज के) (पदमावती यस)
(George George K) (Padmavathy.S)
उपा / Vice President लेखा सद य /Accountant Member
चे नई/Chennai, दनांक/Dated: 27th April, 2026.
EDN, Sr. P.S
IT(TP)A Nos.8 & 15/Chny/2026
Eveready Spinning Mills Pvt. Ltd.
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आदे श क ितिल प अ े षत/Copy to:
1. अपीलाथ /Appellant
2. थ /Respondent
3. आयकर आयु /CIT, Chennai/Madurai/Coimbatore/Salem
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF
Digitally signed by
EJTADA DURGA EJTADA DURGA NARESH
NARESH Date: 2026.05.05
17:02:54 +05'30'