Income Tax Appellate Tribunal - Chennai
M/S. The India Cements Ltd, Chennai vs Dcit, Chennai on 31 May, 2023
आयकर अपीलीय अिधकरण, 'डी' यायपीठ, चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
ी वी दुगा राव, याियक सद य एवं ी मंजुनाथ. जी, लेखा सद य के सम
BEFORE SHRI V. DURGA RAO, HON'BLE JUDICIAL MEMBER AND
SHRI MANJUNATHA. G, HON'BLE ACCOUNTANT MEMBER
आयकर अपील सं./IT(TP)A No.: 66/Chny/2022
िनधारण वष / Assessment Year: 2018-19
M/s. The India Cements Limited, The Deputy Commissioner of
No. 93, Coromandel Towers, v. Income Tax,
Santhome High Road, Corporate Circle -1(1),
Chennai - 600 028. Chennai.
[PAN: AAACT-1728-P]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/Appellant by : Shri. R. Vijayaraghavan, Advocate
यथ क ओर से/Respondent by : Shri. S. Palanikumar, CIT
सुनवाई क तारीख/Date of Hearing : 24.03.2023
घोषणा क तारीख/Date of Pronouncement : 31.05.2023
आदेश /O R D E R
PER MANJUNATHA. G, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against final assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 05.09.2022, in pursuant to directions of the DRP issued u/s. 144C(5) of the Act dated 22.06.2022 and pertains to assessment year 2018-19.
:-2-: IT(TP)A. No: 66/Chny/2022
2. The assessee has raised the following grounds of appeal:
1.1 The order of the DRP/ AO /TPO is contrary to law, facts and circumstances of the case.
1.2 The DRP I AO/TPO erred in computing a downward Transfer Pricing adjustment u/5. 92CA reducing claim of the assessee under section 80IA by a sum of Rs 140,47,96,628/-.
Assessee's own case in ITAT for previous AY's not followed:
2.1 The DRP has grossly erred in not following the decision in Assessee's own case by the Hon'ble Chennai Tribunal in ITA No-2412 to 2416 /2019 for AY- 2011-12, 2012-13, 2014-15, 2015-16 and 2016-17 at Page-16, Para- 29 to 32 and ITA No. 737/Chny/2018 for AY 2013-14 dated 18.08.2021 at Page 41 para 18. Though this ground was raised before the DRP it did not even mention the same in its order dated 22.06.2022.
Judicial decisions by ITAT's and HCs on same issue ignored: 3.1 The DRP grossly erred in ignoring the jurisdictional decision of the Chennai Tribunal as well as other High Courts on the very same issue, all of which were submitted before the DRP. Instead, DRP merely referred to the single decision in the case of Saranya Textiles Vs ACIT merely stating that the case was distinguishable on facts and circumstances of the case, without any elaboration. None of the other cases were even referenced.
3.2 The DRP/ AO/TPO erred in not following a NUMBER of jurisdictional Tribunal decisions and HC decisions on exactly the same issue in the following which have ALL held that the rate of power generation at which electricity boards supplied power to its consumers (assessee) should be taken as the unit sale price such as:
i. Gujarat HC in CIT vs. Gujarat Alkalies Chemicals Ltd (395 /TR 247Guj) ii.Chattisgarh HC in CIT vs Godavari Power &lspat Ltd [2014] 42 taxmann.com 551 iii.lTAT Chennai in Velayudhaswamy Spinning Mills vs DCIT (19 taxmann.com 28 Chennai) iv. IT AT Chennai in Eveready Spinning Mills vs ACIT (17 taxmann.com 254 Chennai) :-3-: IT(TP)A. No: 66/Chny/2022 v.Excel Cotspin (/) Pvt Ltd Vs DCIT - 25 Taxmann.com 418 (Chen) vi Sri Matha Spinning Mills P Ltd Vs DC/T - 31 Taxmann.com 13 Chen) vii. Prabhu Spinning Mills (P) Ltd Vs DCIT - 33 Taxmann.com 398 (Chen) viii. Pr.CIT Vs Pragati Glass Works Pvt ltd - dated 23.07.2019Shree Cement Ltd - 49 Taxmann.cm 274 (Jaipur) Wrong understanding of basic facts:
4.1 The DRP / AO /TPO has completely misunderstood how the market value / ALP was arrived at by the assessee as given in its TP Study. The DRP / AO /TPO ought to have appreciated that the price at which the electricity generated by the eligible units is deemed to have been transferred to other consuming units will be the charges the consuming units would have to pay to purchase these units from the respective electricity boards had there not been credit given for the electricity generated by the assesses eligible 80-IA unit and utilised by other consuming units.
4.2 The DRP/AO/TPO ought to have appreciated that the consuming unit would have had to buy the electricity from the TNEB, or respective Board, at the price TNED, or respective Board, charges to consumers and this price is the ALP price that has been correctly adopted by the assessee. The fact that TNEB gives credit for the captively consumed units at the market price has been completely missed by the AO/TPO. Market value" u/S.80-IA wrongly interpreted: 5.1 The DRP / AO/TPO ought to have appreciated that the provisions of section 8O-IA(8) provides for the transfer price to be the "market value". Market value here is the benefit given by the third party viz., Electricity Board for utilising the electricity generated by the eligible commission (Telangana) in respect of a totally different set of transactions of varying natures (such as bulk production by State undertakings, long- term contracts, differing nature of type/assets/infrastructure employed ft numerous other varying parameters in each contract).
Incorrect adoption of "safe harbour" rates without basis:
:-4-: IT(TP)A. No: 66/Chny/2022 6.1 The DRP / AO/TPO further erred in blindly adopting "safe harbour" rates as the ALP without explaining why the rates adopted by the assessee he's not in accordance with section 92C read with 80lA. In doing so, the DRP/ AO/TPO has not appreciated concept and purpose of safe or safe harbour rules. The DRP / AO /TPO authorities failed to understand that if the safe harbour rules rate is to be adopted blindly without any further examination as the ALP, then all other provisions regarding, methods of determining ALP and the rules therefor, the DRP and appeals to higher forum would be redundant as the only rate that can be adopted as ALP. The safe harbour rates merely provide rates which can be accepted by the department without any further examination as to the methods of computing the ALP.
Rates arrived at without basis:
7. 1 Without prejudice, the DRP / AO /TPO has not specified as to on what basis Rs.0.13, Rs.4.91 and Rs.3.10 has been adopted as the tariff determined by the appropriate Commission under the Electricity Act 2003. The purchase price of electricity by Electricity Boards from various generating units is never Rs 0.13. Further it is not clear how the other rates of Rs 4. 91, Rs 3 .1 O have been arrived at.
8. The Appellant craves leave to file additional hearing."
3. The brief facts of the case are that, M/s. India Cement Ltd, the assessee is engaged in the business of manufacturing and sale of cement. The assessee company has set up total 53 wind mills in Devarkulam and Palladam in Tirunelveli district and uses the electricity generated from such windmill for captive consumption in its plants in Sankarnagar, Sankari and Dalavoi through Tamil Nadu Electricity Board's grid. The assessee has claimed deduction u/s.80IA of the Act, in respect of captive power plants in Vishnupuram, AP and Kayathar, TN.
:-5-: IT(TP)A. No: 66/Chny/2022 The deduction has been claimed based on the rate at which power plant purchased either from the market or from the State Electricity Boards. Since, the deduction claimed u/s.80IA in respect of power generation from captive power plants under specified domestic transactions, the assessee has conducted transfer pricing study and has adopted comparable uncontrolled price method (CUP) as the most appropriate method and claimed that its specific domestic transactions are at arm's length price. During the course of assessment proceedings, a show cause notice was issued by the TPO seeking to adjust deduction claimed u/s.80IA of the Act, by adopting the rate at which the State Electricity Boards purchase power from independent power producers as per the TN Electricity Regulatory Commission. In response, the assessee claimed that both the plants are captive power plants meant for 100% captive use and therefore the ERC pricing has no bearing on the issue. The assessee, further claimed that the windmill at Kayathar generates electricity which is fed into grid of TANGEDCO. Further, whenever the assessee draws power from TANGEDCO grid while billing to the factories, it has adjusted such power fed into the grid and bill for the rest at normal tariff rate which is Rs.5.69 per unit. The Waste Heat :-6-: IT(TP)A. No: 66/Chny/2022 Recovery Plant is located in Telengana and therefore the TNERC rates are not applicable. The power generated in the grid is consumed internally and not fed into the grid and therefore adopting a tariff applicable to power generating entities is not correct.
4. The TPO, however was not convinced with the explanation furnished by the assessee and according to TPO price fixed by ERC becomes a significant factor, because the said rate was fixed to procure and sell power from independent power producers. This is so, since if the assessee had to sell power in the open mart, the buyers would have the only power distribution companies as electricity is not a commodity that is freely saleable to whomsoever is interested. Therefore, he opined that deduction claimed u/s.80IA of the Act on notional profit derived from internal consumption of power from captive power plant should be computed on the basis of rate as which independent power generating companies sold power to distribution companies, and thus, adopted tariff rate fixed by ERC and made adjustment of Rs. 140,47,96,628/-.
:-7-: IT(TP)A. No: 66/Chny/2022
5. The Ld. Counsel for the assessee, submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai Benches in assessee's own case for assessment year 2011-12, 2012-13, 2014-15, 2015-16 & 2016-17, where under identical facts the tribunal by following the decision of Hon'ble Chhattisgarh High Court in the case of M/s. Godavari Power and Ispat Limited [2014] 42 taxman.com 551, held that deduction u/s. 80IA of the Act, is allowable to power generating companies for captive consumption and such deduction should be allowed rate at which the electricity board supplied power to its consumers, rather than the rate at which the power generation companies supply its power to the electricity board. The Ld. Counsel for the assessee, further submitted that this issue is also covered by Hon'ble High Court of Bombay in the case of CIT vs Reliance Industries Ltd [2020] 421 ITR 686, where it has been clearly held that deduction u/s. 80IA of the Act, in respect of profit arising out of captive power generation should be at rate at which electricity distribution companies were allowed to supply electricity to consumers. Although, assessee's case is covered by the decision of coordinate bench of ITAT in assessee's own case, the ld. DRP, grossly erred in not following the decision of ITAT :-8-: IT(TP)A. No: 66/Chny/2022 while adjudicating the issue. He further submitted that the Tribunal has consistently taken a view in assessee's own case and held that deduction u/s. 80IA of the Act should be allowed for profit derived from captive power generation activity on the basis of rate charged by electricity distribution companies to its customers. In this regard, he relied upon the decision of ITAT Chennai Benches in assessee's own case for assessment year 2013-14 in ITA No. 737/Chny/2018 dated 18.08.2021.
6. The Ld. CIT-DR, S. Palanikumar, submitted that although the issue is covered in favour of the assessee by the decision of ITAT, Chennai in assessee's own case for earlier assessment years, but fact remains that the Tribunal has consistently followed its own decision in assessee's case for earlier years. But said decision which rendered in the context of deduction u/s. 80IA, sub section 8 of the Act, but not under TP provisions. The basic purpose of TP study was to determine ALP of eligible business that has claimed deduction u/s. 80IA of the Act on sale of power by the power generation unit. It was not of consumption of electricity by captive consumption unit in other business. In this case, the issue before us is determination of income of eligible business i.e. power :-9-: IT(TP)A. No: 66/Chny/2022 generation unit. When it comes to comparability of power generation unit, the basic question that needs to be considered is functions performed by the comparable, asset employed and revenue generated. In this case, the assessee is in the business of power generation, but it cannot be a comparable company which is into the business of power distribution. The functions performed by power generating companies and power distribution companies are entirely different. The asset employed by these two companies are also entirely different. The revenue employed by generating companies and distribution companies are also different. Therefore, under TP regime this point needs to be considered while selecting the comparable company. The TPO after giving various reasons came to the conclusion that rate charged by power distribution companies cannot be yardstick for comparing revenue earned by power generation company and reasons given by the TPO and DRP are not properly appraised by the Tribunal while adjudicating the issue for earlier years. Therefore, he submitted that the issue to be decided without going into the decisions rendered by the Tribunals in assessee's own case for earlier years. In this regard, he filed detailed written submissions on the issue which has been reproduced as under:
:-10-: IT(TP)A. No: 66/Chny/2022 "The appellant claimed deduction of 80IA of the IT Act on sale of electricity from the eligible business". The TP study in this case referred to TPO was determination of arm's length price on sale of electricity that was captively consumed by "other business' of the appellant company.
1. TP adjustment that has undergone TP study:
This Specified Domestic Transaction (SDT) was referred to TPO. These transactions are presented in para 4.2 of the TP order. Attention is drawn to the table at P.No.4 of the TP order. The TPO briefed about the following transactions;
sale of power generated from waste heat recovery plant, sale of power generated from wind mills at Kayathar, sale of power generated at Banswara, sale of power generated at Sankamagar sale of power generated at Vishnupuram
2. What is the nature of transaction:
Assessee has power generation units at various places listed above. The power generated by those eligible units were captively consumed by Cement plant ("other business"). Whether power generated from those eligible units and sold/captively consumed by other business was at market rate or not was determined by the TPO. What is the arm's length to be determined is sale of Power by the power generation units of eligible business and not purchase of power by "other business" from open market.
3. Legislative History:
Hon 'ble Supreme Court in the case of CIT Vs Glaxo Smithkline Asia (P) Limited /2010] in 195 Taxmann 35, has examined section 40A(2) and 80IA of the IT Act and directed Ministry of Finance and CBDT to enact special provisions in IT Act to deals such transactions empowering the AO to make adjustments to the income declared by the assessee having regard to the fair market value of the transactions between related parties. Thus, the AO can apply generally accepted methods of determination of arm's length price, including the methods provided under Transfer Pricing Regulations. It is as under;
:-11-: IT(TP)A. No: 66/Chny/2022 As far as the instant special leave petition was concerned, no interference was called for as the entire exercise was a revenue neutral exercise. Hence, the special leave petition filed by the department stood dismissed [Para 2] However, a larger issue was involved in the instant case. The main issue which needed to be addressed was, whether Transfer Pricing Regulations should be limited to cross-border transactions or be extended to domestic transactions. In the case of domestic transactions the under-invoicing of sales and over-invoicing of expenses ordinarily would be revenue neutral in nature, except in the following two circumstances having tax arbitrage-
(i)lf one of the related companies is a loss making company and the other is a profit making company and profit is shifted to the loss making concern,· and
(ii)lf there are different rates for two related units [on account of different status, area-based incentives, nature of activity, etc.] and if profit is diverted towards the unit on the lower side of the tax arbitrage. For example, sale of goods or services from non-SEZ area, [taxable division} to SEZ unit [non-taxable unit} at a price below the market price so that taxable division will have less taxable profit and non-taxable division will have a higher profit exemption. [Para 4] All these complications arise in cases where fair market value is required to be assigned to the transactions between related parties in terms of section 40A(2). To get over this situation, the matter needs to be examined by the CBDT. The matter has been examined by the CBDT and it is of the view that amendments would be required to be made to the provisions of the Act, if such Transfer Pricing Regulations are required to be applied to domestic transactions between related parties under section 40A(2). [Para 5] In order to reduce litigation, certain provisions of the Act, like section 40A(2) and section 80- IA(I0), need to be amended to empower the Assessing Officer to make adjustments to the income declared by the assessee, having regard to the fair market value of the transactions between the related parties.
The Assessing Officer may thereafter apply any of the generally accepted methods of determination of arm's length price, including the methods provided under the Transfer Pricing Regulations. However, in a number of matters, the Assessing Officer is constrained by non-maintenance of :-12-: IT(TP)A. No: 66/Chny/2022 relevant documents by the taxpayers as, currently, there is no specific requirement for maintenance of documents or of getting specific transfer pricing audit done by the taxpayers in respect of domestic transactions between the related parties. One of the suggestions which needs consideration is whether the law should be amended to make it compulsory for the taxpayers to maintain books of account and other documents on the lines prescribed under rule 1 OD in respect of such domestic transactions and whether the taxpayers should obtain audit reports from their chartered accountants so that the taxpayers would maintain proper documents and requisite books of account reflecting the transactions between related entities at arm's length price, based on generally accepted methods specified under the Transfer Pricing Regulations. Normally, the Supreme Court does not make recommendations or suggestions. However, in order to reduce litigation in complicated matters, the question of amendment, as indicated above, may require consideration expeditiously by the Ministry of Finance. In the meantime, the CBDT may also consider to issue appropriate instructions in this regard. [Para 6] This lead to enactment of special provisions of Specified Domestic Transaction in section 92BA, Requirement of report of an accountant in section 92E, 92F and Explanation in section 80IA(8) of the IT Act in Finance Act 2012, w.e.f. 1-4- 2013. This is applicable from AY 2013-14.
The Explanation to section 80IA(8) introduced in Finance Act defines "market value" for the purpose of above said provision placed in Chapter X. The explanatory memorandum is as under:
"Transfer Pricing Regulations to apply to certain domestic transactions Section 40A of the Act empowers the Assessing Officer to disallow unreasonable expenditure incurred between related parties. Further, under Chapter VI-A and section 1 0AA, the Assessing Officer is empowered to re-compute the income (based on fair market value) of the undertaking to which profit linked deduction is provided if there are transactions with the related parties or other undertakings of the same entity. However, no specific method to determine reasonableness of expenditure or fair market value to re-compute the income in such related transactions is provided under these sections.
The Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P) Ltd., in its order has, after examining the :-13-: IT(TP)A. No: 66/Chny/2022 complications which arise in cases where fair market value is to be assigned to transactions between domestic related parties, suggested that Ministry of Finance should consider appropriate provisions in law to make transfer pricing regulations applicable to such related party domestic transactions.
The application and extension of scope of transfer pricing regulations to domestic transactions would provide objectivity in determination of income from domestic related party transactions and determination of reasonableness of expenditure between related domestic parties. It will create legally enforceable obligation on assessees to maintain proper documentation. However, extending the transfer pricing requirements to all domestic transactions will lead to increase in compliance burden on all assessees which may not be desirable.
Therefore, the transfer pricing regulations need to be extended to the transactions entered into by domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 1 OAA. The concerns of administrative and compliance burden are addressed by restricting its applicability to the transactions, which exceed a monetary threshold of Rs. 5 crores in aggregate during the year. In view of the circumstances which were present in the case before the Supreme Court, there is a need to expand the definition of related parties for purpose of section 40A to cover cases of companies which have the same parent company.
It is, therefore, proposed to amend the Act to provide applicability of transfer pricing regulations (including procedural and penalty provisions) to transactions between related resident parties for the purposes of computation of income, disallowance of expenses etc. as required under provisions of sections 404, 80IA, 1 OAA, 80A, sections where reference is made to section 80-I4, or to transactions as may be prescribed by the Board, if aggregate amount of all such domestic transactions exceeds Rupees 5 crore in a year. It is further proposed to amend the meaning of related persons as provided in section 40A to include companies having the same holding company.
This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the Assessment Year 2013-14 and subsequent assessment years."
:-14-: IT(TP)A. No: 66/Chny/2022 4. What's market value in Specified Domestic Transaction? Section 80IA(8):
Where any goods or services held for the purpose of eligible business are transferred to any other business carried on by the assessee - First limb Or Where any goods or services held for the purpose of any other business are transferred to eligible business carried on by the assessee In either case - Second limb If consideration recorded in the accounts of eligible business does not correspond to market value of such goods, then for the purpose of section 80IA(8), profit and gains of such eligible business shall be computed as if the transfer in either case had been made at market value of the goods as on date of transfer.
5. Here what is the good transferred?
1. The good transferred or sold here is electricity.
2. The assessee company has generated power from eligible units and transferred to other business carried on by them.
3. It was captively consumed by other business carried on by the assessee.
4. Hence first limb of section 80IA(8) discussed above is attracted.
'Market value' for the purpose of section 801A and arm's length price as per clause (ii) of section 92F Being the power generator in eligible units, the rate at which they can sell in open market toState Electricity Board is the "market value". All the power generation units have to either captively consume or sell to State Electricity Board. That is the market rate as per the explanation discussed above and that is needed for determination of arm's length price. The arm's length price is explained in the pictorial diagram enclosed along with this submission.
7. What was the assessee's TP study or contention?
:-15-: IT(TP)A. No: 66/Chny/2022 The assessee in their TP study determined the arm's length of the captive consumption of other business" by treating the purchase price of electricity from the power distribution company namely TANGEDCO and concluded that their transaction was within arm's length for the captive consumption. That rate is the retail market rate of power sold by power distribution companies of power in open market.
If we follow the method of assessee, the entire purpose of legislation of section 92B, 92E and explanation to section 80IA consequent to direction of Supreme Court in the case of CIT Vs Glaxo Smithkline Asia (P) Limited [2010/ in 195 Taxmann 35 will be defeated.
8. TP study by the TPO:
The TPO has examined the transaction in the following line;
What we have to examine in TP study is the sale price of power generation units/eligible units to State Electricity Board.
The tested party is the power generation units i.e. 'eligible units' and not the captive consumption unit as contended by the appellant.
Because what the assesssee claimed deduction u/s 80IA was on sale of power of eligible business Here, the determination of arm's length of eligible business only underwent TP study and not other business of captive consumption.
That is what Hon'ble SC has prescribed in its decision.
Whether the appellant has given the required documents to TPO?
Attention is drawn to para 1.1.2, 1.1.3 and 1.1.4 of the TP order. The appellant was asked to submit the crucial details required for TP study. Specific show cause notice was issued. The appellant wilfully failed to submit any of those documents. Hon'ble SC has mandated in the above said decision that every assessce has to maintain separate books of accounts for this purpose.
9. Appellants reliance on decision of ITAT for earlier AYs:
:-16-: IT(TP)A. No: 66/Chny/2022 With due regard, it is submitted that Hon'ble ITAT has followed the decision of A Y 2011-12 rendered in ITA No:2412/Chny/2019 dated 12-12-2019 and allowed the appeal of the appellant in all the previous year decisions. It can be referred to para-29 of order dated 12-12-2019 and para 18.5 of the order dated 18-08-2021. The A Y that was relied upon by the ITAT was pertaining to A Y 2011-12 that was prior to enactment of legislation of SDT in Finance Act 2012.
In those appeals the Hon 'ble ITAT held that for the purpose of deduction claimed u/s 80IA of the IT Act, notional profit derived from the internal consumption of power from captive power plant should be computed on basis of rate of power purchased.
This is exactly opposite to the TP study.
Here the TP study was on power generation unit- eligible business TP study was not on power consuming units/captive consumption - other business The market value of power sold by eligible business to Regulatory Authority is the arm's length.
Various other case laws listed in the said decision were all rendered in same context and prior to AY 2013-14. The legislation made in Finance Act 2012 and special provisions enacted to determine the arm's length of the eligible power generation unit was not addressed in those cases.
10.Summary;:
1. The TP study was on determination of arm's length of eligible business that has claimed deduction u/s 80IA of the IT Act on sale of power by the power generation unit.
2. It was not on consumption of electricity by captive consumption unit of other business. Those unit if they but electricity from open market, the rate was retail purchase rate.
However, that is not the case here.
3. Hon 'ble SC has directed Ministry of Finance to enact separate legislation to determine arm's length in such specified domestic transaction.
4. Such legislation was enacted by parliament in Finance Act 2012. Accordingly, w.e.f. 1-4-2013 significant amendment was :-17-: IT(TP)A. No: 66/Chny/2022 brought in the statue to address such specified domestic transaction.
5. TPO in compliance to the legislative enaction, determined the arm's length of the 'eligible business' of the power generation units by comparing with the rate of other power generators.
In view of the above, it is prayed that the decision of lower authorities may be upheld."
7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee's own case for assessment year 2013- 14 in ITA No. 737/Chny/2018, where the Tribunal under identical set of facts and also by following certain judicial precedents, including the decision of Hon'ble High Court of Bombay in the case of CIT vs Reliance Industries Ltd (Supra) held that while computing deduction u/s. 80IA of the Act for power generation companies for captive consumption, the rate charged by electricity distribution companies to its consumers should be considered instead of rate at which the power generating companies supply power to the electricity distribution companies. The relevant findings are as under:
18.5 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee's own case for assessment year 2011-
:-18-: IT(TP)A. No: 66/Chny/2022 12 in ITA No.2412/Chny/2019 dated 12.12.2019, where the Tribunal under identical set of facts by following certain judicial precedents including the decision of Hon'ble Bombay High Court in the case of Reliance Industries Ltd., and the decision of Hon'ble Chhattisgarh High Court in the case of M/s.Godavari Power and Ispat Ltd., supra held that while computing deduction u/s.80IA for generation of power for captive consumption, the rate at which electricity board supply power to its consumers should be considered instead of the rate at which the power generating companies supply its power to the electricity board. The relevant findings of the Tribunal are as under:-
"31. We have considered the rival submission and perused the materials available on record.
32. A perusal of the facts in the present case clearly shows that the assessee has been captively consuming the electricity generated from its wind mill as also the Heat Waste Recovery Treatment Plant. Admittedly, the assessee is entitled to the deduction u/s.80IA of the Act in respect of the electricity generated and consumed. This is not in dispute. The dispute has risen for computing the deduction u/s.80IA of the Act. The issue admittedly is covered by the decision of the Co-ordinate Bench of this Tribunal in the case of Sri Velayudhaswamy Spinning Mills Vs Deputy Commissioner of Income Tax referred to supra and as also the decision in the case of Eveready Spinning Mills vs. Assistant Commissioner of Income Tax referred to supra. A similar view has also been taken in the case of M/s. Saranya Textiles vs. The Assistant Commissioner of Income Tax, wherein one of us is a party. This view of ours is also supported by the decision of the Hon'ble Gujarat High Court in the case of Commissioner of Income Tax vs. Gujarat Alkalies Chemicals Limited reported in 395 ITR 247(Guj.), wherein it has been held that the deduction u/s.80IA was allowable to the for generation of power for captive consumption and that the rate of power generation at which the electricity board supplied power to its consumers rather than the rate at which the power generating companies supply its power to the electricity board was to be taken as the price. Further, this view has been supported by the decision of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs. Reliance Industries Limited in I.T.A. No.1056/Chny/2016 :-19-: IT(TP)A. No: 66/Chny/2022 dated 0.01.2019 and as also the decision of the Hon'ble Chhattisgarh High Court in the case of Godavari power and Ispat Limited reported in [2014] 42 Taxman.com 551 (Chhattisgarh). As it is noticed that the learned CIT(A) has followed judicial discipline by following the decision of this Tribunal in the case of Sri Velayudhaswamy Spinning Mills Vs Deputy Commissioner of Income Tax and Eveready Spinning Mills vs. Assistant Commissioner of Income Tax referred to supra, as it is noticed this view has also been approved by the Hon'ble High Courts referred to supra, we find no error in the order of the learned CIT(A) which calls for any interference. It may be mentioned here that the deduction u/s.80IA is the deduction from the total income of the assessee the profits and gains of an eligible undertakings. The Hon'ble Gujarat High Court has categorically admitted that the deduction u/s.80IA is permissible for captive consumption and even the rate at which the deduction is to be computed. Consequently, the issue is held in favour of the assessee and against the Revenue."
18.6 In the present case, the facts are identical with that of the facts considered by the Tribunal in earlier year. The CIT(A) after considering relevant facts and also by following the decision of the ITAT, Chennai in the case of Eveready Spinning Mills (P) Ltd., vs. ACIT, (2012) 17 taxmann.com 254 and the decision in the case of Shri Velayudhaswamy Spinning Mills (P) Ltd., vs. DCIT, (2012) 19 taxmann.com 28 has deleted additions made by the AO by holding that market value of the power captively consumed should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power at which power could have been sold to SEBs because this is not the rate for which a consumer could have purchased power in the open market. Therefore, we are of the considered view that there is no error in the finding recorded by the ld.CIT(A) to delete additions made by the AO towards TP adjustment on deduction claimed u/s.80IA of the Act. Hence, we reject the ground taken by the Revenue."
8. In this view of the matter and consistent with view taken by the coordinate bench, we are of the considered view that the DRP has completely erred in sustaining the additions made :-20-: IT(TP)A. No: 66/Chny/2022 by the Assessing Officer towards downward adjustment to the transactions of inter unit transfer of power from captive power generating unit to the assessee company. Thus, we direct the Assessing Officer to delete additions made towards TP adjustment in respect of deduction claimed u/s. 80IA of the Act.
9. In the result, appeal filed by the assessee is allowed.
Order pronounced in the court on 31st May, 2023 at Chennai.
Sd/- Sd/-
(वी दुगा राव) (मंजुनाथ. जी)
(V. DURGA RAO) (MANJUNATHA. G)
याियकसद य/Judicial Member लेखासद य/Accountant Member
चे ई/Chennai,
st
दनांक/Dated: 31 May, 2023
JPV
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT
4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF