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4. For the assessment year 2017-2018, original return of income was filed showing total income of Rs. 934,43,95,510/- and subsequently revised on the identical sum and once again revised at total income of Rs. 934,43,99,430/-. The case was selected for scrutiny and notice under Section 143(2) was issued and subsequently notice under Section 142(1) along with questionnaire was served on the assessee. Thereafter another notice under Section 142(1) was issued giving opportunity of hearing to the assessee. It is not in dispute that the assessee responded to the notice and complied with the directions contained therein. The assessee participated in the hearing and was represented by their authorized representatives. The assessee was called upon to furnish various details and documents on various issues. However, in these appeals the issue which falls for consideration is the correctness of the addition on the Transfer Pricing Adjustment (TPA) made by the assessing officer. The assessment for the year ITAT NOS. 215, 216 AND 217 OF 2024 REPORTABLE 2025:CHC-OS:109-DB 2017-2018 was completed under Section 143(3) of the Act by order dated 09.02.2021. Aggrieved by the same, the assessee preferred appeal before the Commissioner of Income Tax (Appeals), Kolkata [CIT(A)]. The assessee contested the addition of Transfer Pricing Adjustment (TPA) by contending that the assessing officer/TPO erred in rejecting the economic analysis document as part of the Transfer Pricing Study Report undertaken by the assessee to determine the Arm's Length Price (ALP) for sale of power by Captive Power Plant (CPP) to non-eligible units in accordance with the provision of the Act read with the Income Tax Rules.

8. The appellant contested the finding recorded by the TPO by stating that the market conditions under which the power generating stations operate are significantly different from those of the Captive Power Units operated within the industries. The intent and purpose behind the setting up of CPPs by a manufacturing industry by explaining that the power tariff charged from the industrial customers by SEBs is different from that of the ITAT NOS. 215, 216 AND 217 OF 2024 REPORTABLE 2025:CHC-OS:109-DB domestic and agricultural consumers as the higher rate charged from the former subsidized the rate charged from the latter group of consumers. Therefore, power tariff in the case of manufacturing industry are very high. Further the Captive Power Plant (CPP) is set up with a dominant intent to save power costs, which the manufacturing unit is otherwise forced to incur and pay to SEBs and at the same time to ensure stable supply of uninterrupted power for smooth production of goods and resulted in cost savings to the company. Further it was contended that the assessee was also procuring power from SEBs beside getting from CPPs and they used landed rate at which the manufacturing units is procuring power from SEB as the comparable rate under the Arm's Length Standards. Further even the notified tariff orders which were referred to by the TPO are regulated and are ascertained by the State Electricity Commission after taking into account several socio-political considerations that have nothing to do with free market operation which fact is evident from the tariff order itself. Further the fact that the rates at which SEBs supplies power is regulated is of no consequences, as it is not the case of the TPO that this rate has been fixed by SEBs exclusively for the appellant as the SEB supplies power at the same tariff rate to all industrial consumers in the state which according to the assessee represents the prevailing market rate. The assessee also faulted the TPO for relying on the tariff order as it operated in all-together different market which is the business to business commonly known as (B2B) model. That the application of CUP as made by the TPO has to fail as the market condition of the comparable transaction cited by the TPO are not similar to that of the assessee. Therefore, they justified the CUP parameters adopted ITAT NOS. 215, 216 AND 217 OF 2024 REPORTABLE 2025:CHC-OS:109-DB by them. Further the assessee pointed out that the only purpose for which the manufacturing units is taken as the tested parties was to determine the market value at which the manufacturing units purchases power from unrelated third parties and therefore, they were right in taking the manufacturing units as tested party for the purpose of determination of Arm's Length Price (ALP) with most appropriate method (MAM) being the Comparable Uncontrolled Price (CUP).

9. The CIT(A) embarked upon an enquiry or in other words a fact finding exercise and called upon the assessee to explain why the CUP method should be considered to be the most appropriate method for the purpose of determining the sale price for the transfer of power from the assessee's eligible units namely the Captive Power Plant (CPPs) to the assessee's non eligible units namely the manufacturing units. The reply given by the assessee found acceptance by the CIT(A). The assessee submitted that the CUP method compares the price charged for property/services transfers/rendered in a controlled transaction with the price charged for similar property/services transfer/rendered in a comparable uncontrolled transaction under comparable circumstances. The assessee's contention was that a transaction is considered comparable only if, both, the property/services as well as the circumstances surrounding the controlled transaction are substantially the same as though that exists in uncontrolled transaction. The most important factor in determining the comparability under the CUP method is the existence of similarity between property/services in question. Further similarity of contractual terms and ITAT NOS. 215, 216 AND 217 OF 2024 REPORTABLE 2025:CHC-OS:109-DB economic conditions such as geographic markets and the level of market are also important, comparability factors to the open market under the CUP method. The assessee justified their bench marking analysis by contending that the same met the both the fair valuation standards as well as Transfer Pricing Guidelines.

11. The CIT(A) agreed with the contention raised by the assessee after noting that both non eligible units had also purchased power from the respective State Electricity Boards apart from procuring power from their Captive Power Plants and therefore accepted the applicability of Internal CUP method as adopted by the assessee. The CIT(A) appears to have called for various documents and took note of the sample copies of the bills showing purchase of power by non-eligible units. Further the CIT(A) noted that the availability of reliable data has not been disputed by the TPO. Reference was made to the decision of the learned tribunal in the case of M/s. Star Paper Mills Limited Versus DCIT in ITA No. 127/Kol/2021 dated 26.10.2021 and the decision in the case of Reliance Industries Limited (supra). With regard to the product comparability and the choice of the tested parties, the following findings was rendered by the CIT(A):-