2013 (10) TMI 5 - CHHATTISGARH HIGH COURT

Deduction u/s 80IA of the Income Tax Act - Whether the "market value", as specified in Section [80-IA (8)] of the Act would be the same as the "sale price" of the State Electricity Board when the assessee did not incur any transmission loss or administrative or any other charges which the State Electricity Board has to incur for the same - The Assessee manufactures iron and steel. It has established a Captive Power Plant(CPP) to supply electricity to its manufacturing unit. The excess power is sold to the Chhattisgarh State Electricity Board - AO computed the market value of the power supplied to the Steel-Division and disallowed the difference between the market value claimed by the Assessee and the market value assessed by him – Held that:- CPP of the Assessee qualifies for claiming deductions under this sub-section 80-IA (4) (iv) of the Act - Sub-section (8) of section 80-IA {80-IA (8)} of the Act provides that for the purposes of deduction under this section profits and gains of eligible business are to be computed as if the transfer was done on the market value on that date - The proviso to section 80-IA (8) of the Act requires the AO to compute the profits and gains in the manner already proved. And in case the manner presents exceptional difficulties then the AO is empowered to compute profits and gains on such reasonable basis as he may deem fit.

The market value of the power supplied to the Steel-Division 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 when it is sold to a supplier as this is not the rate for which a consumer or the Steel- Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market - AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer - Decided against the Revenue.