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2023 (4) TMI 1051 - AT - Income TaxApplication of provisions of specified domestic transfer pricing as laid down in section 92BA determining the price for transfer of power between eligible units and non-eligible units as assessee has not claimed any deduction u/s 80IA - Determination of price of transfer of power between the eligible units and non-eligible units - assessee has adopted the rate at which the Chhattisgarh State Electricity Board is charging for supply of electricity to the industrial consumers - HELD THAT - Respectfully following the judgment in assessee s own case 2013 (10) TMI 5 - CHHATTISGARH HIGH COURT we are persuaded to accept the contention of the assessee regarding the method adopted by the assessee as upheld by the Hon ble Jurisdictional High Court, for transfer of captive power from eligible units to non-eligible units.. Thus, ground Nos.1 to 6 in the present appeal of the assessee are allowed.
Issues Involved:
1. Adjustment to Total Income 2. Transfer Pricing Adjustments 3. Determination of Transfer Price for Power 4. Ignoring Tariff Order 5. Benchmarking Transactions 6. Non-Compliance with Jurisdictional High Court Judgment 7. Penalty Proceedings Summary: Adjustment to Total Income: The learned Assessing Officer (AO) proposed an adjustment of Rs. 24,94,76,749/- to the total income of the assessee, despite the Dispute Resolution Panel (DRP) ruling that no transfer pricing adjustment was warranted since the assessee did not claim any deduction under section 80-IA of the Income Tax Act, 1961. Transfer Pricing Adjustments: The AO and the DRP erred in making adjustments without considering that the company incurred gross total losses and did not claim any deduction under section 80-IA. The provisions of specified domestic transfer pricing under section 92BA of the Act were deemed inapplicable. Determination of Transfer Price for Power: The DRP and AO erred in determining the price for the transfer of power between eligible and non-eligible units. The assessee did not claim any deduction under section 80IA, and thus, the provisions of section 92BA did not apply. Ignoring Tariff Order: The DRP and AO ignored the tariff order passed by the Chhattisgarh State Power Distribution Co. Ltd. (CSPDCL) for supplying power within the state when determining the arm's length price for the transfer of power. Benchmarking Transactions: The DRP and AO erred in considering the rate at which CSPDCL purchases short-term power from captive power units to benchmark the transaction relating to the transfer of power from eligible to non-eligible units. Non-Compliance with Jurisdictional High Court Judgment: The DRP and AO did not follow the Chhattisgarh High Court's order in the assessee's own case for earlier years (AYs 2004-05 to 2006-07), which upheld the method adopted by the assessee for transferring captive power. Penalty Proceedings: The DRP and AO proposed to initiate penalty proceedings under section 270A of the Act without appreciating that no deduction under section 80IA was claimed, and hence, no adjustment to the returned income was warranted. Tribunal's Findings: The Tribunal, after considering the rival submissions and judicial pronouncements, found that the issue related to the determination of the price of power transfer between eligible and non-eligible units was already settled by the Jurisdictional High Court in the assessee's favor. The Tribunal cited several cases, including CIT Vs. Godawari Power & Ispat Ltd., where it was held that the market value of power supplied should be computed considering the rate charged by the State Electricity Board for industrial consumers. The Tribunal upheld the method adopted by the assessee and allowed grounds 1 to 6 of the appeal. Penalty Proceedings: Since the issues raised in grounds 1 to 6 were allowed, the penalty levied under section 270A of the Act was deleted, and ground 7 of the appeal was also allowed. Conclusion: The appeal of the assessee was allowed in full.
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