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TMI Blog2013 (9) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) vide impugned order partly allowed the appeal of the assessee. However, the Commissioner of Income-tax (Appeals) upheld the findings of the Assessing Officer with regard to market value of power consumed at the rate at which the Tamil Nadu Electricity Board (hereinafter referred to as "TNEB") purchased from it in respect of the units of the power generated by the undertaking and consumed captively. Aggrieved against this finding of the Commissioner of Income-tax (Appeals), the assessee has come in the second appeal before the Tribunal. The assessee has assailed the order of the Commissioner of Income-tax (Appeals) on the following grounds : "1. The order of the Commissioner of Income-tax (Appeals) is contrary to law, facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play. 2. The Commissioner of Income-tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. 3. The Commissioner of Income-tax (Appeals) failed to appreciate that the profits of the eligible undertaking is to be determined on the basis of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied to the State Electricity Board at Rs. 2.70 per unit and subsequently the Electricity Board supplied the same to industrial consumers at Rs. 3.50 per unit. The Tribunal in the aforesaid cases had held that the consideration for transfer of power for captive consumption at Rs. 3.50 per unit corresponding to the market value of such power. On the other hand, the Departmental representative defending the order of the Commissioner of Income-tax (Appeals) submitted that the assessee can sell electricity to the Tamil Nadu Electricity Board at Rs. 2.70 per unit. There can be no other price or higher price at which the assessee can sell electricity to any other third party at a higher price. The Departmental representative submitted that the Tribunal need not follow its earlier order as the same did not lay down proper principle of law. To support his submissions, the Departmental representative relied on the judgment of the hon'ble Madras High Court in the case of CIT v. Hi Tech Arai Ltd. reported as [2010] 321 ITR 477 (Mad) and the hon'ble Supreme Court of India in the case of CIT v. Sun Engineering Works P. Ltd. reported as [1992] 198 ITR 297 (SC) and in the case of Distributors (Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady Spinning Mills P. Ltd. v. Asst. CIT [2012] 145 TTJ (Chennai) 393 November 30, 2011 5. 1790/Mds/2011 Excel Cotspin (India) P. Ltd. v. Deputy CIT [2012] 15 ITR (Trib) 57 (Chennai) January 13, 2012 The Tribunal in I. T. A. No. 850/Mds/2011 Sri Velayudhaswamy Spinning Mills P. Ltd. v. Deputy CIT [2011] 12 ITR (Trib) 353 (Chennai) has held as under (page 356) : "8. The assessing authority has adopted the price of power at Rs.2.70 per unit in the light of the provisions of law stated in section 80-IA(8). Sub-section (8) of section 80-IA provides that where any goods are transferred to any other business carried on by the assessee or where any goods are transferred to the eligible business, in either case the consideration for the transfer recorded in the books of account if it does not correspond to the market value of such goods, the assessing authority shall compute the eligible profit on the basis of the market value of such goods. It means that sub-section (8) of section 80-IA does not allow an assessee to inflate the profit of its eligible unit by over invoicing the goods transferred or under invoicing of goods bought in. It is a safeguard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the power generated by the assessee was used by it for own consumption as well as for sale to the State Electricity Board. The Tribunal held that the rate at which the State Electricity Board supplies power to its consumers is to be considered to be the market value for transfer of power by the assessee's electricity generating undertaking for captive consumption for the purposes of section 80-IA(8) and not the price at which power is supplied by the assessee to the Board. 12. Further, as far as captive consumption of power is concerned, the assessee is neither selling nor buying electricity. The quantum of power contributed by the assessee to the Tamil Nadu Electricity Board can be availed of by the assessee for which no additional payment is to be made. If the assessee has received Rs. 2.70 per unit, the assessee has to pay only Rs. 2.70 per unit. It is a kind of commodity banking, or in economic term, barter exchange of same good. Therefore, de facto speaking, there is no sale and purchase. In such circumstances there is no market price at all. 13. Market price comes into play only when the assessee is buying power from the Tamil Nadu Electricity Board just like any other c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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