TMI Blog2012 (8) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... nos. 1 and 2: 1. For that in view of the facts and in the circumstances, the A.O. is wholly unjustified in restricting the deduction u/s 801A in respect of the Captive Power Generating Unit at ₹ 50478555/- as against the claim of your appellant for such deduction amounting to ₹ 35,18,06,526/- and in view of the facts and in the circumstances the Ld. CIT(Appeal) is wholly unjustified in confirming such action of the A.O. and in view of the facts and in the circumstances your petitioner company is eligible for deduction of 35,18,06,526/-, u/s 801A and in view of the facts and in the circumstances it may kindly be held accordingly. 2. For that in view of the facts and in the circumstances, the Captive Power Generating unit had correctly and properly charged the Chemical division in respect of electricity supplied to them at the rate at which such Chemical division was purchasing the e1ecricity from UPSEB and rate per unit of electricity supplied being as per open market rate, the A.O. is wholly unjustified in restricting the rate per unit at which the Captive Power Generating Unit was parking the excess generation with UPSEB and the Ld. CIT(Appeal) is wholly unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the value at which surplus value was being parked with the UPSEB. This system has consistently and regularly been followed by assessee and from all earlier years right from AY 1998-99 to AY 2006-07, AO allowed the claim of the assessee. But during the relevant AY 2007-08, the AO changed the basis of valuation of electricity per unit by adopting the sale value at which the surplus power was supplied to the grid of UPSEB. According to assessee, during the year under consideration the power supplied to UPSEB was at 0.31% of total generation and 99.69% of power generated by assessee s captive power generating unit supplied to its own industrial undertaking. The assessee claimed deduction u/s. 80IA of the Act on captive power unit at ₹ 35,18,06,526/- and AO allowed only at ₹ 5,04,78,555/-. Thereby the AO disallowed the claim of deduction u/s. 80IA of the Act at ₹ 30,13,28,171/-. The AO for making computation of disallowance recorded that it means the consideration for which such transfer which is recorded in the books of account is not equal to market value of such goods on the date of transfer, the consideration is to be the market value. The market value mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed in all the subsequent years, even if there is no change in the facts. In the case of appellant, it had made the claim u/s. 801A which was allowed in earlier years, but in the year under consideration when the A.O. examined the issue in detail it was observed by him that the appellant company has shown inflated turnover and net profit to claim higher amount of deduction. The view of the A.O, was affirmed from the facts and figures nr the case of other companies as mentioned above. Thus, I am of the view that in the case of appellant, on facts, the rule of consistency is not applicable. The appellant has failed to rebut the observations of the A.O. and simply wanted that its claim should be allowed following rule of consistency which, in my opinion, s not correct. The appellant has relied on the decision of Hon ble ITAT, Kolkata in the case of Assam Carbon Products Ltd. Vs. ACIT (supra). Though, in the said decision the issue involved is deduction u/s. 801B but the facts of that case are not exactly similar to the facts in the appellant case. In that case the issue involved was valuation of internal transfer of NH Coke and Import substitute, at notional landed cost by obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he price of power to be given to assessee because it has to transfer to the ultimate consumer through the same channel. According to AO, the market price can only be the price at which assessee is allowed to sale to the grid i.e. UPSEB or UPERC(MU). According to AO UPERC is the only competent statutory authority to make such determination, as the finding of fact, as in this case, is binding on assessee and it is also binding on the AO. The AO noted the tariff decided by UPERC @ 2.25 per unit by taking the base year of 1999-2000 and further increased to ₹ 2.53 per KW per hour with base price for the year 2001-02 and after that price escalation of 5% every year in terms of model power purchase agreement. The CIT(A) followed the same reasoning for dismissing the claim of the assessee. Aggrieved, assessee came in appeal before us. 6. We find that the assessee has supplied power to UPPCL(MU) in term of agreement entered on 15.12.2005 and the rates fixed therein as per annexure to the agreement vide para 2 i.e. Tariff, which reads as under: Single part Tariff Rate for this power shall be as follows: 212.00 paise per KwH (Two hundred twelve paise per KwH) Nett to KC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods 34[or services] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods 34[or services] as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. 35[Explanation.-For the purposes of this sub-section, market value , in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market.] 7. We find that the price at which State Electricity Boards sells electricity to industrial consumers is representative of the price that electricity would ordinarily fetch in the open market and i.e. the price which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever for the AO to re-work the profit of the assessee s captive power plants and he should have adopted the assessee s computation of deduction u/s. 80IA of the Act arrived at the basis of price charged by the State Electricity Board from industrial consumers for sale of power. Further, we clarify that the assessee is referred to give calculation of the pricing of units of electricity as reduced therefrom the electricity duty, cess, taxes etc. 8. Hence, we are of the view that the market value for the purpose of sub-section 8 of section 80IA of the Act is a price arrived at between buyer and seller in the open market where transaction takes place in normal course of business in contrast to a situation where price is fixed between a buyer and a seller in a negotiation done under legislative mandate. The claim of deduction u/s. 80IA of the Act in respect of its captive power undertaking engaged in the business of generation of electric power and power generated by assessee used in its own consumption as well as sale to State Electiricyt Board, the price at which power was supplied by assessee to Board was determined entrely in term of statutory regulation and such a price cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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