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Diamines & Chemicals Ltd. Versus The DCIT Circle-1 (1) , Baroda

Claim of assessee towards deduction u/s 80IA(4) - ‘eligible profits’ for claim of deduction u/s 80IA(4) r.w.s.80IA(8) in respect of assessee’s Captive Wind Power Plant - Held that:- Deemed sales price of the power supplied by independent power plants excluding the cost towards surcharge and duty etc. levied by the supplier should be adopted for the purposes of determination of “market price” for computation of eligible profit under s.80IA(4) r.w.s.80IA(8) of the Act. - Thus we are in agreeme .....

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of the assessee is allowed for statistical purposes. - I.T.A. No.1668/Ahd/2015 - Dated:- 12-9-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For The Appellant : Shri Sanjay R.Shah, AR For The Respondent : Ms. Richa Rastogi, Sr.DR ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-1, Vadodara [CIT(A) in short] dated 02/03/2015 in the matter of assessment order u .....

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cation in diverse industries such as pharmaceuticals, agro chemicals, dyes and pigments etc. The assessee is also simultaneously engaged in the generation of wind-power and has installed wind-electric generators (windmills) in the states of Gujarat and Maharashtra for this purpose. The assessee in its return of income inter alia claimed deduction under s.80IA(4) in respect of notional profits on captive power plant set up at Kutch, Gujarat Plant amounting to ₹ 41,47,476/-. The return of in .....

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aken as a benchmark for determination of market value of captive power generated by the assessee in place of sale price of GUVNL to its consumers. The AO accordingly substituted the claim of deduction under s.80IA (4) to ₹ 22,60,425/-. Consequently, relief under s.80IA(4) was denied to the extent of ₹ 18,87,051/-. 4. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) also declined to entertain the appeal of the assessee in respect of the aforesaid issue. 5. Furthe .....

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undertaking namely GUVNL. It was submitted that the CIT(A) has also wrongly endorsed the aforesaid action of the AO. The claim of eligible deduction under s.80IA(4) was thus reduced by ₹ 18,87,051/-. The Ld.AR submitted that for the purposes of determination of eligible profit under s.80IA(4) of the Act from generation of power for captive consumption, the AO ought to have accepted the rate adopted by the assessee which represents the selling price at which GEB supplied power to its consu .....

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ed the average rate per unit at which MGVCL is charging to its customer for determination of market value of the electricity generated by its Power Plant for captive consumption which is in tune with the provisions of section 80IA(8) of the Act. The Ld.AR relied upon the decision of the Hon ble Gujarat High Court in Pr.CIT vs. Gujarat Alkalies and Chemicals Ltd. (2007) 395 ITR 247 (Guj.) for the aforesaid proposition. Pertinent to note here, in the course of the arguments canvassed by the Ld.AR, .....

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issue that arises for consideration is computation of eligible profits for claim of dedictopm under s.80IA(4) r.w.s.80IA(8) in respect of assessee s Captive Wind Power Plant. For the purposes of claiming tax holiday, the assessee considered the average rate at which power was sold by an independent power supplier, i.e. MGVCL to its customers to enable it to determine the market value of electricity is generated by its Captive Wind Power Plant. The AO, on the other hand, has placed reliance upon .....

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lants (UGVCL - in that case) excluding the cost towards surcharge and duty etc. levied by the supplier should be adopted for the purposes of determination of market price for computation of eligible profit under s.80IA(4) r.w.s.80IA(8) of the Act. The relevant para of the aforesaid order of the Tribunal dealing with the determination of eligible profit reads as under:- 15. We shall now turn to the second and major controversy raised by the assessee towards the market value of captive transfer of .....

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O declined to admit the claim of the assessee to include surcharge and duty levied by the GEB (UGVCL) for the purposes of calculation of selling price. In other words, the AO adjusted the deemed sale price of the power to exclude fuel surcharge and duty chargeable thereon in commercial sale. 15.1. The AO while determining the deemed sale price of power supplied by the captive power generating unit to paper unit excluded the cost towards surcharge and duty levied by GEB (UGVCL) for the purposes o .....

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#8377; 2.99 per unit as per working reproduced in preceding paras. The assessee has vehemently contested the aforesaid action of the CIT(A). Thus, the substantive grievance of the assessee is that (i) the deemed selling price should be determined at the average price at which the GEB (UGVCL) is supplying to its consumers and not the average rate of supply as adopted by the CIT(A) based on the price charged by the distribution company Discoms in the open market and (ii) without excluding surcharg .....

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s benchmark rate for the purposes of deemed selling price along with surcharge collected by the Electricity Board. 15.3. In the context, it will be relevant to refer section 80IA(8) of the Act which provides for the manner of computation of transfer price where there is captive consumption of finished-goods of eligible unit for the purposes of computation of deduction under s.80IA(4) of the Act. We find strength in the assertion on behalf of the assessee that the market price is to be determined .....

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tribution companies to its consumer will form part of selling price or not for the determination of market value under s.80IA(8) for calculation of eligible profits under s.80IA(4) of the Act. 16.1. In this regard, we refer to the Electricity Act, 2003 and note that surcharge is applied with an object of meeting the requirement of current level cross subsidy. The aforesaid Act clearly provides that surcharge shall not be leviable in case open access is provided to a person who had established a .....

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