9911796707
TMI Blog2023 (6) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... - of specific domestic transaction of sale of power by eligible unit to the manufacturing unit. Tax effect: Rs. 8,45,36,176/- b) Ld. TPO/DRP erred in law and on facts in disregarding benchmarking method adopted in transfer pricing documents of the appellant company ignoring factual aspects and submissions. Ld. TPO /DRP ought to have accepted the rate charged by the appellant at Rs. 6.5Rs/Unit as at arm's length. Tax Effect: N.A. being alternative contention to Ground 2(a). 3. a) Ld. TPO/DRP erred in law and on facts in making adjustment of Rs. 15,29,80,317/- of specific domestic transaction of sale of steam by eligible unit to the manufacturing unit. Tax Effect: Rs. 5,29,43,428/- b) Ld. TPO/DRP erred in determining arm's length value for sale of steam at Nil. TPO/DRP ought to have accepted the rate charged by the appellant at Rs. 1.21Rs/Unit as at arm's length. Tax Effect: N.A. being alternative contention to Ground 3(a). Your appellant craves leave to add, amend, alter, edit, delete, modify, or change all or any of the grounds of appeal before the appeal is heard and decided." 4. Ground No. 1 is general and it does not require any adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the price that the goods or services supplied would ordinarily fetch in the open market subject to any statutory or regulatory restrictions. The assessee further submitted that the ld. TPO has taken average value to full cost incurred by the assessee company and has not included other expenses like financial cost, eligible depreciation and administrative expenses etc. while calculating the cost of generation. Therefore, the value taken by the TPO is not supported even by the actual expenses incurred by the assessee company. 7. The Hon'ble DRP observed that the assessee had taken the rate charged by DGVCL as a comparable rate to benchmark the rate of transfer of power from one unit to another unit. The rate charged by DGVCL was Rs. 7.07 per unit whereas the inter unit rate for transfer of power was at Rs. 6.50 per unit by the assessee. Therefore, the assessee claimed that the transactions are at ALP. However, the DRP rejected the contentions of the assessee on the ground that firstly the rate of electricity to be charged by DGVCL is fixed and approved by Gujarat Electricity Regulatory Commission (GERC), which takes into account distribution loss, transmission loss, fixed charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction u/s. 80-IA, market rate at which receiving unit was procuring electricity could be adopted as sale price/ALP by CPP. Further, the counsel for the assessee submitted that in the aforesaid decision, the Ahmedabad ITAT on similar facts had approved the CPP rate of 7.49 charged for supply of power to processing house. Accordingly, the counsel for the assessee submitted that the (Ahmedabad Trib) in the case of Vishal Fabrics (supra) has approved the rate of Rs. 7.49 per unit for supply of power, whereas in the instant facts, the assessee is charging a lower rate of Rs. 6.5 per unit. Accordingly, the counsel for the assessee submitted that in the instant case, the assessee has transferred power to its associated enterprises at a price which was lower than the market price. Accordingly, the DRP has clearly erred in holding that cost plus 15% is the correct arms length price and is representative of the market value. 9. In response, the ld. Departmental Representative placed reliance on the observations made by the DRP in its order. 10. We have heard the rival contentions and perused the material on record. We are of the considered view that in the instant facts, it is a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered view that the assessee has rightly computed the ALP by adopting the rate of Rs. 6.5 per unit as the arms length rate. Accordingly looking into the facts of the instant case, ground no. 2 of assessee's appeal is allowed. Ground No. 3 (Ld. TPO/DRP erred in determining the arms' length value for sale of steam at Rs. "nil") 11. The brief facts in relation to this ground of appeal are that steam generated by captive power plant of the assessee is transmitted to the plant which manufactures chemicals as well as further processed to generate power. The assessee has adopted "other method" in transfer pricing documentation for benchmarking SDT on transfer of steam, wherein quotation was obtained by MOL from independent supplier and such quotation has been considered by the assessee as the benchmark rate. The TPO rejected the quotation by observing that the quotation has been obtained by MOL on 10-04-2015 and terms and conditions stated that the quotation was valid only up to seven days. Accordingly, the ld. TPO has concluded that the quotation was invalid from 17-04-2015. 12. The assessee filed appeal with respect to this ground of appeal before the DRP. The DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the manufacturing units are not backed by any authenticated independent third/party certificates IV. The assessee had submitted quotation for the rate of steam. However, the same is not verifiable with the actual quantity and market rate of the steam. V. The steam is not sold in the open market. Therefore, the rate of the steam is not verifiable with the open market rate. VI. The sale price of steam is not verifiable with the actual quantity and market rate. Hence the pricing method adopted by assessee is not verifiable with the market rates. VII. It is also seen that assessee had not submitted any separate account for the steam unit. Therefore, even the submission of the assessee also supports the finding that cost or price of the steam cannot be determined separately. VIII. The benchmarking analysis claimed to have been adopted by the MOL and relied upon by the assessee is on the basis of a quotation. However, on perusal of the copy of such quotation, it is found that the said quotation is not backed by any analysis of the valuation of the price so quoted and also without any supporting evidences and hence is liable to be rejected. IX. Assessee had booked prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with the relevance placed by the assessee on the quotation obtained from the third party. We observe that the DRP has pointed out various infirmities in the quotation obtained by the assessee from SSPL and we are of the view that the same cannot be a benchmark for ascertaining the arms length price of steam supplied to associated enterprise in the instant facts. Further, we are also of the view that the case of the Vishal Fabrics the ITAT upheld the ALP on the basis of valuation exercise done on the basis of engineering certificate produced by the assessee before the Tribunal for its consideration. However, in the instant facts, no such exercise has been done by the assessee to ascertain the value of steam supplied to its AE. In the case of DCM Shriram Ltd. 140 taxman.com 217 (Delhi Trib), the ITAT held that the steam has a cost and arms length price of steam cannot be determined at "nil". Further, the ITAT held that the value of steam can be expressed in terms of equivalent units of electricity that would have been generated and such value is usually higher than cost of steam. In the case of Nectar Life Sciences Ltd. 138 taxman.com 557 (Delhi Trib), the Delhi ITAT held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istical purposes for assessment year 2016-17. ASSESSMENT YEAR 2017-18 18. The assessee has raised the following grounds of appeal:- "1. The order passed by Assessing Officer pursuant to direction of Hon'ble DRP is bad in law and required to be quashed. Tax Effect: N.A. 2.a Ld. TPO / DRP erred in law and on facts in making adjustment of Rs. 13.43,87,046/- of specific domestic transaction of sale of power of power manufacturing unit. Tax Effect Rs. 4,65,08, 658/- b) Ld. TFI DRP erred in law and on facts in disregarding benchmarking method adopted in transfer pricing documents of the appellant company ignoring factual aspects and submissions. Ld. TPO/DRP ought to nave accepted the rate charged by the appellant at Rs. 6.5 Rs./Unit as at arm's length. Tax Effect: NA being alternative contention to Ground 2(a). 3. a) Ld TPO/DRP erred in law and on facts in making adjustment of Rs. 8,47,51 530/- of specific domestic transaction of sale of steam by eligible unit to the manufacturing unit. Tax Effect: Rs. 2,93,31,249/- b) Ld. TPO/DRP erred in determining arm's length value for sale of steam at Nil TPO / DRP ought to have accepted the rate charged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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