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TMI Blog2025 (5) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... P parameters and in that view of the matter the transfer pricing adjustment made by the TPO was impermissible on the given facts and in law. (c) For that on the facts and in the circumstances of the case and in law, the manner in which the DRP/TPO has benchmarked the arm's length value of the power generated by the eligible unit was wholly fallacious and suffered from serious infirmities and in that view of the matter the downward adjustment of Rs. 24,72,79,392/- deserves to be deleted 2. For that on the facts and in the circumstances of the case and in law, the NFAC erred in recommending the initiation of penalty proceedings u/s. 270A of the Act in respect of the claim of deduction for education cess to the tune of Rs. 59,46,067/- despite having had taken cognizance of the fact that the appellant had suo moto disallowed the same by way of filing of Form 69. 3. For that on the facts and in the circumstances of the case and in law, the interest of Rs. 61,40,757/- levied u/s 234A of the Act was unjustified and deserves to be deleted. 4. For that on the facts and in the circumstances of the case and in law, the JAO erred in not granting credit for advance tax of Rs. 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case reported in (2022) 144 taxmann.com 110(Kol), wherein the issue has been decided in favour of the assessee. Therefore, the issue in the instant appeal is squarely covered by assessee's own case in A.Y. 2015-16. The ld. AR also submitted that the issue has been finally settled by the Hon'ble Supreme Court in the case of Jindal Steel & Power Ltd, reported in (2023) 157 taxmann.com 207(SC) n which the similar issue has been decided by the Hon'ble Apex Court in favour of the assessee. Accordingly, the ld. AR of the assessee prayed that following the above decision, the ground No.1 raised in the present appeal of the assessee may be allowed. 5. On the other hand, ld. CIT-DR relied on the orders of the DRP/TPO/AO. 6. After hearing the rival submissions of the parties and perusing the material available on record including the decision of the coordinate bench of the Tribunal in the case of DCIT Vs Dhunseri Ventures Ltd. (supra), we note that the facts of the assessee are identical to the facts considered in the case of Dhunseri (supra) and, therefore, the issue is squarely covered in favour of the assessee. The operative part of the order of the coordinate bench of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted party is of lesser significance for the purpose of application of CUP method but instead key factor in application of CUP is product comparability and similar market conditions. Further the CUP method can be classified into two categories i.e. internal CUP method and external CUP method. Under internal CUP method the transactions between the AE's involving buying or selling of goods and services are comparable to the transactions entered into by the AE's with the unrelated parties for buying and selling similar goods and service under similar circumstances. However when such internal data was not available then one may apply external CUP which involves comparison of price paid/charged between the two unrelated parties in uncontrolled condition for transactions entered into between the AE's. In the instant case as noted elsewhere hereinabove that the CPPs bench marked the transactions with non eligible units at a rate at which power is supplied by the SEB to the non eligible units and therefore is the prevailing rate at which the power has been supplied by the SEB to other parties/factories located in the same geographical areas/location. It is also undisputed that both CPPs as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Benches of the Tribunal. We have also noted the arguments advanced by the ld DR that average rate of Rs. 3.47 per unit as calculated on the basis of sale data of power by independent CPPs /IPPs as determined by various tariff orders should be taken as ALP however can not overlook the fact that the said transactions did not take place under similar market conditions and that price cannot be taken as ALP under CUP method. The power supplied by the CPPs to non eligible units was business to consumer (commonly known As B2C) meaning thereby the rate at which the ultimate consumers can purchase the power for their consumption is relevant. In the instant case before us, the B2C market comprises the sale of power by SEB and other distribution companies to different categories of consumers. Thus the power sold by other CPPs/IPPs to unrelated parties was in altogether different market conditions which is business to business commonly known as B2B model and the said rate represented the rate at which the distribution companies purchased power from generation companies. Further no consumer can buy the power in the open market at a rate generation companies sell power to distribution compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h goods would ordinarily fetch on sale in the open market. 23. This brings to the fore as to what do we mean by the expression "open market" which is not a defined expression. 24. Black's Law Dictionary, 10th Edition, defines the expression "open market" to mean a market in which any buyer or seller may trade and in which prices and product availability are determined by free competition. P. Ramanatha Aiyer's Advanced Law Lexicon has also defined the expression "open market" to mean a market in which goods are available to be bought and sold by anyone who cares to. Prices in an open market are determined by the laws of supply and demand. 25. Therefore, the expression "market value" in relation to any goods as defined by the explanation below the proviso to sub-section (8) of Section 80IA would mean the price of such goods determined in an environment of free trade or competition. "Market value" is an expression which denotes the price of a good arrived at between a buyer and a seller in the open market i.e., where the transaction takes place in the normal course of trading. Such pricing is unfettered by any control or regulation; rather, it is determined by the eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the industrial units of the assessee did not have the option of obtaining power from the captive power plants of the assessee, then in that case it would have had to purchase electricity from the State Electricity Board. In such a scenario, the industrial units of the assessee would have had to purchase power from the State Electricity Board at the same rate at which the State Electricity Board supplied to the industrial consumers i.e. Rs. 3.72 per unit. 28. Thus, market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumer in the open market. The State Electricity Board's rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under Section 80IA of the Act. 31. That being the position, we hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue. 32. Revenue has relied upon the decision of the Calcutta High Court in CIT Vs. ITC Ltd. (supra). In that case, the High Court rejected the first contention of the revenue that the assessee therein was not entitled to the benefit under Section 80IA of the Act because the power generated was consumed at home or by other business of the assessee. After holding so, the High Court however, answered the question on the point of computation of profits and gains of the eligible business against the assessee. On going through the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s case vis a vis the decision of the Hon'ble Supreme Court(supra), we set aside the order of the DRP/AO/TPO and direct the AO to delete the downward adjustment of Rs. 24,72,79,392/- in respect of the transfer value of power by the captive power plants at Haldia, West Bengal. Ground No.1 is allowed. 9. The issue raised in ground No. 2 is against the order of NFAC in recommending the initiation of penalty proceedings u/s. 270A of the Act, in respect of the claim of deduction for education cess to the tune of Rs. 59,46,067/- despite the fact that the assessee had suo motto disallowed the same by way of filing of form 69. 10. Facts in brief are that the assessee claimed deduction for education cess of Rs. 59,46,067/- as expenditure under the head 'any other amount allowable as deduction' and accordingly a refund of income tax was claimed. The AO accordingly issued a show cause notice to the assessee which was replied by the assessee by submitting that vide letter dated 10.08.2023, the assessee has already brought on record the fact that the assessee has already disallowed the education cess of the above amount claimed in the computation of taxable business income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was still not filed. Finally, the amount was added to total income of the year under consideration and the AO initiated the penalty proceedings u/s. 270A of the Act for under reporting of income. 12. Ld. CIT-DR, on the other hand, relied on the orders of the DRP/TPO/AO. 13. After hearing the rival submissions of the parties and perusing the material available on record, we note that the assessee has correctly filed Form No. 69 before the AO on 29.11.2022 furnishing the revised computation and requested the AO to recompute the income. Further the AO has mentioned that Form No.70 has not been uploaded, however, the assessee has already disallowed the same suo moto by filing Form No. 69 which has also not been denied by the department. Moreover, it the /ao who issues the form 70 and not the assessee. Considering the facts and circumstances of the case, we are of the view that the penalty proceedings initiated by the AO is invalid and the AO is directed to drop the same. Thus, ground NO. 2 is allowed. 14. The issue raised in ground No. 3 is against the levy of interest of Rs. 61,40,757/- u/s. 234A of the Act. 15. After hearing the rival submissions of the parties and perusing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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