Asstt. CIT v. Godavari Power & Ispat Ltd.

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The Tax Publishers2012 TaxPub(DT) 0588 (Bilaspur-Trib) : (2012) 044 (II) ITCL 0009 : (2011) 133 ITD 0502 INCOME TAX ACT, 1961 --Deduction under section 80-IA--AllowabilityMarket price in respect of electricity draun for captive consumption--The assessee was having two undertakings, i.e., (i) the undertaking engaged in the business of generation and distribution of electricity; and (ii) steel division. The steel division requires electricity and draws the same from the other undertaking which generates the electricity. Thus, the assessee accounted captive consumption of electricity. Electricity Division is an exempt undertaking under section 80-IA and the Steel Division is not an exempt undertaking. During the assessment proceedings, the assessing officer found that the electricity for captive consumption is accounted at the tariff higher than the sale price recorded for sale to State Electricity Board (SEB). In the process, assessing officer interpreted that this inflated the profits of the eligible undertaking and deflated the taxable profits of the steel making undertaking. Factually, the assessees sold the electricity not only to the SEB but also to other persons at the market rate. The sale price of the electricity sold to the SEB is @ Re. 1 per unit. On the other hand, the sale price at which the electricity sold to other persons, i.e., M/s. R.R., M/s. H Ltd. and to its power division @ Rs. 3.30 per unit. Assessee accounted per unit rate transferred to the steel division for capital consumption adopting Rs. 3.30 per unit. This rate was not accepted by the assessing officer. The assessing officer was of the opinion that the assessee inflated the profits of the exempt unit under section 80-IA(4) and deflated the profit of the steel division which is a non-exempt unit. In effect, the assessing officer invoked the provisions of sub-section (8) of section 80-IA. The assessee filed appeal before CIT(A). The CIT(A) explained the said provisions of sub-section (8) and stated that the price tariff reached between the assessee and the SEB is not arrived at in a competitive environment. Therefore, the price determined in such a scenario cannot be equated with the situation where price is determined in normal business environment. The price charged by the Electricity Board to its customers constitutes a market price. He accordingly gave the relief to the assessee. *Held:* Justified. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0588 (Bilaspur-Trib) : (2012) 044 (II) ITCL 0009 : (2011) 133 ITD 0502

INCOME TAX ACT, 1961

--Deduction under section 80-IA--AllowabilityMarket price in respect of electricity draun for captive consumption--The assessee was having two undertakings, i.e., (i) the undertaking engaged in the business of generation and distribution of electricity; and (ii) steel division. The steel division requires electricity and draws the same from the other undertaking which generates the electricity. Thus, the assessee accounted captive consumption of electricity. Electricity Division is an exempt undertaking under section 80-IA and the Steel Division is not an exempt undertaking. During the assessment proceedings, the assessing officer found that the electricity for captive consumption is accounted at the tariff higher than the sale price recorded for sale to State Electricity Board (SEB). In the process, assessing officer interpreted that this inflated the profits of the eligible undertaking and deflated the taxable profits of the steel making undertaking. Factually, the assessees sold the electricity not only to the SEB but also to other persons at the market rate. The sale price of the electricity sold to the SEB is @ Re. 1 per unit. On the other hand, the sale price at which the electricity sold to other persons, i.e., M/s. R.R., M/s. H Ltd. and to its power division @ Rs. 3.30 per unit. Assessee accounted per unit rate transferred to the steel division for capital consumption adopting Rs. 3.30 per unit. This rate was not accepted by the assessing officer. The assessing officer was of the opinion that the assessee inflated the profits of the exempt unit under section 80-IA(4) and deflated the profit of the steel division which is a non-exempt unit. In effect, the assessing officer invoked the provisions of sub-section (8) of section 80-IA. The assessee filed appeal before CIT(A). The CIT(A) explained the said provisions of sub-section (8) and stated that the price tariff reached between the assessee and the SEB is not arrived at in a competitive environment. Therefore, the price determined in such a scenario cannot be equated with the situation where price is determined in normal business environment. The price charged by the Electricity Board to its customers constitutes a market price. He accordingly gave the relief to the assessee. Held: Justified.