My Home Industries Private Limited Vs DCIT (ITAT Hyderabad)
The appeal before the Hyderabad Bench of the Income Tax Appellate Tribunal concerned assessment proceedings for Assessment Year 2018–19. The assessee was engaged in manufacturing Portland cement and generating power. The return of income was filed declaring total income of ₹120.24 crore. The case was selected for complete scrutiny, and since it involved specified domestic transactions, the Assessing Officer referred the matter to the Transfer Pricing Officer for determination of arm’s length price (ALP).
During transfer pricing proceedings, it was noticed that the assessee had generated electricity which was partly captively consumed and partly supplied to its wholly owned subsidiary. For benchmarking purposes, the assessee had adopted a weighted average rate derived from three comparables, including the associated enterprise. The Transfer Pricing Officer excluded the associated enterprise from the comparables and recomputed the ALP using the arithmetic mean of the remaining two comparables. On this basis, the Transfer Pricing Officer determined a lower ALP and proposed transfer pricing adjustments aggregating to ₹37.12 crore in respect of captive consumption of power and supply of power to the associated enterprise.
Based on the transfer pricing order, the Assessing Officer passed a draft assessment order proposing transfer pricing additions of ₹37.12 crore along with a further disallowance of ₹37.33 lakh under section 14A of the Income Tax Act. As no objections were filed before the Dispute Resolution Panel, the final assessment order was passed confirming the proposed additions, assessing total income at ₹157.73 crore.
