ACIT Vs ACB India Ltd (ITAT Delhi)
Summary: The Revenue’s appeal in ITA No. 5469/Del/2019 and the assessee’s Cross Objections for Assessment Year 2014-15 arose from the order of the CIT(A)-44, New Delhi dated 28.02.2019 concerning the assessment framed under section 143(3) of the Income-tax Act, 1961.
The principal issue before the ITAT Delhi concerned determination of the transfer price for electricity supplied by the assessee’s thermal power plant to its Washeries division. The assessee was engaged in coal beneficiation, coal trading and power generation and sale. It had two eligible units for purposes of deduction under section 80-IA, namely a 15 MW windmill unit and a 30 MW thermal power plant. Since the thermal power plant had suffered losses, the assessee claimed deduction under section 80-IA only in respect of the windmill unit.
During the relevant year, electricity generated by the thermal unit was transferred to the Washeries division at Rs 4 per unit. The assessee relied upon the rate published by the Chhattisgarh State Electricity Board for the mines and cement industry, which was Rs 4.05 per unit, and contended that the transfer price of Rs 4 per unit represented the Arm’s Length Price.
The Transfer Pricing Officer did not accept the assessee’s benchmarking. The TPO averaged the CSEB rate, after adjustment for transmission and distribution cost but without adjustment for transmission and distribution losses, with the rate of trade as per IEX without adjustment for transmission/distribution loss or charges. The resulting ALP was determined at Rs 2.868 per unit, resulting in a differential adjustment of Rs 2,74,40,110/-. The Assessing Officer incorporated the adjustment in the assessment.
