Nectar Lifesciences Limited Vs DCIT (ITAT Chandigarh)
The appeal was filed by Nectar Lifesciences Limited against the assessment order dated 30/09/2019 passed under section 144C(13) read with section 143(3) of the Income Tax Act, 1961, pursuant to the directions of the Dispute Resolution Panel-1 dated 25/07/2019. The principal disputes concerned transfer pricing adjustments relating to transfer of power and steam from eligible captive power units to non-eligible manufacturing units.
The assessee is engaged in manufacturing and delivery of pharmaceutical products and research in the health sector. It had set up two 6 MW electricity power plants at Dera Bassi, Punjab, for captive requirements. The plants generated electricity and steam used in the manufacturing process. For electricity transferred to manufacturing processes, the assessee adopted a rate of Rs. 6.72 per unit under the CUP method. The assessee pointed out that this was below the purchase rate of Rs. 6.95 fixed by the Punjab State Electricity Regulatory Commission, the sale rate of Rs. 7.15 charged by Punjab State Power Corporation Limited to industrial undertakings, and the rate of Rs. 7.48 actually paid by the company.
The TPO rejected the assessee’s benchmarking and considered the average power-trading rate of Rs. 3.499 per unit obtained from the Indian Energy Exchange. He ultimately adopted an average of the generic tariff of Rs. 6.93 per unit and the IEX rate, arriving at Rs. 5.2145 per unit. An adjustment of Rs. 7,00,49,674 was initially proposed. The DRP upheld the use of an external CUP but directed adoption of Rs. 6.95 per unit as the tariff for a biomass steam plant. The resulting adjustment was Rs. 6,95,84,383.
