Aditya Birla Nuvo Ltd. Vs DCIT (ITAT Mumbai)
Summary: The Income Tax Appellate Tribunal (ITAT), Mumbai ‘K’ Bench, in Aditya Birla Nuvo Ltd. Vs DCIT, decided cross-appeals for Assessment Year 2013-14 concerning various additions and deductions under the Income-tax Act, 1961. The appeals were originally heard by a Division Bench comprising the Judicial Member and Accountant Member, who differed only on Ground No. 7 relating to the determination of the fair market value of electricity supplied by the assessee’s captive power plant to its Rayon manufacturing unit. The dispute directly affected the deduction claimed under Section 80-IA. Since the Members expressed divergent opinions on this issue, the matter was referred to a Third Member under Section 255(4) of the Act. Following the Third Member’s decision, the Division Bench passed its consequential order on 17 November 2025, adopting the majority view.
The assessee, Aditya Birla Nuvo Ltd., subsequently amalgamated with Grasim Industries Ltd., operated manufacturing businesses including rayon, carbon black, insulators, textiles and garments. To meet its electricity requirements, the assessee operated a captive power plant known as Rayon CPP-2, which generated and supplied electricity to its Rayon manufacturing unit. During the relevant assessment year, the Rayon unit also purchased electricity from Gujarat Urja Vikas Nigam Limited (GUVNL). The assessee adopted the rate of ₹6.62 per unit charged by GUVNL as an internal Comparable Uncontrolled Price (CUP) for benchmarking the captive transfer of electricity. On this basis, it determined the arm’s length value of electricity supplied by the captive power plant and claimed deduction under Section 80-IA in respect of the eligible undertaking.
The Transfer Pricing Officer rejected the assessee’s benchmarking methodology, reasoning that an electricity-generating undertaking could not be directly compared with an electricity distribution company because their functions, assets and risks differed. The TPO instead relied on rates at which power-generating companies supplied electricity to distribution utilities, ultimately adopting ₹2.52 per unit as the arm’s length price. This resulted in a downward adjustment of approximately ₹57.36 crore to the assessee’s claimed deduction under Section 80-IA. The Assessing Officer incorporated the adjustment in the assessment order, and the first appellate authority upheld the Department’s position. The assessee consequently challenged the adjustment before the Tribunal, maintaining that the price actually paid by its manufacturing unit to an independent electricity supplier represented the appropriate comparable market rate.
The Third Member, Vice President Saktijit Dey, examined the statutory provisions, electricity tariff structure, comparable transactions and rival interpretations. He concluded that the price at which the Rayon manufacturing unit actually purchased electricity from GUVNL constituted a valid CUP for determining the arm’s length value of electricity supplied by the captive power plant. The rate of ₹6.62 per unit reflected an actual transaction with an independent electricity distribution utility at the applicable industrial tariff. Accordingly, the Third Member agreed with the Judicial Member that the assessee’s deduction under Section 80-IA should be allowed without any downward adjustment. Having resolved the principal issue, he considered it unnecessary to decide the remaining referred questions, which had become academic.
In its final consequential order, the Division Bench adopted the majority opinion formed by the Judicial Member and the Third Member. It held that the electricity transfer price of ₹6.62 per unit was acceptable for computing the deduction under Section 80-IA and that the downward adjustment made by the Assessing Officer or Transfer Pricing Officer could not be sustained. Ground No. 7 was therefore allowed in favour of the assessee. The Tribunal further clarified that there had been no disagreement between the original Members on the remaining grounds and that their earlier findings and conclusions on those issues continued to stand. Accordingly, the cross-appeals were disposed of in terms of the majority decision, confirming the assessee’s entitlement to compute the captive power deduction using the industrial electricity purchase rate.
Five Alternative SEO Titles
- Captive Power Transfer at GUVNL Tariff Allowed for Section 80-IA: ITAT Mumbai
- ITAT Mumbai Upholds ₹6.62 Per Unit Internal CUP for Captive Electricity
- Section 80-IA Deduction Cannot Be Reduced on Captive Power Pricing: ITAT
- Aditya Birla Nuvo Wins Captive Power Transfer Pricing Dispute at ITAT
- Third Member Majority Accepts Industrial Electricity Tariff as CUP
Cases Discussed
The uploaded order discusses several judicial precedents, including CIT v. Jindal Steel & Power Ltd., PCIT v. DCM Shriram Ltd., CIT v. ITC Ltd., CIT v. Reliance Industries Ltd., CIT v. Godavari Power and Ispat Ltd. and CIT v. Gujarat Alkalies and Chemicals Ltd. The HTML includes these references, with an exact TaxGuru link for the Supreme Court’s Jindal Steel & Power judgment.
