ITAT Chennai Allowed Section 80-IA Deduction as Consumer Tariff Held Correct Benchmark

India Cements Ltd. Vs DCIT (ITAT Chennai)

The Income Tax Appellate Tribunal (ITAT), Chennai, adjudicated an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) dated 25.08.2025 for Assessment Year 2020–21. The appeal primarily involved issues relating to deduction under Section 80-IA and disallowance under Section 14A of the Income Tax Act, 1961.

With respect to Section 80-IA, the assessee operated multiple thermal power plants generating electricity for captive consumption in its cement manufacturing units. The assessee computed the market value of electricity based on the rate at which State Electricity Boards (SEBs) supplied power to consumers. However, the Transfer Pricing Officer (TPO) determined the arm’s length price using a lower tariff based on regulatory rates applicable to power sold to electricity boards, resulting in a downward adjustment. The CIT(A) upheld this adjustment.

Before the Tribunal, the assessee relied on earlier decisions in its own case where similar issues had been decided in its favour. The Tribunal noted that the issue was covered by coordinate bench decisions for earlier assessment years, which held that for computing deduction under Section 80-IA in cases of captive consumption, the appropriate benchmark is the rate at which electricity is supplied to consumers by electricity distribution companies, and not the rate at which power is sold to SEBs. Following judicial discipline and consistent precedent, the Tribunal held that the TPO’s adjustment was not justified and directed deletion of the transfer pricing adjustment. Accordingly, the deduction under Section 80-IA was allowed.