ITAT Upholds SEB Consumer Tariff for Section 80-IA Deduction on Captive Power Transfers

DCIT Vs Shyam Sel And Power Limited (ITAT Kolkata)

The Income Tax Appellate Tribunal (ITAT), Kolkata, dismissed the Revenue’s appeals relating to Assessment Years 2020-21 and 2021-22 in the cases of Shyam Sel & Power Ltd. and Shyam Metalics & Energy Ltd. The principal issues concerned transfer pricing adjustments to the transfer value of electricity supplied by captive power plants to manufacturing units for computing deduction under Section 80-IA of the Income-tax Act, and the allocation of common head office expenses to eligible units.

For Shyam Sel & Power Ltd. (AY 2020-21), the assessee operated captive power plants at Mangalpur and Jamuria and claimed deduction under Section 80-IA. The assessee revised its deduction claim after benchmarking the transfer value of power using the tariffs charged by the respective State Electricity Boards (SEBs). While the Transfer Pricing Officer (TPO) accepted the revised transfer price for the Jamuria units, he benchmarked the transfer price for the Mangalpur unit at a lower rate, resulting in a downward transfer pricing adjustment of Rs. 39.79 crore, including a reduction of Rs. 26.03 crore in the Section 80-IA deduction for the Mangalpur unit.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the adjustment relating to the Mangalpur unit, holding that the assessee had correctly benchmarked the transfer value of electricity based on the average annual landed cost at which its manufacturing units purchased electricity from the electricity distribution company. Before the Tribunal, the assessee submitted that the issue had already been decided in its favour in earlier assessment years and was also covered by the Supreme Court’s decision in CIT v. Jindal Steel & Power Ltd. and the Calcutta High Court’s decision in Pr. CIT v. Rungta Mines Ltd.

The Tribunal found that the facts were identical to the assessee’s earlier cases and followed its previous orders as well as the Supreme Court’s ruling. Referring extensively to the Supreme Court judgment, the Tribunal noted that the market value of electricity supplied by captive power plants to industrial units should be determined with reference to the rate at which the State Electricity Board supplies electricity to industrial consumers, rather than the lower rate at which surplus power is compulsorily supplied by captive generators to the State Electricity Board. It also relied on the Calcutta High Court’s decision in Pr. CIT v. Rungta Mines Ltd., which applied the Supreme Court’s reasoning to similar facts. Accordingly, the Tribunal upheld the CIT(A)’s order deleting the transfer pricing adjustment relating to the transfer value of power by the Mangalpur captive power plant and dismissed the Revenue’s grounds.

The second issue related to the allocation of common head office expenses to eligible units. The assessee had allocated common expenses based on the ratio of fixed assets, whereas the Assessing Officer reallocated such expenses in proportion to profitability, thereby increasing the allocation to eligible units and reducing the deduction under Section 80-IA by Rs. 5.25 crore.

The CIT(A) observed that in the assessee’s own cases for Assessment Years 2014-15 and 2015-16, the Revenue itself had adopted allocation based on the ratio of fixed assets in assessments completed under Section 143(3). Applying the principle of consistency, the CIT(A) held that the Assessing Officer was not justified in changing the methodology to a profitability-based allocation without any change in facts or law. The CIT(A) further observed that allocation based on profitability lacked a sound basis and that allocation based on assets or sales would be more appropriate. Since the assessee’s asset-based allocation was reasonable and consistent with earlier years, the additional allocation made by the Assessing Officer was deleted.

The Tribunal agreed with the CIT(A), holding that the Assessing Officer was unjustified in departing from the allocation method consistently followed in earlier years. It observed that allocation based on profitability was fundamentally flawed, while allocation based on assets was an accepted methodology, particularly for capital-intensive industries. The Tribunal also noted that allocation based on sales would have resulted in an even lower allocation than the asset-based method adopted by the assessee. Accordingly, it upheld the CIT(A)’s deletion of the additional allocation and dismissed the Revenue’s ground.

For Assessment Year 2021-22 in the case of Shyam Sel & Power Ltd., the Tribunal found that the issues relating to the transfer pricing adjustment for the Jamuria captive power plants and the allocation of common expenses were identical to those decided for AY 2020-21. Applying its earlier reasoning, it dismissed the Revenue’s appeal.

The Tribunal similarly dealt with the Revenue’s appeals concerning Shyam Metalics & Energy Ltd. for AYs 2020-21 and 2021-22. The dispute related to the transfer pricing adjustment for electricity supplied by the captive power plant at Pandoli and the allocation of common expenses. The assessee had benchmarked the transfer value of power based on the rate at which its manufacturing units purchased electricity from the local electricity company, whereas the TPO adopted a lower tariff notified by the Odisha State Electricity Commission. The CIT(A), relying on earlier Tribunal decisions in the assessee’s own case, deleted the transfer pricing adjustment and directed recomputation of the deduction under Section 80-IA based on the revised benchmarking adopted by the assessee. The Tribunal held that these issues were identical to those decided in the Shyam Sel & Power Ltd. appeals and upheld the CIT(A)’s orders. It also upheld allocation of common expenses in the ratio of assets instead of profitability.

Accordingly, the Tribunal dismissed all the Revenue’s appeals.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

These are the appeals of Revenue against two different assessees’ against the orders of the Commissioner of Income-tax (Appeals)-22, Kolkata (hereinafter referred to as the “Ld. CIT(A)”] for the AYs2020-21 & 2021-22.

2. Since these appeals relate to the related companies and issues involved are mostly common, therefore these are being decided by this common order for the sake of convenience and brevity. First of all, we shall take up ITA No. 2663/KOL/2025 for A.Y. 2020-21 in case of Shyam Sel & Power Ltd.

ITA No. 2663/KOL/2025 (Revenue’s appeal)

3. The issue raised in Ground Nos.1 to 11 is against the order of ld. TPO/AO making downward adjustment of Rs.39,79,08,552/- in respect of transfer value of power by the captive power plants at Mangalpur & Jamuria.

4. Facts in brief are that, the assessee had set up three captive power plants, with one located in Mangalpur and two located in Jamuria in order to meet the power requirements of its manufacturing units at the same location. The assessee claimed tax holidays as per section 80IA in respect of their profits from generation of electricity from captive power plants. The details of the transactions were duly mentioned in Form 3CEB filed by the assessee. The assessee company had originally claimed deduction of Rs.216,44,56,783/- u/s.80IA of the Act for the eligible units against the specified domestic transactions, whose details are as follows:-

5. The above claim was subsequently revised to Rs.196,83,82,588/-. As per the revised working, the assessee benchmarked the transfer of power from the eligible units to the assessee on the tariffs charged by the respective SEBs i.e. Rs.4.58/unit [Jamunia CPP- I & II] and Rs.4.39/unit for Mangalpur CPP-II, whose break-up is as under:-

6. The ld. TPO in his order dated 05.04.2023 passed u/s 92CA(3) accepted the revised transfer price of power relating to the CPPs at Jamuria and therefore the corresponding TP adjustment of Rs.13,75,36,212/- offered by the assessee in the revised working was not disputed by both the parties. The ld. TPO however benchmarked the transfer price of power of Mangalpur Unit at Rs.2.53 unit. Accordingly, the ld. TPO reduced the deduction claimed u/s 80-IA of the Act in respect of Mangalpur Unit by Rs.26,03,72,340/-. Overall therefore, the ld. TPO made downward adjustment of Rs.39,79,08,552/- to the transfer value of power of these eligible CPPs.

7. In the appellate proceedings, the ld. CIT(A) deleted the transfer pricing adjustment of Rs.26,03,72,340/- made to the Mangalpur Unit by holding that the assessee had rightly adopted the benchmarking methodology of valuing the transfer of power from their captive power plants eligible for deduction u/s 80-IA to its manufacturing units at the average annual landed cost at which the non-eligible manufacturing units procured power from the electricity distribution company.

8. At the outset, the ld. AR for the assessee submitted that the issue is squarely covered by the decision of the coordinate bench in its own case in IT(SS)A Nos.129, 91 & 130/Kol/2023 wherein the issue has been decided in favour of the assessee. Therefore, the issue in the instant appeal is squarely covered by assessee’s own case in A.Ys 2017-18, 2018-19 & 2019-20. The ld. AR also submitted that the issue has been finally settled by the Hon’ble Supreme Court infavour of the assessee in the case of CIT v. Jindal Steel & Power Ltd (460 ITR 162), which was followed by the Hon’ble jurisdictional Calcutta High Court in the case of Pr.CIT Vs Rungta Mines Ltd (176 com410). Accordingly, the ld. AR of the assessee prayed that following the above decisions, the grounds raised by the Revenue on this issue may be dismissed.

9. On the other hand, ld. CIT-DR relied on the orders of the ld. TPO/AO.

10. After hearing the rival submissions of the parties and perusing the material available on record including the decision of the coordinate bench of the Tribunal in the case of Shyam Sel & Power Ltd (supra), we note that the facts of the assessee are identical to the facts considered in the case of Shyam Sel & Power Ltd (supra) and, therefore, the issue is squarely covered in favour of the assessee. The operative part of the order of the coordinate bench of the Tribunal read as under :-

“22. After hearing the rival contentions and perusing the material on record, we observe that the issue of determining the claim of the assessee u/s 80IA in respect of CPPs which were supplying power to other non eligible units were determined on the basis of electricity at which the power was procured by the assessee from the Indian Power Corporation Ltd. We find that the case is squarely covered by the decision of Hon’ble Apex Court in the case of CIT vs. M/s Jindal Steel & Power Ltd. 460 ITR 162 (SC)wherein the identical issue has been decided in favour of the assessee by holding that the rate at which the electricity board supplied/sold power to various customers has to be taken to market value/price for computing deduction u/s 80IA of the Act. The relevant portion of the said decision are extracted below:

17. In so far facts of the present case are concerned, there is no dispute. Since electricity from the State Electricity Board to the industrial units of the assessee was inadequate, the assessee had set up captive power plants to supply electricity to its industrial units. For disposal of the surplus electricity, the assessee could not supply the same to any third-party consumer. Therefore, in terms of the provisions of Section 43A of the 1948 Act, the assessee had entered into an agreement dated 15-7-1999 with the State Electricity Board as per which, the assessee had supplied the surplus electricity to the State Electricity Board at the rate of Rs. 2.32 per unit determined as per the agreement. Thus, for the assessment year under consideration, the assessee was paid at the rate of Rs. 2.32 per unit for the surplus electricity supplied to the State Electricity Board. We may mention that the State Electricity Board had supplied power (electricity) to the industrial consumers at the rate of Rs. 3.72 per unit.

18. There is also no dispute that the assessee or rather, the captive power plants of the assessee are entitled to deduction under section 80-IA of the Act. For the purpose of computing the profits and gains of the eligible business, which is necessary for quantifying the deduction under section 80-IA, the assessee had recorded in its books of accounts that it had supplied power to its industrial units at the rate of Rs. 3.72 per unit which rate is disputed by the revenue as not being the market value of electricity.

19. While the assessing officer accepted the claim of the assessee for deduction under section 80-IA, he, however, did not accept the profits and gains of the eligible business computed by the assessee on the ground that those were inflated by showing supply of power to its own industrial units for captive consumption at the rate of Rs. 3.72 per unit. Assessing officer took the view that there was no justification on the part of the assessee to claim electricity charge at the rate of Rs. 3.72 for supply to its own industrial units when the assessee was supplying surplus power to the State Electricity Board at the rate of Rs. 2.32 per unit. Finally, the assessing officer held that Rs. 2.32 per unit was the market value of electricity and on that basis, reduced the profits and gains of the assessee thereby restricting the claim of deduction of the assessee under section 80-IA of the Act.

20. We have already analyzed Section 80-IA of the Act. There is no dispute that respondent-assessee is entitled to deduction under section 80-IA of the Act for the relevant assessment year. The only issue is with regard to the quantum of profits and gains of the eligible business of the assessee and the resultant deduction under section 80-IA of the Act. The higher the profits and gains, the higher would be the quantum of deduction. Conversely, if the profits and gains of the eligible business of the assessee is determined at a lower figure, the deduction under section 80-IA would be on the lower side. Assessee had computed the profits and gains by taking Rs. 3.72 as the price of electricity per unit supplied by its captive power plants to its industrial units. The basis for taking this figure was that it was the rate at which the State Electricity Board was supplying electricity to its industrial consumers. Assessing officer repudiated such claim. According to him, the rate at which the assessee had supplied the surplus electricity to the State Electricity Board i.e., Rs. 2.32 per unit, should be the market value of electricity. Assessee cannot claim two rates for the same good i.e., electricity. When it supplies electricity to the State Electricity Board at the rate of Rs. 2.32 per unit, it cannot claim Rs. 3.72 per unit for supplying the same electricity to its sister concern i.e., the industrial units. This view of the assessing officer was confirmed by the CIT (A).

21. We have noticed that the Tribunal had rejected such contention of the revenue which has been affirmed by the High Court. In this proceeding, we are called upon to decide as to which of the two views is the correct one.

22. Reverting back to sub-section (8) of Section 80-IA, it is seen that if the assessing officer disputes the consideration for supply of any goods by the assessee as recorded in the accounts of the eligible business on the ground that it does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under section 80-IA, the profits and gains of such eligible business shall be computed by adopting arm’s length pricing. In other words, if the assessing officer rejects the price as not corresponding to the market value of such good, then he has to compute the sale price of the good at the market value as per his determination. The explanation below the proviso defines market value in relation to any goods to mean the price that such goods would ordinarily fetch on sale in the open market. Thus, as per this definition, the market value of any goods would mean the price that such goods would ordinarily fetch on sale in the open market.

23. This brings to the fore as to what do we mean by the expression “open market” which is not a defined expression.

24. Black’s Law Dictionary, 10th Edition, defines the expression “open market” to mean a market in which any buyer or seller may trade and in which prices and product availability are determined by free competition. P. Ramanatha Aiyer’s Advanced Law Lexicon has also defined the expression “open market” to mean a market in which goods are available to be bought and sold by anyone who cares to. Prices in an open market are determined by the laws of supply and demand.

25. Therefore, the expression “market value” in relation to any goods as defined by the explanation below the proviso to sub-section (8) of Section 80-IA would mean the price of such goods determined in an environment of free trade or competition. “Market value” is an expression which denotes the price of a good arrived at between a buyer and a seller in the open market i.e., where the transaction takes place in the normal course of trading. Such pricing is unfettered by any control or regulation; rather, it is determined by the economics of demand and supply.

26. Under the electricity regime in force, an industrial consumer could purchase electricity from the State Electricity Board or avail electricity produced by its own captive power generating unit. No other entity could supply electricity to any consumer. A private person could set up a power generating unit having restrictions on the use of power generated and at the same time, the tariff at which the said power plant could supply surplus power to the State Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after supplying electricity to its industrial units) to the State Electricity Board only and not to any other authority or person. Therefore, the surplus electricity had to be compulsorily supplied by the assessee to the State Electricity Board and in terms of Sections 43 and 43A of the 1948 Act, a contract was entered into between the assessee and the State Electricity Board for supply of the surplus electricity by the former to the latter. The price for supply of such electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. This price is, therefore, a contracted price. Further, there was no room or any elbow space for negotiation on the part of the assessee. Under the statutory regime in place, the assessee had no other alternative but to sell or supply the surplus electricity to the State Electricity Board. Being in a dominant position, the State Electricity Board could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition.

27. Another way of looking at the issue is, if the industrial units of the assessee did not have the option of obtaining power from the captive power plants of the assessee, then in that case it would have had to purchase electricity from the State Electricity Board. In such a scenario, the industrial units of the assessee would have had to purchase power from the State Electricity Board at the same rate at which the State Electricity Board supplied to the industrial consumers i.e., Rs. 3.72 per unit.

28. Thus, market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under section 80-IA of the Act.

….

Considering the facts of the assessee in the light of the aforesaid decision we are of the considered opinion that the case of the assessee is squarely covered by the decision of the Hon’ble Apex Court and therefore we are inclined to dismiss the appeal of the revenue by upholding the order of ld CIT(A) on this issue.”

11. Besides, the case is also covered by the decision of Hon’ble Supreme Court in the case of Jindal Steel & Power Ltd (supra) which has finally settled the issue in which, similar issue has been decided by the Hon’ble Apex Court in favour of the assessee. It is seen that the Hon’ble jurisdictional Calcutta High Court in the case of Pr.CIT Vs Rungta Mines Ltd (supra) on similar facts and circumstances has followed the decision of the Hon’ble Apex Court (supra) and dismissed the appeal of the Revenue. The operative para of the decision of the Hon’ble Calcutta High Court in the said case read as under:-

“14. It is not in dispute that the main business of the assessee is not generating power to sell the same to distribution companies/SEBs. It is also not in dispute that the Captive Power Plants (CPPs) were established by the assessee for its own need, i.e. for supply of uninterrupted power to its manufacturing units as well as to save the cost of power purchased from SEBs. If such be the factual position the Arm’s Length Price cannot be determined by taking the average market rates of power supply units to distribution companies as the assessee is not in the business of selling power to distribution companies. Therefore, the Arm’s Length Price has to be determined bearing in mind the reason behind establishment of the CPPs namely to ensure uninterrupted power and to save on cost of electricity which otherwise has to be paid to the State Electricity Board.

15. At this juncture, it would be relevant to take note of the Electricity Act, 2003. Section 2(8) of the Act defines “Captive Generating Plant” to mean a power plant set up by any person to generate electricity primarily for its own use and includes its power plant set up by any cooperative society or association of persons for generating electricity primarily for use of members of such cooperative society or association. Section 9 of the Act deals with Captive Generation. Subsection 1 of Section 9 commences with a non obstante clause and states that notwithstanding anything contained in the Electricity Act, 2003, a person may construct, maintain or operate a Captive Generating Plant and dedicated transmission lines.

16. The first proviso states that the supply of electricity from Captive Generating Plant through grid can be regulated in the same manner as the generating station of a generating company.

17. The second proviso states that no license shall be required under the Electricity Act for supply of electricity generated from Captive generating plant to any licensee in accordance with the provisions of the Act and the Rules and Regulations made thereunder and to any consumer subject to Regulations made under Sub Section 2 of Section 42. Sub Section 2 of Section 9 states that every person, who has constructed a Captive Generating Plant and maintains and operates such plant shall have the right to open access for the purpose of carrying electricity from his Captive Generating Plant to the destination of his use. Section 42 of the Act deals with duties of the distribution licensees and open access. Thus, the scheme of the Act is that a person may construct, maintain or operate a Captive Generating Plant and dedicated transmission lines and captive plants will have the right to open access for the purpose of carrying electricity from captive plants to the destination of its use and no surcharge is leviable in case open access is provided to captive units by the central or state transmission utility or the transmission licensee involved in the distribution/transmission of power. Further the provision make it clear that there is no embargo to other power generating companies to directly sell the power to such consumer at mutually agreed rate. This being not the legal position when the decision in ITC Limited was rendered, the said decision could not have been relied upon by the TPO/assessing officer.

18. We concur with the views expressed by the learned tribunal that the consumer/contracting parties will certainly desire to purchase electricity at lesser rate than the rates offered by State Electricity Board whereas the Captive Power Plants/generating companies would desire to get maximum rate on the sale of power in unregulated and uncontrolled transaction and both the parties would settle at mutually agreed rates irrespective of the rates at which the State Electricity purchases power from other generating units.

19. The learned tribunal in the case of Star Paper Mills Limited v. Dy. CIT [2022] 134 com177 (Kolkata – Trib.) held that where the assessee company, engaged in business of manufacturing and sale of paper, had set up Captive Power Plant (CPP) to meet its requirements of its paper manufacturing units which also availed power from State Electricity Board, the said transaction being in nature of specified domestic transaction, transfer price of power supplied by CPP was to be bench marked at annual average of landed cost at which power was being purchased by manufacturing units from State Electricity Board. The revenue carried the matter on appeal before this court and the appeal filed by the revenue was dismissed and the said decision is reported in Pr. CIT v. Star Paper Mills Ltd. [2025] 172 taxmann.com 391 (Calcutta). In the said appeal, the following two substantial questions of law were taken up for consideration:-

“(a) WHETHER in facts of the case and in law, the Hon’ble ITAT is justified upholding the internal CUP applied by the assessee to benchmark the transaction (sale of power) to its AE, as well as computation of deduction under section 80-IA of the Act, whereas as per explanation to section 80- IA(8) of the Act, “market value” in relation to any goods or services, means (a) the price that such goods or services would ordinarily fetch in the open market; or (b) the arm’s length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA?

(b) WHETHER in facts of the case and in law, the Hon’ble ITAT is justified in not appreciating the finding of the TPO that the assessee’s generating unit cannot as such claim any benefit under section 80IA of the Income Tax Act computed on the basis of rates charged by the distribution licensee from the consumer. The benefit can only be claimed on the basis of the rates fixed by the tariff regulation commission for sale of electricity by the generating companies to the distribution company?

20. The Court took note of the decision of the Hon’ble Supreme Court in Jindal Steel and Power Limited (supra). In the said case, the assessee having found that the electricity supplied by the State Electricity Board was inadequate and to meet the requirements of its industrial units, set up captive power generating units to supply electricity to its industrial units which was done at a particular rate. The surplus power if any, generated was to be wheeled out to the electricity board grid pursuant to an agreement between the State Electricity Board and the assessee at a rate fixed by the State Electricity Board. The question which arose of consideration is as to the quantum of deduction which the assessee would be entitled to claim under Section 80IA of the Act. The assessing officer held that the market value of the electricity should be computed based on the rate fixed by the State Electricity Board for the electricity which is purchased by the assessee. The Dispute Resolution Panel (DRP) affirmed the view taken by the assessing officer and the matter was challenged before the tribunal. The tribunal followed the decision in the assessee’s own case for an earlier assessment year which order had become final as the department did not prefer any appeal under Section 260A of the Act. In the batch of cases, in Jindal Steel and Power one of the appeals was an appeal filed by the assessee namely ITC Limited against the judgment of the Division Bench of this court in ITC Limited (supra) in CA No. 9920 of 2016 and this appeal was allowed by the Hon’ble Supreme Court by order dated 07.12.2023 and the Hon’ble Supreme Court held as follows:-

“28. Thus, the market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market and not comparing it with the rate of power when sold to a supplier, i.e., sold by the assessee to the State Electricity Board as this was not the rate at which an industrial consumer could have purchased power in the open market. It is clear that the rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under section 80-IA of the Act.

30. Thus on a careful consideration, we are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board’s rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under section 80-IA of the Act.

31. That being the position, we hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market, i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the Revenue.”

21. The Hon’ble Supreme Court after taking note of the relevant provisions of the Income Tax Act, and in particular Section 80IA held that the market value of the power supplied by State Electricity Board to the Industrial consumers should be construed to be the market value of electricity and it should not be compared with the rate of power sold to or supply to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. It was further held that the State Electricity Boards rate when it supplies power to the consumer have to be taken as market value for computing the deduction under Section 80IA of the Act. Thus, applying the decision of the Hon’ble Supreme Court in Jindal Steel and Power and in the light of the reasoning given in the preceding paragraphs, we hold that the learned tribunal rightly dismissed the appeals filed by the revenue.

22. In the result, these appeals are dismissed and the substantial questions of law are answered against the revenue.”

12. Considering the facts of the assessee’s case vis a vis the decisions of the Hon’ble Supreme Court(supra) and Hon’ble Calcutta High Court (supra), we are not inclined to interfere with the order of ld. CIT(A) deleting the downward transfer pricing adjustment in respect of the transfer value of power by the captive power plant at Mangalpur and therefore dismiss these grounds of the Revenue.

13. The issue raised in Ground No. 12 relates to the allocation of common expenses of the head office to the eligible units.

14. The facts as noted are that, the appellant had allocated the common expenses to the eligible units in the ratio of fixed assets. The ld. AO however was of the view that the common expenses ought to be allocated in the ratio of profitability of the units. Accordingly, the ld. AO enhanced the allocation of common expenses to the eligible units from Rs.1,63,15,442/- to Rs.6,88,65,718/- and thereby reducing the claim of deduction u/s 80-IA of the Act by Rs.5,25,50,276/-.

15. In the appellate proceedings, the ld. CIT(A) observed that, this issue had first arisen in assessee’s own case for AY 2014-15 & 2015-16 wherein the Revenue had determined and allocated the common expenses in proportion to the fixed assets, in the income-tax assessments completed u/s 143(3) of the Act and since then, the assessee had been consistently following this allocation methodology propounded by the Revenue. Applying the rule of consistency, the ld. CIT(A) accordingly held that the AO was unjustified in departing from the previously accepted method of allocation and shifting from the fixed asset ratio to a profitability-based ratio without demonstrating any change in the factual or legal matrix. The operative part of the order of ld. CIT(A) is noted to be as under:-

“3.12 Upon careful consideration of the appellant’s submissions and the findings of the Learned Assessing Officer (AO), it is observed that the common expenses incurred at the head office—comprising administrative costs, fixed overheads, shared manpower, etc.—are indeed required to be apportioned across all units, including the eligible Captive Power Plants (CPPs), to determine their true and accurate profitability. Such allocation must be carried out on a reasonable and judicious basis. From the records, it is noted that this issue had first arisen in the appellant’s own case for Assessment Years (AYs) 2014–15 and2015–16, during which the Ld. AO had allocated the common expenses in proportion to the fixed assets, as reflected in the assessment orders passed under Section 143(3) of the Act.

Taking cognizance of these past assessments, I find merit in the appellant’s plea that, in the absence of any change in facts or legal position, the AO ought to have followed the same method of allocation for the present assessment year, in keeping with the principle of consistency.

3.13 The appellant’s reliance on the decision of the Hon’ble Supreme Court in CIT v. Radhasoami Satsang [(1992) 193 ITR 321 (SC)] is found to be apt. In my considered view, the AO’s departure from the previously accepted method of allocation—shifting from the fixed asset ratio to a profitability-based ratio— without demonstrating any change in the factual or legal matrix, is unjustified. While the rule of res judicata may not strictly apply to income-tax proceedings, the well-established principle of consistency must nevertheless be observed in respect of recurring factual matters across assessment years. It is a settled position in law that when an AO has accepted a particular stand on a recurring issue in earlier years, it is not open to him to adopt a contrary approach in a subsequent year without a material change in facts or law—none of which are present in the current case. Therefore, I agree with the appellant that the AO ought to have continued with the fixed asset ratio for allocating common expenses, as had been consistently applied in earlier years. Consequently, I do not endorse the AO’s action in shifting to a profitability-based allocation method, which is both inconsistent and unjustified.

3.14 Furthermore, I concur with the appellant’s submission that allocating common expenses on the basis of profitability lacks any sound rationale. A more appropriate basis for such allocation would be the deployment of assets, the functions performed, or sales/turnover—depending on the specific facts and circumstances of the case. It is also observed that, had the allocation been made using the ratio of sales—which has been widely accepted as a standard parameter in several judicial precedents—the quantum of expenses allocable to the eligible units would actually be lower than the amount allocated by the appellant using the fixed asset ratio. This further reinforces the reasonableness of the methodology adopted by the appellant. In view of the above, I find the appellant’s approach to be not only consistent with prior assessments but also reasonable from a functional and economic perspective. Accordingly, the further allocation of common expenses amounting to Rs. 5,25,50,276 made by the AO is held to be unjustified and is directed to be deleted. This ground of appeal is, therefore, allowed.”

16. Having heard the rival submissions and perusing the material placed before us, the undisputed facts are that, the assessee had allocated the common expenses in the ratio of fixed assets, which was the allocation methodology adopted by the Revenue in assessee’s own case in earlier AYs 2014-15 & 2015-16. According to us therefore, the ld. AO was unjustified in departing from his own stand consistently followed in the earlier years and allocating the common expenses in the ratio of profitability. We agree with the ld. CIT(A) that, using profitability as a basis for allocating common expenses is fundamentally flawed. Ordinarily, the most prudent approach is to allocate the common expenses in the ratio of sales or in the ratio of assets. The latter methodology is commonly used in capital intensive industries, like that of the assessee. The ld. AR also showed us that, even if the common expenses are allocated in the ratio of sales, the quantum allocable would be lower than what has been allocated in the ratio of assets. For these reasons, we concur with the view expressed by the ld. CIT(A) in paras 3.11 to 3.14 of the appellate order and thus dismiss this ground of the Revenue.

17. In the result, the appeal of the Revenue in ITA No.2663/Kol/2025 is dismissed.

ITA No.2600/KOL/2025 – AY 2021-22 (Revenue’s appeal)

18. This issue raised in Ground Nos. 1 to 11 relate to transfer pricing adjustment made by the ld. TPO/AO to transfer value of power by the captive power plants at Jamuria.

19. Heard both the parties. The uncontroverted facts are that, the assessee had benchmarked the transfer price of power at Jamuria Units at the average landed cost of electricity of Rs.4.80/unit at which the assessee procured electricity from WBERC. The ld. TPO however had benchmarked the same at Rs.4.19/unit using the tariff rate of Damodar Valley Corporation. It is seen that the issue raised in ground nos. 1 to 11 of this appeal is similar to ground no. 1 to 11 of Revenue’s appeal for A.Y. 2020-21 in ITA No. 2663/KOL/2025, as decided by us in above paras. Accordingly, our decision would, mutatis mutandis, apply to ground nos. 1 to 11 of ITA no. 2600/KOL/2025. Hence, Ground nos. 1 to 11 are dismissed.

20. The issue raised in Ground No. 12 relates to the allocation of common expenses to the eligible units.

21. The issue raised in this appeal is similar to ground no. 12 in ITA No. 2663/KOL/2025 for A.Y. 2020-21 as decided by us (supra). Accordingly, our decision would, mutatis mutandis, apply to this appeal of Revenue. Hence, the ground nos.12is dismissed.

22. In the result, the appeal of the Revenue in ITA No. 2600/KOL/2025 is dismissed.

23. We now take up the Revenue’s appeals relating to M/s Shyam Metalics and Energy Ltd. for AYs 2020-21 & 2021-22

ITA No. 2664/KOL/2025 – AY 2020-21 [Revenue’s appeal]

24. This issue raised in Ground Nos. 1 to 11 relate to transfer pricing adjustment made by the ld. TPO/AO to transfer value of power by the captive power plants at Pandoli.

25. The facts as noted are that, the assessee company had originally claimed deduction of Rs.119,39,16,357/- u/s.80IA of the Act for the eligible units against the specified domestic transactions. Later on, the assessee revised the claim to Rs.125,36,80,316/-. As per the revised working, the assessee benchmarked the transfer power from the eligible units to the assessee on the rates at which the manufacturing units were procuring power from the local electricity company, WESCO. The ld. TPO however benchmarked the transfer price of power at Rs.2.54/unit using the power generation tariff notified by Orissa State Electricity Commission. Accordingly, the ld. TPO reduced the deduction claimed u/s 80-IA of the Act.

26. In the appellate proceedings, the ld. CIT(A) noted that the impugned issue was squarely covered by the decision of the coordinate bench in assessee’s own case of Dy. CIT vs. Shyam Metalics & Energy Ltd in IT(SS)A Nos.127 & 128/Kol/2023 for AYs 2017-18& 2018-19. Accordingly, the ld. CIT(A) deleted the transfer pricing adjustment and directed theld. AO to re-compute the eligible deduction u/s 80-IA, as per the revised working furnished by the assessee by adopting the transfer price at Rs.6.19/unit.

27. Heard both the parties. The issue raised in this appeal is similar to ground Nos. 1 to 11 in ITA No. 2663/KOL/2025 for A.Y. 2020-21 as decided by us (supra). Accordingly, our decision would, mutatis mutandis, apply to this appeal as well. We thus uphold the order of ld. CIT(A) and dismiss these grounds of the Revenue.

28. This issue raised in Ground No. 12 is against the action of ld. CIT(A) upholding the assessee’s allocation of common expenses in the ratio of assets, as opposed to the profitability ratio adopted by the ld. AO.

29. The issue raised in this appeal is similar to ground no. 12 in ITA No. 2663/KOL/2025 for A.Y. 2020-21 as decided by us (supra). Accordingly, our decision would, mutatis mutandis, apply to this appeal of Revenue. Hence, the ground no.12is dismissed.

30. In the result, the appeal of the Revenue in ITA No. 2664/KOL/2025 is dismissed.

ITA No. 2665/KOL/2025 – AY 2021-22 [Revenue’s appeal]

31. This issue raised in Ground Nos. 1 to 11 relate to transfer pricing adjustment made by the ld. TPO/AO to transfer value of power by the captive power plants at Pandoli.

32. The issue raised in this appeal is similar to ground Nos. 1 to 11 in ITA No. 2663/KOL/2025 for A.Y. 2020-21 as decided by us (supra). Accordingly, our decision would, mutatis mutandis, apply to this appeal as well. We thus are in agreement with the findings of the ld. CIT(A) deleting the transfer pricing adjustment and directing the ld. AO to re-compute the eligible deduction u/s 80-IA, as per the revised working furnished by the assessee. Hence, the ground nos.1 to 11 are dismissed.

33. This issue raised in Ground No. 12 is against the action of ld. CIT(A) upholding the assessee’s allocation of common expenses in the ratio of assets, as opposed to the profitability ratio adopted by the ld. AO.

34. The issue raised in this appeal is similar to ground no. 12 in ITA No. 2663/KOL/2025 for A.Y. 2020-21 as decided by us (supra). Accordingly, our decision would, mutatis mutandis, apply to this appeal of Revenue. Hence, the ground no.12is dismissed.

35. In the result, the appeal of the Revenue in ITA No. 2665/KOL/2025 is dismissed.

36. To sum up, the appeals of the Revenue are dismissed.

Order is pronounced in the open court on 18^th May, 2026