Eveready Spinning Mills Pvt. Ltd. Vs ACIT (ITAT Chennai)
ITAT Chennai Allows Section 80IA Deduction Because Market Value Must Match Consumer Tariff; ITAT Chennai Deletes TP Adjustment on Captive Power Transfer Due to Supreme Court Ruling; Captive Power Consumption Must Be Valued at Open Market Consumer Rate; ITAT Chennai Rejects TPO’s Electricity Procurement Benchmark for Section 80IA Claim.
In , the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal for Assessment Year 2018-19 and allowed the appeal for Assessment Year 2022-23. The central issue in both appeals related to disallowance of deduction claimed under Section 80IA of the Income Tax Act concerning electricity generated by the assessee’s windmill division and captively consumed by its spinning division.
The assessee, engaged in manufacturing yarn, had benchmarked the specified domestic transaction of supply of power from its windmill division to its spinning division using the CUP method. The assessee adopted a rate of Rs.6.35 per unit, contending that Tamil Nadu Electricity Board (TNEB) supplied electricity to industrial consumers at approximately Rs.6.90 per unit. The Transfer Pricing Officer (TPO), however, rejected the assessee’s benchmarking and held that the relevant rate should be the rate at which TNEB purchased power from windmill units. Based on this approach, the TPO proposed an adjustment of Rs.23.04 crore, which was confirmed by the Dispute Resolution Panel (DRP).
