Case Law Details
Tata Steel Ltd Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the rates on which power is available through Indian Energy Exchange cannot be applied, because these are not the rates to the consumers but rates to the DISCOMs. Accordingly, transfer pricing adjustment deleted.
Facts- The assessee is a company engaged in the business of manufacturing iron and steel, bearings, Ferro alloys and sale of power and water. In so far as the transfer pricing adjustment of Specified Domestic Transactions made u/s. 80(A(8), the facts are that the assessee has three captive power plants on which claim of deduction u/s. 80IA has been made.
Notably, the price at which non-eligible units purchased power from third-party power distribution companies (DISCOMS) to be the market value of electricity was considered. The case of the ld. TPO was that once the transfer of goods and services referred to in sub-section (8) of section 80IA has been brought under the scope of SDT u/s.92BA therefore, the same principles have to be applied for determining the arm’s length price as provided u/s.92F r.w.r. 10B(2). TPO then held that DISCOM cannot be compared to captive power units. In working out the costs to be added to the cost of power purchased, the TPO reduced the employee cost to 20% of that incurred by the DISCOMs, denied inclusion of provision for doubtful debts, and denied inclusion of transmission cost.
Conclusion- Held that, the rates on which power is available through Indian Energy Exchange cannot be applied, because these are not the rates to the consumers but rates to the DISCOMs. Thus, our same reasoning given in the decision of M/s. Tata Chemicals Ltd. will apply to the case of the assessee. Accordingly, following the ratio in the decision of M/s. Tata Chemicals, this issue is decided in favour of the assessee and consequently the entire adjustment made by the ld. TPO is directed to be deleted.
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