ADITYA BIRLA NUVO LTD (SINCE AMALGAMATED WITH GRASIM INDUSTRIES LIMITED),MUMBAI V. DCIT CC-1(4) EARLIER WITH ACIT(LTU) 1, MUMBAI

ITA 563/MUM/2018

AI Insights

The case involves cross-appeals by Aditya Birla Nuvo Ltd. and the Deputy Commissioner of Income Tax concerning various disallowances and deductions under the Income Tax Act, 1961 for the Assessment Year 2013-14. The primary issues revolved around the determination of the fair market value for captive transfer of electricity for computing deduction under section 80IA, the treatment of corporate advertisement expenses, and the allocation of head office expenses to the captive power plant eligible for deduction under section 80IA. The Tribunal examined the applicability of the arm's length principle under transfer pricing regulations to the transactions between the captive power plant and the manufacturing unit, and the treatment of various subsidies and incentives under the tax laws.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787579 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2013-2014
• Appeal Filed On: 30-01-2018
• Other Referred Cases: CIT vs. Jindal Steel & Power Ltd., CIT vs. ITC Ltd., PCIT vs. DCM Shriram Ltd., Tata Steel Ltd. vs. DCIT, Tata Chemicals Ltd. vs. DCIT, M/s Mangalam Cement vs. PCIT, Star Paper Mills Vs. DCIT, Jayant Agro Organic Ltd. vs. Additional, DCIT vs. Rungta Mines Ltd., Delhi Transport Corporation vs. Vidyawati and others, Nalini Mahajan vs. Director of Income Tax, Shinhan Bank vs. DDIT (IT)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU JOSHI; ASHISH KUMAR AGRAWAL
• Assessee Lawyers: YOGESH THAR AW; SAURABH SOPARKAR COUNSEL; YOGESH THAR AW; FOLLOWING
• Keywords: Set aside; Difference of opinion; Opportunity of being heard; Additional evidence; Revised return; Revenue expenditure; Transfer pricing; International transaction; Question of law; Depreciation; Additional depreciation; Fair market value; Capital receipt; Capital expenditure; TDS; Earning of tax free income; Assessment record; Competent authority; Double taxation relief; Rule 8D; Related party transaction
• Section: 144; 143(3); 133(6); 37; 92; 14A; 43B; 115JB; 40(a)(ia); 10B; 92C; 32(1)(iia); 92E; 92D; 92F; 260A; 92A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘K’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER ITA No.563/Mum/2018 (Assessment Year :2013-14) Aditya BirlaNuvo Ltd. (Since Amalgamated with Grasim Industries Limited) A2 Aditya Birla Centre, S. K. Ahire Marg, Worli, Mumbai Vs. Dy. CIT, Central Circle – 1(4) Earlier with Asst. CIT(LTU) 1 Room No. 902, Old CGO Building, 9th Floor, M. K. Road, Mumbai-400 020 PAN/GIR No.AAACI1747H (Appellant) .. (Respondent) ITA No.1885/Mum/2018 (Assessment Year :2013-14) Dy. CIT, Central Circle – 1(4) Earlier with Asst. CIT(LTU) 1 Room No. 902, Old CGO Building, 9th Floor, M. K. Road, Mumbai-400 020 Vs. Aditya BirlaNuvo Ltd. (Since Amalgamated with Grasim Industries Limited) A2 Aditya Birla Centre, S. K. Ahire Marg, Worli, Mumbai PAN/GIR No.AAACI1747H (Appellant) .. (Respondent) Assessee by Shri Yogesh Thar a/w. Shri Riken Shah & Ms. Sukanya Jayaram Revenue by Shri Himanshu Joshi, Sr. DR Date of Hearing 31/10/2025 Date of Pronouncement 17/11/2025 Printed from counselvise.com ITA No.563/Mum/2025 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 2 आदेश / O R D E R PER AMIT SHUKLA (J.M): These cross appeals were earlier disposed of by two separate orders, one passed by the learned Accountant Member and the other by the learned Judicial Member. A difference arose only on Ground No. 7 relating to the determination of fair market value for captive transfer of electricity for the purpose of computing deduction under section 80 IA. In view of this divergence, the matter was placed before the Hon’ble President under section 255(4) of the Act. The points of difference were thereafter referred to the Hon’ble Third Member for resolution. The Hon’ble Third Member has now rendered his detailed opinion, and the appeals have been placed before us to pass the consequential confirmatory order that must follow the majority view. 2. At the outset, it deserves to be recorded without any ambiguity that except for Ground No. 7 there was no disagreement between the learned Members. The learned Judicial Member concurred entirely with the findings and conclusions of the learned Accountant Member on all other issues, including the reasoning spread across paragraphs 22 and 23 of the Accountant Member’s order and the corresponding conclusions in the Judicial Member’s order. Therefore, all such issues stand affirmed as they were originally decided, and no interference or modification is required on those grounds. Printed from counselvise.com ITA No.563/Mum/2025 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 3 3. The only issue that required reference to the Hon’ble Third Member arises from Ground No. 7. The learned Accountant Member took the view that the question of determining the fair market value of electricity supplied by the captive power plant to the Rayon unit should be restored to the Assessing Officer or Transfer Pricing Officer for a fresh determination after making reasonable adjustments on the basis of industrial tariff rates applicable under the State Electricity Board. The learned Judicial Member disagreed, holding that the assessee had adopted a proper internal comparable uncontrolled price by benchmarking the transaction at the same rate at which it purchased electricity from the State Electricity Board, that is, Rs 6.62 per unit. In the view of the learned Judicial Member, this internal CUP represented the most reliable and appropriate benchmark for the purpose of section 80 IA and required no downward adjustment. Thus, the core question that travelled to the Hon’ble Third Member was whether the rate at which the assessee purchased power from the State Electricity Board constitutes a valid and acceptable CUP for determining the fair market value under section 80 IA(8). 4. The Hon’ble Third Member examined the issue in substantial detail. He evaluated the statutory framework of section 80 IA(8) which requires that when goods or services of an eligible business are transferred to any other business carried on by the assessee, the consideration recorded in the accounts must correspond to the market value of such goods or services. He analysed the nature of the assessee’s Printed from counselvise.com ITA No.563/Mum/2025 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 4 electricity purchases from the State Electricity Board, the pattern of tariff determination by GUVNL, the absence of any deviation from approved industrial tariff, and the economic rationale underlying the internal transfer price adopted by the assessee. He also took note of the submissions recorded in the earlier orders of the learned Members and the factual matrices that prompted the divergence of opinion. 5. After considering all relevant material, the Hon’ble Third Member expressed his conclusions in paragraph 46 of his order. Paragraph 46 forms the fulcrum of the majority view, and for completeness it is necessary to incorporate and discuss it fully in this confirmatory order. The Hon’ble Third Member held as follows:- “46. Upon considering the overall facts and circumstances of the case in the light of the judicial precedents cited before me, I am of the considered opinion that the price at which the assessee purchased power from the distribution licensee GUVNL can be applied as a valid CUP for determining the arm’s length price of sale or supply of power by the captive power plant to the Rayon Plant. In other words, the price of Rs 6.62 per unit charged by the captive power plant to the Rayon Plant can be considered as the arm’s length value of power supplied by the captive power plant to the Rayon Plant. Thus, I agree with the view expressed by the learned Judicial Member that the deduction claimed by the assessee under section 80 IA of the Act should be allowed without making any downward adjustment. Having held so, I do not intend to dwell upon the remaining questions as they are of academic importance and not necessary for deciding the issue arising in Ground No. 7. Records may be returned to the registry for placing before the concerned Division Bench to pass the concerned order as per majority view.” Printed from counselvise.com ITA No.563/Mum/2025 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 5 6. The foregoing findings of the Hon’ble Third Member are decisive. The Third Member has clearly held that the rate at which the assessee purchased electricity from the State Electricity Board represents a reliable and appropriate CUP for internal benchmarking. The internal CUP adopted by the assessee is based on an actual purchase transaction with an independent public utility provider at regulated tariff, which reflects fair market conditions. The Hon’ble Third Member has therefore accepted this benchmark as the correct market value for the purpose of section 80 IA. In view of this majority position between the Hon’ble Judicial Member and the Hon’ble Third Member, the adjustment made by the Assessing Officer or Transfer Pricing Officer cannot be sustained. Ground No. 7 thus stands allowed in favour of the assessee and the deduction under section 80 IA must be computed on the basis of the rate of Rs 6.62 per unit without any downward modification. 7. To summarise, all the findings recorded by the Division Bench on all other grounds stands except to the extent modified by the majority view on Ground No. 7, Ground No. 7 is thus, allowed in favour of the assessee. Accordingly, the appeals are disposed of. Order pronounced on 17th November, 2025. Sd/- (RENU JAUHRI) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 17/11/2025 KARUNA, sr.ps Printed from counselvise.com ITA No.563/Mum/2025 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 6 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT– AS THIRD MEMBER ITA No. 563/Mum/2018 (Assessment Year: 2013-14) Aditya BirlaNuvo Ltd. (Since Amalgamated with Grasim Industries Limited) A2 Aditya Birla Centre, S. K. Ahire Marg, Worli, Mumbai Vs. Dy. CIT, Central Circle – 1(4) Earlier with Asst. CIT(LTU) 1 Room No. 902, Old CGO Building, 9th Floor, M. K. Road, Mumbai-400 020 PAN/GIR No. AAACI 1747 H (Appellant) : (Respondent) Appellant by : Shri Saurabh Soparkar – Sr. Counsel/ Shri Yogesh Thar/ Ms. Sukanya Jayram/ Shri Sushil Chopra Respondentby : Shri Ajay Chandra/Neena Jeph Date of Hearing : 25.03.2025 Date of Pronouncement : 18.09.2025 O R D E R The captioned appeal came up for hearing before a division bench on 29.04.2024. After conclusion of hearing, the appeal was allotted to learned Accountant Member, who proposed a draft order for the approval of learned Judicial Member. However, qua ground no. 7, there was difference of opinion between learned Judicial Member and learned Accountant Member.Learned Judicial Member, not being agreeable to the view expressed by learned Accountant Member, proposed a separate order on the issue expressing his dissenting view. As a result of difference in opinion, learned Members constituting the division bench have proposed the following points of difference/questions to the Hon‟ble President, Income Tax Appellate Tribunal (ITAT) for resolution by nominating a Third Member: Printed from counselvise.com 2 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT i. Whether, while computing the amount of eligible deduction u/s.801A, can the price at which manufacturing unit of the assessee which is also purchasing the power from State Electricity Board (SEB) be said to correspond to the \"market value\" as a benchmark price for purchase of the electricity power from the eligible captive power unit of the assessee in terms of Section 801A(8) of the Act. ii. Whether, after amendment brought in the Explanation to Section 801A(8) by insertion of Clause (ii) by the Finance Act 2012 w.e.f. 01/04/2013, all the transactions hit by Section B01A(5), the market value has to be compulsorily determined in accordance with the arm's length principle under Specified Domestic Transaction (SDT) referred to Section 92BA, Le, under Clause (ii) and market value, henceforth cannot be determined under Clause (1). iii. Whether, after the insertion of Clause (ii) to Explanation in Section BDIA(8) ... 01/04/2013, the principles and ratio of the Judgment of the Hon'ble Supreme Court in the case of CIT vs. Jindal Steel and Power Ltd., reported in 468 ITR 162 is no longer applicable as it pertained to 'market value' as defined in earlier clause corresponding to clause (il and accordingly, the market value has to be determined in terms of arm's length principle provided from Section 92 to 92F iv. Whether, even under the SDT while determining the arm's length price, can the price at which State Electricity Board (SEBs) or Power Distribution Companies purchases the power from power manufacturing entities should be taken as Comparable Uncontrolled Price (CUP) to benchmark the ALP of the purchase price of power from eligible captive power unit or are these entities not deemed AE u/s.928(2)(i) as prices and other conditions are influenced by SEB's, or any other method can be adopted to determine the market price. 2. In terms with reference made by learned division bench, the Hon‟ble President has nominated the undersigned as Third Member to resolve the point of difference. Ground no. 7 raised in appeal reads as under: 7. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the A.O./TPO in reducing the deduction u/s. 80IA by Rs.57,35,11,496/- by rejecting the market rate considered by the Appellant for supply of electricity by eligible undertaking to on-eligible unit(s). 3. As could be seen from the ground raised, the dispute is in relation to reduction in claim of deduction u/s. 80IA of Income Tax Act, 1961 by making a downward adjustment to the arm‟s length price (ALP) of the cost of electricity supplied by the Captive Power Plant(CPP) to its Associate Enterprises (AE), the manufacturing unit being Rayon plant, by treating it as Specified Domestic Transaction (SDT) in terms with section 92BA of the Act. As could be seen from the points of difference referred by learned division bench forthe consideration of Third Member, Q. Nos. (i) and (ii) broadly bring out the core issue as to what should be the ALP of the cost of electricity supplied by Printed from counselvise.com 3 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT the CPP to the manufacturing unit (AE) in terms with section 80IA(8)r.w.s. 80A(6) r.w.s. 92 r.w.s 92F of the Act.Whereas, Q. Nos. (iii) and (iv) are offshoots of the main issue and may become academic once the broad issue arising inQ. Nos. (i) and (ii) are answered. 4. The relevant facts necessary for deciding the core issue, briefly stated are, the assessee is a resident corporate entity. As stated by the Assessing Officer (AO), the assessee is engaged in the business of manufacturing of diverse products, such as, rayon, carbon black, insulators, textile, readymade garments, etc. To carry on its manufacturing activities, the assessee has set up manufacturing units in different locations. To ensure uninterrupted power supply to the manufacturing units, the assessee has set up a captive power plant named „Rayon CPP-2‟. The captive power plant generates and supplies electricity only to the manufacturing unit known as Rayon Plant for captive consumption and has not supplied electricity to any other unrelated parties. Since, the transaction relating to supply of power to the Rayon Plant fell within the ambit of SDT in terms with section 92BA of the Act, the assessee undertook transfer pricing analysis to benchmark the transaction. In this context, the assessee noted that the Rayon Plant had also purchased electricity from Gujarat Urja Vidut Nigam Limited (GUVNL), which is the nodal agency of Gujarat State Government for distribution of power in Gujarat. Adopting the cost of Rs.6.62 per unit at which GUVNL had supplied power to the Rayon Plant, as Comparable Uncontrolled Price (CUP) in terms with Rule 10B(1)(a) and applying suchCUP to the SDT of supply of electricity by CPP to the Rayon Plant, the assessee worked out the ALP of the transaction and the CPP being the eligible unit u/s. 80IA of the Act, claimed such income arising from supply of power amounting to Rs.92,61,75,506/- as deduction u/s. 80IA of the Act. Printed from counselvise.com 4 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 5. The return of income filed by the assessee for the impugned assessment year was picked up for scrutiny and in course of assessment proceeding, the A.O. being of the view that the ALP of the SDT requires to be examined by the Transfer Pricing Officer (TPO) made a reference u/s. 92CA of the Act. 6. While examining the issue, the TPO was of the view that the CPP, being a generator of electricity is not functionally similar to the electricity distribution company, as the electricity distribution company purchases power from power generating companies. In this context, the TPO referred to the information requisitionedu/s. 133(6) of the Act from State Electricity Board (SEB). On verification of such information, the TPO found that the average cost at which SEB purchases power from the electricity generating companies works out to Rs.3.92 per unit. He further referred to some more information received regarding power purchased by GUVNL from various coal based private power generating companies, as per which, the average cost of purchase per unit of power is Rs.2.52. Referring to Explanation (ii) u/s. 80IA(8)r.w.s. 92BA of the Act, the TPO observed that since the functions of a distribution licensee is totally different from functions of a electricity generating company, the cost at which the distribution company supplies power cannot be treated as a CUP for determining the ALP. In this context, he relied upon the decision of Hon‟ble Calcutta High Court in the case of CIT vs. ITC Ltd. [2015] 64 taxmann.com 214. Thus ultimately, the TPO concluded that the ALP of the transaction relating to supply of power by CPP to the Rayon Plant has to be determined by applying the rate of Rs.2.52 per unit. Accordingly, he determined the ALP of the transaction at Rs.35,25,64,010/-, thereby, suggesting an adjustment of Rs.57,36,11,496/- to the ALP, resulting in reduction of claim of deduction u/s. 80IA of the Act to that extent. In terms with the adjustment proposed by the TPO, the A.O. passed the Printed from counselvise.com 5 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT assessment order downsizing the claim of deduction u/s. 80IA of the Act, by an amount of Rs.57,36,11,496/-. 7. Though the assessee contested the aforesaid decision of the A.O., in an appeal preferred before the learned First Appellate Authority, however, the assessee was unsuccessful, as the learned First Appellate Authority simply endorsed the viewof the A.O. 8. Being aggrieved, the assessee came in appeal before the Tribunal. As discussed earlier, while deciding the issue, learned Accountant Member has agreed with the view expressed by the departmental authorities, whereas, learned Judicial Member has expressed the view that the assessee is entitled to the deduction claimed u/s. 80IA of the Act, without any reduction in the quantum. 9. Before me, Shri Saurabh Soparkar, learned counsel appearing for the assessee submitted that the CPP has generated and supplied power only to assessee‟s manufacturing unit Rayon Plant (related party) for captive consumption. He submitted, no sale of power has been made by the CPP to any third party. He submitted, in the year under consideration, to meet its requirements, Rayon Plant had also purchased power from GUVNL at an average rate of Rs.6.62 per unit. He submitted, sale/supply of power by the CPP to the Rayon Plant being a SDT within the meaning of Section 92BA of the Act, a transfer pricing analysis was undertaken to ascertain the ALP of the transaction. He submitted, the Rayon Plant, being the manufacturing unit, was considered as the tested party and the rate at which the Rayon plant purchased electricity from GUVNL was treated as internal CUP available for benchmarking the transaction of sales/supply of electricity by CPP to Rayon Plant at average rate of Rs.6.62 per unit. He submitted, the Printed from counselvise.com 6 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT TPO rejected the transfer pricing analysis by the assessee on the ground that the CPP does not perform distribution functions as compared to the GSEB and also no distribution risk is assumed since it supplies only to its AE, the Rayon plant. Whereas, according to the TPO, GUVNL is capital intensive and requires a license for distribution of power. The TPO observed that while applying CUP method close comparability in specific characteristics of goods and services has to be the other comparability factor. 10. Learned counsel submitted, TPO took the CPP as the tested party and thereafter called upon the power generating companies‟ to furnish information relating to the rate at which the power generating companies sold/ supplied power to State Electricity Board. Based on the information received from power generating companies, the arm‟s length rate of supply of power at Rs.2.25 per unit was computed by the TPO by heavily relying upon the decision of Hon‟ble Kolkata High Court in case of ITC Ltd., (64 Taxman.com 214). 11. Drawing my attention to explanation under Section 80IA(8) of the Act, learned Counsel submitted, as per Clause-(ii) of the said explanation, the ALP as defined in Clause-(ii) of Section 92F of the Act in case of a specified domestic transaction should be market value. Taking me through Section 92F(ii) of the Act, he submitted, as per the said provision ALP means the price which is applied or proposed to be applied in a transaction between a person other than Associated Enterprise in uncontrolled conditions. He submitted, as per the definition of ALP u/s. 92F(ii), the price should be in relation to a transaction between two unrelated parties in uncontrolled conditions. He submitted, the price at which generating companies‟ sale electricity to the State Electricity Board cannot be treated as uncontrolled in terms of Section 92F(ii) of the Act as the tariffs are decided Printed from counselvise.com 7 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT by the Electricity Regulatory Commission under the Electricity Act 2003. Therefore, he submitted, the conditions of Section 92F(ii) are not satisfied. 12. Drawing my attention to various provisions of Electricity Act, 2003, learned counsel submitted, Section 61 empowers the Electricity Regulatory Commission to specify the terms and conditions for the determination of tariff applicable to generating companies and transmission license fees. He submitted, the said provision lays down the guidelines on which tariff, transmission, distribution and supply of electricity have to be conducted on commercial principles. He submitted, Section 62 of the Electricity Act empowers the Regulatory Commission to determine the tariff (i) for supply of electricity by generating company to a distribution licensees (ii) transmission of electricity (iii) wheeling of electricity (iv) retail sale of electricity. He submitted, Section 86 of the Electricity Act sets out the functions of State Electricity Regulatory Commission. He submitted, as per Section 86(1)(a) of the Act, the State Commission has authority to determine the tariff for generation, supply, transmission and wheeling of electricity on wholesale, bulk, or retail, as the case may be, within the State. However, in so far as open access for certain category of persons in terms of Section 42 of the Electricity Act, the commission shall determine only the wheeling charges and surcharge if any. He submitted, Section 86(1)(b) authorizes the state commission to regulate electricity purchase and procurement process of distribution license fees, including price at which electricity shall be procured from the generating companies or license fees or from other sources through agreement for purchase of power for distribution and supply within the state. Thus, he submitted, the sale/supply of power by the generating companies to distribution company is a totally controlled transaction as the tariff at which the sales/supply has to be made is not at the hands of the generating companies but totally Printed from counselvise.com 8 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT under the control of the regulatory commission and subject to various restrictions/conditions. Thus, he submitted, the price at which the generating company sales/supplies power to the distribution company cannot be treated as uncontrolled transaction in terms with Section 92F(ii) of the Act. He submitted, Section 9 of the Electricity Act authorizes a person to construct, maintain or operate a captive generating plant and dedicated transmission line. He submitted, the provision further provides that a person who has constructed a captive generating plant and maintains/operates such plant shall have the right of open access for the purpose of carrying electricity plant to the destination of his use subject to availability of adequate transmission facility, which is determined by the central transmission utility or the state transmission utility as the case may be. He submitted, captive generation and supply of power for own use is not subject to any control and tariff as applicable to a generating company selling/supplying power to Distribution Licensees. Therefore, he submitted, the function of a generating company cannot be equated with the functions of captive power plant. He submitted, had the Rayon Plant not purchased power from the CPP, its entire power need would have been covered with supply of power by GUVNL and the rate applicable would have been the same as charged by the CPP. Therefore, it cannot be said that the price at which, the CPP has supplied power to the Rayon Plant is not as per ALP. Learned counsel submitted, the issue is no more res integra in view of the ratio laid down by the Hon‟ble Supreme Court in the case of CIT vs. Jindal Steel & Power Ltd. [2023] 157 taxmann.com 207 (SC). 13. In this context, he drew my attention to the following observations in Paragraphs 25 to 29 of the judgment: “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 Printed from counselvise.com 9 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 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. 29. Section 43A of the 1948 Act lays down the terms and conditions for determining the tariff for supply of electricity. The said provision makes it clear that tariff is determined on the basis of various parameters. That apart, it is only upon granting of specific consent that a private entity could set up a power generating unit. However, such a unit would have restrictions not only on the use of the power generated but also regarding determination of tariff at which the power generating unit could supply surplus power to the 43 concerned State Electricity Board. Thus, determination of tariff of the surplus electricity between a power generating company and the State Electricity Board cannot be said to be an exercise between a buyer and a seller under a competitive environment or a transaction carried out in the ordinary course of trade and commerce. It is determined in an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of the extant statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade Printed from counselvise.com 10 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT and competition. Consequently, the price determined as per the power purchase agreement cannot be equated with the market value of power as understood in the common parlance. The price at which the surplus power supplied by the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equated with the market value as is understood for the purpose of Section 80IA (8). On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under Section 80 IA of the Act.” 14. Learned counsel submitted, the observations made by the Hon‟ble Apex Court, as aforesaid, are in the context of explanation u/s. 80IA(8) of the Act as it stood prior to its amendment w.e.f. 01.04.2013. However, he submitted, the principles laid down by the Hon‟ble Supreme Court would apply in all force even after amendment. Learned counsel submitted, in case of PCIT vs. DCM Shri Ram Ltd., [2025] 170 taxmann.com 631. The Hon‟ble Delhi High Court, after taking note of the amended provisions of Section 80IA(8) of the Act has held that the ratio laid down by the Hon‟ble Supreme Court in the case of Jindal Steel & Power Ltd. (Supra) would still apply and the ALP of the SDT relating to sale/supply of electricity by the CPP to the manufacturing unit would be the price at which the manufacturing unit purchases electricity from the SEB/distribution company. In this context, he drew my attention to the following observations of the Hon‟ble Delhi Court in the case of PCIT vs. DCM Shriram (Supra): “56. Undoubtedly, there is a degree of similarity between the transaction of supply of electricity by SEBs to the Assessee and the supply of electricity by the Assessee's eligible units. However, there is a difference between the transactions being benchmarked, which is supply of electricity by captive units, and the transaction of supply of electricity by distribution companies/corporations. The power distribution companies enjoy a near monopoly status. The tariff charged by such companies are regulated tariffs. However, we accept that there is a sufficient degree of similarity between the said transaction for reasonably determining the ALP by using the CUP method. 57. We also consider it apposite to refer to the recent decision of the Supreme Court in Commissioner of Income Tax v. Jindal Steel and Power Limited7. The principal issue involved in the said decision was the determination of market value of goods and services. In terms of Clause (i) of Explanation to Sub-section (8) of Section 80IA of the Act, the market value in relation to goods and services would mean the price that such goods or services would ordinarily fetch in the open market. In the aforesaid context, the Supreme Court had considered the question of what would constitute an open market in the context of determining the market value of electricity supplied by captive power units of the assessee in that case. In that case, the assessee had entered into an agreement with the SEB of State of Madhya Pradesh to supply surplus electricity at the rate of ₹2.32 per unit. However, the Assessee had (2024) 460 ITR 162 computed Printed from counselvise.com 11 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT the revenue from supply of electricity to its own unit at the rate of ₹3.72 per unit. It was the Assessee's case that the market value of the electricity was ₹3.72 per unit as that was the rate charged by the SEB for supply of electricity to industrial consumers including the Assessee. The learned ITAT had accepted the assessee's stand and had set aside the order passed by the CIT(A) rejecting the assessee's appeal in that regard. The High Court had also rejected the Revenue's appeal by referring to its earlier decision where the question of law had been answered against the Revenue and in favour of the Assessee. 58. The Revenue had approached the Supreme Court assailing the orders passed by the learned ITAT and the High Court. In the aforesaid context, the Supreme Court had held as under: \"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. Printed from counselvise.com 12 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 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.\"[emphasis added] 59. As is apparent from the above, the Supreme Court had accepted the rates at which electricity was supplied by the SEBs to industrial consumers as being the market value of the said supplies for the purposes of Sub-section (8) of Section 80IA of the Act.” 15. He submitted, in case of „CIT Vs. Reliance Industries Ltd.‟ [2019] 102 Taxmann.com 372, the Hon‟ble Bombay High Court after taking note of the decisions of Hon‟ble Chhattisgarh High Court in the case of CIT vs. Godavari Power and Ispat Ltd.[2014] 42 Taxmann.com 551 and Hon‟ble Gujarat High Court in case of CIT Vs. Gujarat Alkalies and Chemicals Ltd.395 ITR 247. [2017] 395 ITR 247 has held that the market value of power supplied by the captive power plant to the manufacturing unit should be the cost at which the manufacturing units/industrial consumers purchase power from SEB/distribution company. He further submitted, in the aforesaid judgment the Hon‟ble Bombay High Court did not agree with the view expressed by the Hon‟ble Kolkata High Court in the case of CIT vs. ITC Ltd. (supra) relied upon by the Department. He submitted, in case of various other assessees the coordinate Benches of the Tribunal, after taking note of the amended provisions Section 80IA(8) and Section 80A(6) of the Act have held that the ALP/market value of electricity/power supplied by the CPP to manufacturing unit would be the cost at which the SEB/distribution company Printed from counselvise.com 13 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT supplies electricity to industrial consumers. In this context, he relied upon the following decisions: i. M/s Manglam Cement vs. PCIT IT/TP No.01./JP/2024 dated 15.01.2025. ii. Star Paper Mills Vs. DCIT [2023] 154 Taxmann.com 543. iii. Jayant Agro Organic Ltd. vs. Additional ITA No. 6073-6074/Mum/2019 dated 14.09.2021. iv . DCIT vs. Rungta Mines Ltd. [2024] 158 taxmann.com 573 (Kokata-Trib.) 16. He submitted, the reliance on the decision of Kolkata High Court in the case of CIT vs. ITC Ltd. (Supra) by the Department is totally misplaced as the said decision now stands reversed by the Hon‟ble Supreme Court, while deciding a batch of Special Leave Petitions (SLPs) including S.L.P. filed by ITC Ltd. registered as CA No. 9920/2016. Thus, he submitted,the view expressed by learned Judicial Member, being the correct view, should be accepted. 17. Shri Ajay Chandra, learned CIT(DR) submitted, the definition of market value has undergone significant amendment with introduction of Section 80A(6) of the Act on 01.04.2009, which overrides the provisions of Section 80IA(8) of the Act. He submitted, Section 80A(6) of the Act differentiates between seller‟s market and consumer‟s market. He submitted, Clause (i) to explanation under Section 80A(6) of the Act clearly states that the market value of goods and services sold, will be the price that such goods or services would fetch if sold by the eligible business in the open market subject to statutory and regulatory restrictions. Therefore, while determining the market value of electricity sold by the CPP, as per Explanation (i) to Section 80A(6) of the Act, the market value of electricity sold by the CPP will be the price that the CPP will get while selling electricity in the open market and not the price which the electricity would get Printed from counselvise.com 14 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT when purchased by the Rayon plant in the open market. He submitted, this crucial aspect has not been taken note of in the decisions cited by learned counsel for the assessee. Therefore, the decisions cannot be taken as binding precedents as they are per incuriam. He submitted, the ratio laid down by the Hon‟ble Supreme Court in the case of CIT vs. Jindal Steel & Power Ltd. (Supra) would not be applicable as the definition of market value has now been fettered with statutory and regulatory restrictions of the Electricity Act, 2003 and Section 80A(6) of the Act. He submitted, in terms with Electricity Act, 2003, the regulatory commission determines and regulates the price of electricity sold by the generating company to the distribution licensee as well as by the distribution licensee to the end consumer. He submitted, even Rule 10B(2)(b) which provides for determination of ALP and difference in the FAR analysis between a power generator and distribution licensee has to be accounted for. He submitted, while learned Accountant Member has taken note of such difference in FAR analysis, learned Judicial Member has not disputed it. He submitted, decisions cited by learned counsel for the assessee are sub silentio on this aspect. He submitted, since the decisions cited on behalf of the assessee have not taken note of Section 80A(6) of the Act, they cannot be applied. 18. In this context, learned Departmental Representative (DR) relied upon the following decisions: i. Delhi Transport Corporation vs. Vidyawati and others [2009] ILR 4 Delhi 546. ii. Nalini Mahajan vs. Director of Income Tax [2002] 257 ITR 123 (Delhi). iii. Shinhan Bank vs. DDIT (IT) [2022] 139 Taxmann.com 563 (Mum-Trib). 19. Proceeding further, he submitted, even in case of Jindal Power and Steel (Supra) the Hon‟ble Supreme Court has acknowledged that Section 80A(6) will have to be taken into consideration to determine the market value of the electricity for the A.Y. 2009-10 Printed from counselvise.com 15 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT onwards. He submitted, the observations of learned Judicial Member. that use of word „or‟ between Clause-(i) and Clause-(ii) of explanation u/s. 80IA(8) of the Act gives an option to the assessee to chose the method suitable to it for ascertaining the price of electricity in open market is an improper interpretation. He submitted, after 01.04.2009, by virtue of the overriding effect of Section 80A(6) of the Act, the definition of „market value‟ as per Section 80A(6) of the Act overrides the definition of market value under Section 80IA(8) of the Act. Without prejudice, he submitted, the definition of market value as per explanation under Section 80IA(8) of the Act would apply in different situations. He submitted, while clause-(i) of the explanation would apply where the value of goods and services transferred falls below the threshold monetary limit for referring the SDT to the TPO for determination of ALP, in case the value of goods/services is more than threshold limit, which falls within the ambit of SDT, clause-(ii) of explanation u/s. Section 80IA(8) would apply. 20. In this context, he drew my attention to explanatory memorandum to the Finance Bill-2012. He further submitted, while expressing his dissenting view, learned Judicial Member has not taken note of Rule 10B(2), which states that while comparing a SDT with uncontrolled transaction, the factors which need to be considered are; (i) the functions performed, assets employed and risk assumed. (ii) the contractual terms. (iii) conditions prevailing in the market in which respective parties to the transaction operate including the laws and government orders in force. Thus, he submitted, even an uncontrolled transaction can be subject to government rules and regulations. In so far as the observations of learned Judicial Member that the power generating company and the distribution licenseeare deemed Associated Enterprises (AE) as the transaction between them and the price fixed/negotiated is by the State Electricity Board and the Regulatory Printed from counselvise.com 16 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT Commission, learned DR submitted, the provisions relating to AE in Section 92A of the Act will apply only to Sections 92, 92B, 92C, 92D and 92E of the Act. He submitted, concept of AE in Section 92A does not apply to SDT in Section 92BA of the Act. Hence, the view expressed by learned Judicial Member may not be the correct view. He submitted, in case of Sanghi Industries Ltd. vs. DCIT, ITA(TP) No.104/Hyd/2022 dated 23.01.2025, the Tribunal, after examining Clause-(ii) under explanation to Section 80IA(8) has upheld the stand of Revenue that the rate at which electricity is sold by a power generating company to the State Electricity Board shall be the ALP of the transaction between the CPP and the manufacturing unit. He submitted, since as per Rule 10B(2)(b) of the Act FAR analysis has to be made, the functions performed, assets employed and risk undertaken by a power generating company being totally different to a power distributing company, the price at which power is sold by a power distributing company cannot be taken as the ALP in case of power sold by a power generating company. He submitted, even as per Rule 10B(2)(d), while comparing a SDT with uncontrolled transaction, the Government laws and order in force needs to be taken into consideration. Thus, he submitted, the TPO was correct in determining the ALP by applying the rate at which the distribution company/SEB purchases power from power generating company as the ALP. 21. In rejoinder, learned counsel appearing for the assessee submitted, though, sub Rule(2) to Rule 10B lays down the parameters which have to be taken into consideration while comparing SDT with uncontrolled transaction, however, the parameters have to be applied in the context of sub rule(1) which provides methods for bench marking transaction. He submitted, while applying CUP method for bench marking SDT, not only the product has to be similar but also market conditions have to be taken into account. He Printed from counselvise.com 17 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT submitted, FAR analysis may be relevant from standpoint of tested party but not in case of product comparability which is the key factor in CUP method. He submitted, in so far as, the market conditions are concerned, power supplied by CPP to the Rayon Plant is under business to consumer (B to C) model, whereas, power supplied by the power generation company to SEB is under business to business (B to B) model. Thus, he submitted, the conditions of B to B market being different and distinct from B to C market, the rate at which SEB purchases power from generation company cannot be used as comparable price for transaction between CPP and manufacturing unit (consumer). In this context, he relied upon the following decisions: i. Star Paper Mills vs. DCIT [2022] 134 Taxmann.com 177 (Kol.-Trib) ii. ACIT-Vs-Philips Carbon Black Ltd. [2022] 142 Taxmann.com 325 (Kolkata ITAT) 22. He submitted, contention of the learned DR that SDT is not required to be compared with open market transaction is untenable in view of the following decisions: i. Star Paper Mills vs. DCIT (Supra) ii. ACIT vs. Wonder Cement Ltd. ITA No. 1543/JPR/2024 (Jaipur-Trib) iii. DCIT vs. Mahendra Sponge and Power Pvt. Ltd. [2024] 159 taxmann.com 147 (Raipur-Trib.). iv. Bhagwati Power and Steel Ltd. vs. ACIT [2024]163 Taxmann.com 253 (Raipur-Trib). 23. With regard to the contention of learned Departmental Representative that the transaction between the distribution company and the consumer is not an open market transaction or an uncontrolled transaction as the price of electricity sold by the distribution licensee to a consumer is determined by tariff regulatory commission in terms with provisions of Electricity Act, learned counsel submitted, this issue has been specifically addressed in case of PCIT vs. DCM Shriram [2025] 170 taxmann.com 631 (Delhi HC), wherein, the Hon‟ble Court has held, though, the tariff charged by distribution company to the industrial consumers are regulatory tariff however there is a Printed from counselvise.com 18 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT degree of similarity between supply of electricity by SEB to the industrial consumer and the supply of electricity by CPP to the manufacturing unit. 24. With regard to contention of learned DR that even the transaction between the SEB/distribution company with the consumer is a controlled transaction as the tariff is regulated by the tariff regulatory commission, learned counsel submitted that as per the decision of the Coordinate Bench in case of Star Paper Mills vs. DCIT (Supra) the fact that the rate at which SEB supplies power to consumer is fixed by regulatory authority is of no consequence as it is not a case that the rate has been fixed only for the assessee. Rather, the SEB/ distribution company supplies power at the same tariff to all industrial consumers similar to the assessee within the same State, which thus represents the prevailing market rate. 25. In this context, learned counsel also relied upon the decision of DCIT vs. Rungta Mines Ltd. (supra). Learned counsel submitted, the contention of learned DR that the provisions of Section 80A(6) of the Act have not been considered in any of the decisions cited on behalf of the assessee is an incorrect submission as in case of M/s Mangalam Cement Ltd. vs. DCIT [IT(TP) A No. 01/JPR/2024, the Tribunal has taken note of Section 80A(6) of the Act and decided the issue in favour of the assessee. In this context, he also relied upon the decision of the coordinate bench in case of Orient Paper & Industries Ltd. vs. DCIT in ITA No. 1488/Kol/2024. He submitted, the open market value as per Clause- (i) under explanation to Section 80IA(8) corresponds to the ALP standard provided in Section 92F (ii) and both will ordinarily lead to the same result. Printed from counselvise.com 19 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 26. In this context, he again referred to the decision of coordinate Bench in the case of Star Paper Mills vs. DCIT (Supra). Learned counsel finally submitted, once there are decisions of Hon‟ble High Courts on a particular issue, they cannot be ignored merely because they are not of jurisdictional High Court. He further submitted, whether the decisions rendered by the High Courts are per incuriam or sub silentio, cannot be commented upon by any forum subordinate to High Court. Thus, he submitted, the view expressed by learned Judicial Member, being consistent with the ratio laid down in the judicial precedents cited before the Bench, the view should be upheld. 27. I have carefully considered the exhaustive submissions made by the parties and perused the materials on record. I have also gone through the respective orders proposed by the learned Members constituting the Division Bench in respect of ground no. 7, relating to the issue of the quantum of deduction allowable to the assessee u/s. 80IA of the Act. I have also applied my mind to the catena of judicial precedents cited before me. As far as the factual position relating to the issue in dispute is concerned, there is no dispute that the assessee has set up a captive power plant known as „Rayon CPP-2‟ for generation and supply of power to its manufacturing unit-Rayon Plant. The CPP undoubtedly is the eligible business of the assessee for the purpose of section 80IA of the Act. Even, the department has no quarrel on this aspect. Further, there is no dispute between the assessee and the department that the transaction relating to sale/purchase of power between CPP-2 and Rayon Plant qualifies as SDT u/s. 92BA of the Act. Even, the assessee had undertaken a benchmarking analysis of the SDT. Since, in the year under consideration, theRayon Plant had also purchased power from a State owned distribution licensee at Rs.6.62 per unit, the said rate has been applied as CUP to determine the ALP of the sale of power by CPP to Rayon Plant. Printed from counselvise.com 20 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 28. However, according to the TPO, the distribution licensee being functionally different from a power generating entity, the price charged by it cannot be compared to the price charged by a power generating company. Thus, the TPO has applied the per unit rate of Rs.2.52/- at which the distribution licensee purchases power from power generation companies. Thus, the issue arising for consideration is-what should be the ALP of sale/supply of power by CPP to Rayon Plant?‟. 29. Before I proceed to deal with the issue, it needs to be mentioned that if one looks at the legislative history of sub section (8) of section 80IA of the Act, it can be seen, initially, as per the said provision where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration is not corresponding to the market value of such goods or services, then the market value of such goods or services can be considered for allowing deduction u/s. 80IA of the Act. Subsequently, Explanation under sub section (8) of section 80IA of the Act was introduced by Finance Act, 2001 w.e.f. 01.04.2002, which defines the market value in relation to any goods or services to mean the price that such goods or services would ordinarily fetch in the open market. However, the said explanation was substituted by Finance Act, 2012 w.e.f. 01.04.2013 with the following explanation: Explanation.—For the purposes of this sub-section, \"market value\", in relation to any goods or services, means— (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) 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. Printed from counselvise.com 21 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 30. As could be seen from a reading of the said Explanation, clause (i) is verbatim same to the earlier Explanation. What is new is clause (ii), which provides that in case of SDT, the ALP in terms with section 92F(ii) would substitute the market value of goods or services transferred to the Associated Enterprise. At this stage, I must observe, a holistic reading of Explanation under sub section (8) of section 80IA of the Act would make it clear that clause (i) and clause (ii) operate in different situations. When the transaction between the related parties is in the nature of SDT coming within the ambit of section 92BA of the Act and is above a particular threshold limit, in that case, clause (ii) would be applicable and in all other cases clause (i) of Explanation would apply. 31. Having said that, it is now necessary to look into the aspect as to what should be the ALP of the SDT relating to sale of power by CPP to Rayon Plant. As stated earlier, clause (ii) to Explanation under sub section (8) of section 80IA of the Act refers to the ALP as defined in clause (ii) of section 92F of the Act in respect of SDT. Section 92F(ii) of the Act defines ALP as under: Definitions of certain terms relevant to computation of arm's length price, etc. 92F. In sections 92, 92A, 92B, 92C, 92D and 92E, unless the context otherwise requires,— (i) ……… (ii) \"arm's length price\" means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions; 32. The definition of ALP, as reproduced above, speaks of two conditions. Firstly, the transaction must be between two unrelated parties and secondly, such transaction must be in uncontrolled conditions. In the facts of the present appeal, undisputedly, the Rayon Plant has purchased power from the distribution licensee at Rs.6.62 per unit. The assessee has applied the said price as CUP to benchmark the sale of power by CPP to Rayon plant. At this stage, it needs to be noted that section 92C of the Act prescribes the method for Printed from counselvise.com 22 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT computation of ALP. Whereas, Rule 10B prescribes the mode and manner of computation of ALP under different methods. Undisputedly, the assessee has applied CUP method to determine the ALP. According to the TPO, the assessee, being a power generating company, the cost at which the distribution company supplies power to the consumer cannot be taken as ALP for sale of power by the generating company. Even, in course of hearing, learned CIT(DR) has argued in similar line. According to ld. DR, functions performed, assets employed and risk undertaken by a distribution company being totally different from a power generating company, the cost at which the distribution company sales power to consumers cannot be compared with the cost at which the distribution company purchases power from a power generating company. According to the Revenue, the rate at which the power generating company supplies power to a distribution company has to be taken as ALP, as the functions of the assessee are similar to that of a power generating company. 33. Keeping in perspective the aforesaid stand taken by the Revenue, it is necessary to look into the position of a power generating company which sells supply to a distribution licensee and that of a CPP under the Indian Electricity Act, 2003. As per section 2(28)of Electricity Act,2003,\"generating company\" means any company or body corporate or association or body of individuals, which owns or operates or maintains a generating station. Section 2(30) of theElectricity Actdefines \"generating station\" or “station” to mean any station for generating electricity, including any building and plant with step-up transformer, switchgear, switch yard, cables or other appurtenant equipment, if any, used for that purpose and the site thereof; a site intended to be used for a generating station, and any building used for housing the operating staff of a generating station, and where electricity is generated by water-power, includes penstocks, head and tail works, main Printed from counselvise.com 23 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT and regulating reservoirs, dams and other hydraulic works, but does not in any case include any sub-station. Whereas, “Captive generating plant”has been defined u/s. 2(8) of the Electricity Act to mean a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such cooperative society or association. Section 2(17) defines \"distribution licensee\" to mean a licensee authorised to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply. \"Distribution system\" has been defined u/s.2(19) of Electricity Act to mean the system of wires and associated facilities between the delivery points on the transmission lines or the generating station connection and the point of connection to the installation of the consumers. Section 7 of the Electricity Act provides that any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73. Whereas, section 8 of Electricity Act provides for Hydro-electric generation which can only be set up with concurrence of the competent authority and must involve capital expenditure exceedingthe limit as may be fixed by the Central Government through Notification. Section 9 of the Electricity Act provides that notwithstanding anything contained in the Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines. The said provision provides that where the supply of electricity from the captive generating plant is through the grid, it shall be regulated in the same manner as the generating station of a generating company. However, no licence shall be required for supply of electricity generated from a captive generating plant to any licencee or a consumer, subject to the regulations made under sub section (2) of section Printed from counselvise.com 24 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 40. Further, subsection (2) of section 9 provides 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 purposes of carrying electricity from his captive generating plant to the destination of his use, subject to the availability of adequate transfer facility. Section 10 of Electricity Actprescribes the duties of generating companies other than captive power plants. Whereas, section 11 empowers theappropriate Government to issue direction to generating companies in the matter of generation and supply of electricity. Section 14 empowers the regulatory commission to grant license for transmission of electricity or to distribute electricity or to undertake trading in electricity. Section 42 of the Electricity Act prescribes the duties of distribution licensee and open access. As per the said provision, while it is the duty of a distribution licensee to develop and maintain an efficient, co-ordinated and economical distribution system in his area of supply and to supply electricity in accordance with the provisions contained in the Act, a captive power generating plant shall have open access only on payment of wheeling charge and surcharge. Sections 61 and 62 of the Electricity Act empowers the Regulatory Commission to determine and prescribe tariff both in case of supply of power by generating company to distribution licensee and in case of a distribution licensee to the consumers. However, the captive power generating units have been kept out of all such control and regulation under the Electricity Act. Section 86 of the Electricity Act empowers the State Commission to determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. 34. The purpose of dealing in detail with the various provisions under the Electricity Act is to demonstrate that while the power generating companies, who have to Printed from counselvise.com 25 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT sale/supply power to the distribution licensees, are fetteredwith various rules/regulations/control under the provisions of the Electricity Act, the captive power generation plants have been purposefully kept out of all such control and regulatory measures. In terms with section 9 of the Electricity Act, 2003, the captive power plants have been given the right of open access for carrying electricity from the captive generating plant to the destination for own use, ofcourse,only on payment ofwheeling charge. In other words, the provisions under the Electricity Act make it clear that the similarity between a power generating plant and captive power plant is only to the limited extent of generation of power and the similarity ends there. Under the Electricity Act itself captive power generating plant is treated differently than a generating company. That being the position under the Electricity Act, by no stretch of imagination functions performed, assets employed and risk undertaken by a power generating company which sales/supplies power to a distribution licensee for ultimate supply/sale of power to the consumers cannot be equated with a small captive generation plant. Rule 10B(2) prescribes the factors for comparability analysis of either goods or services in relation to an international transaction or SDT with an uncontrolled transaction. The factors which needs to be considered are : (i) the specific characteristics of the property transferred or services provided in both the transaction; (ii) the functions performed, assets employed and risk assumed, by the respective parties to the transactions; (iii) the contractual terms of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (iv) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. Printed from counselvise.com 26 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 35. If we apply the parameters of Rule 10B(2), it can be seen thatsetting up of a power generation plant for bulk supply of electricity is capital intensive and requires huge investment. Whereas, the investment made by a captive power generating plant is minuscule in comparison. While the power generating company is subject to all regulatory measures under the Electricity Act, the captive power generating plant has not been put under such restrictions. Thus, in my opinion, a captive power plant cannot be equated with a bulk power generating company, either in functionality or in employment of assets or even on account of risk undertaken, as the power generated by a captive power plant is for own captive consumption, hence, with minimal risk. In such a scenario, what can be considered for comparability, analysis is a transaction with sufficient degree of similarity. 36. Before us, the learned DR has put much stress on section 80A(6) of the Act to emphasise that due to its overriding effect, it will override even the Explanation u/s. 80IA(8) of the Act. In this context, he has submitted that as per Explanation u/s.80A(6) of the Act, there is no „or‟ between various clauses, hence, the conditions would apply cumulatively. He has submitted that as per clause (i) to Explanation u/s. 80A(6), the market value of goods or services in open market conditions subject to statutory or regulatory consideration, if any, has to be considered. Referring to clause (iii) of Explanation u/s. 80A(6) of the Act, he has furthersubmitted that in respect of SDT, the ALP in terms with section 92F(ii) will apply. Thus, according to him, clause (i) and (iii) to Explanation u/s. 80A(6) of the Act, being provisions having overriding effect, would get precedence over any other provisions under the Act, including Explanation u/s. 80IA(8) of the Act. Printed from counselvise.com 27 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 37. On carefully going through the provisions contained u/s. 80IA(8) and 80A(6) of the Act, in my understanding, there is no conflict between them. As discussed earlier, w.e.f. 01.04.2013 the earlier Explanation u/s. 80IA(8) of the Act was substituted by a new Explanation,whereunder, the only new addition is clause (ii), which substitutes the market value under clause (i) with ALP as per section 92F(ii) qua SDT. Simultaneously, w.e.f. 01.04.2013, clause (iii) to Explanation u/s.80A(6) of the Act was introduced which is more or lessparimateria to clause (ii) to Explanation u/s.80A(8) of the Act. Clause (iii) to Explanation u/s.80A(6) and clause (ii) to Explanation u/s.80IA(8) of the Act were introduced simultaneously only for the purpose of substituting the market value with ALP in respect of SDT. That being the intention of the legislature, the contention of learned DR that clause (i) to Explanation u/s.80A(6) of the Act would also apply to determine the market value in the open market condition subject to statutory regulatory restriction, in my view, is unacceptable. Had it been the intention of the legislature to apply clause (i) to Explanation u/s.80A(6) of the Act to SDT, there was no requirement in introducing clause (iii) to Explanation u/s.80A(6) of the Act, which is specifically applicable to SDT. Thus, in my humble opinion, clause (iii) to Explanation u/s.80A(6) of the Act and clause (ii) to Explanation u/s.80IA(8) of the Actwere brought into the statute specifically for the purpose of substituting the market value by ALP in respect of SDT. 38. It is noteworthy, both clause (iii) to Explanation u/s.80A(6) of the Act and clause (ii) to Explanation u/s.80IA(8) of the Act refers to ALP as defined u/s. 92F(ii) of the Act. As discussed elsewhere in the order, the ALP as defined u/s. 92F(ii) of the Act means the price at which a transaction between the two unrelated parties is undertaken in uncontrolled conditions. Printed from counselvise.com 28 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 39. In the facts of the present appeal, admittedly, the Rayon Plant had purchased electricity from the State owned distribution licensee at Rs.6.62 per unit. Had the Rayon Plant not purchased power from CPP to meet its requirement, it would have purchased power from the distribution licencee at the very samerate of Rs.6.62 per unit. Therefore, there cannot be any doubt that the rate at which the Rayon Plant purchased power from the distribution licensee can be applied as a valid CUP to determine the ALP of the power supplied/sold by CPP to Rayon Plant. In this context, the ld. DR has advanced an argument that even the cost of supply of power by the distribution licensee to the assessee is not auncontrolled transaction in strict sense of the term, as, it is regulated by tariff determined by the regulatory commission under the Electricity Act. Therefore, it cannot be taken as ALP in terms with section 92F(ii) of the Act. To answer the aforesaid argument of ld. DR, it would be apposite to quote the following observations of the Hon'ble Delhi High Court in the case of Pr. CIT vs. DCM Shriram Ltd. [2025] 170 taxmann.com 631 (Delhi) : 56. Undoubtedly, there is a degree of similarity between the transaction of supply of electricity by SEBs to the assessee and the supply of electricity by the Assessee’s eligible units. However, there is a difference between the transactions being benchmarked, which is supply of electricity by captive units, and the transaction of supply of electricity by distribution companies/corporations. The power distribution companies enjoy a near monopoly status. The tariff charged by such companies are regulated tariffs. However, we accept that there is a sufficient degree of similarity between the transaction for reasonably determining the ALP by using the CUP method. 40. Though, Hon'ble Delhi High Court acknowledged the fact that the tariff charged by distribution companies are regulated, however, the Hon'ble High Court has held that there being sufficient degree of similarity between the two transactions it can be taken as CUP for determining ALP. More so, when the rate at which the distribution licensee supplies poweris not exclusively fixed for a particular consumer but is applicable to a large segment of consumers. It will be relevant to observe, the aforesaid judgment of the Printed from counselvise.com 29 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT Hon'ble Delhi High Court is after considering the amendment to Explanation u/s. 80IA(8) of the Act effective from 01.04.2013 and Rule 10B as well. In fact, in the aforesaid judgment, the Hon'ble High Court, while coming to its conclusion, has applied the ratio laid down by the Hon'ble Supreme Court in case of CIT vs. Jindal Steel & Power Ltd. [2023] 157 taxmann.com 207 (SC). 41. At this stage, it would be necessary to observe that in case of DCIT vs. Rungta Mines Ltd. [2024] 158 taxmann.com 573 (Kolkata), the co-ordinate bench has held that the price at which electricity is sold and supplied by the distribution company to an industrial consumer can be treated as ALP for determining the cost of power supplied by CPP for captive use. 42. While deciding the appeal preferred by the Revenue against the aforesaid order of the co-ordinate bench,the Hon'ble Calcutta High Court in PCIT vsRungta Mines Ltd. [2025] 176 taxmann.com 410 (Calcutta) had an occasion to deal with the identical issue. Pertinently, in the said appeal, the Revenue had specifically raised the following question amongst others : (b) Whether on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified in law in not considering the provisions of Income Tax Act, 1961 where it has been mandated in cases of transaction between eligible units and non-eligible units of an undertaking, in explanation (iii) of sub section (6) of Section 80A, that the expression “market value” in relation to any goods or services sold, supplied or acquired means the “arm’s length price” as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transactions referred to in section 92BA? 43. After examining various provisions under the Electricity Act, 2003 as well as provisions contained under the Income Tax Act, the Hon'ble High Court upheld the decision of co-ordinate bench with the following observations: 14. It is not in dispute that the main business of the assessee is notgenerating power to sell the same to distribution companies/SEBs. It is alsonot in dispute that the Captive Power Plants (CPPs) were established by theassessee for its own need, i.e. for supply of uninterrupted power to itsmanufacturing units as well as to save the cost of power purchased fromSEBs. If such be the factual position the Arm's Length Price cannot bedetermined by taking the average market rates of power supply units todistribution companies as the assessee is not in the business of Printed from counselvise.com 30 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT sellingpower to distribution companies. Therefore, the Arm's Length Price has to be determined bearing in mind the reason behind establishment of the CPPsnamely to ensure uninterrupted power and to save on cost of electricitywhich otherwise has to be paid to the State Electricity Board. 15. At this juncture, it would be relevant to take note of the ElectricityAct, 2003. Section 2(8) of the Act defines \"Captive Generating Plant\" to meana power plant set up by any person to generate electricity primarily for itsown use and includes its power plant set up by any cooperative society orassociation of persons for generating electricity primarily for use of membersof such cooperative society or association. Section 9 of the Act deals withCaptive Generation. Subsection 1 of Section 9 commences with a nonobstante clause and states that notwithstanding anything contained in theElectricity Act, 2003, a person may construct, maintain or operate a CaptiveGenerating Plant and dedicated transmission lines. 16. The first proviso states that the supply of electricity from CaptiveGenerating Plant through grid can be regulated in the same manner as thegenerating station of a generating company. 17. The second proviso states that no license shall be required underthe Electricity Act for supply of electricity generated from Captive generatingplant to any licensee in accordance with the provisions of the Act and theRules and Regulations made thereunder and to any consumer subject toRegulations made under Sub Section 2 of Section 42. Sub Section 2 ofSection 9 states that every person, who has constructed a CaptiveGenerating Plant and maintains and operates such plant shall have theright to open access for the purpose of carrying electricity from his CaptiveGenerating Plant to the destination of his use. Section 42 of the Act dealswith duties of the distribution licensees and open access. Thus, the schemeof the Act is that a person may construct, maintain or operate a CaptiveGenerating Plant and dedicated transmission lines and captive plants willhave the right to open access for the purpose of carrying electricity fromcaptive plants to the destination of its use and no surcharge is leviable incase open access is provided to captive units by the central or statetransmission utility or the transmission licensee involved in thedistribution/transmission of power. Further the provision make it clear thatthere is no embargo to other power generating companies to directly sell thepower to such consumer at mutually agreed rate. This being not the legalposition when the decision in ITC Limited was rendered, the said decisioncould not have been relied upon by the TPO/assessing officer. 18. We concur with the views expressed by the learned tribunal thatthe consumer/contracting parties will certainly desire to purchase electricityat lesser rate than the rates offered by State Electricity Board whereas theCaptive Power Plants/generating companies would desire to get maximumrate on the sale of power in unregulated and uncontrolled transaction andboth the parties would settle at mutually agreed rates irrespective of therates at which the State Electricity purchases power from other generatingunits. 19. The learned tribunal in the case of Star Paper Mills Limited VersusDCIT Circle 4 Kolkata 5 held that where the assessee company, engaged inbusiness of manufacturing and sale of paper, had set up Captive PowerPlant (CPP) to meet its requirements of its paper manufacturing units whichalso availed power from State Electricity Board, the said transaction being innature of specified domestic transaction, transfer price of power supplied byCPP was to be bench marked at annual average of landed cost at whichpower was being purchased by manufacturing units from State ElectricityBoard. The revenue carried the matter on appeal before this court and theappeal filed by the revenue was dismissed and the said decision is reportedin (2025) 172 taxman.com 391 (Kolkata). In the said appeal, the followingtwo 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 ofdeduction 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? Printed from counselvise.com 31 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 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 Courtin CIT Versus Jindal Steel and Power Limited 6. In the said case, theassessee having found that the electricity supplied by the State ElectricityBoard was inadequate and to meet the requirements of its industrial units,set up captive power generating units to supply electricity to its industrialunits 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 anagreement between the State Electricity Board and the assessee at a ratefixed by the State Electricity Board. The question which arose ofconsideration is as to the quantum of deduction which the assessee wouldbe entitled to claim under Section 80IA of the Act. The assessing officer heldvalue of the electricity should be computed based on therate fixed by the State Electricity Board for the electricity which ispurchased by the assessee. The Dispute Resolution Panel (DRP affirmed theview taken by the assessing officer and the matter was challenged before thetribunal. The tribunal followed the decision in the assessee's own case for anearlier assessment year which order had become final as the department didnot 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 theassessee namely ITC Limited against the judgment of the Division Bench ofthis court in Commissioner of Income Tax Versus ITC Limited (supra) inCA No. 9920 of 2016 and this appeal was allowed by the Hon'ble SupremeCourt by order dated 07.12.2023 and the Hon'ble Supreme Court held asfollows:- \"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 relevantprovisions of the Income Tax Act, and in particular Section 80IA held thatthe market value of the power supplied by State Electricity Board to theIndustrial consumers should be construed to be the market value ofelectricity and it should not be compared with the rate of power sold to orsupply to the State Electricity Board since the rate of power to a suppliercannot 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 Printed from counselvise.com 32 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT suppliespower to the consumer have to be taken as market value for computing thededuction under Section 80IA of the Act. Thus, applying the decision of theHon'ble Supreme Court in Jindal Steel and Power and in the light of thereasoning given in the preceding paragraphs, we hold that the learnedtribunal rightly dismissed the appeals filed by the revenue. 44. It is noteworthy, in case of Star Paper Mills Limited vs.DCIT(supra)identical view expressed by the Bench has been upheld by the Hon‟ble Calcutta High Court. At this stage, we must observe, in case of Jindal Steel & Power Ltd. (supra), the Hon'ble Supreme Court while was on the issue of what should be the market value u/s. 80IA(8) of the Act prior to its amendment in 2013, had observed that in case the assessee had not obtained power from the captive power plant, it would have purchased power from the State Electricity Board and in such a scenario, it would have purchased power at the same rate at which the State Electricity Board supplies power to other consumers, hence such rate can be considered as the market value. The learned DR has forcefully submitted that the decision of Hon'ble Supreme Court having been rendered prior to the amendment to section 80IA(8) of the Act and having not been rendered in the context of Explanation u/s.80A(6) of the Act, will not apply. The learned DR hasfurther submitted that the decision of Hon'ble Delhi High Court in case ofDCM Shriram Ltd. (supra) and other decisions having not taken note of the overriding effect of section 80A(6) of the Act, are per incuriam and aresub-silentio on the issue of applicability of section 80IA(6) of the Act and hence, will not constitute binding precedents. In my considered opinion, such contention of learned DR is unacceptable for the simple reason that ITAT being at a lower level in the judicial hierarchy than High Courts, does not have the power or competence to question the correctness of a judgment rendered by Hon'ble High Court or declareit as per incuriam. The correctness or otherwise of a judgment of Hon'ble High Court can be tested by an aggrieved party before the highest court and not before the Tribunal. Printed from counselvise.com 33 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT 45. At this stage, I must observe, learned DR has heavily relied upon a decision of ITAT, Hyderabad Bench in case of Sanghi Industries Ltd. Vs DCIT (supra) to contend that the rate at which the generating company supplies power to the distribution licensee will be the ALP. Upon carefully going through the aforesaid decision of the coordinate Bench I found it to be factually distinguishable. The Bench has recorded a finding of fact that the CPP had sold surplus electricity to 14 individuals at an average rate of Rs. 2.97/- per unit. Whereas, in the TP study it has adopted the rate of Rs. 7.85/- per unit. In contrast, in the present case, CPP has sold power only to Rayon Plant for captive consumption at Rs. 6.62/- per unit and to no other party at any other rate. As against the aforesaid decision cited by learned DR, there are decisions of Hon‟ble Delhi High Court in case of PCIT Vs DCM Shriram Ltd.(supra) and that of Hon‟ble Calcutta High Court in case of PCIT Vs Rungta Mines Ltd. as well as plethora of other decisions of ITAT favourable to assessee, which are directly on the issue and have been rendered after considering all the relevant provisions of the Act, including, sections 80A(6), 80IA(8) with amended explanation, 92F(ii), Rule 10B etc. Therefore, these decisions carrying precedent value cannot be lightly brushed aside by branding them as per incuriam or having been rendered sub silentio of certain relevant provisions, merely because they are against the revenue. 46. Thus, upon considering the overall facts and circumstances of the case in the light of the judicial precedents cited before me, I am of the considered opinion that the price at which the assessee purchased power from the distribution licensee, GUVNL can be applied as a valid CUP for determining the ALP of sale/supply of power by the CPP to the Rayon Plant. In other words, the price of Rs.6.62 per unit charged by CPP to the Rayon Plant can be considered as ALP of the power supplied by the CPP to Rayon Plant. Printed from counselvise.com 34 ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya BirlaNuvo Ltd. vs. Dy. CIT Thus, I agree with the view expressed by learned Judicial Member that the deduction claimed by the assessee u/s. 80IA of the Act should be allowed without making any downward adjustment. 47. Having held so, I do not intend to dwell upon the question nos. 3 & 4 as they are of mere academic importance and not necessary for deciding the issue arising in ground no. 7. Records may be returned back to the registry for placing before the concerned Division Bench to pass the concerned order as per majority view. Sd/- (Saktijit Dey) Vice President Mumbai; Dated :18.09.2025 Roshani, Sr. PS&Aks/- Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT- concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com IN THE INCOME TAX APPELLATE TRIBUNAL, „K „ BENCH MUMBAI ITA No.563/Mum/2018 (Assessment Year :2013-14) आदेश / O R D E R PER AMIT SHUKLA (J.M): I have gone through the order passed by the Learned Accountant Member, however, with respect to finding given qua ground No.7 relating to reduction of deduction u/s.80IA of the Act with regard to supply of electricity by eligible undertaking to non-eligible unit, I am unable to persuade myself to agree with the finding arrived at by the ld. Accountant Member. Accordingly, I am passing my separate order on this issue. 2. Although the facts have been captured in para 22 in the said order, however, in a succinct manner the facts relating to adjustment made by the ld. TPO / AO with regard to deduction claimed u/s.80IA of the Act are reiterated. Assessee Company had a co-generation power plant called as „Rayon CPP-2‟ which was set up to supply electricity to its manufacturing plant involved in the manufacturing of Viscose Filament Yarn, Caustic Soda and other chemicals. The said captive power plant has generated and supplied power to other manufacturing units of Rayon plant for the captive consumption and have not supplied to any third parties. It is also a matter of fact that Rayon plant of the assessee company had also purchased electricity from Gujarat Urja Vidut Nigam Limited (GUVNL) which is a nodal Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 2 agency of Gujarat State Government for distribution of power in Gujarat, (herein referred to as GSEB). The assessee company had computed the transfer pricing rate adopting the same methodology as done in the earlier year, i.e. fixed cost, variable cost and applicable electricity duty as charged by the GSEB to the assessee company. The assessee in Form 10CCB alongwith audited financial statements of the power plants had given the details of electricity transferred by the Captive Power Plant (Rayon CPP-2) to other manufacturing units and details of electricity purchased from GSEB during the financial year alongwith other manufacturing units alongwith sample bills. The purchase rate for benchmarking the price of supply power from eligible to non-eligible unit was considered at Rs.6.62 per unit based on the rate charged by GUVNL / GSEB. Thus, assessee company had adopted market price of electricity generated by power plant fetched in the open market and transferred to the main plant during the relevant financial year which was the price assessee had purchased electricity from GSEB and the price for electricity purchase was considered as „market value‟. 3. The ld. TPO to whom the matter was referred u/s.92BA(ii) held that the comparability of the specified domestic transaction with the uncontrolled transaction has to be established in terms of the parameters contained in Rule 10B(2) and the arm‟s length price has to be determined in accordance with Section 92C. He further observed that assessee has adopted, CUP, i.e., the price charged by the power distribution company (GSEB to the end consumer in Gujarat). He held that margin earned by the power Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 3 distributor have different functions, assets employed and consumed which are embedded in the price and assessee does not perform any function on account of power distribution and does not assume any risk, therefore, adopting the price charged by the Gujarat State Electricity Board (GSEB) as CUP for the price charged to the assessee is incorrect. Then, he analysed the distribution function required by the distribution company and held that assessee does not perform the function of the distributor but only a power generator. He further held that object of Section 80IA is to quantify the profits and gains derived by an undertaking that is engaged in eligible activity of power generation and the SDT for which ALP is to be determined if the supply of power by the eligible power generation unit and therefore, the method chosen to determine the ALP as well as the choice of the tested party should be as such to arrive at the best possible presumption of the profits of such eligible power generation unit. Thus, the FAR analysis does not give correct picture in the case of the assessee, because assessee does not perform distribution activity and therefore, benchmarking done by the assessee by adopting the rate of distributor of electricity is liable to be rejected. 4. The ld. TPO then referred to the judgment of the Hon‟ble Supreme Court in the case of CIT vs. Glaxo Smithkline Asia (P) Ltd reported in 195 Taxman 35 wherein due to the observation made by the Hon‟ble Supreme Court, the SDT provision was brought to extend the application of transfer pricing provision to domestic transactions. Thus, tested party in the case of SDT has Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 4 to be the person performing the economic activity which is entitled for exemption, i.e., power generating company and not the units which are power consuming. Accordingly he treated Captive Power Unit as tested party to benchmark the ALP under CUP Methodology. Thereafter, ld. TPO issued notice u/s.133(6) to seek the information from Gujarat State Electricity Board to furnish the rates at which it has brought the power from power generating companies and found that the rate of purchasing power for generating companies was Rs.3.92 per unit with Dakshin Gujarat VIJ Company Limited (DGVCL) and 0.96 per unit with TANGEDCO. Before the ld. TPO, assessee had relied upon various judgments including that of Addl. CIT vs. Jindal Steel & Power Ltd. (2007) 16 SOT 509 (Delhi ITAT) and further stated that when internal and external CUP are available, then preference has to be given to internal CUP. And once the assessee company was purchasing power from the market, then same should be adopted as the market value while purchasing the power from captive power unit. However, the ld. TPO has rejected the said contention and sought information about the average rate of coal based power purchased from various power generation parties who supplied power to GSEB. He found that average rate/unit was Rs.2.52. 5. However, the assessee objected for adopting such rate in the following manner:- \"At the outset, we submit that in respect of Power plant at Veravel, the Assessee Company has been supplying power to related party (Rayon Plant) and also procuring power from State Electricity of Gujarat Board (i.e. Paschim Gujarat Vij Company Limited, Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 5 distributing agency) Accordingly, it is humbly that submitted that since grid rate (le, rate at which power is purchased from State Electricity Board) is available, the same should be considered as Internal CUP for benchmarking the captive supply of power. Please refer our detailed explanation submitted vide letter dated 15 July 2016 before your goodself. Without prejudice to the above, the Assessee Company submits that the unit rate of coal based power purchased by GUVNL from various private power generations parties should not be considered in inter-unit supply of power at units in Veraval for the following reasons: 1. Complete functional, assets and risk analysis of transaction between private power generators and GUVNL has not been provided to us for comparisons. 2. The private power generators (viz. Essar Power Gujarat Limited, Adani Power Limited, ACB India Limited and CGPL) supply power to GUVNL which is again a distributor, wherein in the instant case, the Assessee Company has supplied power to industrial consumer. We understand that the GUVNL further supply the same power to industrial consumers at much higher rates. Hence the transaction between the generator and distributer is not comparable with transaction between generator and industrial consumer. Therefore our humble submission that the rate at which the industrial consumers purchase the power shall only be treated as price for benchmarking. 3. External comparable should be applied only if internal comparable is not available. In view of the above, we humbly request your goodself to kindly consider the grid rate for benchmarking the captive supply of power at Veraval.\" Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 6 6. The ld. TPO rejected the aforesaid contention relying upon the judgment of the Hon‟ble Calcutta High Court in the case of CIT vs. ITC Ltd. reported in 236 taxman.com 614 and reproduced the relevant paragraphs of the said judgment and held that the Hon‟ble High Court has held that the rate at which electricity was purchased from Andhra Pradesh State Electricity Board by the paper unit of the assessee by no means is the market rate at which the power plant of the assessee could have sold its production in the open market. He also observed that the Hon‟ble Calcutta High Court has considered the amended Explanation to Section 80IA(8) while rendering the above decision i.e. when the provision of SDT was brought. Accordingly, he made the adjustment in the following manner:- “In view of the facts of the case and also considering the decision of the Hon'ble Kolkata High Court and the Safe Harbour Rules specified above, rate charged by similar generating companies for supply of power to the distribution company is considered as the market value of the power sold by it to its AE. In this regard, the rate charged by similar generating companies for supply of power to the distribution company was obtained from the respective distribution companies. The tariff are also available on the website to the respective distribution companies. For the purpose of comparability, the rates available are as under:- Total Units transferred by CPP- II to non- eligible units in FY 2012-13 Turnover as per Assessee @Rate / unit is Rs. 6.62/unit (A) Turnover as per Arm's Length Price @ Rate/unit is Ra. 2.52/unit (B) Excess Claim u/s 801A (C=A-B) 139906,353 units Rs. 926,175,506 Rs. 352,564,010 Rs. 573,611,496 Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 7 Accordingly, the claim u/s 801A will be subjected to downward adjustment of Rs. 573,611,496/-towards inter-unit transfer of power by Rayon CPP-II 7. Ld. CIT (A) has confirmed the order of the ld TPO holding as under:- “21.3 Decision The issue is discussed in detailed above. In my considered opinion, the methodology adopted by the TPO in fixing the ALP is correct. The price at which power is made available by a power distribution company and that of a power generating unit can not be held comparable. This is because of the extra functions and risks associated with a power distributing unit. The price charged by a power distribution company in itself embeds price for various distribution related function and the associated risks. The TPO has fixed the price after gathering the details from other power generating units. Therefore considering entirety of the facts of the case, this ground of appeal is dismissed.” 8. Before us, ld. Counsel has contended that this issue stands covered by series of decisions of various Tribunals including the decision of this Tribunal in the case of Tata Steel Ltd. vs. DCIT reported in 156 taxmann.com 262 (Mumbai); and Tata Chemicals Ltd vs. DCIT reported in (2023) 155 taxmann.com 461 (Mumbai). He further submitted that this issue also now stands covered by the decision of the Hon‟ble Supreme Court in the case of CIT vs. Jindal Steel & Power Ltd (2023) 156 taxmann.com 207 wherein the judgment of the Hon‟ble Calcutta High Court in the case of CIT vs. ITC Ltd. has been reversed. Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 8 9. I find that the ld. Accountant Member in para 23 has held that, once the amendment has been brought by the Finance Act 2012, w.e.f. 01/04/2013 whereby clause (ii) to Explanation to subsection (8) of the 80(IA) linking the „market value to arm‟s length price for specified domestic transactions then, it is mandatory that, after 01/04/2013 the fair market value or the market value has to be determined under Chapter X of the Act, i.e., under the transfer pricing provisions only. Prior to the amendment, the market value would be that goods and services would ordinarily fetch in the open markets which was provided under clause (i); but now, post amendment after 01/04/2013 it has to be under clause (ii); and therefore the judgment of the Hon‟ble Supreme Court in Jindal Steel and Power Ltd. would not apply after the introduction of SDT w.e.f. 01/04/2013. Ld. AM has also referred to the Explanatory Memorandum to the Finance Bill of 2012 to hold that now if there is any SDT then ALP has to be determined as per the provision of 92BA/ 92 CA and held that assessee‟s contention that rate of Rs. 6.62 per unit which is the price at which power is supplied by GSEB cannot be considered as „market price‟. It has been further held that the FAR of a distributor of electricity is different from the FAR of generating unit and therefore, the cost per unit charged by the distributing entity from the final customer which includes remuneration as well as losses incurred by the transmission by the distribution entities is different, which is not present in the case of Capital Power Units. Thus, applying this rate charged by the GSEB to the supply of electricity from CPP to the Main unit Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 9 would be unfair and therefore, the matter was restored back to the ld. AO for determination of the ALP as per the amended provisions. 10. But here in this case the TPO has determined the ALP of SDT and determined the price for transfer of power by taking average cost of manufacturing entities selling the power to GSEB which according to him is CUP Method. The issue which has been challenged before us, is, whether such determination by the TPO is correct on facts and law. 11. On going through the facts and the order of the authorities below, I‟m unable to agree with the proposition of the ld. Accountant Member. Here what is relevant is, whether the manufacturing unit which is purchasing the power from State Electricity Board at Rs.6.62 per unit can be said to be „market value‟ in relation to the purchase of electricity while purchasing the power / electricity from the eligible captive power unit in terms of section 80IA. For the sake of ready reference, the relevant provisions u/s.80IA is reproduced hereunder:- “8) Where any goods for services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services]held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the \"market value of such goods \"or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 10 computed as if the transfer, in either case, had been made at the \"market value of such goods \"or services” as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation- For the purposes of this sub-section, \"market value\", in relation to any goods or services, means- (i)the price that such goods or services would ordinarily fetch in the open market; or (ii) 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. 12. Ergo, the aforesaid provision provides that goods and services provided by the eligible business which is being transferred to other business carried on by the assessee has to correspond to the market value of such goods as on the date of the transfer. The Explanation provides the scope and the meaning of the „market value‟ in relation to any goods and services and has provided two manners to determine;  Firstly, the price that such goods or services would ordinarily fetch in the open market; and then the phrase “or” has been used;  Secondly, 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 section 92BA. Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 11 The first clause gives the option of determining the market value for a goods or services which would ordinarily fetch in the open market, that is, the price of the similar goods and services available in the open market. If someone wants to purchase the goods and services from the open market then what is required to be seen is the price available for such goods in the open market, if it is available or ascertainable from the comparable market or transaction. Second option is the determination of arm‟s length price determined as per transfer pricing principles. Section 92BA incorporates the determination of ALP under transfer pricing provision of sections 92,92C, 92D and 92E. It provides that any transfer of goods or services referred to in sub- section (8) of Section 80IA is also covered under the specified domestic transaction. Section 92F sub-clause (ii) defines the arm‟s length price, which means the price which is applied or proposed to be applied in a transaction between the persons other than associated enterprises in uncontrolled conditions. Thus, the second option for determining the market value is the mechanism of transfer pricing provision for determining the arm‟s length price. 13. The Revenue‟s case as well as of the LD. AM is:–  Firstly, while computing the amount eligible for deduction u/s.80IA(8) with respect to Specified Domestic Transaction, Clause (ii) of the Explanation to Section 80IA(8) alone will apply and Clause (i) is irrelevant after the amendment brought in the Explanation by insertion of Clause (ii) w.e.f. 01/04/2013. In other words once any transaction is hit by Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 12 Section 80IA(8), then, compulsorily, the market value has to be determined in accordance with the arm‟s length principle under Clause (ii) and not under Clause (i) if it hits the monetary limit for applicability of SDT;  Secondly, consequently, the price at which State Electricity Board or the distribution companies purchase surplus power from captive power purchasing units should be taken as Comparable Uncontrolled Price (CUP). In other words the appropriate CUP would the companies which are producing / manufacturing the power and supplying to the SEBs or to the distribution companies. 14. It is reiterated here that the Explanation to Section 80IA while defining the „market value‟ in relation to any goods or services as provided two mechanism; (i), the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F(ii), where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. The word “or” dividing two clauses under the Explanation to Section 80IA clearly indicates the intention of the legislature is to give an option to the person entitled to claim deduction u/s.80IA(8) to chose either which is more beneficial or if one of the mechanism fails then market value can be determined under the second option. For instance, if there are certain unique services which have been transferred or any unique goods or goods produced with patented IPR or intangibles where the market rate which can ordinarily fetch in the open market is not available, or where Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 13 market value is not available in the open market, then market value has to be determined in terms of Sub-Clause (ii). If such option is not available then AO cannot ascertain the market value of goods and services. However, if market value is available on such goods and services which are available in the open market, then same can be adopted for the purpose of Section 80IA(8). 15. This proposition can be further illustrated by the intention of the Legislature where in some cases only SDT will apply. For instance in Section 80IA (10), Legislature has carved out the exception and specifically provided that the specified domestic transaction has to be determined only as per ALP principle. This has been provided in proviso to Section 80IA (10) which has been inserted w.e.f. 01/04/2013 wherein only option which has been given for determination of arm‟s length price is as defined in Section 92F(ii). Here, the legislature clearly provided that the amount of profit from such transaction as mentioned in sub- Section (10) of Section 80IA shall be determining having regard to arm‟s length price. On the contrary in Section 80IA (8), the legislature amended the Explanation by converting the extant value as alternative to the value arrived at u/s.92F. Thus, it can be inferred that legislature has consciously created a distinction between the manner in which market value will be determined when it comes to transactions between two businesses / unit / undertaking of one person and the manner in which the market value will be determined when it comes to transaction between two separate persons under both the sections. Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 14 16. Further, the different manner of treatment for determination of „market value‟ becomes even more glaring when Explanation to section 80IA (8) is juxtaposed with section 80A(6) wherein the Explanation to Section 80A(6) does not provide the word \"or\" and all the 3 clauses therein used for situation specific have been made separate and disjunctive from other clauses. For the sake of ready reference Sub-Section (6) of Section 80A (6) alongwith Explanation reads as under:- (6)[ Notwithstanding anything to the contrary contained in section 10-A or section 10-AA or section 10-B or section 10-BA or in any provisions of this Chapter under the heading \"C.-Deductions in respect of certain incomes\", where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date. Explanation. - For the purposes of this sub-section, the expression \"market value\",- (i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 15 (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any.] (iii) in relation to any goods or services sold, supplied or acquired means the arm’s length price as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in Section 92BA.” 17. From the plain reading of the aforesaid Explanation, it can be seen that it is clearly different from Explanation to Section 80IA (8) because here the expression “market value” has been elaborated in three sub-clauses and there no word “or” which has been used, albeit the three clauses are separated by using semi-colon, which means in these specific transactions „market value‟ has to be ascertained and determined in that particular manner only and there is no option for “or”. Thus, difference in treatment in different sections cannot be lost sight of while interpreting the provisions. 18. Thus, the word “or” appearing between two sub-clauses in Explanation to Section 80IA (8) cannot be inferred that after the introduction of SDT from A.Y.2013-14 only sub-clause (ii) alone can be applied. The use of the word “or” can be interpreted as, firstly, both manner are available with the assessee to demonstrate that market value of the goods and services has to be either by showing that the price of such goods and services is in consonance with the price available in the open market; or if Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 16 assessee is not able to establish the price available in the open market, then the price of goods and services has to be established through arm‟s length principle u/s 92CA/92F. Secondly, if the price of the transfer of goods and services is in consonance with the price available in the open market then the profits of the eligible business shown as per this price is eligible for deduction and in that case the second option may not be necessary. 19. This Tribunal in the case of Tata Chemicals Ltd vs. DCIT reported in (2023) 155 taxmann.com 461 has categorically dealt and analysed the phrase “or” used between two sub- clauses of Explanation to Section 80IA(8). For the sake of ready reference para 14-16 are reproduced hereunder:- “14. The entire case of the department is that, since it is SDT in term of Section 80I (8), therefore, the market value has to be in accordance with the determination of arm’s length price u/s.92C r.w.r. 10BA. In other words, once any transaction is hit by 80IA (8), then compulsorily, the market value has to be determined in accordance with the arm’s length principle and not otherwise. If the TPO’s contention and the opinion is accepted, then under all the transactions which are covered u/s.80IA(8) would compulsorily be determined as per transfer pricing provision as all the transactions falling u/s.80IA(8) will be specified domestic transactions only. If that is the only opinion which is to be upheld, then, ostensibly the entire exercise of ld. TPO is justified, that is, the whole process of determining, who is the tested party, what should be the FAR analysis of the tested party vis-à-vis the comparables under uncontrolled transactions and whether particularly in this case the price charged by the distribution entity can be said to be arm’s length price or the comparable has to be from the entities which are generating power, which here in this case one comparable has been Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 17 chosen i.e. M/s. Torrent Power Ltd. (TPL). In our opinion it will be too myopic view to give an interpretation that all the transaction covered u/s. 80IA(8) has to be compulsorily determined under transfer pricing provision, cannot be accepted. Because, the statute has clearly provided two options or two manner in which market value of the goods and services can be determined. The phrase “or” does not give mean that the second mechanism provided in clause (ii) of Explanation alone can be applied after introduction of SDT from 01.04.2013. The use of the word “or” can be interpreted as, firstly, both manner are available with the assessee to demonstrate that market value of the goods and services has to be either by showing that the price of such goods and services is in consonance with the price available in the open market; or if assessee is not able to establish the price available in the open market, then the price of goods and services has to be established through arm’s length principle. Secondly, if the price of the transfer of goods and services is in consonance with the price available in the open market then the profits of the eligible business shown as per this price is eligible for deduction and in that case the second option may not be necessary. 15. Both the authorities, i.e., ld. TPO and ld. DRP have held that in case of 80IA (8), the market value has to be compulsory governed by Explanation (ii) to Section 80IA (8), because in 92BA provides that such transfer of goods and services referred in this sub-section falls within SDT and therefore, arm’s length price has to be determined as per Section 92F(ii). Further according to them Explanation (i) & (ii) have separate application because it is separated by word “or”, but how they are separately applicable and under which circumstances has not been elaborated. If such an interpretation is to be accepted, then clause-(i) of the Explanation will become otios and redundant, because then the transfer of the goods and services falling u/s.80IA(8) has to be compulsorily be determined under arm’s length principle. Had it been so, then post introduction of SDT in Section 92BA w.e.f. 01/04/2013, then statute would have provided that for the purpose of Sub-section (8) to Section 80IA, “market value” in relation to goods or services means the arm’s length price as Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 18 defined in clause (ii) of Section 92F. If both the clauses exist then one has to see if the market value is discernable from the price for such goods would ordinarily fetch in the open market unless such price is not available, then there is an option for determining the market value as per the arm’s length price. 16. Here in this case what is required to be seen is, whether the market value in the price charged by the eligible unit for the sale of electricity to another unit can be benchmarked with the price on which GEB is supplying to the customers. From the records, it is seen that the manufacturing unit of the assessee also buys electricity from GEB at the same price of Rs.6.90/- per unit and the same price is being paid to the eligible unit also. The case of the department is that since assessee is generating electricity and supplying it to the manufacturing unit, therefore, functionally it is similar to entities which are generating electricity and not which are into distribution of electricity. What is required to be seen u/s. 80IA (8) is that, where any goods or services provided by the eligible business or transfer to any other business carried on by the assessee, the same should correspond to market value of such goods and services. The market value has to be seen qua the price in which such goods or services would ordinarily be fetched in the open market, i.e., whether in the open market the price of such goods and services are available or not? Here assessee is a captive service provider for generating electricity and to supply and distribute to the manufacturing unit which otherwise would have bought from the open market. The price has to be seen what the manufacturing unit is paying in the open market. This precisely has been dealt by the Hon’ble Gujarat High Court in the case of PCIT vs. Gujarat Fluorochemicals Ltd., and also by the Hon’ble Jurisdictional High Court in the case of CIT vs. Reliance Industries Ltd., wherein the Courts had held that if the assessee had set up a captive power generating unit and provided electricity to its another unit and claimed deduction under section 80-IA in respect of profits arising out of such activity, then violation of electricity provided to another unit should be at the rate at Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 19 which electricity distribution companies were allowed to supply electricity to the consumers. This judgment has been distinguished by ld. TPO / ld. DRP holding that these judgments relate to assessment years where SDT provisions were not applicable. We are not inclined to agree to such a view that these judgments have become redundant and Explanation (i) is no more applicable after the introduction of Clause (ii) w.e.f. 01/04/2013, because, the statute has not omitted clause (i). Thus, in our opinion these judgments still holds the field and once the market value of such price on which electricity is sold to another unit of the assessee, the same can be compared with the electricity distribution entities for supplying to the customers in the open market. Accordingly, there is no infirmity in the contention of the assessee that per unit electricity sold to the non-eligible unit at Rs.6.90 per unit is the market value.” 20. This judgment has been followed in the case of Tata Steel Ltd. vs. DCIT (supra) and not only that there are several judgments of Co-ordinate Bench post amendment, i.e. insertion of Clause (ii) and Explanation wherein unanimously it has been held that the “market value” for supply of electricity / power has to be taken at the price in which the manufacturing unit has been purchasing power from the State Electricity Board. 21. The contention of the Revenue has been that now Section 92(BA) has been introduced owing to the observation contained in the decision of the Hon‟ble Apex Court in the case of CIT vs. Glaxo Smithkline Asia (P) Ltd.reported in 195 Taxman 35 that caused the introduction of specified domestic transaction u/s.80IA(8). For the sake of ready reference, the relevant observation of the Hon‟ble Supreme Court reads as under:- Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 20 6. In order to reduce litigation, we are of the view that certain provisions of the Act, like section 40A(2) and section 80-IA(10), need to be amended empowering the Assessing Officer to make adjustments to the income declared by the assessee having regard to the fair market value of the transactions between the related parties. The Assessing Officer may thereafter apply any of the generally accepted methods of determination of arm's length price, Including the methods provided under Transfer Pricing Regulations. However, in a number of matters, we find that, many a times, the Assessing Officer is constrained by non-maintenance of relevant documents by the taxpayers as, currently, there is no specific requirement for maintenance of documents or getting specific transfer pricing audit done by the taxpayers in respect of domestic transactions between the related parties The suggestions which need consideration are whether the law should be amended to make it compulsory for the taxpayer to maintain books of account and other documents on the lines prescribed under rule 10D of the Income-tax Rules in respect of such domestic transactions and whether the taxpayer should obtain an audit report from his Chartered Accountant so that the taxpayer maintains proper documents and requisite books of account reflecting the transactions between related entities as at arm's length price based on generally accepted methods specified under the Transfer Pricing Regulations. Normally, this Court does not make recommendations or suggestions. However, as stated above, in order to reduce litigation occurring in complicated matters, we are of the view that the question of amendment, as indicated above, may require consideration expeditiously by the Ministry of Finance. In the meantime, CBDT may also consider issuing appropriate instructions in that regard. 7. Accordingly, we direct the Registry to forward copies of this Order both to the Ministry of Finance and CBDT for consideration. 22. Thus, the Hon‟ble Supreme Court advised that where AO were making the adjustments to determine the fair market value in their own manner where fair market value is not ascertainable then the Court advised to formulate SDT in lines with generally Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 21 accepted methods of determination of arm's length price, Including the methods provided under Transfer Pricing Regulations. This was to reduce litigation, especially under section 40A(2) and section 80-IA(10). Ultimately Section 92(BA) seeks to achieve is, computation of a fair market value. If the fair market value is available, that is, if same is available in the open market as envisaged in Section 80IA(8), then same can be adopted for determining the market value of goods and services as given in Section 80IA(8). It is in those cases where market value is not available in the open market and AO has no other mechanism to determine or ascertain the market value then Legislature now provides for determination on ALP principles which was not there prior to 1/04/2013. 23. The view of the ld. Accountant Member that the decision of the Apex Court in the case of CIT vs. Jindal Steel & Power Ltd., reported in 468 ITR 162 is very little to do with the controversy at hand since it dealt with the interpretation of law prior to the introduction of Clause (ii) to Explanation to Section 80IA, therefore the principles of the judgment is no longer applicable. However, if one goes through the judgment of the Hon‟ble Supreme Court and also on deeper scrutiny, then the stand of the Revenue and its reliance of Clause (ii) to Explanation to Section 80IA stands jettisoned by the findings of the Hon‟ble Court‟s decision in the Jindal Steel & Power Ltd. While holding that the price at which electricity sold to SEBs should be taken as market value, the Hon‟ble Supreme Court has defined the phrase “open market” in the following manner:- Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 22 23. This brings to the fore as to what do we mean by the expression \"open market\" which is expression not defined. 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 80-1A 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 ie 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. 24. The Hon‟ble Supreme Court also held that price at which electricity is sold to SEBs, that is, distribution company selling the power to SEBs, (which precisely has been done by the TPO here in this case), cannot be considered as “market value” for which their Lordships have given reasons as to why it is tainted. The Apex Court observed as under:- “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 Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 23 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 Beard 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.” 25. Having observed so, thereafter the Hon‟ble Court further opined and held that 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 Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 24 purchase electricity from the State Electricity Board and 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 and accordingly, the Hon‟ble Supreme Court held as under:- 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 is 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 80-1A of the Act. 29. Section 43A of the 1948 Act lays down the terms and conditions for determining the tariff for supply of electricity. The said provision makes it clear that tariff is determined on the basis of various parameters. That apart, it is only upon granting of specific consent that a private entity could set up a power generating unit However, such a unit would have restrictions not only on the use of the power generated but also regarding determination of tariff at which the power generating unit could supply surplus power to the concerned State Electricity Board. Thus, determination of tariff of the surplus electricity between a power generating company and the State Electricity Board cannot be said to be an exercise between a buyer and a seller under a competitive environment or a transaction carried out in the Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 25 ordinary course of trade and commerce. It is determined in an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of the extant statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Consequently, the price determined as per the power purchase agreement cannot be equated with the market value of power as understood in the common parlance. The price at which the surplus power supplied by the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equated with the market value as is understood for the purpose of Section 801A (8) On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have 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 26. Thus, the Hon‟ble Supreme Court has clearly held that power supplied by the SEBs to the industrial consumers should be construed to be the market value of electricity and the market value of the power supplied by the SEB to the industrial Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 26 consumers should be construed to be the market value of electricity. Further, the Hon‟ble Court held that it should not be compared with the rate of power sold to or supplied to the SEBs since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market, which AO has tried to do here in this case. If the Hon‟ble Supreme Court has defined the „market value‟ as given in Clause (i) which is still relevant and existing in the statute then no contrary view can be taken post 01/04/2013, because the concept of “market value” still can be ascertained as per the price available in the open market then same should be adopted. In the situation like in the present case, by taking the SEB rate when it supplies the power to the consumers. 27. Another important fact is that the ld. TPO as well as the ld. DR has strongly relied upon the judgments of Hon‟ble Calcutta High Court in the case of ITC Ltd. The judgment of the Hon‟ble Calcutta High Court has been distinguished by the Hon‟ble Supreme Court in the case of Jindal Steel & Power Ltd. vide para 32 of the said order (which was separate SLP No.31636 of 2015) which has been disposed of on 06/12/2023 i.e. in the case of Jindal Steel & Power Ltd., which was connected with the appeal of the ITC and this has been clarified vide order dated 07/12/2023. The Hon‟ble Supreme Court in a way has reversed the decision of the Hon‟ble High Court relied upon by the Revenue in support of the interpretation canvassed by them, in which case the Calcutta High Court had relied on the machinery and mechanism of the Electricity Act, 2003 to hold that the price Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 27 determined pursued to the orders of the Central Electricity Regulatory Commission be the price taken as the open/fair market value. 28. Thus, in my opinion the judgment of Jindal Steel & Power Ltd, (supra) would still hold good and will be applicable because Clause (i) of Explanation to Section 80IA of the Act still exist in the statute and one of the mode enshrined to determine the market value is, value available in the open market and now as held by the Hon‟ble Supreme Court the market value has to be taken as the purchase price of electricity from SEB for the purpose of Section 80IA (8), that is, SEBs selling the power in the open market. Even under transfer pricing principle the approach of the TPO/AO is erroneous: 29. Without prejudice even under the transfer pricing provision, the market value has to be determined as per the arm‟s length price by adopting appropriate method. The assessee has adopted CUP for comparing the price at which electricity is available in the open market. Under the CUP method, what is relevant is the price charged or paid for the goods or services provided in comparable uncontrolled transaction. Thus, the benchmarking of the comparable uncontrolled transaction has to be found for establishing the comparability under the CUP method. If there is direct CUP, i.e., the price on which electricity is sold in the open market in an uncontrolled transaction, then same is to be taken as the market price or arm‟s length price. What TPO has done he Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 28 has taken Captive Power Unit as tested party and then called for the average rate of supply of power on which power manufacturing companies were supplying the power to SEBs to arrive at the ALP or market price, because CPU is also manufacturing power. First of all, under the CUP method it is not necessary to see who the „tested party‟ is or identify the tested party. What is to be seen is that the person buying the goods or services from related a party or under controlled transaction has paid comparable uncontrolled price, that is, the market price available in the market under uncontrolled transaction which is available to independent third parties. The concept of „tested party‟ is to be identified when margins of controlled transactions are to be compared with uncontrolled transactions, like under TNMM. What is relevant in CUP is the price at which the goods and services are available under the comparable uncontrolled transaction and if such market price is available to the entity which is purchasing the goods or services in the open market then same can be said to be a CUP and here there is an internal CUP, because the manufacturing unit is purchasing the power from the open market from SEBs and the same price is paid to the said unit for purchasing the power unit from its captive power unit. Thus under CUP the market price of the goods can be quote available in the open market. 30. There is another factor why the comparables used by TPO is flawed or fails when he compares the companies who manufacture and supply to SEBs. This aspect as noted above, have been discussed in detail by the Hon‟ble Supreme Court in Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 29 Jindal Steel and Power Ltd. in para 26 and 29 (supra) that price at which surplus power is supplied by the manufacturing unit to the State Electricity Board is entirely determined as per the terms of the statutory regulations and the contract and they are not allowed to sell the power outside the market to any other party. Thus, the Hon‟ble Supreme Court categorically held that this cannot be reckoned as the market price, because pricing mechanism is controlled by SEBs. These manufacturing units have no option but to completely sell their power to State Electricity Board and if that is the case, then as per the definition of associated enterprises as given in Section 92(2A)(i), it is a related party transaction. The reason being the price and the contract is negotiated by the State Electricity Board as per the regulatory statutory provisions and the manufacturing unit have no say in such contract and once the price is negotiated by one party on its terms and conditions and pricing is influenced by the said party, then it cannot be held that there is a Comparable Uncontrolled transaction. Clause (i) of Section 92(2)(i) reads as under:- “(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises if, at any time during the previous year,— ------------------------------------ (i) the goods or articles manufactured or processed by one enterprise, are sold to the other enterprise or to persons specified by the other enterprise, and the prices and other conditions relating thereto are influenced by such other enterprise; or Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 30 31. Thus, if the prices and other conditions are influenced by such other enterprise, here in this case SEBs influencing prices upon the power manufacturing entities, then under terms of Section 92(2)(i) the manufacturing companies and the SEB fall in the category of AE and in that scenario it is a related party transaction and tainted transaction and accordingly, price of which electricity is given by the manufacturing unit to State Electricity Board cannot be benchmarked under the CUP as done by the ld. TPO. If methodology adopted by the TPO is accepted that only power manufacturing entities are to be taken as comparable then it does fall under category of uncontrolled transaction to carry out comparability analysis, because they cannot sell to outside parties and are compel to sell to SEBs on the price decided and regulated by the regulatory authority governing SEBs. Thus, his comparables fails the FAR and comparability analysis to benchmark ALP under CUP. Accordingly, on this ground also price taken by the ld. TPO is not as per transfer pricing principle and hence ALP is also incorrect. Accordingly, I hold that the market value should be taken at Rs.6.62 per unit which is the market value available in the open market i.e. the price at which manufacturing unit of the assessee company has been purchasing electricity / power from the State Electricity Board. Accordingly, this ground no. 7 is allowed in favour of the assessee. Printed from counselvise.com ITA No.563/Mum/2018 & 1885/Mum/2018 Aditya Birla Nuvo Ltd., 31 32. In all the other grounds I concur with the finding of the Ld. AM. Sd/- (AMIT SHUKLA) JUDICIAL MEMBER Mumbai; Dated 21/11/2024 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com IN THE INCOME-TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT.RENU JAUHRI, ACCOUNTAN MEMBER ITA No. 563/Mum/2018 (A.Y. 2013-14) Aditya Birla Nuvo Ltd. (Since amalgamated with Grasim Industries Ltd.) A2, Aditya Birla Centre, S.K. Ahire Marg, Worli, Mumbai-400030 Vs. DCIT-CC-1(4) [Earlier with ACIT(LTU)-1, Mumbai Room No. 902, Old CGO building, 9th Floor, M.K. Road, Mumbai-400020 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No: AAACI1747H Appellant .. Respondent ITA No. 1885/Mum/2018 (A.Y. 2013-14) DCIT-CC-1(4) [Earlier with ACIT(LTU)-1, Mumbai Room No. 902, Old CGO building, 9th Floor, M.K. Road, Mumbai-400020 Vs. Aditya Birla Nuvo Ltd. (Since amalgamated with Grasim Industries Ltd.) A2, Aditya Birla Centre, S.K. Ahire Marg, Worli, Mumbai-400030 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No: AAACI1747H Appellant .. Respondent Appellant by : Shri. Yogesh Thar a/w Ms. Sukanya Jayaram Respondent by : Shri Ashish Kumar Agrawal Date of Hearing 29.04.2024 Date of Pronouncement 25.07.2024 Printed from counselvise.com P a g e | 2 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) आदेश / O R D E R PER RENU JAUHRI [A.M.] :- These cross appeals are filed by the assessee and the revenue against the order u/s 250 of the Income-tax Act, 1961 [hereinafter referred to as the Act] of the Ld. Commissioner of Income-tax (Appeals)-55, Mumbai dated 21.12.2017. 2. The grounds of appeal taken by the assessee are as under: a) “On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in partly confirming the disallowance to Rs.10,08,00,000/- u/s 14A r.w. Rule 8D(2)(in). The leamed CIT(A) ought to have followed the decision of the Mumbai ITAT in Appellant's own case for AY 2006-07 and restricted the disallowance u/s 14A of the Act to the extent of Rs.69,50,000/- being 0.5% of average value of non-strategic investments held by the Appellant. b) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in reducing deduction u/s 80IA of the Act by Rs.5,98,92,130/- by increasing the input cost by including the component of excise duty/service tax claimed as CENVAT credit by the Appellant. c) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO treating the expenses of Rs.1,88,59,786/- incurred towards corporate advertisement as capital expenditure. d) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in disallowing lease equalization charges of Rs. 1,47,06,437/- Printed from counselvise.com P a g e | 3 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) e) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in disallowing Interest on electricity tax of Rs.2,65,40,325/- u/s 43B of the Act. f) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO/ TPO in:- i. treating the corporate guarantee and performance guarantee given by the Appellant for its overseas subsidiaries as an international transaction u/s 92 of the Act. ii. partly confirming the additions by applying rate of 0.5% towards commission on corporate guarantee on loan taken by Associated Enterprises (AEs) from foreign bank and also applying rate of 0.5% towards commission on performance guarantee given for its AE. g) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO/ TPO in reducing the deduction u/s 80IA by Rs.57,35,11,496/- by rejecting the market rate considered by the Appellant for supply of electricity by eligible undertaking to non-eligible unit(s). h. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO/ TPO in reducing the deduction u/s 80IA by Rs.2,26,84,910/- by rejecting the rate considered by the Appellant for supply of steam by eligible undertaking to non-eligible unit(s).” 3. The assessee has also taken following additions grounds of appeal: “Additional Ground No. 1 1.1 On the facts and the circumstances of the case and in law, the learned AO erred in treating Education cess and Secondary and Higher Education Cess (collectively called as \"Education Cess\") as disallowable expenditure under Section 40(a)(ii) of the Act. Additional Ground No. 2 Printed from counselvise.com P a g e | 4 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 2.2 On the facts and the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to re-compute liability of Dividend Distribution Tax (DDT) payable by the Appellant with respect to dividend paid to Non-resident shareholders at beneficial rate as per applicable Double Tax Avoidance Agreements and grant refund of excess tax paid. Additional Ground No. 3. 3.1 On the facts and the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to treat incentive under the Focus Market Scheme, Focus Product Scheme and Market Linked Focus Product Scheme as capital receipt not chargeable to tax. 3.2 On the facts and in the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to exclude incentive under the Focus Market Scheme Focus Product Scheme and Market Linked Focus Product Scheme being capital receipt, from Profit as shown in the statement of profit and loss, while computing Book profit u/s 115JB of the ITAct. Additional Ground No. 4. 4.1 On the facts and the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to treat the fertilizer subsidy under the \"Policy for Stage-III of New Pricing Scheme for urea manufacturing units as capital receipt not chargeable to tax. 4.2. On the facts and in the circumstances of the case and in law, the Appellant prays that the Id. AO be directed to exclude fertilizer subsidy, being a capital receipt, from Profit as shown in the statement of profit and loss, while computing Book profit u/s 115JB of the ITA. Additional Ground No. 5 5. On the facts and the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to treat the freight subsidy under the 'Policy for uniform freight subsidy on all fertilizers under the fertilizer subsidy regime as capital receipt not chargeable to tax. 5.2 On the facts and in the circumstances of the case and in law, the Appellant prays that the Ld. AO be directed to exclude freight subsidy, Printed from counselvise.com P a g e | 5 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) being a capital receipt, fromProfit as shown in the statement of profit and loss, while computing Book profit u/s 115JB of the IT Act.” 4. In cross appeal by the revenue, following grounds of appeal have been taken: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the additional disallowance of Rs. 27,51,33,108/-made u/s 14A of the Act to Rs. 8,96,08,108/-. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in restricting the additional disallowance of Rs. 27,51,33,108/- made u/s 14A of the Act to Rs. 8,96,08,108/- relying on the decision of the CIT(A) for A.Y.- 2009-10 to 2011-12 without appreciating that the department has not accepted the decisions and filed further appeal. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to exclude the disallowance of Rs. 27,51,53,108/-added in the book profit u/s 115JB of the Act. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to exclude the disallowance of Rs. 27,51,53,108/- added in the book profit u/s 115JB of the Act following the decision of the Ld. CIT(A) for A.Y. 2011-12 without appreciating that the department has not accepted the decision and filed further appeal. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 1,66,69,505/-made u/s 40(a)(ia) of the Act. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 1,66,69,505/- made u/s 40(a)(ia) of the Income Tax Act, 1961, following the decision of the Hon'ble ITAT for A.Y.- 2011-12, without appreciating that the Department has filed appeal u/s 260A of the Income Tax Act, 1961, before the Hon'ble Bombay High Court for A.Y. 2007-08 and 2008-09; based on which the Hon'ble ITAT has decided the Appeal for Assessment Year 2011-12. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in excluding the disallowance of Rs. 1,66,69,505/- made u/s 40(a)(ia) of the Printed from counselvise.com P a g e | 6 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Income Tax Act, 1961, while computing book profit u/s 115JB of the Income Tax Act, 1961, stating that the disallowance is deleted from computation of normal income without appreciating that the same is contested in further appeal. 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the net resultant enhancement of Rs.22,72,66,123/-being net CENVAT credit in the Closing Stock. 9. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the net resultant enhancement of Rs.22,72,66,123/-being net CENVAT credit following the decision of the CIT(A) in the earlier years without appreciating that the same were not accepted and further appeal in filed in the Hon'ble ITAT for Assessment Years 2010-11 and 2011-12. 10. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting Rs. 10,46,01,913/- u/s 43B(f) of the Income Tax Act, 1961, on account of provision of leave salary. 11. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 10,46,01,913/- u/s 43B(f) of the Income Tax Act, 1961, on account of provision of leave salary following the decisions of the Ld. CIT(A)in earlier years without appreciating that the same were not accepted and further appeal in filed in the Hon'ble ITAT for A.Y.-2010-11 and 2011-12. 12. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance of Rs.54,33,785/- u/s 80IA of the Income Tax Act, 1961, on account of allocation of Head Office expenses. 13. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.54,33,785/-u/s 80IA of the Income Tax Act, 1961, on account of allocation of Head Office expenses following the decisions of the Ld.CIT(A) in A.Y.-2011-12 without appreciating that the same were not accepted and further appeal is filed in the Hon'ble ITAT for A.Y.- 2011-12. 14. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 14,47,322/- u/s 40A(9), on account of 50% payment of the fees of the employees made to Rayon School, Veraval. Printed from counselvise.com P a g e | 7 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 15. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 14,47,322/-u/s 40A(9), on account of 50% payment of the fees of the employees made to Rayon School, Veraval, following the decision of the Ld.CIT(A) in earlier years without appreciating that the Hon'ble ITAT has adjudicated the issue in favour of the assessee for A.Y.-2004-05 and 2005-06 which were not accepted by the department and further appeal u/s 260A of the Act has been filed in the Hon'ble Bombay High Court for both the years. 16. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.5,64,03,698/-on account of additional depreciation. 17. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.5,64,03,698/ on account of additional depreciation relying upon the decision of the Hon'ble ITAT, Mumbai, in case of M/s Godrej Industries Ltd. without appreciating that the Ld. CIT(A) has disallowed the similar claim of the Assessee in the case of M/s Ultratech Cement Ltd. for A.Y.-2011-12. 18. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of ESOP expenses of Rs.29,56,045/-. 19. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of ESOP expenses of Rs.29,56,045/- relying upon the decision of the CIT(A) and ITAT in the Assessee's own case in earlier years without appreciating that the decision of the Ld. CIT(A) has not been accepted for A.Y.2011-12 and further appeal has been filed. 20. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.3,95,52,948/ claimed as revenue expenditure incurred on catalyst which was treated as capital in nature by the Assessing Officer. 21. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.3,95,52,948/- observing that the catalyst is only a part of the plant which is replaced to restore the efficiency of the plant, without appreciating that the department has not accepted the Printed from counselvise.com P a g e | 8 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) decision of the Hon'ble ITAT on this issue for A.Y.-2008-09 and further appeal u/s 260A is filed before the Hon'ble Bombay High Court. 22. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 18,80,123/-claimed as depreciation on goodwill. 23. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 18,80,123/- claimed as depreciation on goodwill going by the precedence, without appreciating that the Department has not accepted the decision of the Hon'ble ITAT on this issue for A.Y.2009-10 to 2011-12 and further appeal u/s 260A is filed before the Hon'ble Bombay High Court. 24. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 12,56,84,983/-on account of the interest subsidy on TUF loan which was treated as revenue by the AO. 25. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 12,56,84,983/- on account of the interest subsidy on TUF loan which was treated as revenue by the AO without appreciating that the department has not accepted the decision of the Ld. CIT(A) for A.Y.-2010-11 and 2011-12 and further appeal is filed. 26. On the facts and circumstances of the case and in the law, the Ld CIT(A) erred in restricting ALP of guarantee fee, in respect of corporate guarantee given by assessee to its AEs to enable them to borrow funds from foreign banks, to 0.5% as against 2% as held by TPO/AO. 27.On the facts and circumstances of the case and in the law, the Ld CIT(A) erred in restricting ALP of guarantee fee, in respect of performance guarantee given by assessee on behalf of its AE to M/s Capital One Service Inc., to 0.5% as against 1.74% as held by TPO/AO. 5. The brief facts of the case are as under: a) The return of income was filed by the assessee on 28.11.2013 declaring total income of ₹ 308,54,18,801/- as per normal provisions of the Act and book profit of ₹ 411,70,32,063/- as per Printed from counselvise.com P a g e | 9 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) the provisions of section 115JB of the Act. Subsequently, a revised return was filed by the assessee on 30.03.2015 declaring total income of ₹ 283,15,81,630/- as per normal provisions and book profit of ₹ 411,70,32,063/- as per provisions of section 115JB of the Act. b) The case was selected for scrutiny and assessment was made vide order dated 21.12.2017 u/s 143(3) of the Act at total income of ₹ 366,01,24,600 and book profit u/s 115JB of the Act of₹ 440,88,34,676/- after making several additions/disallowances under different provisions of the Act. Aggrieved with the order, the assessee preferred an appeal before CIT(A) who vide order dated 21.12.2017 partly allowed the appeal. Both the assessee and revenue are in appeal against the said order. ITA No. 563/Mum/2018 for AY 2013-14 (Assessee’s Appeal) 6. Ground No. 1 relates to partial confirmation of disallowance u/s 14A r.w. Rule 8D(2)(iii) by the Ld. CIT(A). On the other hand, the grounds No. 1 and 2 of revenue‟s appeal also pertain to restricting the additional disallowance of ₹ 27,51,33,108/- to₹ 8,96,08,108/- by the Ld.CIT(A). 7. The brief facts are as under: Printed from counselvise.com P a g e | 10 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) (a) the assessee had earned dividend income amounting to ₹ 151,05,75,453/- during the year under consideration. At the time of filling the return,suo-moto disallowance to the extent of ₹ 1,11,91,892/- was made by the assessee based on the Chartered Accountant‟s report. (b) This disallowance related to expenses, other than interest on borrowings, which were recorded as expenses incurred in relation to such investments. Since the AO was not satisfied with the correctness of suo-moto disallowance made by the assessee, provisions of section 14A r.w. Rule 8D were invoked and the additional disallowance was calculated by the AO, after reducing the amount of suo-moto disallowance, at ₹ 27,51,33,108/-. (c) The Ld.CIT(A) reduced the abovesaid disallowance considering only those investments which have yielded exempt dividend income, which came to ₹ 8,96,08,108/-. 8. Before us, the Ld.AR submitted that the AO has not recorded any satisfaction as to why the suo-moto disallowance computed by the assessee is not correct, he has merely stated as under: “Since the assessee has not apportioned expenses as per Rule 8D having been incurred for earning this exempt income, I am not satisfied with regard to correctness of claim of expenditure made by the assessee and provisions of Rule 8D of Income Tax Rules are being invoked.” 9. In this regard the Ld.AR placed reliance on the HDFC Bank Ltd. V. DCIT (ITA No. 1783,1784 and 1785/Mum/2023, dated 24.01.2024) Printed from counselvise.com P a g e | 11 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) (Mum. Trib.) wherein it has been held that sou-moto disallowance offered by the assessee ought to be accepted when the AO has not recorded any satisfaction as to why the suo-moto disallowance computed by the assessee is not correct. Ld. DR, on the other hand, relied on the orders of the lower authorities. 10. It is seen that this issue is covered in the assessee‟s own case for A.Y. 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 [Mum. Trib.]. The co-ordinate bench of the Tribunal on this issue has held in A.Y. 2011-12 as under: “7. We have heard the parties and perused the material on record. We noticed that the identical issue has been considered by the Tribunal in assessee's own case for AY 2010-11 (supra) wherein it is held that 5.3 The third contention of the assessee is that for the purpose of computing disallowance u/r.8D(2)(iii) only those investments are to be considered which have yielded exempt income. This contention of the assessee is supported by the decision rendered in the case of ACIT vs. Vireet Investments Pvt. Ltd. (supra). The assessee has filed fact sheet listing the investments where the assessee has earned dividend income. We deem it appropriate to restore this issue to the file of Assessing Officer for recomputation of disallowance u/r.8D(2)(iii) in line with the decision of Special Bench in the case of DCIT vs. Vireet Investments Pvt. Ltd. (supra). Thus in view of our above finding, ground No.1 and additional ground No.1 of the appeal by the assessee are partly allowed for statistical purpose.\" Printed from counselvise.com P a g e | 12 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 8. Respectfully following the above decision we remit the issue of disallowance towards indirect expenses back to the AO with similar directions.” Respectfully following the decision of the co-ordinate bench for earlier year, we direct the AO to recompute the disallowance on similar lines. 11. Related to the above,grounds No. 3 and 4 of the revenue appeal are with regard to addition of the amount of disallowance u/s 14A to the book profit u/s 115JB of the Act. The AO while computing the book profit u/s 115JB made an addition of ₹ 27,51,33,108/-, the amount disallowed u/s 14A r.w. Rule 8D(2)(iii) of the Act following the decision of the Hon‟ble Special Bench of Delhi Tribunal in the case of ACIT v/s Vireet Investments (P.) Ltd. (82 taxmann.com 415) (Del. Trib.) (SB). This issue is also covered by the decision of the co-ordinate bench in assessee‟s own case in ITA No. 1065/Mum/2023 A.Y. 2011-12 (supra) wherein, it has been held as under: “9. With regard to disallowance under section 14A being added to the book profits under section 115JB of the Act, the Ld. AR submitted that this issue has also been considered by the decision of Co-ordinate Bench in assessee's own case for AY 20110-11 (supra) where it has been held that - \"7. We find merit in the contentions of the ld. Authorized Representative for the assessee. For the purpose of computation of book profits under section115JB, disallowance made under section 144 r.w.r. 8D cannot be added. The Hon'ble Jurisdictional High Court in the case of CIT vs. Bengal Finance & Investment Pvt. Ltd.(supra) while answering thesubstantial question of law on this issue affirming findings of Tribunal observed: \"4. So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s Essar Printed from counselvise.com P a g e | 13 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No. 438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law\". The Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd.(supra) reiterated the view by holding that computation under clause (f) of Explanation 1 to Section 115JB(2), is to be made without resorting to the computation as contemplated under section 144 r.w.r. 8D. Thus, in the light of the above decisions, ground No.2 of the appeal by the assessee is allowed.\" 10. We heard the DR. The facts for year under consideration being similar, in our considered view the issue is covered by the above decision of the coordinate bench. Accordingly we direct the AO to delete the adjustment made to book profits under section 115JB towards disallowance under section 14A.” Respectfully following the decision of co-ordinate bench of ITAT for AY 2011-12, the decision of the Ld.CIT(A) is upheld. 12. Ground No. 2:Reduction in deduction u/s 80IA of the Act by increasing the input cost by including the component of excise duty/service tax/VAT claimed as CENVT credit amounting to ₹ 5,98,92,130/- Brief facts of this ground are as under: a. While computing the deduction u/s 80IA in respect of captive power plants („CPP‟) which supply power to the manufacturing Printed from counselvise.com P a g e | 14 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) units („MU‟), the assessee had debited expenses directly attributable to the CPP, net of CENVAT credit availed, wherever applicable, on the expenditure incurred. b. Such CENVAT credit is available to the MU under the excise/service tax provisions and is adjusted against excise duty/service tax liability on goods produced by the relevant MU. Therefore, the debit in respect of the excise duty/service tax element and the credit in respect of excise duty on manufactured goods are both recorded in the books of MU. c. The Ld.AO allocated Cenvat credit while computing profits eligible for deduction u/s 80IA on the contention that all direct expenses incurred for CPP should be deducted in computing deduction u/s 80IA. d. Following the order of CIT(A) of A.Y. 2012-13, the disallowance in the captioned assessment year made by the AO has been upheld by the Ld. CIT(A) vide order dated 21.12.2017. e. The assessee has submitted before us that the issue is covered by assessee‟s own case in A.Y. 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mumbai Tribunal)wherein it has been held as under : 13.We have heard the parties and perused the material on record. We noticed that on identical issues the co-ordinate bench in assessee's own case for AYs 2008-09 to 2010-11 has held that Printed from counselvise.com P a g e | 15 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) \"3.10. Even on merits, we find that the main grievance of the Revenue is that the assessee had not debited certain expenses in the eligible unit i.e. 801A units and thereby had claimed excess deduction u/s.801A of the Act in the return of income. We find that this aspect has been addressed elaborately by the ld.CIT(A) and the ld. CIT(A) had deleted the said disallowances by placing reliance on various decisions of Tribunals, High Courts and Supreme Court and granted relief to the assessee. ................... ……………….. ………………… …………………. 3.11. We further find that the similar issue had arose before this Tribunal in the case of Ambuja Cements Ltd vs. Addl. CIT in ITA No.2384 & 3475/Mum/2019 and 1241/Mum/2018 for A.Y. 2010- 11, 2011-12 and 2012-13 and ITA Nos. 2958 and 3843/Mum/2019 and 1889/Mum/2018 for A.Yrs. 2010-11, 2011- 12 and 2012-13 vide consolidated order dated 07/11/2022 wherein this Tribunal had held as under:- 99. In ground no. 6, the assessee has raised the following grievances: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 801A as cost of the eligible undertakings. 100. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note of. During the course of the assessment proceedings, the Assessing Officer noted that while computing the deduction under section 801A in respect of captive power plants, ports and rail systems, the assessee had debited the expenses Printed from counselvise.com P a g e | 16 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) directly attributable to the eligible units, net of CENVAT credit availed, wherever applicable, on the expenditure incurred. These CENVAT credits are available under the excise provisions and adjusted against the excise duty liability on goods produced by the related cement manufacturing units. In effect, the component of expenses of statutory duties/ taxes is credited directly to „CENVAT receivable account\" without routing it through the profit and loss account. The Assessing Officer was of the view that Section 80A (IA) provides for exemption in respect of profit derived by an eligible undertaking\" for the specified purposes, but the critical words are \"derived from\" and, therefore, \"it is only the expenditure, which had a direct and proximate (immediate) nexus with the earning of profit from eligible undertaking that could be taken into consideration for determining such profits\". It was also noted that the eligible unit is to be viewed as an independent unit on the standalone basis, as Section 801A(5) requires such an eligible unit to be treated \"as if such eligible business were the only source of income of the assessee during the previous year relevant to the assessment year\". Accordingly, the Assessing Officer reduced the eligible deductions under section 801A, by the amount of CENVAT credits attributable to eligible units, as the expenses were not booked through the profit and loss account, and, to that extent, the profits stood distorted/ inflated. These allocations were done on the basis of turnover \"in the absence of any item wise details\". Aggrieved, inter- alia, by these adjustments on account of CENVAT credit, assessee carried the matter in appeal before the CIT(A) but without success. The assessee is not satisfied and is in further appeal before us. Printed from counselvise.com P a g e | 17 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 101. We have heard the rival contentions, perused the material on record and duly considered the fact of the case in the light of the applicable legal position. 102. We find that Section 801A(5), which has been heavily relied upon by the assessee, provides that \" notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made\". All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee - other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedded in the profit computation on a standalone basis requires that the Ropar Cement Manufacturing Unit must reimburse the captive power unit for such a CENVAT credit. It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the Printed from counselvise.com P a g e | 18 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 801A(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units and other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed by the other units as is the undisputed position anyway. What the assessee has done is that the expenses are debited net of the CENVAT credit availed. To this extent, we see no infirmity in the stand of the assessee. 103. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment on account of CENVAT in the profits of the eligible units. The assessee gets the relief accordingly. 3.12. Even on merits, the addition made by the ld. AO deserves to be deleted in view of the aforesaid decision of this Tribunal. 3.13. In view of the aforesaid observations and respectfully following the various judicial precedents, the reopening made by the ld. AO for A.Y.2008-09 is bad in law and is hereby quashed. Accordingly, the appeal of the assessee is allowed. On merits, the issue is already covered in favour of the assessee by relying the decision of this Tribunal in the case of Ambuja cements referred to supra. Accordingly, the grounds raised by the Revenue are dismissed. Printed from counselvise.com P a g e | 19 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 14. The facts being identical, respectfully following the decision of Co- ordinate Bench in assessee's own case, we allow the issue in favour of the assessee.” Respectfully following the order of the co-ordinate bench for AY 2011- 12, ground No. 2 is allowed in favour of the assessee. 13.Ground No. 3 : Disallowance of corporate advertisement expenditure amounting to ₹ 1,88,59,786/- Brief facts of the ground are as under: a) The assessee had incurred expenditure amounting to Rs. 1,88,59,786/- towards corporate advertising on the ground that it is a promotional strategy that is designed to not only interest the consumers in products and services offered by the company but also to cultivate a positive reputation among consumers and others within the business world b) The assessee submitted before the Ld.AO that the corporate advertising expenses are incurred to generate and enhance the confidence among vendors and consumers. The assessee has incurred advertisement expenses including, inter alia, expenses for promotion of brand image i.e. Corporate Brand Building.Accordingly, the corporate advertisement expenses cannot be treated as capital expenditure as such expenses do not Printed from counselvise.com P a g e | 20 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) generate any enduring benefit or assets, much less in the capital field. c) The same was however, not accepted by the AO. The Ld.AO held that the assessee is deriving enduring benefit from corporate advertisement and, therefore, treated the aforesaid sum as capital expenditure and allowed depreciation thereon. d) The Ld CIT(A) held that the issue is covered by the CIT(A)‟s orders for A.Y. 2009-10 to A.Y. 2012-13 and since the facts are similar, the ground is decided against the assessee. 14. Before us, the Ld.AR has submitted that this issue is covered by assessee‟s own case in A.Y. 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 128/Mum/2017 (Mumbai Tribunal) In the above order, it has been held as under: “17. We have heard the parties and perused the material on record. We noticed the co-ordinate bench in assessee's own case for AY 2010-11 has considered the similar issue where it has been held that \"11. We have heard the submissions made by rival sides and have examined the orders of authorities below. The expenditure incurred by assessee towards corporate advertisement was disallowed holding it to be capital in nature. We find that similar disallowance of advertisement expenditure was made in assessment year 2009-10. The Co- ordinate Bench of the Tribunal, following the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Asian Paints (India) Ltd., reported as 243 Taxman 348 (Bom) held the expenditure as revenue in nature. The Id. Departmental Printed from counselvise.com P a g e | 21 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Representative has not been able to controvert the findings of then Co-ordinate Bench of the Tribunal in assessee's own case on the same issue. Following the same reasoning, we hold corporate advertisement expenditure as revenue expenditure. Thus, ground No.4 of the appeal of the assessee is allowed. 18.We also noticed that a similar view has been held by the co- ordinate Bench in assessee's own case for AY 2009-10 also, the facts of the year under consideration being identical respectfully following the above decision of the co- ordinate bench, we allow the grounds raised by the assessee and delete the addition made in this regard.” Respectfully following the order of the co-ordinate bench of the Tribunal for the year 2011-12, the ground No. 3 is allowed in favour of the assessee and addition made in this account is hereby deleted. 15. Ground No. 4 : Disallowance of lease equalization charges of ₹ 1,47,06,436/- Brief facts of the issue are as under: a) The assessee has debited in the Profit and Loss account, a sum of ₹ 1,86,96,472/- towards lease equalization charges as per Accounting Standard 19. The same was disallowed in the computation of income out of abundant caution and has been claimed as an allowable expense u/s 37 through the notes to the Return of income. b) The AO has not allowed the claim made by the assessee on the ground that it has neither been made in the original return of income nor in the Printed from counselvise.com P a g e | 22 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) revised return of income. It was also observed by the AO that the lease equalization charge is a notional charge on the Profit and Loss account and no actual liability has been incurred. Hence, the claim is otherwise also not allowable. c) In appeal the disallowance has been confirmed by the CIT(A) following his decision in A.Y. 2011-12 and 2012-13. 16. Before us, the Ld. AR submitted that this issue is covered by the order co- ordinate bench in assessee‟s own case in A.Y. 2011-12 in ITA No. 1065/Mum/2017 and ITANo. 1248/Mum/2017 (Mumbai Tribunal)wherein it has been held as under: 23. We have heard the parties and perused the material on record. The assessee during the year under consideration debited a sum of Rs. 19,48,66,687/- as lease equalization charges to the P&L A/c as per accounting standard 19. The same is claimed as a deduction through a note to Return of Income before the AO though the assessee had initially disallowed the same in the Return of Income. The revenue's stand is that the amount debited is a notional charge and an unascertained liability. Accordingly, only the rent as per the rental agreement could only be allowed as a deduction. The assessee's argument is that the AS-19 is mandatorily applicable in assessee's case and therefore the amount debited to the P&L account is an ascertained liability that should be allowed as a deduction. In this regard we notice that the Kolkata Bench of the Tribunal has considered a similar issue in the case of Bata India Ltd (supra)…..’ . . . Printed from counselvise.com P a g e | 23 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) . . 24. We also notice that a similar view is held by the coordinate bench of the Tribunal in the case of M/s. HDFC Securities Limited vs DCIT (ITA No.3137 & 3502/Mum/2014 dated 19.02.2016). The relevant observations of the Tribunal are extracted below - 6. Effective ground of appeal, raised by the AO is about deleting the addition of Rs.1.08 Crores. During the assessment proceedings, the AO found that the assessee had claimed the abovementioned amount under the head Rent being AS-19 Provisions. He called for justification for allowing the same.After considering the reply of the assessee, the AO held that the disputed amount was nothing but prepaid expenses which ought to have been claimed in the relevant financial year to which it belonged, that the amount was a balance-sheet item and not a P&L A/c. item. Finally, he treated the amount in question as prepaid expense and made a disallowance of Rs.1.08.45.878/- 7. Before the FAA, the assessee made elaborate arguments and produced additional evidences. He called for remand report from the AO. After considering the Report and rejoinder to the report of the AO, the FAA held that lease expenses were nothing but expenses that accrued to the assessee and were computed as per the provisions of Accounting Standard-19(AS-19),that the assessee had to follow the AS compulsorily, that AS-19 had been prescribed by the ICAI to claim lease expenses, that the expenses were claimed in accordance with accounting standard, that AO was not justified in treating the expenses as contingent/unconfirmed, that the claim made by the assessee was based on scientific method, that the assessee was following the same method in earlier years. Finally, he held that the lease payment under the operating lease should be recognised as an Printed from counselvise.com P a g e | 24 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) item of the P&L A/c on a straight-line basis over the lease period. He deleted the addition made by the AO. 8. Before us, the DR supported the order of the AO.AR relied upon the order of the FAA and stated that the assessee followed the mandate of AS-19, that the provision was made on a scientific basis, that rent payable was allowable as per the section 30 of the Act. 9. We find that the AO had made the disallowance as he was of the opinion that it was a prepaid expense and that it could not be claimed during the year under appeal, that the assessee had claimed the expenditure as per the provisions of AS-19, that the agreement entered into by the assessee was in the nature of operating lease as defined in AS-19, as per the accounting standard in such cases the payments have to be considered as an item of P&L account on a straight line basis over the lease period. The FAA had given a categorical finding of fact that the provision of Rs. 1.08 crores was in respect of the liability that had accrued during the FY 2009-10. We are of the opinion that, by following AS-19 the assessee has complied with the provisions of the Act, that AS-19 provides that in case of operating leases, the lease rent payment has to be treated as an allowable expenditure. Therefore, in our opinion, the order of the FAA does not require any interference from our side. 25. Considering that the facts in assessee’s case being identical, we place reliance on the above decisions, to hold that the lease rent claimed by the assessee as per AS-19 is to be allowed as a deduction and the AO is directed to delete the disallowance made in this regard.” Respectfully following the order of the co-ordinate bench of this Tribunal for AY 2011-12, the ground No. 4 is allowed in favour of the assessee and claim of lease equalisation charges is hereby allowed. Printed from counselvise.com P a g e | 25 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 17. Ground No. 5 : Disallowance of interest on Electricity Tax u/s 43B amounting to ₹ 2,65,40,325/- Relevant facts are as under: a) The assessee had made a provision on account of interest on electricity duty in its books of account. In the return of income, the same was not disallowed u/s 43B on the ground that the said section cannot be extended to include „interest on tax‟. b) The AO has disallowed the interest observing that the Hon’ble Rajasthan High Court in the case of Mewar Motors v. CIT (2003) 260 ITR 218 has held in context of sales tax liability, that interest on sales tax is covered within the ambit of section 43B. Hence, on the same logic, interest on electricity tax is a part and parcel of electricity tax and is therefore, covered u/s 43B of the Act. Since,the interest on electricity tax did not crystallize during the year,the same shall be allowed as and when the liability is crystallized and is paid. c) Following the decision of his predecessor in A.Y. 2012-13, the disallowance in the captioned assessment year made by the AO has been upheld by the CIT(A) in the impugned order. 18. The Ld.AR submitted before us that this issue is also covered by the decision of the co-ordinate bench in assessee‟s own case in A.Y. 2011- 12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mumbai Tribunal) wherein it has been held as under: Printed from counselvise.com P a g e | 26 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) “31. We also notice that the Hon’ble High of Telangana & Andhra Pradesh in the case of CIT v/s Andhra Sugars Ltd. (2014) 42 taxmann.com 61 (Andhra Pradesh and Telangana) while considering the allowability of interest on purchase duty has held as contrary view that if actual tax, duty, or cess can be deducted only on payment, interest thereon cab be deducted only on making payment and that the provisions of section 43B are applicable to interest payable on purchase duty. Further the Hon’ble Rajasthan High Court in the case Shree Pipes V/s DCIT (2007) 162 Taxman 442 (Rajasthan) had held a similar view in the context of interest on sales tax. However, in the absence of decision of jurisdictional High Court, when two contrary views are expressed by the non- jurisdictional High Courts, the view favourable to the assessee need to be followed. We place reliance in this regard on the decision of the Hon’ble Supreme Court in the matter of CIT v/s Vegetable Products Ltd. (1972) 88 ITR 192 (SC) where the Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted”. Accordingly, we hold that the interest on Electricity Tax which is compensatory in nature is to be allowed as a deduction under section 37 and that the interest on Electricity Tax not to be considered as part of tax for the provisions of section 43B.” 19. The Tribunal in A.Y. 2011-12 has passed a detailed order after considering contradictory decisions of different High Courts on the subject and has preferred to follow the decisions relied upon by the assessee following the Supreme Court decision in CIT v/s Vegetable Products Ltd. (1972) 88 ITR 192 (SC). Respectfully following the order of the co-ordinate bench of the Tribunal, ground No. 5 is allowed and disallowance of interest on electricity tax u/s 43B is hereby deleted. Printed from counselvise.com P a g e | 27 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 20. Ground No. 6 :Treating corporate and performance guarantee given to subsidiaries as an international transaction and partly confirming the additions made by the TPO This ground is linked with grounds No. 26 and 27 of the revenue‟s grounds of appeal, hence these are being discussed together. Ground No. 26:(Revenue’s Appeal) Restriction of transfer pricing adjustment made on corporate guarantee given to AE - 0.5% as against 2% as held by AO/TPO: The brief facts of the issue are as under: i. During the year under consideration, the assessee gave explicit financial guarantees to lender banks to enable overseas subsidiaries viz. Aditya Birla Minacs Worldwide Inc. („ABMWI‟) and Minacs Group (USA) Inc („MGI‟) to borrow funds from them for working capital and term loans. For the aforesaid guarantee transaction, no guarantee commission was charged by the assessee to its AEs. ii. It was the stand of assessee that without prejudice to the assessee‟s contentions that corporate guarantee is not an international transaction and the same is in the nature of shareholder‟s activity, if corporate guarantee is to be treated as an international transaction, then the rate should be applied based on Internal CUP viz. the Printed from counselvise.com P a g e | 28 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) weighted average rate of 0.30% which is the rate of guarantee commission paid to unrelated third parties by the assessee. iii) In the assessment proceedings, the internal CUP submitted by the assessee was rejected by the TPO due to difference in purpose, tenure, currency, risk, etc. The alternative plea of the assessee that 0.5 should be considered as the ALP for benchmarking the transaction was also rejected since the department had not accepted the said rate to be the ALP rate in other cases. Following the decision in Everest Kanto and Glenmark, downward adjustment was made by the TPO in the average rate of bank guarantee (obtained via notices u/s. 133(6) issued to various banks) and the ALP guarantee commission was computed at 2%. iv. On identical facts, the Ld. CIT(A) in AY 2012-13 had fixed the guarantee commission rate at 0.5% by placing reliance on the decision of the Hon‟ble Jurisdictional High Court in case of CIT v/s Everest Kanto Cylinder Ltd. in 58 taxmann.com 254 (Bom.) and also on the decision of Mumbai Tribunal in the case of Aditya Birla Minacs Worldwide Ltd. V/s DCIT 9ITA No. 7033/Mum/2012) for AY 2007-08. Hence for the year under consideration also, the Ld. CIT(A) has held 0.5% as ALP of the guarantee transaction. Printed from counselvise.com P a g e | 29 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Ground No. 27 : Restriction of transfer pricing adjustment made on performance guarantee fees given on behalf of AE to M/s Capital One Service Inc – 0.5 as against 1.74% as held by AO/TPO: i. The related facts are that the assessee had given performance guarantee to Capital One Service Inc in respect of service agreement between its AE, Aditya Birla Minacs Inc, Canada and Capital One Service Inc.For the aforesaid guarantee transaction, no guarantee commission was charged by the assessee to its AEs.The assessee submitted that without prejudice to its contentions that performance guarantee is not an international transaction and the same is in the nature of shareholder‟s activity, if performance guarantee is to be treated as an international transaction, then the rate should be applied based on Internal CUP viz. the weighted average rate of 0.30% which is the rate of guarantee commission paid to unrelated third parties by the assessee. ii. In the assessment proceeding it was held that by giving performance guarantee, the assessee has irrevocably and unconditionally guaranteed performance of its AE. The assessee has taken up the liability of its AE for the amount of contract.The benefit given by the assessee to its AE was determined as per US Corporate Bonds as adopted in TP order for AY 2012-13 at 1.74%. Printed from counselvise.com P a g e | 30 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) iii. On identical facts, the Ld. CIT(A) in AY 2012.13 had applied the same rate as in guarantee fee. Considering that facts for the year under consideration are similar, the performance fee was fixed at the same rate as for guarantee commission i.e. at 0.5% by the Ld. CIT(A). iv. The Ld. AR submitted that this issue is covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.) wherein it has been held as under: “74. Ground No. 15 & 16 of the revenue pertain to CIT(A) restricting the ALP of guarantee fees in respect of corporate guarantee and performance given to AE to 0.5% as against 2.42% and 1.74% as held by AO/TPO. We have while considering Ground No. 8 have already upheld decision of the CIT(A) by placing reliance on the decision of the jurisdictional High Court in the case of Everest Kanto Cylinder Ltd. (supra). Therefore, these grounds of the revenue are dismissed. 21. The Co-ordinate Bench in assessee‟s own case for AY 2011-12 has considered the similar issue and upheld the guarantee commission @0.5% by relying on the decision of the Bombay High Court in the case of Everest Kanto Cylinder Ltd. (supra). The facts being identical for the year under consideration, we see no reason to interfere with the decision of the CIT(A). In view of the above, both the grounds of the assessee and the revenue are dismissed and CIT(A)‟s order on the issue is upheld. 22. Ground No. 7 : Reduction in deduction u/s 80IA of the Act – supply of electricity by eligible undertaking to non-eligible unit- Printed from counselvise.com P a g e | 31 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) The brief facts of the issue are as under: i. The assessee has a co-generation power plant (i.e. for generation of power and steam) which is an eligible unit u/s 80 IA at Rayon CPP II at Veraval, Gujarat. The assessee has claimed deduction u/s 80IA amounting to Rs. 25,90,11,780/- in respect of supply of power by the captive power plant (CPP) to the manufacturing unit (MU). During the year under consideration, the CPP has generated and supplied power only to the assessee‟s MU at Rayon Plant for captive consumption at an average rate of Rs. 6.62 per unit. No third-party sales have been made by the CPP. ii. The MU at Rayon Plant has also purchased power from Gujarat State Electricity Board („GSEB‟) to meet its requirements.To benchmark the aforesaid specified domestic transaction between the CPP and the MU, internal CUP has been used whereby the MU has been considered as the tested party and the rate at which the transaction has been taken place between the two units is based on the rate at which the MU has purchased power from the GSEB. iii. In the assessment proceedings, the CUP applied by the assessee is rejected on the following grounds:  The assessee does not perform any distribution functions as compared to GSEB and also no distribution risk is assumed by the assessee since it supplies only to its AE. Printed from counselvise.com P a g e | 32 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.)  The SEB is capital intensive and requires a license for distribution of power.  Close comparability in specific characteristics of goods should be coupled with other comparability factors of CUP.  Since the profits earned by the CPP are to be benchmarked, the ALP should be determined by considering the CPP unit as the tested party and not the MU. Since GSEB purchases power from State Power Generation Companies, therefore, rates at which GSEB had purchased power was called for by the TPO by issuance of notices u/s 133(6). This rate as calculated by the TPO is Rs. 2.52 per unit. iv. It was held by the TPO that the various decisions relied upon by the assessee for considering the GSEB rate as the ALP rate have not dealt with Chapter X of the Act and hence cannot be applied. Reliancehas been placed by the TPO on the decision of Hon. Calcutta High Court in the case of CIT v/sITC Ltd. (64 taxmnn.com 214) wherein it has been held that the rate of sale is to be benchmarked using similar comparable instead of the rates of purchase. v. Therefore, the ALP rate wasconsidered by the Ld. TPO as Rs. 2.52 per unit instead of Rs. 6.62 per unit. Printed from counselvise.com P a g e | 33 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) vi. In appeal, Ld. CIT(A) observed that the price charged by GSEB i.e. distribution company in itself embeds the price of various distribution related functions performed by it and the associated risks. Therefore, the GSEB cannot be used as a comparable for the CPP unit. Accordingly, the Ld. CIT(A) upheld the ALP determined and the adjustment made by the TPO. vii. Before us, the Ld. AR has submitted that the issue under consideration now stands covered by the decision of Hon‟ble Supreme Court in the case of CIT v/s Jindal Steel & Power Ltd. (2023) 157 taxmann.com 207 (SC). While the TPO has relied upon the decision of the Hon‟ble Calcutta High Court in CIT v/s ITC Ltd. (2015) 64 taxmann.com 214, the Supreme Court has considered the said decision of ITC while deciding the issue in Jindal Steel (supra). viii. The contention of the Ld. AR is that the rate at which the MUhas purchased power from the GSEB is the ALP rate for the CPP unit even under the provisions of Chapter X of the Act.In this connection, reliance was placed on the decision of:  Kolkata Tribunal in DCIT v. IFB Agro Industries Ltd. [2024] (ITA No. 490-491/Kol/2019, order dated 08/02/2024):  Tata Steel Ltd. v. DCIT [2023] 156 taxmann.com 262 (Mumbai - Trib.); Printed from counselvise.com P a g e | 34 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.)  Tata Chemicals Ltd. v. DCIT [2023] 155 taxmann.com 461 (Mumbai - Trib.) ix. In view of the foregoing as well as other legal precedents cited, the Ld. AR submitted that the transaction of inter-unit supply of power as benchmarked by the assessee considering the GSEB rate as comparable be upheld. x. In response, the Ld. DR besides making the oral arguments also submitted following written submissions: “During the year, assessee supplied electricity from its captive generator plant (eligible unit) to its manufacturing unit (noneligible unit). Assessee benchmarked it at Rs. 6.62 per unit based on the rate at which electricity was supplied by the state electricity board to its manufacturing unit. The TPO did not accept the benchmarking done by assessee and determined the ALP of the transaction at the rate of Rs. 2.52 per unit. The TPO benchmarked the transaction based on the electricity supplied by the independent third party power generators to Gujarat Urja Vidut Nigam Limited (GUVNL). 1.2 The TPO was correct in benchmarking the transaction at ALP as provided in clause (ii) of explanation to Section 801A(8) of the Act. After the amendment made vide Finance Act 2012, if any transfer of goods and services is a Specified Domestic Transaction, then the \"market value\" also means the ALP as defined in clause (II) of Section 92F of the Act. 1.3 The TPO has correctly rejected the benchmarking done by the assessee wherein it had taken its AE as a tested party. For correct determination of profit of the eligible unit claiming benefit u/s 80(IA)(8) of the Act, the power generating unit is to be taken as the tested party. The TPO had correctly held that Printed from counselvise.com P a g e | 35 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) FAR of the power generating company cannot be compared with FAR of a power distribution company to determine ALP of the transaction. Therefore, the TPO correctly determined the market value of electricity @ 2.52 per unit based on the rate at which independent third party power generators supplied electricity to GUVNL. 1.4 Assessee has primarily relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Jindal Steel & Power Ltd. (2023] 157 taxmann.com 207 (SC) and submitted that its cases is covered by the Jindal Steel (supra) decision. However, the decision of Hon'ble SC pertains to the period prior to the introduction of clause (ii) of Explanation to Section 80-(IA)(8) of the Act. Hence, the case of assessee cannot be said to be covered by the decision of Jindal Steel (supra). Assessee's case is squarely covered by the decision of Hon'ble Kolkata High Court in the case of CIT vs ITC Ltd. (2015) 64 taxmann.com 214 (Calcutta) 1.5 Without prejudice to the above, the Hon'ble SC in the case of Jindal Steel (supra) interpreted the expression \"market value\" after interpreting the expression \"open market\", in the case of Jindal Steel (supra), the AO benchmarked the transaction based on a obligatory contract wherein the assessee had to compulsorily supply the surplus electricity to state electricity board on a rate. The Hon'ble Court, in this context, held that the determination of tariff between the assessee and 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. Thus the Hon'ble SC held that \"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 Printed from counselvise.com P a g e | 36 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) control or regulations; rather, it is determined by the economics of demand and supply. 1.6 In the present case, while determining the ALP of the transaction, the TPO has referred to various prices such as Rs. 2.66, 2.85, 2.11, 2.45 at which electricity was supplied by independent power generator to the GUVNL. All these prices also qualify to be \"market value\" as these prices denote the price of electricity between buyer and seller in the open market where transaction took place in normal course of trading and the pricing was unfettered by the regulations or control. During the proceedings before the TPO or before the Hon'ble Bench, assessee has not been able to claim/prove that all these prices are contracted/controlled/regulated rates. Hence, the price of Rs. 2.52 per unit as determined by the TPO denote market value as per clause (i) and also denote ALP as per clause (ii) of Explanation to Section 80(IA) (8) of the Act. 2. Further, assessee has relied on the decision of Hon'ble Bombay tribunal in the case of Tata Chemicals Ltd. vs DCIT [2023] 155 taxmann.com 461 (Mum). The Hon'ble tribunal in the case of tata Chemicals (supra) held that the phrase \"or\" in Explanation to Sec 80(IA)(8) does not mean that the second mechanism provided in clause (ii) of Explanation alone can be applied after introduction of SDT from 01.04.2013. It is correct that assessee may apply clause (i) to determine market value of any goods or services. However, the market value as adopted by assessee under clause (i) of Explanation to Section 80(1A)(8) is to pass the test of provisions of Chapter X of the Act after the amendments brought via Finance Act, 2012. The adoption of market value by assessee to determine profit of its eligible unit u/s 80(1A)(8) of the Act is to be read with provisions of Chapter- X of the Act. The provisions of SDIT were brought into TP regulations after the Hon'ble Supreme Court in the case of CIT Printed from counselvise.com P a g e | 37 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) vs M/s Glaxo Smithkline Asia (P) Ltd. observed that the profit shifting may take place towards the lower side of tax arbitrage. 2.1 To deal with situations such as the present one, where assessee try to adopt such price as market value which will shift its profits towards lower side of taxes, provisions of SDT were introduced in TP regulations. So, even if it is considered that the transaction can be benchmarked both as per clause (i) as well as clause (ii) of Explanation, then it must be seen that whether assessee is shifting its profits to lower tax arbitrage by adopting one of the favourable clauses. in this case, by adopting clause (i) of Explanation, assessee is shifting profits towards eligible units which have lower tax liabilities as compared to non eligible units. Hence, the market value adopted by the assessee cannot be accepted and the ALP determined by the TPO (which is both market value as per clause (i) and ALP as per clause (ii) of Explanation to Section 80(IA)(8) of the Act) was correct. 2.2 Assessee's reliance on the decision of Hon'ble Bombay Tribunal in the case of Tata Steel Ltd. vs DCIT [2323] 156 taxmann.com 262 (Mum) is also not acceptable as the decision of Tata Chemicals (supra) was relied upon by the Hon'ble Tribunal in the case of Tata Steel (supra). 2.4 Assessee's reliance on the decision of Hon'ble Kolkata Tribunal in the case of DCIT vs IFB Agro Industries Ltd. is also not acceptable as the Kolkata tribunal relied upon the decision of Hon'ble SC in the case of Jindal Steel (supra)” 23. We have carefully considered the arguments of Ld. AR as well as Ld. DR and it is observed as under: a. When an eligible business provides goods or services to a non- eligible business, section 80IA(8) gives power to the AO to determine the allowable deduction by computing the market Printed from counselvise.com P a g e | 38 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) value of such goods or services. The amendment made by the Finance Act 2012, w.e.f. 01.04.2013 introduced clause (ii) to explanation of subsection (8) of the 80(IA) linking the „market value to arm‟s length price (ALP)‟ as determined in Chapter X of the Act, for specified domestic transactions (SDT). Relevant explanation is reproduced below: “Explanation -For the purposes of this sub-section, \"market value\", in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) 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. Prior to this amendment, the market value related to any goods or services meant the price that such goods or services would ordinarily fetch in the open market. The judgement of the Hon‟ble Supreme Court in Jindal Steel and Power Ltd. (supra) was passed in the context of unamended law. c. Now, the amendment introducing clause (ii) in the explanation under section 80(IA)(8) has linked the determination of ALP to the deduction that can be claimed under section 80(IA) and has thus brought the extensive methodologies of chapter X into the section 80IA framework. In this regard its pertinent to refer to the Explanatory Memorandum to the Finance Bill of Printed from counselvise.com P a g e | 39 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 2012, vide which the amendment was made. The relevant portion is reproduced below: Transfer Pricing Regulations to apply to certain domestic transactions Section 40A of the Act empowers the Assessing Officer to disallow unreasonable expenditure incurred between related parties. Further, under Chapter VI-A and section 10AA, the Assessing Officer is empowered to re-compute the income (based on fair market value) of the undertaking to which profit linked deduction is provided if there are transactions with the related parties or other undertakings of the same entity. However, no specific method to determine reasonableness of expenditure or fair market value to re-compute the income in such related transactions is provided under these sections. The Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P) Ltd., in its order has, after examining the complications which arise in cases where fair market value is to be assigned to transactions between domestic related parties, suggested that Ministry of Finance should consider appropriate provisions in law to make transfer pricing regulations applicable to such related party domestic transactions. The application and extension of scope of transfer pricing regulations to domestic transactions would provide objectivity in determination of income from domestic related party transactions and determination of reasonableness of expenditure between related domestic parties. It will create legally enforceable obligation on assessees to maintain proper documentation. However, extending the transfer pricing requirements to all domestic transactions will lead to increase in Printed from counselvise.com P a g e | 40 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) compliance burden on all assessees which may not be desirable. Therefore, the transfer pricing regulations need to be extended to the transactions entered into by domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 10AA. The concerns of administrative and compliance burden are addressed by restricting its applicability to the transactions, which exceed a monetary threshold of Rs. 5 crores in aggregate during the year. In view of the circumstances which were present in the case before the Supreme Court, there is a need to expand the definition of related parties for purpose of section 40A to cover cases of companies which have the same parent company. It is, therefore, proposed to amend the Act to provide applicability of transfer pricing regulations (including procedural and penalty provisions) to transactions between related resident parties for the purposes of computation of income, disallowance of expenses etc. as required under provisions of sections 40A, 80-IA, 10AA, 80A, sections where reference is made to section 80-IA, or to transactions as may be prescribed by the Board, if aggregate amount of all such domestic transactions exceeds Rupees 5 crore in a year. It is further proposed to amend the meaning of related persons as provided in section 40A to include companies having the same holding company. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the Assessment Year 2013-14 and subsequent assessment years. xi. In view of above backdrop, the Ld. AR‟s contention that rate of Rs. 6.62 per unit (which is the price at which power is supplied by GSEB) Printed from counselvise.com P a g e | 41 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) isthe market price (as well as the ALP)is not justified. The ALP is determined after detailed examination of FAR.There can be no dispute on the fact that FAR of a distributor of electricity is different from the FAR of generating entity. The cost per unit charged by the distributing entity from the final customer includes remuneration as well as losses incurred by the transmission as well as distribution entities which are not present in the case of CPP. Applying this rate (charged by the GSEB) to the supply of electricity from CPP to the MUwould be unfair, since the very purpose of setting up captivepower plants is to have dedicated, uninterrupted and cheap accessto power for the manufacturing unit. Accordingly, reasonably accurate adjustments are required to be made to the GSEB rate to account for these factors. xii. We, accordingly, deem it proper to restore the matter back to the AO for determination the ALP as per the amended provisions and in the light of above discussion. 24. Ground No. 8 : Reduction in deduction u/s 80 IA of the Act – supply of steam by eligible undertaking to non-eligible unit(s). The brief facts of the issue are as under: i. The assessee has 3 CPP units from which steam has been supplied viz. CPP at Gummidipoondi, Veraval and Renukoot. Out of these 3 CPP Units, the CPP at Renukoot has already surpassed its tax holiday Printed from counselvise.com P a g e | 42 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) period u/s. 80-1A, whereas the other 2 units continue to enjoy the tax holiday during the captioned assessment year.During the year under consideration, the Assessee supplied steam from its eligible units viz. HTC Plant I, HTC Plant II and HTC Plant III at Gummidipoondi on a cost-to-cost basis to the carbon black plant (i.e. non-eligible unit). The Assessee has also supplied steam from its eligible unit at Rayon CPP II at Veraval on cost-to-cost basis. The average sale price of steam is Rs. 655.60 per MT. ii. It was stated that no mark-up has been charged by the eligible units and no benefit u/s. 80-1A has been claimed on steam supplied by the captive power plants.The Assessee has supplied steam from its Renukoot CPP unit (non-eligible unit) to M/s Hindalco Ltd at an average rate of Rs. 519.53 per MT. However, no claim u/s. 80-1A has been made on this behalf. iii. In the assessment proceedings, the AO observed that the assessee has supplied steam from its Renukoot CPP unit (non-eligible unit) to M/s. Hindalco Ltd at an average rate of Rs. 519.53 per MT. Therefore, applying CUP as the most appropriate method, the ALP of the transaction of inter-unit supply of steam from eligible units to non-eligible units is considered at Rs. 519.53 per MT, being the actual sale transaction between Renukoot unit and Hindalco Ltd instead of Rs. 655.60 per MT which is the average cost of production of steam for the eligible CPP units Printed from counselvise.com P a g e | 43 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) iv. The Ld. CIT(A) upheld the ALP as determined by the TPO and the consequent adjustment made by the TPO. 25. Before us, the Ld. AR submitted that the eligible CPP units have supplied steam to the MU at cost. Since the profit derived from supply of steam is Nil, the question of claiming any deduction u/s. 80-IA does not arise. Therefore, the TPO has no jurisdiction to compute the ALP of the said transaction.Without prejudice to the above, the Ld. AR submitted that while it has sold steam on cost basis, the Ld. TPO on the other hand has taken the price at which the Assessee has sold steam to Hindalco from its Renukoot unit. In this connection, it has been submittedby the Ld. AR that:  The quality of steam supplied at Veraval and Gummidipoondi is different from that supplied from Renukoot to Hindalco. Infact, the quality of steam supplied from Renukoot to Hindalco itself is different at different points of time and therefore, its pricing is also different. Attention is drawn to submissions dated October 20, 2016, wherein the invoice-wise list of steam supplied by Renukoot unit to Hindalco is given. The price for low pressure steam ranges from Rs. 133 PMT to Rs. 208 PMT whereas the price for super-heated steam is Rs. 750 PMT. Therefore, as the very quality of steam supplied at the aforesaid units is different, CUP cannot be considered to be the most appropriate method, Further, when from the same Printed from counselvise.com P a g e | 44 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) location (being Renukoot) itself, the steam is supplied at different rates at different points in time, applying the average thereof to determine the price of steam supplied at different locations (being Veraval and Gummidipoondi) is misplaced.  Furthermore, when there is a difference in the price at which power is supplied by various power generation parties from the same state to Gujarat Vikas Nigam Limited [refer the table given in TPO's order - para 29 at page 28] due to inter alia, differences in the machineries and the associated fixed as well as variable costs, there is bound to be a difference even in the cost of steam, especially when supplied from different locations.  Accordingly, it was contended that the price at which Renukoot unit (in Uttar Pradesh) has supplied steam cannot be compared with the price at which units in Veraval (in Gujarat) and Gummidipoondi (in T.N.) have supplied steam. In view of the foregoing, Ld. AR submitted that the transaction of inter-unit supply of steam as benchmarked by the Assessee considering the cost of production as the sale price be upheld. In response, the Ld. DR submitted that the facts relating to sale of steam being similar to that of sale of electricity, all the arguments made in that context reproduced in para 24(ix) were reiterated. Printed from counselvise.com P a g e | 45 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 26. We have carefully considered the arguments of Ld. AR as well as Ld. DR. Since the issue of supply of steam is similar to supply of electricity, we deem it fit to restore this issue also to the file of AO for determination of ALP on similar lines. 27. Additional Ground No. 1 : Disallowance of Education Cess Expenditure: i. The Ld. AR submitted that the issue raised in the addition ground being a legal one, may be admitted. He further pointed out that similar additional ground was raised in the previous assessment year AY 2011-12 wherein the same was admitted by the co- ordinate bench and decided against the assessee. It is seen that the issue of allowability of Secondary and Higher Education Cess is covered against the assessee by the decision of the Hon‟ble Supreme Court in the case of JCIT v/s Chambal Fertilisers & Chemicals Ltd. (2023) 147 taxmann.com 285 (SC). ii. Accordingly, in view of the legal position, this additional ground is hereby rejected on merits. 28. Additional Ground No. 2 : Re-computation of liability of Dividend Distribution Tax (“DDT”) payable with respect to dividend paid to Non-resident shareholders at beneficial rate as per Double Taxation Avoidance Agreements. Printed from counselvise.com P a g e | 46 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) i. While additional ground is admitted on account of being a legal issue, the same is covered against the assessee by the decision of the Special Bench of Mumbai Tribunal in the case of DCIT v/s Total Oil India (P.) Ltd. (2023) 149 taxmann.com 332 (Mum.-Trib.)wherein it has been held that DTAA does not get triggered at all when a domestic company pays DDT under section 115-O. ii. Respectfully following the decision of the Special Bench as well as Co-ordinate bench (Mumbai) for AY 2011-12, this ground of the assessee isdismissed. 28. Additional Ground No. 3 : Treatment of incentives under Focus Market Scheme, Focus Product Scheme and Market Linked Product Scheme as a capital receipt and therefore not charging it to tax. i. The legal issue involved in this ground is whether the incentive received under the Focus Market Scheme („FMS‟), Focus Product Scheme („FPS‟) and Market Linked Focus Product Scheme („MLFPS‟). a. Can be regarded as a capital receipt or not under normal provisions of the Act; and b. Can be excluded in computing book profits u/s 115JB of the Act. ii. The Ld. AR submitted as under: Printed from counselvise.com P a g e | 47 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) The Hon'ble High Court of Rajasthan, in the case of PCIT v. Nitin Spinners Ltd. (116 taxmann.com 26) decided the issue of subsidy under the Focus Market Scheme for the first time. The said decision is dated September 19, 2019. To the best of the knowledge of the Assessee, there was no prior decision of any High Court on incentives under the Focus Market Scheme. The SLP filed by the Department before the Hon'ble Supreme Court was dismissed vide the order dated August 31, 2021 reported as PCIT v/s Nitin Spinners Ltd. (130 taxmann.com 402) (SC). The Hon'ble Delhi Tribunal took a view on this matter in the case of Bharat Rasayan Ltd. v. ACIT (ITA No. 1231/ Del/2019) vide order dated February 02, 2021. In view of the above, the Assessee submits that the legal argument that the incentive received under Focus Market Scheme is a capital receipt became available to the Assessee for the first time in 2019 by which time the order of Ld. CIT(A) was passed and the appeal before the Hon'ble Tribunal was already filed. The Assessee relies on the decision of the Hon'ble Bombay High Court in Ultratech Cement Ltd. vs. Addl CIT (408 ITR 500) wherein, after discussing various case laws on the subject including, inter alia, the decision of the Hon'ble Supreme Court in Jute Corporation of India Ltd. (187 ITR 688) (SC) and Addl. CIT v. Gujargravures (P.) Ltd. (111 ITR 1) (SC) and other decisions it has Printed from counselvise.com P a g e | 48 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) been held that \"when the grounds so raised could not have been raised before the Assessing Officer or the ground if now becomes available in view of changed circumstances such as decision of a Court to allow a particular deduction, then the assessee is not prohibited from raising an additional ground before the appellate authority\" Ld. AR submitted that since the ground relating to incentives under FMS, FPS and MLPFS became available to the Assessee much after filing the original appeal before the Hon'ble Tribunal, the said ground deserves to be admitted, even though the relevant scheme document was not available in the records of the Assessing Officer 11.8. Ld. AR further submitted that similar additional ground was raised in the previous assessment year viz. AY 2011-12 [ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mumbai Tribunal) attached at page no. 1-56 of the legal compilation], wherein the Hon. Bench at Para 44 of the order admitted the additional ground and at Paras 46 and 47 gave directions to the Id. AO to decide the issue for a denovo examination. iii. The co-ordinate bench admitted the additional ground and gave direction as under: “47.We heard the parties with regard to additional ground no 3 to 7. We notice that the assessee has not raised these issues before the lower authorities and that the same is raised before us based on Printed from counselvise.com P a g e | 49 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) certain judicial pronouncements which happened subsequent to the appellate proceedings. At the same time we see merit in the argument of the Id DR that the treatment of subsidies and incentives are not uniform across all Schemes and that the various clauses, terms and conditions of the specific scheme need to be examined before applying the decisions of the Hon'ble High Courts and Tribunals to assessee's case. Since the AO has not scrutinized these issues and since the issues require factual verification, we are remitting the issues of treatment of incentives under Market Linked Focus Product Scheme, fertilizer subsidy and sales tax subsidy as capital receipt back to the AO for a denovo examination. The AO is directed to call for necessary details and keep in mind the judicial pronouncements rendered in this regard to decide in accordance with law. Needless to say that the assessee be given an opportunity of being heard” iv. Respectfully following the decision of the co-ordinate bench for AY 2011-12, the additional ground of appeal is admitted and same is restored to the AO for denovo examination and afresh decision after giving the assessee due opportunity of being heard. 29. Additional Ground No. 4 : Treating fertilizer subsidy as a capital receipt and therefore not charging it to tax under normal provisions of the Act and excluding it while computing book profit u/s 115JB of the Act. i. Ground relates to the legal question as to whether the fertilizer subsidy received: Printed from counselvise.com P a g e | 50 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) a. Can be regarded as a capital receipt or not under normal provisions of the Act; and b. Can be excluded in computing book profits u/s 115JB of the Act. ii. The Ld. AR submitted as under: The claim that the fertilizer subsidy received should be treated as a capital receipt was not available to the Assessee at the time when the return of income was filed in the year 2013. Nor was this claim available while filing the appeal before Id. CIT(A) in the year 2017. The Hon'ble Mumbai Tribunal, in the case of ACIT v. M/s Shree Pushkar Chemicals and Fertilizers Ltd. (ITA No. 7008/Mum/2019) decided the issue of fertilizer subsidy being a capital receipt for the first time. The said decision is dated August 09, 2021. To the best of the knowledge of the Assessee, there was no prior decision of any Hon'ble Tribunal on fertilizer subsidy prior to this decision. In view of the above, the Assessee submits that the legal argument that the fertilizer subsidy is a capital receipt became available to the Assessee for the first time in 2021 by which time the order of Id. CIT(A) was passed and the appeal before the Hon'ble Tribunal was already filed. The Assessee relies on the decision of the Hon'ble Bombay High Court in Ultratech Cement Ltd. vs. Addi CIT (408 ITR 500) wherein, after discussing various case laws on the subject including, inter alia, the decision of the Hon'ble Supreme Court in Jute Corporation of India Ltd. (187 ITR 688) (SC) and Addl. CIT v. Gujargravures (P.) Ltd. (111 ITR 1) Printed from counselvise.com P a g e | 51 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) (SC) and other decisions and has held that \"when the grounds so raised could not have been raised before the Assessing Officer or the ground if now becomes available in view of changed circumstances such as decision of a Court to allow a particular deduction, then the assessee is not prohibited from raising an additional ground before the appellate authority\", iii. Respectfully following the decision of the co-ordinate bench for AY 2011-12, the additional ground of appeal is admitted and same is restored to the AO for denovo examination and fresh decision. 30. Additional Ground No. 5 : Treating freight subsidy as a capital receipt and therefore not charging it to tax under normal provisions of the Act and excluding it while computing book profits u/s 115JB of the Act. i. The additional ground relates to the legal question as to whether the freight subsidy received: a. Can be regarded as a capital receipt or not under normal provisions of the Act; and b. Can be excluded in computing book profits u/s 115JB of the Act. ii. It has been submitted by the Ld. AR that the claim of freight subsidy received should not treated as a capital receipt was not available to the Assessee at the time when the return of income Printed from counselvise.com P a g e | 52 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) was filed in the year 2013. The Hon'ble Gauhati High Court, in the case of Shiv Shakti Flour Mills (P.) Ltd. v. CIT [2017] (390 ITR 346) (Gau.) decided the issue of freight subsidy being a capital receipt for the first time. The said decision is dated November 29, 2016. To the best of the knowledge of the Assessee, there was no prior decision of any Hon'ble High Court on freight subsidy prior to this decision. The Assessee relies on the decision of the Hon'ble Bombay High Court in Ultratech Cement Ltd. vs. Addl CIT (2017) 408 ITR 500 wherein, ithas been held that \"when the grounds so raised could not have been raised before the Assessing Officer or the ground if now becomes available in view of changed circumstances such as decision of a Court to allow a particular deduction, then the assessee is not prohibited from raising an additional ground before the appellate authority. iii. The assessee further submitted that similar additional ground was raised and admitted in the previous assessment year viz. AY 2011- 12 [ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.)] iv. Respectfully, following the decision of the Co-ordinate Bench for AY 2011-12, the additional ground of appeal is admitted and same is restored to the Ld. AO for denovo examination and fresh decision. Printed from counselvise.com P a g e | 53 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 31. Additional Ground No. 6: Treating sales tax subsidy as a capital receipt and therefore not charging it to tax under normal provisions of the Act and excluding it while computing profits u/s 115JB of the Act. i. It has been submitted by the Ld. AR that the additional ground is based on the legal question as to whether the sales tax subsidy under West Bengal Incentive Scheme 2004 received: a. Can be regarded as a capital receipt or not under normal provisions of the Act; and b. Can be excluded in computing book profits u/s 115JB of the Act. ii. The accounting treatment of the said sales tax subsidy is appropriately disclosed in the audited financial statements under \"other operating income\" under Schedule 16 Income from Operations, which was a part of the assessment records. The assessee relies on the decision of the Hon'ble Bombay High Court in Ultratech Cement Ltd. vs. Addl CIT [2017] (81 taxmann.com 74) wherein, it has been held that \"where only a pure question of law arises from the facts which are already on record, then there is no reason why the appellate authority should not consider the question of law so as to determine the correct tax liability of an assessee in accordance with law\".The assessee Printed from counselvise.com P a g e | 54 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) further submitted that similar additional ground was raised in the previous assessment year viz AY 2011-12 and admitted by the coordinate bench. v. Respectfully following the decision of the co-ordinate bench for AY 2011-12, the additional ground of appeal is admitted and same is restored to the AO for denovo examination and fresh decision. ITA No. 1885/Mum/2018 AY 2013-14 [Revenue’s Appeal] : - 32. Ground No. 1 to 4 : Disallowance u/s 14A by restricting the disallowance. i. These have been clubbed and decided along with ground No. 1 of assessee‟s ground of appeal vide Paras 6 to 12 hereinbefore. 33. Ground No. 5 & 6 : Deletion of disallowance made u/s 40(a)(ia) of the Act- Expenses on year-end provisions. i. Brief facts are that the year-end provisions amounting to Rs. 1,66,69,505/- were made, since the parties were not identified in some cases and the bills had not been raised by the parties.The assessee claimed that it was not the “person responsible for paying sums” to the parties and consequently, no liability arose on the assessee to deduct tax at source on such amounts. Printed from counselvise.com P a g e | 55 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) ii. The AO held that since TDS has not been deducted on the year- end provisions, disallowance is required to be made u/s. 40(a)(ia) of the Act. iii. The AO further observed that the provision for expenses was made on an estimated basis pending receipt of actual invoices from the vendors, the liability for expenses was not accrued to the assessee and hence, the same is in the nature of contingent liability. This is exactly the same basis on which the disallowance was made in AY 2011-12. 34. We have heard both parties on this ground and it is seen that the issue has also been covered by decision of the Co-ordinate bench in assessee‟s own case for AY 2011-12 wherein it has been held as under: “53. We have heard both the parties on this issue. We noticed that the issue is covered by the decision of the Co-ordinate Bench in assessee's own case for AY 2010-11 wherein it has held that \"24.1 The ground No.2 of the appeal by Revenue is with respect to disallowance under section 40(a)(ia) of the Act on the provision made an the end of the year Rs.5.84,07,299/-, The Id. Authorized Representative for the assessee pointed that identical issue was raised in the appeal by the Revenue in assessment year 2009-10, ITA No.2963/Mum/2014 decided on 20/12/2019. We find that the Co-ordinate Bench of the Tribunal following the decision in assessee's own case in ITA No. 3033/Mum/2012 for assessment year 2008-09 decided on 09/12/2015 deleted the disallowance made under section Printed from counselvise.com P a g e | 56 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 40(a)(ia) of the Act. The Id. Departmental Representative has not been able to distinguish the findings of the Co-ordinate Bench of the Tribunal on this issue in immediately preceding Assessment Year in assessee's case. The CIT(A) has deleted the addition by following the order of Tribunal in assessee's case in ITA No. 8427/Mum/2010 for A.Y. 2006-07 decided on 17- 09-2014. We observe that this issue is recurring and the Tribunal has been consistently deciding the issue in favour of axsessee. Since, the facts in impugned A.Y. are similar, we see no reason to take a different view. We uphold the findings of the CIT(A) and dismiss ground No.2 of the appeal by Revenue in the light of Tribunal order in assessee's case for A.Y. 2009- 10.\" 54. Respectfully following the above decision of the co-ordinate Bench. We uphold the decision of the CIT(A). Revenue's ground is dismissed.” iv. Respectfully following the decision of the co-ordinate bench for AY 2011-12 and earlier years, ground No. 5 & 6 are hereby rejected. 35. Ground No. 7 : Deletion of addition made u/s 40(a)(ia) while computing book profits u/s 115JB of the Act – Expenses on year provisions. i. Ld. AR has submitted before us that if the disallowance u/s 40(a)(ia) is itselfdeleted, the question of addition of the said disallowance while computing book profits u/s 115JB of the Act would not arise. Printed from counselvise.com P a g e | 57 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) ii. Accordingly, the Ld. CIT(A)‟s decision of deleting the addition u/s 115JB is upheld. 36. Ground No. 8-9 : Deletion of adjustment of CENVAT on valuation of stock. i. Brief facts are that the assessee has not included the Cenvat credit in valuation of closing stock of raw materials since the same is not debited to the purchases but maintained in a separate account. ii. The AO observed that similar disallowance/addition was made to the closing stock of AY 2011-12. Based thereon, addition has been made in the captioned assessment year. iii. The facts of this issue are identical as compared to earlier years. Ld. CIT(A), following his decision in AY 2012-13 and also the fact that the first appellate authority had deleted the addition on this issue from AY 2005-06 to AY 2011-12 based on the decision of the Hon‟ble Supreme Court in the case of CIT v/s Indo-Nippon Chemical Co. Ltd. (2003) (261 ITR 272), has deleted the addition for the year under consideration also. iii. The Ld. AR submitted that this issue is also covered by its own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.). Printed from counselvise.com P a g e | 58 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) iv. We find that this issue has been covered by the co-ordinate bench in assessee‟s own case for AY 2011-12 as well as earlier years. v. Respectfully following the decisions of the co-ordinate bench, ground No. 8 & 9 are hereby rejected. 37. Ground No. 10-11 : Deletion of disallowance made on account of provision for leave salary/compared absence. i. Brief facts of this issue are that the net global provision for leave salary amounting to Rs. 10,46,01,913/- was created based on actuarial valuation, being a scientific method of computing estimated liability. ii. The AO held the same as disallowable u/s 43B(f) of the Act. The Ld. CIT(A) deleted the disallowance and the revenue is in appeal. iii. Before us, the Ld. AR submitted that this global provision is not the sum of leave salary “payable” to employees retired/resigned during the year under consideration in respect of leave at the credit of such employees. Therefore, the aforesaid provisions are not covered within the ambit of section 43B(f). Reliance was also placed, inter-alia, on the decision of Hon‟ble Andhra Pradesh High Court in the case of SrikakolluShubbarao& Co. (1988) 173 ITR 708. Printed from counselvise.com P a g e | 59 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) iv. In addition to the above, the Ld. AR also placed reliance on the decision rendered in case of DCIT v/s Ultratech Cement Ltd. (ITA No. 4835 & 5318/Mum/2017) (Mum. Trib.), wherein it has been held that leave encashment payable for employees who had retired during the year alone would fall within the ambit of section 43B(f) and if the same is not paid within the due date of filing of return of income u/s. 139(1), the said expenditure shall not be allowed as deduction. However, in respect of provisions made for leave in respect of non-retiring employees, the same, though “incurred”, does not become “payable” at all to those employees and hence, the provisions of section 43B(f) could not be put into operation in respect of the said provision. v. The Ld. CIT(A) has deleted the disallowance for the captioned assessment year following the decision of his predecessor in AY 2012-13, wherein considering the identical facts and following the Tribunal decision in assessee‟s own case for AY 2002-03 to AY 2008-09, the disallowance was deleted. vi. After hearing both the parties, we have noted that this issue is covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.) wherein it has been held as under: “58. Ground No.7 is with regard to the deletion of disallowance made by the AO towards provision made for leave Printed from counselvise.com P a g e | 60 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) salary/compensated absence. We noticed that the issue is covered by the decision of the co-ordinate bench in assessee's own case for AY 2010-11 where it is held that \"30. We observed that that the Co-ordinate Bench of the Tribunal while deciding the appeal of the assessee for assessment year 2008-09 decided the issue on merits in turn by placing reliance on Tribunal order for A.Y. 2008- 09. The Tribunal allowed relief to the assessee by following the decision of the Hon'ble Apex Court in the case of Bharat Earth Movers CIT reported as 245 ITR 428(SC). Dehors the issue of constitutional validity of clause(f) to section 43B of the Act, the Co-ordinate Bench after considering the issue on merits has deleted the addition. Taking into consideration, entirety of facts we respectfully follow the decision of Tribunal in assessee's own case for assessment year 2008-09 and confirm the findings of CIT(A) in deleting the disallowance. Consequently, ground No.4 of the appeal by the Revenue is dismissed.\" 59. Considering that there is no change to the facts for the year under consideration following the above decision of the co- ordinate Bench, we dismissed the ground raised by the Revenue.” vii. Respectfully following the decision of the co-ordinate bench, ground No. 10&11 are hereby rejected. 38. Ground No. 12 &13 : Allowance of allocation of head office expenses to the captive power plant eligible to claim deduction u/s 80IA of the Act. Printed from counselvise.com P a g e | 61 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) i. Brief facts of the issue are that the captive power plants (CPP) in respect of which the assessee has claimed deduction u/s 80-IA are treated as separate and independent entities and all expenses in respect thereof have been accounted for in the accounts maintained for the said CPPs. It has been claimed that there is no direct and proximate nexus between the expenses incurred at the Head Office and such CPPs. Therefore, no Head Office expenses have been allocated to the profitability of the said CPPs. ii. The AO did not accept the contention of the assessee on the ground that without the involvement of Head Office, the CPPs cannot work. The expenses at Head Office are in relation to activities for the entire company including R&D activities, borrowings, etc. Thus, such Head Office expenses should be allocated to the CPPs. As per AO, Rs. 26,01,54,956/- is the total common Head Office expenses allocable to the CPPs. The expenses have been allocated based on the turnover of all units as higher turnover would require more attention from the management and the same would be the most logical and fair criterion for apportioning the Head Office expenses. iii. The Id. CIT(A) has deleted the disallowance for the following the decision of his predecessor in AY 2012-13, wherein considering the identical facts and following the decision of CIT(A) in AY Printed from counselvise.com P a g e | 62 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 2011-12 as well as for AY 2003-04 to AY 2008-09, the disallowance was deleted. iv. We have gone through the order of the coordinate benches for various assessment years. In AY 2009-10 , the issue has been discussed in detail and decided as under: “5 We have heard rival submissions. We find that this issue is already covered in favour of the assessee by the orders of this Tribunal from A.Yrs 2003-04 to 2008-09. We also find that for A.Y.2006-07, the revenue had carried this matter to the Hon'ble Jurisdictional High Court and the Hon'ble Jurisdictional High Court in Income Tax Appeal No.433/2015 dated 15/01/2018 had held that the question raised by the revenue does not give rise to any substantial question of law and accordingly, did not entertain the same. This goes to prove that the order passed by this Tribunal on the impugned issue had attained finality. Respectfully following the same, the ground No. 4 raised by the assessee is allowed.\" Respectfully following the decision of the co-ordinate bench for earlier years, ground No. 12 & 13 are hereby rejected. 39. Ground No. 14 &15 : Allowance of payment of employees’ children school fees as expenditure u/s 37 of the Act. i. Facts related to this issue are that the assessee has incurred expenditure amounting to Rs. 14,47,322/- on Indian Rayon School at Veraval where children of Assessee's employees are studying. These schools are at remote and backward places where basic educational facility is not available. In order to Printed from counselvise.com P a g e | 63 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) attract/retain employees at such units and to assure good educational facilities, 50% of the school fees of each child is paid by the assessee. Thus the assessee claimed that such expenditure is in the nature of employee welfare expenses, allowable u/s. 37 as business expense and is not in the nature of \"contribution\" to any fund as given in section 40A(9). ii. The AO disallowed the expenditure u/s 40A(9) after holding that there is no law requiring the assessee to incur such expenses or to make such a contribution. iii. The disallowance made by the Ld. AO has been deleted by the Ld. CIT(A) after following decision of his predecessor in AY 2007-09 to AY 2012-13. iv. Before us, the Ld. AR has submitted that this issue is covered by its own case (as successor to Indian Rayon & industries Ltd), in AY 1998-99 & AY 1999-00 [ITA Nos. 6668 & 6669/Mum/2003 (Mumbai Tribunal)] & AY 2000-01 & AY 2001-02 (ITA Nos. 5421 & 5422/Mum/2005 (Mumbai Tribunal)]. The relevant part of the order for AY 2001-02 is reproduced as under: “36. On going through the orders of the coordinate Benches in assessee's own cases and in ITA No. 6668 & 6669/Mum/2003, the coordinate Bench relied on the decision pertaining to assessment year 1995-96 in ITA No. 3207/Mum/2002, wherein it was held. 2.9 The ground No.9 is regarding disallowance of Rs. 19.05, 146/ under section 40A (9). The said expenditure had been incurred by the assessee on payment made to schools at Veraval Printed from counselvise.com P a g e | 64 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) and Malkhed wherein the children of the employees of the company were studying. The AO disallowed the expenditure under section 40A(9). The said section provides that no deduction could be allowed in respect of any sum paid by the assessee as an employer towards setting up or formation of or as contribution to any fund/ trust, company, association of persons, hods of individuals, society registered under the Societies Registration Act or other institution for any purpose except where sum is 30 paid for the purposes and to the extent provided for under clause (iv) or clause (v) of sub section (1) of section 36 or as required by or under any other law for the time being in force. The assessee argued that provisions of section 40A(9) were not applicable and the expenditure was allowable as revenue expenditure under section 37(1). CIT(A) however following the decision in Assessment year 1994-95 confirmed the disallowance. Aggrieved by the said decision the assessee is in appeal 2.91 We have heard both the parties in the matter. We find that the same issue had been considered by the Tribunal in assessee's own case in assessment year 1991 95 in ITA No.2320/M/2007 In that year also disallowance had been made under section 40A(9) in respect of payments made to Indrayan School. The tribunal however following the decision in A.Y.199291 and 1993-94 allowed the claim. Facts this year are identical. Therefore following the decision of the tribunal supra we set aside the order of CIT(A) and allow the claim of the assessee\" 19 Therefore, respectfully following the order of the Tribunal in assessee's own case for Assessment Year 1995-96, we allow the claim of the assessee for the year under consideration also\". 37.Since the issue is identical, we, therefore, respectfully following the decisions of the coordinate Benches in assessee's own case, sustain the order of the CIT(A). 38. Grounds no. 1 & 2 are rejected.” Printed from counselvise.com P a g e | 65 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) v. Respectfully following the decision of the co-ordinate bench, ground No. 14 & 15 are hereby rejected. 40. Ground No. 16-17 : Allowance of additional depreciation u/s. 32(1)(iia) in the succeeding assessment year where the assets were put to use for less than 180 days in relevant previous year. i. The assessee has claimed the balance/spill-over additional depreciation u/s. 32(1)(iia) in the captioned assessment year at the rate of 10% in respect of assets purchased in FY 2011- 12 (i.e. AY 2012-13 being the earlier assessment year) and put to use for less than 180 days in the said year. ii. The AO has held that the additional depreciation is a one-time incentive viz. depreciation at the rate of 20% is to be claimed on the actual cost of new machinery and not on WDV of the machinery. Therefore, the spill-over depreciation of 10% was not allowed in the captioned assessment year. The Ld. CIT(A) has deleted the addition made by the Ld. AO in this year as well as AY 2012-13following the decision of co-ordinate bench in the case of Godrej Industries Ltd. (2-15-TIOPL-1226-ITAT-Mum). iii. The Ld. AR has submitted that this issue is covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.) wherein in it has been held as under: Printed from counselvise.com P a g e | 66 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) “62. “………………………………….Ground no.9 raised by the revenue is with regard to CIT(A) allowing additional depreciation u/s 32(1)(iia) in the succeeding assessment year where the assets were put to use for less than 180 days in relevant previous year. We notice that the issue has been considered by the Co-ordinate Bench in assessee's own case for AY 2010-11. The relevant observations of the Tribunal are extracted as below: \"9. We find that the Assessing Officer has disallowed the assessee's claim of additional depreciation amounting to Rs.5.71,08,316/- in respect of the assets acquired and put to use for less than 180 days in the earlier assessment years. The Assessing Officer has allowed 50% claim of additional depreciation in the current assessment year and has directed to reduce the total income accordingly. We observe that in the immediately preceding assessment year similar issue had come up before the Tribunal. The Co-ordinate Bench of the Tribunal after placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of PCIT vs. Godrej Industries (supra) allowed the claim of the assessee. 9.1 The ld. Departmental Representative has not been able to controvert the findings of Co-ordinate Bench of the Tribunal on this issue in assessee's own case. We find no reason to take a different view, hence, following the decision of the Tribunal in assessee's own case in the immediately preceding assessment year, ground No.3 of the appeal is allowed. iv. Respectfully following the decision of the co-ordinate bench, ground No. 16 & 17 are hereby rejected. 41. Ground No. 18-19 : Allowance of ESOP Expenses: i. Brief facts of the issue are that the assessee has claimed ESOP expenses and debited to the P&L account amounting to Rs. Printed from counselvise.com P a g e | 67 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 29,56,045/-. The said amount has been recognized as an expense as per the relevant SEBI Guidelines being the difference between the market price and the price at which the option is exercised by the employees. ii. The AO noted that the notional loss as per SEBI guidelines is not allowable u/s 37. Hence, the deduction of Rs. 29,56,045/- claimed on account of ESOP was disallowed. iii. The Ld. CIT(A) has deleted the additionfollowing the earlier year‟s order of the Co-ordinate Bench in AY 2008-09 and also of the Ld. CIT(A) in 2011-12 and AY 2012-13. iv. Before us, the Ld. AR submitted that this issue is covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum.Trib.) wherein it has been held as under: “64. Ground no. 10 raised by the revenue is with regard to CIT(A)’sdeletion of addition made on account of ESOP expenses. It has been brought to our attention by the Ld AR that this has been a recurring issue in assessee's case and that the coordinate bench has been consistently holding the issue in favour of the assessee. The Id DR did not controvert the statement. The relevant observations of the coordinate bench on this issue in assessee's own case for AY 2010-11 is as follows - Printed from counselvise.com P a g e | 68 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 13. We have heard the submissions made by rival sides. We find that identical issue was raised in an appeal by the assessee before the Tribunal in assessment year 2009-10. The Tribunal in turn following the order of Co-ordinate Bench in assessee's own case in ITA No.3033/Mum/2012 for assessment year 2008-09 decided on 09/12/2015 allowed assessee's claim and held the expenditure in respect of ESOP as revenue in nature. No contrary decision has been placed by ld. Departmental Representative. Respectfully following the decisions of Co- ordinate Bench of the Tribunal in assessee's own case for the preceding assessment years we hold ESOP expenditure as revenue in nature. The ground No.5 of the appeal is allowed for parity of reasons. 65. We notice that the facts for the year under consideration are identical and therefore we see no reason to take a different view on the impugned issue. Accordingly, we dismissed the ground raised by the Revenue.” v. Respectfully following the decision of the co-ordinate bench, ground No. 18 & 19 are hereby rejected. 42. Ground No. 20 &21 : Allowance of expenditure on account of catalyst deployed in plant. i. Brief facts in this regard are that the assessee has set up a plant for manufacturing of ammonia and urea. It was claimed that in Printed from counselvise.com P a g e | 69 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) one of the running machineries, the catalyst was replaced which resulted in the plant/machinery being brought back to the normal level without achieving any extra production. Thus, since the catalyst was in the nature of consumables, the expenditure incurred thereon was claimed as business expense. ii. The Ld. AO disallowed the expense and allowed normal depreciation at the rate of 15% on the same. The Id. AO further disallowed the assessee's claim of additional depreciation u/s 32(1)(iia) on the ground that it has \"merely replaced certain serviceable parts which cannot be said to be a new plant and machinery for purposes of section 32(2)(iia)\" iii. The Ld. CIT(A) held that the catalyst is only a part of the plant and is replaced for restoring the efficiency of the plant. Since the Ld. AO also accepts that these are only replacement of serviceable parts, the same is to be allowed as a revenue expenditure and hence, disallowance by the Ld. AO was deleted. iv. Before us, the Ld. AR submitted that this issue is also covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum.Trib.) wherein it has been held as under: “66. While contending the issue of CIT(A) deleting the addition made towards expenditure on account of catalyst deployed in plant through Ground No.11, the Id DR fairly conceded that the issue is covered by the decision of the coordinate bench in Printed from counselvise.com P a g e | 70 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) assessee's own case for AY 2008-09 (ITA No.3033/Mum/2012 dated 09.12.2015) wherein it has been held that - We have heard the rival submissions and perused the material before us. We find that the Lucknow Tribunal has discussed and decided the issue of catalyst in following manner: \"5. Coming to the disallowance of claim of deduction of Rs.45,64 595/- towards expenditure on catalysts it was claimed that the issue was decided in assessee's favour and the matter was before the High Court for the Asses merit Year 1997-98. It was further submitted that irrespective of the fact that whether the expenditure is held to be revenue or capital, it is not in dispute that the spares and catalysts were a passive or active use during the whole of the year. U/s.32 only two conditions are to be fulfilled for allowing depreciation i.e., (a) ownership and (b) its use for the purpose of business. According to the proviso to Section 32, depreciation is to be restricted to 50% if it was acquired during the previous year and put to use for a period of less than 180 days. The assessee was not coming under the limitation according to the proviso. 6. the assessee further submitted that in fact the assessee had made the written submission running to 43 pages which, among other details contained the date of purchase, commercial description of the spare, number of pieces and total value against a particular entry. Out of the total spares for the financial year 1995-96, items that cost less than Rs.5,000/- totalled to Rs.45.30.617/-. The assessee also furnished a copy of vouchers/bills covering value of Rs.1,05,93,876/-. Originals were also submitted for verification. It was claimed that all the purchases of the spare parts were debited to inventory. It was submitted that the actually none of the spare parts were drawn from Printed from counselvise.com P a g e | 71 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) stores for consumption by the plant engineers. They were being carried forward from year to year in the inventory. During the year under consideration, ICAI came out with the interpretation of AS-2 which insisted relisting of spares. The question of taxability of amount as revenue has arisen only because of the reason of a distinct treatment for the purpose of accounting and taxation. While in the financial accounts such value has been capitalized for the purpose of taxation, it was being claimed as expense. Capitalisation was done on the basis of binding directives of ICAI Many of the spares were procured as back as 1986 but capitalized now because of the change in the accounting standards. The assessee relying on the decision of the Hon'ble Supreme Court in the case of Kedarmath Jute Mfg. Co. Ltd., v. Commissioner of Income-tax (1971) 82 ITR 363, contended that entries in the books of account cannot be decisive or conclusive, for determining the taxability of income. The assessee contended in the light of the decision of the jurisdictional High Court in the case of Anil Bulk Carriers P. Ltd. v. Commissioner of Income tax(2005) 276 ITR 625 and in the case of Commissioner of Income tax v. Swarup Vegetable Products India Ltd.. (2005) 277 ITR 60, on the subject to depreciation in the value due to passage of time is to be recognized. 21. Coming to the objection of the revenue that spares and catalysts were carried forward from year to year and by the year 2002-03, it had lost its commercial value and therefore, the claim was without merit. The learned AR's submission that the capitalization was done by the assessee only because of the prescription of the ICAl with regard to the change of the accounting standard is to be accepted. The counsel's objection that the reliance placed by the revenue on the decision of the Delhi High Court in Printed from counselvise.com P a g e | 72 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Delhi Tourism and T.D.C. Ltd. v. Commissioner of Income- tax (2006) 285 ITR 114 is distinguishable on facts. In the case before the Hon'ble Delhi High Court, the High Court held that since the electricity charges for the electricity consumed were a known expenditure to the assessee, the assessee, on the basis of average could make a provision for this expenditure for every year of assessment even if no bill was received in a particular of assessment. As the assessee had failed to claim this expenditure in the earlier assessment year and having failed to discharge this duty of providing for a known expenditure, the assessee could not claim the electricity charges in the subsequent assessment years. Coming to the instant case of the assessee, on facts it is to be seen that the assessee changed the method and started capitalization of the spares and catalysts b cause of the change in the method of accounting standards as prescribed by the ICAL. Coming to the objection of the revenue as to how the spare parts were valued, it is always the case of the assessee that it was always valued at cost and it had never changed this method. One of the objection of the revenue was that there was no certificate nor evidence to show that these spa or catalysts had lost its commercial properties nor that the same had aged. At the time of hearing, we directed the assessee to produce certificate from the competent authority, which has now been placed on record. The revenue has again raised an objection on this. 22. Another objection of the revenue is that in the case of National Aluminium Co. Ltd., (supra), the bench allowed the claim of the assessee in respect of non-moving stock and spares as revenue expenses since there was depreciation in the cost of the same. But in the case of the assessee before us, it is not known ether the spares and Printed from counselvise.com P a g e | 73 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) catalysts were really fast moving or not. It is the case of the assessee that some of the items were purchased as back as 18 years and if it is still lying in the stores, we are of the view that it indicates that it is not a fast moving item. The further objection of the revenue is that one of the major reason for this claim now made is the amalgamation of IGFL with Aditya Birla Muva Ltd., and the loss is passed on to the amalgamated company. We are unable to subscribe to the view canvassed by the revenue that whether the collaboration took place in this year or not, the fact that the accounting standard was changed by the ICAl during the year is not disputed. 23. We find that on a similar issue which was agitated before the Cuttack bench of the Tribunal in the case of National Aluminium Co. Ltd., (supra) the Tribunal held that the valuation taken of obsolescence loss at 20% of the historical cost cannot be said to be without any basis not it is improper. Consequentially, the claim of the assessee after three years, the Tribunal held, is to be allowed. The same decision on principle is applicable in the instant case of the assessee as well. The assessee capitalized these items on account of the change in the accounting standard prescribed by the ICAI. The objection by the revenue that the assessee should have claimed it in the earlier years, or the basis for claiming this during the year under consideration is because the assessee started making profit for the first time after amalgamation etc., is not sustainable. Even the assessee's counsel submitted before us that this was not the first year of profit making. Even before the amalgamation the company made the profit. It is true that after amalgamation also the assessee had positive income. We have to accept the assessee's contention that it was not the motive to reduce tax, but it Printed from counselvise.com P a g e | 74 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) was because of the change in the method accounting standard prescribed by the ICAI is a reason to be accepted in the absence of any evidence to the contrary. 23. In view of the above, we allow this ground taken by the assessee.” v. Respectfully following the decision of the co-ordinate bench, ground No. 20 & 21 are hereby rejected. 43. Ground No. 22 & 23 : Allowance of depreciation on goodwill. i. Brief facts of the issue are that the assessee had incurred an expenditure of Rs. 20.35 cr on the acquisition of goodwill relating to the garments division of Madura Coats Ltd. during FY 1999- 2000. Since the goodwill is acquired, depreciation has been claimed u/s 32 of the Act. ii. The AO disallowed the depreciation claim for the reason that the Department has not accepted the favourable order of the Tribunal in assessee‟s own case for AY 2000-01 and AY 2001-02. iii. In appeal, Ld. CIT(A) deleted the addition holding that on identical facts, the issue was decided in favour of the assessee in AY 2011-12 and AY 2012-13 by placing reliance on the decision of Hon’ble Supreme Court in CIT v/s Smifs Securities Ltd. (2012) 348 ITR 302. Printed from counselvise.com P a g e | 75 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) iv. Before us, the Ld. AR has submitted that this issue is covered by its own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.) v. After hearing both the sides, we observe that the issue has been decided by the Co-ordinate Bench of the Tribunal for AY 2010-11 and also for earlier years in favour of the assessee. vi. Respectfully following the decision of the co-ordinate bench, ground No. 22 & 23 are hereby rejected. 44. Ground No. 24 &25 : Treatment of interest subsidy from TUF as capital receipt not chargeable to tax. Brief facts of the matter are as under: i. The objective of the Technology Upgradation Fund Scheme (TUFS) was modernization and technology upgradation in the textile sector and improving the viability and competitiveness in domestic and international markets. The benefit of TUFS is only conferred to the eligible industry which invests in certain specified assets using funds borrowed from certain banks/financial institutions and out of interest paid on such borrowed funds, 5% is refunded by the Government. ii. It was held by the AO that the subsidy reduced the interest cost and thus, there is reduction in the production cost of the assessee. Printed from counselvise.com P a g e | 76 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) Consequently, there is an increase in profits and,therefore, the subsidy is a taxable revenue receipt. iii. In appeal, the Ld. CIT(A) following the decision of his predecessor in AY 2012-13 has deleted the disallowance made by the AO. iv. Before us, Ld. AR has submitted that this issue is covered by assessee‟s own case in AY 2011-12 in ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017 (Mum. Trib.) v. We have perused the order of AY 2011-12 of the Co-ordinate bench on this issue wherein it has been held as under: “72. Revenue is contending the direction of the CIT(A) to treat interest subsidy from TUF as capital in nature through Ground No. 14. Both the parties conceded that the issue is covered by the decision of the coordinate bench in assessee's case for AY 2010-11 where it has been held that - 40 Both sides heard. The assessee has received subsids under TUF scheme. The assessee has claimed the subsidy as capital receipt, whereas, the Department treated the subsidy as Revenue in nature. We find that the Hon'ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd (supra) examined the scheme in the light of various decisions and held the subsidy under TUF scheme as capital in nature Similar view has been taken by the Hon'ble Calcutta High Court in the case of CIT vs. Gloster Jute Mais Ltd. (supra). Thus, in view of above judgements of Hon'ble High Courts, we see no infirmity in the findings of CIT(A), The same are upheld and ground No.11 of the appeal is dismissed 73.Considering that the fact for the year under consideration being identical we see no reason to interfere with the decision of Printed from counselvise.com P a g e | 77 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) the CIT(A). Accordingly the ground raised by the Revenue is dismissed.” vii. Respectfully following the decision of the co-ordinate bench, ground No. 24 & 25 are hereby rejected. 45. Ground No. 26 : Restriction of transfer pricing adjustment made on Corporate guarantee given to AE-0.5% as held by AO/TPO: & Ground No. 27 Restriction of transfer pricing adjustment made on performance guarantee fees given on behalf of AE to M/s Capital One Service Inc. – 05% as against 1.74% as held by AO/TPO. These two grounds have already been discussed and decided along with assessee‟s ground of appeal No. 6 at Para 20 hereinbefore. 22. In the result, theappeals filed by the assessee and revenue are partly allowed. Order Pronounced in Open Court on .2024 Sd/- (AMIT SHUKLA) (RENU JAUHRI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Mumbai Date .2024 ANIKET SINGH RAJPUT/STENO आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent. Printed from counselvise.com P a g e | 78 ITA No. 563, 1885/Mum/2018 A.Y. 2013-14 Aditya Birla Nuvo Ltd. (Since Amalgamated with Grasim Industries Ltd.) 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "