Appeal details
Counselvise Citation
[2023] 100 COUNSELVISE.COM (IT) 9409 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 7 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
30-10-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
18-10-2023
Assessment Year
2013-2014
Appeal Filed On
01-03-2020
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH (Conducted Through Virtual Court) Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The ACIT, Circle-3(1)(1), Ahmedabad (Appellant) Vs M/s. Nandan Denim Ltd. 198/1, 203/2, Saijpur, Gopalpur Pirana Road,Peplej, Ahmedabad-382405 PAN No. AAACN5327L (Respondent) M/s. Nandan Denim Ltd. 198/1, 203/2, Saijpur, Gopalpur Pirana Road, Peplej, Ahmedabad-382405 PAN No. AAACN5327L (Appellant) Vs The ACIT, Circle-3(1)(1), Ahmedabad (Respondent) Revenue Represented: Shri Kamlesh Makwana, CIT-DR Assessee Represented: Shri S.N. Soparkar, A.R & Shri Parin Shah, A.R. Date of hearing : 19-10-2023 Date of pronouncement : 31-10-2023 ITA Nos: 1768 & 1769/Ahd/2019 Assessment Years: 2013-14 & 2014-15 C.O. Nos: 28 & 29/Ahd/2020 Assessment Years: 2013-14 & 2014-15 I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 2 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by the Revenue as against separate appellate orders both dated 06-09-2019 and 20-09-2019 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of assessment orders passed under section 143(3) rws 144C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Y.) 2013-14 and 2014-15. Cross Objections are filed by the assessee against the above Revenue appeals. Since common issues are involved in both the asstt. years therefore the same are disposed of by this common order. 2. ITA No.1768/Ahd/2019 is taken as the lead case and the brief facts of the case that the assessee is a company engaged in the business of manufacturing of denim, bottom wear fabrics, garments & yarn and trading of fabrics. For the assessment year 2013-14 the assessee filed its Return of Income declaring total income of Rs. 60,52,59,370/- and claimed deduction under section 80 IA of Rs. 10,64,57,144/-. The assessee credited the sale of Rs. 60,70,12,171/ on account of sale of electricity power generated through its Captive Power Plant [shortly known as CPP] by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd [hereinafter referred as TPL] as “Tested Party” and applied the same rates for which the electricity was purchased by the manufacturing unit [non eligible unit] for the purpose of benchmarking of the rates to be applied for transfer of electricity I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 3 from its CPP to non-eligible unit and also to its Associated Enterprise namely M/s. Chiripal Industries Ltd. The assessee thus applied the internal Comparable Uncontrolled Price [CUP] method. The assessee also sold steam generated through this CPP of Rs. 10,55,95,210/- making total credit of Rs. 71,26,07,381/-. 2.1. Whereas the Ld. Transfer Pricing Officer [TPO] has worked out the sale price of the electricity by adopting ₹ 3.35 per unit being the supply of electricity rates by adopting First and Second external CUP method of Uttar Gujarat Vij Company Ltd [UGVCL] and Indian Exchange Ltd [IEL]. Thus the TPO has worked out the sale price of the electricity and steam by applying the average formula of Rs.3.35 per unit and total adjustment of Rs.44,76,15,240/- was made by the AO by reducing the declared sale of electricity and steam in the profit and loss account of the eligible unit and worked out the deduction u/s.80IA at Rs.Nil. 3. Aggrieved against the assessment order the assessee filed an appeal before Commissioner of Income Tax [Appeals]. After considering the above submissions of the Assessee, the Ld CIT[A] deleted the additions made by the AO observing as follows: “....The appellant has lignite based captive power its factory premises. This power plant generates power which is transferred other unit of the appellant which is manufacturing the denim cloth. As and when, there is any surplus power, the same is sold to associate of the appellant namely M/s Chiripal Industries Ltd. The apppellant's power plant also generates the steam during the process of generation of electricity which is also transferred to the denim manufacturing unit. 5.2 During the year under consideration, the appellant has declared gross total income of Rs 27,32,16,512/- and claimed deduction under Chapter VIA of Rs. 10,79,,57,144/- which comprised of deduction u/s 80IA of the Act claimed at Rs. 10,64,57,144/- being 100% of the profit of the eligible unit(a electricity generating unit of the appellant). The appellant has filed I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 4 the required audit report in form no. 10CCB giving the details and basis for claiming this deduction of Rs.10,64,57 144/-. In the separate profit & loss account, the income of Rs.71,26,07,381/- has been credited in the Profit & Loss Account which comprised of sale of power of Rs.60,70,12,171/- and steam of Rs.10,55,95,210/- The appellant had worked out the profit of Rs. 11,12,50,090/-. However, it had claimed the deduction at Rs. 10,64,57,144/- which is the profit worked as per the IT. Act. The entire sales of electricity and steam have been made to its non-eligible unit and the AE namely M/s Chiripal Industries Ltd. In benchmarking the transaction of transfer of power to denim manufacturing unit by the captive power plant, the appellant has selected the internal comparable transaction of purchase of power by denim manufacturing plant from M/s Torrent Power Limited. The TPO in turn has selected external transactions of UGVCL and IEX for the benchmarking purposes. He has adopted two external comparable entities i.e, the UGVCL and the IEX as explained in detail in the assessment order and also through written submissions reproduced in para 4.3 above. The appellant has explained that the TPO has wrongly taken these two entities for determining the ALP in violation of Rule 10B(2) of the Act. The intention of the TPO and the A.O. was to adopt the reduced sales as against the declared sales by substituting the figures of sale of electricity and steam so that the deduction u/s 801A claimed by the appellant is curtailed or not allowed. It has been contended by the appellant that it had correctly selected the manufacturing division who generated the electricity through its CPP as tested party and was non- eligible unit for the purpose of section 80IA of the Act and adopted the same rates as were charged by TPL to the manufacturing unit as benchmark. The A.O. rejected this selection with rates so benchmarked by taking two external CUP ie. UGVCL and IEX and both these could not be compared for many factors and business transactions along with the manner in which they carried out. Further, according to the TPO, captive power plant and electricity distributing companies are not comparable. M/s Torrent Power Ltd. is a distribution entity. According to him, there is a material difference between captive power plant as a seller and distribution/transmission entity like M/s Torrent Power Ltd. The differences are both in terms of functions performed as well as asset used. In the case of distribution and transmission entities, apart from assets used for generation of electricity huge investments have gone in laying in transmission and distribution infrastructure. These investments and related transmission and distribution function are totally missing in the CPP. He also observed that sale of electricity is regulated activity. thus, as per the law, CPP could have sold to a distribution licensee (through transmission utility). The benchmarking of sale of CPP at the rate at which non- eligible units brought electricity from the grid is thus incorrect. The TPO under this misconception construed that the rate at which power generating companies sell to distribution companies should be used for bench marking. In other words, the TPO was of the view that denim manufacturing unit cannot be taken for the benchmarking for determining the value at which electricity was sold by the CPP. He observed that value of electricity cannot be benchmarked by adopting the rate at which denim I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 5 manufacturing unit of the appellant has been purchasing the electricity, rather, according to the TPO, the rate at which power generating companies sell to distribution companies ought to be applied. However, this controversy has been silenced by the Hon'ble Gujarat High Court in the case of CIT vs Gujarat Alkalis and Chemicals Ltd reported at 395 ITR 247. The Hon'ble Court has held that for the purpose of computation of deduction admissible under section 801A, market price of the electricity supplied by a CPP is to be determined by adopting rate at which manufacturing unit has been purchasing the electricity from the open market. The decision of the Hon'ble jurisdictional high court is reproduced as under for the instant reference wherein the identical issue has been decided while dealing with question no.2 framed:- PCIT-Vs-Gujarat Alkalies & Chemicals Ltd. [2017] 88 taxman.com 722 (Guj.) “Section 80-1A of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings - Deduction under section 80-IA(4) was allowable to assessee for generation of power for captive consumption and same was to be computed considering rate of power on which Electricity Board supplied power to its consumer [In favour of assessee]” Further, the Ahmedabad Bench of ITAT also dealt with the similar issue in the case of GUJARAT FLUOROCHEMICALS LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX reported at 53 CCH 476 wherein the Hon'ble ITAT has while relying on the decision of Hon'ble Gujarat High Court in the case of Gujarat Alkalies and Chemicals Ltd, observed as under- “33. Respectfully following the authoritative pronouncements of the Hon'ble jurisdictional High Court, we allow these grounds of appeal. We direct the AO to grant deduction under section 80IA(4) on the value of electricity supplied by the CPP to its manufacturing units by adopting the average rate of electricity supplied to the assessee by MGVCL, DGVCL." This judgment of Hon'ble High Court and that of Ahmedabad Bench of ITAT is directly on the issue. Hon'ble Court has considered section 80IA(8). The Hon'ble ITAT has considered the Domestic Transfer Pricing Provisions as well as provisions of section 801A(8). Therefore, it would not be justifiable to ignore the judgments of Hon'ble jurisdictional High Court and the ITAT. 5.3 Following the ratio laid down in the above decisions, I direct the AO to grant deduction under section 801A(4) on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at which M/s Torrent Power has supplied the power to I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 6 the denim manufacturing unit of the appellant. I also direct the AO to use the same value for benchmarking the sale of steam by CPP to denim manufacturing unit by converting the units of electricity to units of steam. Accordingly, the ground no.1 of the appeal is allowed. 4. Aggrieved against the appellate order the Revenue is in appeal before us raising the following Grounds of Appeal in ITA No. 1768/Ahd 2019 relating to the Asst. Year 2013-14 which reads as follows: (1) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power despite the fact that Torrent Power is involved only in transmission and distribution whereas the CPP of the assessee is only producing electricity. (2) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that huge investment is required for transmission and distribution whereas in CPP no such huge investments is required. (3) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that the TPO has compared the rate of production of CPP from rate of GERC which is the rates of power generation unit only. (4) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s. 80IA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that the IPO has consider CPP unit as tested party being less complex than the manufacturing unit and compare the rate of power generation unit decided by GEREC. (5) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s. 80LA on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that transmission and distribution functions are totally missing in CPP unit i.e. Torrent Power is functionally different than CPP unit. (6) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s 801A on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that if the non-eligible unit is taken as tested party there will be need for making multiple adjustments for the charges I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 7 incorporated in the electricity price paid for functions like distribution and transmission such as STU charges, STU losses, Distribution losses, Distribution Charges, Additional Surcharge, Cross subsidy surcharge, which was not done by the assessee. (7) The Ld. CIT(A) has erred in law and on facts in directing to grant deduction u/s. 801A on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power, despite the fact that the decision of the Hon'ble High Court of Gujarat pronounced in the case of Gujarat Alkalies and Chemicals Ltd. is relevant to the claim of deduction u/s. 80IA(4) of the Act and not on ALP of transaction determined by the TPO u/s. 92C of the Act. 8. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer. 9. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored. 5. The Ld. CIT DR Sri Kamlesh Makwana appearing for the Revenue in support of the Grounds raised by the Revenue submitted that the CIT[A] is not correct in allowing the claim of deduction u/s. 80IA of the Act, which was denied made by the A.O. Thus the Ld. CIT[A] erred in deleting the addition on the ground that is not acceptable and pleaded to restore the order passed by the Assessing Officer and allow the Revenue appeal. 6. Per contra Ld Senior Counsel Mr. S.N. Sorparkar appearing for the assessee reiterated the submissions made before the lower authorities and relied upon the Paper Book and following case laws: (i) Meghmani Finechem Ltd.-Vs-National E Assessment Centre [2023] 151 Taxmann.com 440 [AHD ITAT) (ii) DCIT-Vs-Vishal Fabrics Ltd. [2022] 139 Taxmann.com 30 (AHD ITAT) (iii) ACIT-Vs-Philips Carbon Black Ltd. [2022] 142 Taxmann.com 325 (Kolkata ITAT) I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 8 7. We have given our thoughtful consideration and perused the materials available on record including the paper books and case laws filed by the assessee. This issue of value of electricity supplied by the Captive Power Plant for the purpose of deduction u/s. 80IA is to be computed on the market value of power supply or the rate of power charged by State electricity Board, the same is no more res integra by the Jurisdictional High Court Judgment in the case of PCIT-Vs-Gujarat Alkalies & Chemicals Ltd. [2017] 88 taxmann.com 722 wherein it was held as follows: “....2. In both the tax appeals though slightly differently worded, the questions concerning the sante assessee are identical and concern the issue of deduction under section 80IA of the Income Tax Act granted to the assessee by the Tribunal on captive power generation plant The second question is with respect to recognising such claim on the basis of purchase price of power from GEB and substituting the rates of 2.47 per unit adopted by the Assessing Officer 3. Since both the issues are covered by various judgments of this Court, we do not find in necessary to record facts at any length. Division Bench of this Court by judgment dated 22.11.2011 in Tax Appeal No.2092/2010 in somewhat similar controversy observed as under "3. With respect to Question [B], the issue pertains to sub Section (8) of Section 801A of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs. 540 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section 801A restricted the same to Rs. 5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 801A of the Act. This restriction was primarily on the basis that the rate of Rs 5.40 ps charged by Gujarat Electricity Board (" GEB" for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion that the market value of I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 9 the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Counsel for the Revenue contended that the component of 8 paise per unit was the electricity duty which GEB was not authorized to retain but had to pass on to the Government. In essence, GEB was only collecting 8 paise per unit as electricity duty for and on behalf of the Government. He submitted that the market value of the electricity should be reckoned on Rs. 5.32 ps. per unit as was done by the Revenue authority 6. Under sub-Section(s) of Section 80IA of the Act. if it is found that 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 for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 801A in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. 7 We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section (8) of Section 801A of the Act. However, in so far as the Tribunal's reasoning to adopt the market value of the goods at Rs 5.40 ps per unit is concerned, we find no error Undisputedly, GEB supplied the electricity to its consumers at the same rate. This, therefore, was a market value of the electricity supplied by the CPP Unit to the general uni The fact that this amount of Rs. 5.40 ps. comprises of a component of 8 paise, which was electricity duty, to our mind, would make no difference in so far as the market value is concerned. To a consumer, the price being paid remains 3.40 ps per unit. The fact that the seller retains only Rs. 5.32 ps. out of the said collection and passes on 8 paise per unit to the Government in the form of electricity duty, to our mind, would make no difference. This question is, therefore not required to be considered." 4. This was followed in case of CIT v Shah Alloys Ltd in Tax Appeal No. 2093/2010 This was reiterated in Tax Appeal No. 1646/2010 in case of ACIT v Pragati Glass Works (P) Ltd. (order dated 30.1.2012), in which following observations were made: "7 To our mind. Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 10 through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) terms recorded that Rs 451 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 417 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 801A(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open marker To our mind sum of Rs 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Stace the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Stace the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non-eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed" 5. Issue once again reached the Division Bench of this Court in case of CIT v. Alembic Ltd. in Tax Appeal No.471/2009 and connected appeals. The Division Bench referring to earlier Court held as under: "11. We have considered the submissions made by the learned counsel for the parties. judgments of the We have also considered the case laws cited by the learned counsel for the assessee. Taking I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 11 into consideration the judements of this court and other High Courts, cited above, we are of the opinion that the Tribunal has rightly allowed the claim of the assessee. In that view of the matter, we do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of the assessee and against the revenue." 6. Issues are thus considered on number of occasions by the Court and held against the Revenue. Questions are answered against the Revenue. Both the tax appeals are therefore. Dismissed.” 8. Further Co-ordinate Bench of this Tribunal in a recent judgment in the case of Meghmani Finechem Ltd.-Vs-National E Assessment Centre [2023] 151 Taxmann.com 440 [AHD ITAT] held as follows: 10. We have heard the rival contentions and perused the material on record. We are of the considered view that in the instant facts, it is a well settled principle that where an assessee, being a captive power plant provided electricity to its associated enterprises and claimed deduction u/s. 80-IA, then for the purpose of deduction, market value of power, supplied by the assessee to its associated enterprises should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers. Further, we observe that the Ahmedabad Tribunal in the case of Gujarat Fluorochemicals Ltd. (supra) held that for the purpose of allowing deduction, the rate should be adopted equivalent to the rate at which Madhya Gujarat Vij Company Ltd. and Dakshin Gujarat Vij Company Ltd. are supplying the electricity to the assessee's manufacturing unit. We observe that vide letter dated 1st October, 2019 to the Transfer Pricing Officer, the assessee had submitted that power was supplied by DGVCL to assessee's associated enterprise (MOL) having its unit in adjacent compound to MFL, and had charged a monthly average rate of Rs. 7.07 per unit per MOL. Accordingly, the decision of Gujarat Fluro Chemicals clearly applies to the assessee set of facts. Further, we observe that the decision of Gujarat Fluro Chemicals was also followed by ITAT Ahmedabad in the case of Vishal Fabrics Ltd. (supra), wherein it was held that in case of captive power plant (CPP) eligible for deduction u/s. 80-IA, market rate at which receiving unit was procuring electricity could be adopted as sale price/ALP of CPP. In the case of Sree Rayalaseema Hi Strength Hypo Ltd. v. Dy. CIT [2023] 146 taxmann.com 168 (Hyd. - Trib.), the ITAT held that where assessee, a captive thermal power plant, provided electricity to its AES and claimed deduction under section 80-IA in respect of profits arising out of such activity, for purpose of such deduction market value of power supplied by assessee to its AEs should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers and thus, assessee was justified in adopting ALP of electricity supply to its I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 12 AES at rate charged by State Electricity Board and Revenue was not justified in excluding certain heads of charges out of it. 10.1 Accordingly, respectfully following the aforesaid decision rendered by the jurisdictional Gujarat High Court and ITAT Ahmedabad, we are of the considered view that the assessee has rightly computed the ALP by adopting the rate of Rs. 6.5 per unit as the arms length rate. Accordingly looking into the facts of the instant case, ground no. 2 of assessee's appeal is allowed. 9. Respectfully following the above judicial precedents, in our considered opinion, the assessee has rightly computed the sale of electricity generated through its CPP by adopting Rs. 5.50 per unit being the supply of electricity rate by Torrent Power Ltd. for the purpose ALP and claim of deduction u/s. 80IA of the Act. The same does not require any interference, further the Ld. CIT-DR could not place any judgments in favour of the Revenue and reversing Jurisdictional High Court Judgments by the Hon’ble Supreme Court. Therefore the Grounds raised by the Revenue are devoid of merits. Therefore the appeals filed by the Revenue are hereby dismissed. 10. In the result, the appeal filed by the Revenue in ITA No. 1768/Ahd/2019 is hereby dismissed. 11. The assessee is in Cross Objection before us raising the following Grounds of Appeal in C.O. No. 28/Ahd 2019 which reads as follows: 1. Ld. CIT (A) erred in holding that charging of interest u/s 234A, 234B & 234C of the Act is mandatory in nature ignoring various judicial precedents. 2. Ld. CIT (A) erred in dismissing ground regarding penalty u/s 271(1)(c) of the Act by holding that AO has merely initiated penalty proceedings ignoring fact that there is neither concealment of income nor furnishing of I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 13 inaccurate particulars of income as full details and information has been duly disclosed by the appellant. 3. In facts & Circumstances of the case, Your Appellant, most respectfully submits that both lower authorities has erred on law and on facts by not Considering the TUFF Subsidy of Rs.9,82,79,275/- credited to profit & Loss Account by way of a credit to Interest Expense Account as Capital receipt and therefore not taxable as income chargeable to tax in the hand of the appellant company. 4. Your petitioner craves leave to add, to alter on to amend the grounds of appeal, if the occasion arises. 12. Ground No. 1 namely charging of interest u/s. 234A, 234B and 234C of the Act. The assessee got relief before the Ld. CIT(A) against all additions made by the A.O., therefore charging of interest is automatic and consequential in nature. Thus the Ground No. 1 is dismissed. 13. Ground No. 2 namely initiation of penalty proceedings u/s. 271(1)(c) of the Act. Here also, the assessee got relief before Ld. CIT(A). Hence this ground becomes infructuous. 14. Regarding Ground No. 3 both the Lower Authorities erred in law in not considering the TUFF Subsidy of Rs. 9.82 crores credited to Profit & Loss Account by way of a credit to Interest Expense Account which is capital receipt are not chargeable to tax and relied upon PCIT-Vs-Nitin Spinners Ltd. of Rajasthan High Court [2020] 116 taxmann.com 26, which was confirmed by Hon’ble Supreme Court in [2021] 130 taxmann.com 402 (SC) and Madras High Court in the case of CIT-Vs-Best Corporation Ltd. [2022] 143 taxmann.com 62 & Punjab and Haryana High Court in the case of CIT-Vs-Sham Lal Bansal [2011] 11 taxmann.com 369 wherein it was that Technology Upgradation Fund subsidy and compensation I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 14 received by the assessee-company on non-performance of energy generation being capital receipts were not liable to be taxed. 14.1. Thus Ld. Counsel relied upon Delhi Tribunal decision in the case of ITO-Vs-Jasjit Singh reported in [2014] 52 taxmann.com 477 wherein it was held that where reasons for not raising legal issues before lower authorities was found to be bona fide, same could be validly raised in objections for first time before Tribunal and Bombay High Court in the case of Peter Vaz-Vs-CIT reported in [2021] 128 taxmann.com 180 wherein the Hon’ble High Court set aside the mater back to the Tribunal to consider the legal issue for first time raised before the Tribunal. 15. We have given our thoughtful consideration and perused the materials available on record. This issue of TUFF subsidy received by the assessee as capital receipt is not a subject matter of discussions and disallowance by the Assessing Officer in the assessment order. Similarly before Ld. CIT(A), the assessee was in appeal against the disallowances made by the Assessing Officer namely (a) u/s. 80IA claim, (b) disallowance u/s. 14A and (c) disallowance on depreciation of vehicles. In our considered view, this TUFF Subsidy is not an issue arising from the record of the assessment proceedings. The Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT reported in [1998] 229 ITR 383 wherein it was held that undoubtedly, the ITAT has the discretion to allow or not to allow a new ground to be raised but where the ITAT is only required to consider the question of law arising from the facts “which are on record in the assessment I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 15 proceedings”, in order to correctly assess the tax liability of an assessee. In our considered view this issue of TUFF Subsidy does not arise from the “record of the assessment proceedings” of the Assessing Officer. The Ld. Counsel also not drawn our attention to the claim in Return of Income and other records. When this issue does not emanate from the assessment records, we do not have power to adjudicate the same. 16. Respectfully following the Hon’ble Supreme Court judgment of NTPC, we hereby reject the ground raised by the assessee and the same is hereby dismissed. 17. In the result, the C.O. filed by the Assessee is hereby dismissed. ITA No. 1769/Ahd/2019( by the Revenue) for A.Y. 2014-15 19. The facts in this case are similar to that of ITA No. 1768/Ahd/2019. Respectfully following of our decision above, the grounds raised by the Revenue are devoid of merits and the same is hereby dismissed. 20. In the result, the appeal filed by the Revenue in ITA No. 1769/Ahd/2019 is hereby dismissed. C.O. No. 29/Ahd/2020 (by the Assessee) 22. The facts in the above cross objection are similar to the decisions arrived in C.O. No. 28/Ahd/2020. Respectfully following I.T.A Nos. 1768 & 1769/Ahd/2019 A.Ys. 2013-14 & 2014-15 Page No ACIT VS. M/s. Nandan Denim Ltd. 16 the same, this cross objection filed by the assessee is hereby dismissed. 23. In the combined result, the appeals filed by the Revenue and C.O. filed by the Assessee both are dismissed. Order pronounced in the open court on 31-10-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 31/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद
