GTP WIND ENERGY PVT. LTD.,SALEM V. DCIT, CIRCLE-1(1), SALEM

ITA 2361/CHNY/2025

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GTP Wind Energy Pvt. Ltd., engaged in wind power generation, appealed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, which had confirmed the Assessing Officer's decision to restrict the deduction claimed under section 80IA. The deduction was initially claimed based on the sale of power to a sister concern at Rs. 5.25 per unit, while the Assessing Officer considered the procurement rate of TNEB, which was lower, leading to a reduced deduction. The Tribunal, referencing the Supreme Court's decision in Jindal Steel & Power Ltd. and other precedents, held that the deduction should be based on the rate at which TNEB supplies power to consumers, not the rate at which it procures power.

• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Chennai
• Assessment Year: 2018-2019
• Appeal Filed On: 28-08-2025
• Other Referred Cases: CIT(A) vs. Jindal Steel and Power Ltd. [2023] 157 taxmann.com 207 (SC), ACIT v. Prabhu Spinning Mills Pvt. Ltd., Tata Chemicals Ltd., PCIT v Gujarat Fluorochemicals Ltd., CIT v Reliance Industries Ltd., PCIT v Rungta Mines Ltd. [TS-402-HC-202(CAL)-TP]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALAMIRTHA
• Assessee Lawyers: G. BASKAR
• Section: 92F

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ ा यपीठ, चे\u0012ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI सु\u0017ी पदमा वती यस, लेखा सद एवं \u0017ी मनु क ुमा र िग!र, ा ियक सद क े सम\" BEFORE MS. PADMAVATHY.S, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./ITA No.2361/Chny/2025 िनधा #रण वष# /Assessment Year: 2018-19 GTP Wind Energy Pvt. Ltd., 4/36, Bharathi Street, Swarnapuri, Salem – 636 004. PAN: AAECG 8495L Vs. The Dy. Commissioner of Income Tax, Circle-1(1), Salem. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीला थ& की ओर से/ Appellant by : Mr. G. Baskar, Advocate ()थ& की ओर से /Respondent by : Ms. Balamirtha, JCIT सुनवा ई की ता रीख/Date of Hearing : 24.03.2026 घोषणा की ता रीख /Date of Pronouncement : 25.03.2026 आदेश / O R D E R PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short \"CIT(A)\") passed u/s. 250 of the Income Tax Act, 1961 (in short \"the Act\") dated 25.07.2025 for Assessment Year (AY) 2018-19. 2. The assessee is a company engaged in generation of wind power using wind electric generators. The assessee sells the power generated to private parties including its sister concern. The assessee filed a return of income for AY 2018-19 on 30.09.2018 declaring total income of Rs.70,65,290/- after Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 2 -: claiming deduction u/s. 80IA of the Act to the tune of Rs.1,45,35,916/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O during the course of assessment noticed that the assessee is selling the power to its sister concern @ Rs. 5.25/- per unit and claimed deduction u/s. 80IA of the Act towards the same. The A.O held that the Tamil Nadu Electricity Board (TNEB) procures electricity @ 2.75 to 3.50. The A.O held that the assessee is charging excess rate for the purpose of claiming higher deduction u/s. 80IA of the Act. Accordingly, the A.O recomputed the deduction u/s. 80IA of the by restricting it to Rs.43,11,345/. On further appeal, the CIT(A) confirmed the action of the A.O. 3. We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee submitted that it is a settled position that for the purpose of deduction u/s. 80IA of the Act, the rate at which the TNEB supplies power to customers is to be considered and not the rate at which TNEB procures the power. The Ld. AR further submitted that in the present case the rate at which TNEB supplies power to its customer is Rs. 6.35/- whereas the assessee is supplying power at a lesser rate of Rs. 5.25/- per unit. Accordingly, the Ld. AR argued that the addition made by restricting the deduction by applying the rate at which TNEB purchases the power is not correct. The ld. AR in this regard relied on the decision of the Hon'ble Supreme Court in the case of CIT(A) vs. Jindal Steel and Power Ltd. [2023] 157 taxmann.com 207 (SC), where it has been held that: “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 Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 3 -: supplier Le., 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.” 4. We further notice in this regard that the Coordinate Bench while considering the identical issues in the case of ACIT v. Prabhu Spinning Mills Pvt. Ltd. has held: “We have heard the rival contentions perused all the material available on record before us and gone through the orders of the authorities along with the judicial precedents relied on. Before adjudicating on whether the decisions of the Hon’ble Calcutta High Court placed on record by the Ld.AR have taken into consideration the change in law, i.e., the amendment of explanation to section 80IA(8) of the Act, we would like to emphasize on the ratio laid down by the Hon’ble Supreme Court in the case of Jindal Steel & Power Ltd. referred to supra in respect of the issue of quantum of deduction u/s.80-IA of the Act as regards inter-unit transfer of electricity was concerned: “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 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 Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 4 -: 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 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. 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.” 32. From the above decision, it is quite clear that where the price at which surplus power supplied by assessee to State Electricity Board was determined entirely by State Electricity Board in terms of statutory regulations and contract, such a price could not be equated with market value as was understood for purpose of section 80-IA(8) and on the contrary, the rate at which State Electricity Board supplied electricity to industrial consumers would have to be taken as market value for computing deduction u/s.80-IA of the Act. 33. At this stage, it may also be noted that at Para 22 of the said judgment of the Hon’ble Supreme Court, it was held as under: Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 5 -: “22. Reverting back to sub-section (8) of Section 80-IA, it is seen that if the assessing officer disputes the consideration for supply of any goods by the assessee as recorded in the accounts of the eligible business on the ground that it does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under section 80-IA, the profits and gains of such eligible business shall be computed by adopting arm's length pricing. In other words, if the assessing officer rejects the price as not corresponding to the market value of such good, then he has to compute the sale price of the good at the market value as per his determination. The explanation below the proviso defines market value in relation to any goods to mean the price that such goods would ordinarily fetch on sale in the open market. Thus, as per this definition, the market value of any goods would mean the price that such goods would ordinarily fetch on sale in the open market.” 34. On the basis of the above observation of the Hon’ble Supreme Court, one may note that as contended by the Ld.AR, the terms “Market Value” and “Arm’s Length Price” have been used interchangeably. As far as the argument of the Ld.DR in this regard to state that since the said judgement relates to A.Y.2001-02, the term ALP used therein was not in the context of section 92F of the Act is concerned, we are not in agreement of the same because the definition of the term “Arm’s Length Price” that existed before and post the amendment of explanation to section 80-IA(8) is exactly the same except for the fact the amendment of explanation to section 80IA(8) now brings within its ambit specified domestic transactions. 35. In other words, but for the mere inclusion of applicability of Arm’s Length Price mechanism for determining market value for specified domestic transactions for determining the deduction u/s.80-IA, to say that the usage of the said term in the judgement of the Hon’ble Supreme Court is not in context of section 92F of the Act would be incorrect. Having said so, we are of the view that the usage of the terms Market Value and Arm’s Length Price interchangeably in its decision and thereafter arriving at the conclusion that the rate at which State Electricity Board supplied electricity to industrial consumers would have to be taken as market value for computing deduction u/s.80-IA of the Act would be appropriate for determination of quantum of deduction u/s.80-IA in the instant case. 36. Further, at this stage, we find it necessary to refer to the decision of the Mumbai Bench of the Tribunal in the case of Tata Chemicals Ltd. relied upon by the Ld.AR wherein in effect it was held that since clauses (i) or (ii) of explanation to section 80-IA(8) are separated by an “or”, an interpretation that only clause (ii) of explanation to section 80-IA(8) has to be used for determination of specified domestic transaction would render clause (i) of explanation to section 80-IA(8) otiose and redundant which is not a permissible rule of interpretation. It would be relevant to point out that the Tribunal therefore concluded that so long as both Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 6 -: clauses exist, one has to see if market value is discernible from the price for such goods which it would ordinarily fetch in the open market and only in a case where such price is not available, the market value has to be determined as per ALP. In doing so, the Mumbai Bench of the Tribunal followed the decision of the Hon’ble Supreme Court in Jindal Steel & Power Ltd referred to supra as also the decision of the Hon’ble Gujarat High Court in the case of PCIT v Gujarat Fluorochemicals Ltd. and the Hon’ble Bombay High Court in CIT v Reliance Industries Ltd. to hold that the selling price of the State Electricity Board to high tension industrial consumers can be taken as market value in accordance with section 80- IA(8) of the Act. Thus, even on this count, we do not find favour with the argument of the Ld.DR that the market value in respect of specified domestic transactions with respect to computation of deduction u/s.80- IA(8) would have to be compulsorily determined by clause (ii) of explanation to section 80-IA(8), i.e., the Arm’s Length Price. 37. We further state that the decision relied upon by the Ld.DR in the case of Sanghi Industries Ltd. decided by the Hyderabad Bench of the Tribunal is not applicable in the facts of the instant case for the reason that the assessee herein in the instant case has not undertaken any third-party sale of power as was the facts of that case and that the entire quantum of electricity generated by the windmill units is captively consumed by the assessee’s own manufacturing divisions. 38. We also note that the decisions of the Hon’ble Calcutta High Court relied upon by the Ld.AR in the case of Star Paper Mills Ltd. which has been followed in the case of Birla Corporation Ltd. and also Rungta Mines Ltd. are all binding on us since all of these decisions have been rendered by higher courts and have considered the issue in hand, i.e., the determination of quantum of deduction in respect of inter-unit transfer of electricity, after taking into consideration the decision of the Hon’ble Supreme Court in Jindal Steel & Power Ltd., the relevant provisions of the Electricity Act and also the amendment in explanation to section 80-IA(8) of the Act. 39. We may particularly draw reference to the decision of the Hon’ble Calcutta High Court in the case of PCIT v Rungta Mines Ltd. [TS-402- HC-202(CAL)-TP] wherein it was held as under: “14. It is not in dispute that the main business of the assessee is not generating power to sell the same to distribution companies/SEBs. It is also not in dispute that the Captive Power Plants (CPPs) were established by the assessee for its own need, i.e. for supply of uninterrupted power to its manufacturing units as well as to save the cost of power purchased from SEBs. If such be the factual position the Arm’s Length Price cannot be determined by taking the average market rates of power supply units to distribution companies as the assessee is not in the business of selling power to distribution companies. Therefore, the Arm’s Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 7 -: Length Price has to be determined bearing in mind the reason behind establishment of the CPPs namely to ensure uninterrupted power and to save on cost of electricity which otherwise has to be paid to the State Electricity Board.” 40. From the above, it is quite clear that the Hon’ble Calcutta High Court has clearly observed that in case of an assessee who is not in the business of selling power to distribution companies or State Electricity Board, the Arm’s Length Price cannot be determined by taking the average market rates of power supply units to distribution companies but by bearing in mind the reason behind establishment of the captive power plants (CPPs) namely to ensure uninterrupted power and to save on cost of electricity which otherwise has to be paid to the State Electricity Board. 41 It is in this background that the Hon’ble Calcutta High Court after analysing the provisions of the Electricity Act, 2003, the decision in Star Paper Mills Ltd. and the decision of the Hon’ble Supreme Court in Jindal Steel & Power Ltd. concluded as under: “21. The Hon’ble Supreme Court after taking note of the relevant provisions of the Income Tax Act, and in particular Section 80IA held that the market value of the power supplied by State Electricity Board to the Industrial consumers should be construed to be the market value of electricity and it should not be compared with the rate of power sold to or supply to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. It was further held that the State Electricity Boards rate when it supplies power to the consumer have to be taken as market value for computing the deduction under Section 80IA of the Act. Thus, applying the decision of the Hon’ble Supreme Court in Jindal Steel and Power and in the light of the reasoning given in the preceding paragraphs, we hold that the learned tribunal rightly dismissed the appeals filed by the revenue.” 42. Thus, in our considered view, we hold that the decision of the Hon’ble Supreme Court in Jindal Steel & Power Ltd. referred to supra would apply even after the amendment made to Explanation to section 80-IA(8) of the Act. Also, the decision of the Hon’ble Calcutta High Court in Rungta Mines Limited and Star Paper Mills Ltd. referred to supra rendered after considering the decision of the Hon’ble Supreme Court in Jindal Steel & Power Ltd. referred to supra and after taking into account the amendment made to Explanation to section 80-IA(8) of the Act would apply to the facts and circumstances of the instant case. The ALP in the instant case would thus have to be the price at which electricity is supplied by the State Electricity Board (TANGEDCO in the instant case) to end consumers in open market. Therefore, we direct the AO to recompute the ALP considering the rate adopted by the assessee as per the market price.” Printed from counselvise.com ITA No.2361/Chny/2025 GTP Wind Energy Pvt. Ltd. :- 8 -: 5. From the above judicial precedence, it is clear that for the purpose of section 80IA, the rate at which TNEB supplies power with the consumers in the open market is to be considered and not the rare at which the TNEB procures the power. In the present case, the rate charged by the assessee for the purpose of claiming deduction u/s. 80IA of the Act is less than the rate at which TNEB supplies power to its customers and therefore respectfully following the above judicial precedence, we hold that the lower authorities are not correct in restricting the deduction claimed by the assessee u/s. 80IA of the Act. Accordingly we direct the A.O to delete the disallowance made in this regard and allow the deduction u/s. 80IA of the Act as claimed by the assessee in the return of income. 6. In the result, the appeal of the assessee is allowed. Order pronounced on 25th day of March, 2026 at Chennai. Sd/- Sd/- (मनु क ुमा र िग!र) (Manu Kumar Giri) \u0001याियक \u0001याियक \u0001याियक \u0001याियक सद\bय सद\bय सद\bय सद\bय / Judicial Member (पदमा वती यस) (Padmavathy.S) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 25th March, 2026. EDN, Sr. P.S आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF Printed from counselvise.com EJTADA DURGA NARESH Digitally signed by EJTADA DURGA NARESH Date: 2026.03.30 15:29:06 +05'30' "