The Dy. CIT., Circle-4(1)(2), Ahmedabad V. M/s. Vishal Fabrics Ltd., Ahmedabad

ITA 1820/AHD/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0452 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 05-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Question of law
• Section: 92C; 143(3); 92F; 142(1); 10B; 80IA; 144C; 143(2); 48; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL AT AHMEDABAD] BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER& Ms. MADHUMITA ROY, JUDICIAL MEMBER I .T .A . N o . 18 20 /A h d /2 01 9 ( A s s e s s me nt Y ea r : 20 1 5- 16 ) DC I T C ir c l e- 4 ( 1 )( 2 ) , Ah me da bad V s. V i s ha l Fa b r ic s L td . B / h . Ka s h ir a m M il l C o mp o u nd , R a n i pu r , N a r o l, A h m e d a b ad-3 82 4 2 4 [ P AN N o. A A A C V 63 04 R ] (Appellant) .. (Respondent) Assessee by : Shri Gaurav Nahta, AR Revenue by : Shri Umesh Agarwal, Sr. DR D a t e of H ea r i ng 01.12.2021 D a t e of P r o no u n ce me nt 07.01.2022 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 20.09.2019 passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad arising out of the order dated 20.02.2019 passed by the DCIT, Circle-4(1)(2), Ahmedabad under Section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for A.Y. 2015-16 with the following grounds: “(i) The Ld.CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO 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 Torrent Power is involved in generation, transmission and distribution whereas the CPP of the assesses is only a generation unit and therefore, the FAR analysis being completely different and thus not comparable at all ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 2 - (ii) The Ld. CIT(A) has erred in facts and in law in ignoring the fact that as per Transfer Pricing guidelines, the functionally least complex entity is to be taken as the tested party for performing the benchmarking analysis of the transactions between Associated Enterprises and the TPO has correctly taken the CPP as the tested party. (iii) The Ld. CIT(A) has erred in facts and in law in allowing the cost of consumption at the hands of the manufacturing unit as a comparable despite the fact the tested party is the CPP and not the manufacturing unit and the comparable ought to be the price at which electricity is sold by the CPP and not cost of consumption in the hands of the manufacturing unit especially in view of the fact that the CPP is considered as an independent unit for ail purposes. (iv) The Ld. CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO and allowing 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, whereas, as per the FAR analysis i.e. functions performed, assets deployed and risk involved, the CPP unit is least complex in comparison to manufacturing unit and the TPO has rightly considered CPP unit as tested party. (v) The Ld. CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO on the value of electricity supplied by the CPP to its manufacturing units by benchmarking the some with .rate at M/s. Torrent Power, since the FAR analysis of the tested party is completely divergent from that of the comparable on account of major differences in functions, assets employed and risks assumed and since the MAM adopted in this case is CUP, there has to be a very high degree of similarity in the FAR for the entities to be comparable. As such, even if the manufacturing unit is taken as the tested party, there will be a requirement of making multiple adjustments as per provisions under rule JOB of Income fax Rules 1962 on account of the charges 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 to arrive at the ALP, which has not been done by the assesses while undertaking the benchmarking analysis. (vi) The Ld. CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO 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 the CPP unit since it is engaged only in the generation of power. ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 3 - (vii) the Ld. CIT(A) has erred in law and on facts in deleting the adjustments made by the TPO 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 consider CPP unit as tested party being less complex than the manufacturing unit and compare the rate at which power generation-unit sold electricity to distribution and transmission unit which was decided by GERC. (viii) The Ld.CIT(A) has erred in law and on facts -in deleting the adjustments made by the TPO 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. did not consider the FAR analysis and therefore, the question of benchmarking of the transactions entered into by the Associated Enterprises to arrive at the ALP as determined by the TPO u/s. 92C of the Act was never before the Hon'ble High Court of Gujarat. (ix) The Ld. CIT(A) has erred in law and on facts in directing to delete the adjustment of Rs.4,10,81,113/- made by the TPO towards Safe of steam by CPP to Power House relying upon the decision of Hon'ble ITAT in appellant's own case for A.Y. 2012-13, despite the fact that there was no TP reference made in the A.Y. 2012-13. (x) The Ld. CIT(A) has erred in law and on facts in directing to delete the adjustment of Rs.4,10,81,113A made by the TPO towards Sale of steam by CPP to Power House despite the fact that the assesse has failed to provide the comparable for benchmarking of transaction of Sale of steam. (xi) The Ld. CIT(A) has erred in ignoring the provisions u/s 80IA of the Act which allows deduction to an undertaking engaged in the generation of power whereas steam is a by-product and serves to reduce the cost of generation of power and therefore cannot be taken to be a commodity which is transferred/ sold by the assessee.” 2. By way of Ground Nos. 1 to 8 the Revenue has challenged the order passed by the Ld. CIT(A) in deleting the adjustment made by the TPO on the value of electricity supplied by the Captive Power Plant (CPP) to its manufacturing units by benchmarking the same with rate at M/s. Torrent Power. It is further contended that the Torrent Power is involved in generation, transmission and distribution whereas the Captive Power Plant ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 4 - (CPP) of the assessee is only a generation unit and in that view of the matter the FAR i.e. (Functions performed, assets deployed and risk involved) being completely different and not comparable at all. Further that according to the Revenue the comparable ought to be the price at which the electricity is sold by the CPP and not the cost of consumption in the hands of the manufacturing unit particularly when the CPP is considered as an independent unit. Moreso, the CPP unit is least complex in comparison to manufacturing unit and the TPO has rightly considered the CPP unit as tested party. 3. The assessee a manufacturing company of Textile, Handloom, Power looms and manufacturer of Fabrics and Hosiery filed its return of income on 29.09.2015 declaring total income at Rs. 1,50,66,560/-. The case was selected for limited scrutiny under CASS and a notice under Section 143(2) of the Act dated 22.03.2016 was issued and served upon the assessee followed by a notice under Section 142(1) dated 18.01.2017 alongwith the detail questionnaire. Due to change of incumbent a further notice under Section 142(1) r.w.s. 129 was issued on 05.06.2017. 4. The brief facts leading to the case is this that the assessee company is engaged in the business of producing processed fabrics for clothing; mainly carries out job work activities like colouring, sewing, printing and bleaching etc. It has a processing house and 2.3 mw Captive Power Plant (CPP) wherefrom the electricity and the steam generated are exclusively supplied to the processing house. The said CPP is a separate unit and eligible and the processing house is another unit which is not eligible for any deduction. The CPP charges @7.49 per unit for supply of power to the processing house on the basis of the rate charged by M/s. Torrent Power Ltd. from processing house. Therefore, this rate is adopted as market value by the appellant ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 5 - consistently over a period of time (with the charges of rate of Torrent Power). Though, the method of rate was accepted by the Ld. AO in earlier assessment the Ld. AO referred the case for determination for Arms Length Price (ALP) to the TPO who in turn by and under the order under Section 92CA(3) of the Act hold that the rate adopted by the appellant is excessive in as much as the rate charged by Torrent Power is inclusive of transmission cost whereas the CPP bears only the generation cost as the power is generated for captive consumption. On that basis the TPO restricted the sale price charged to CPP to processing house to Rs. 3.08/kwh and resultantly downward adjustment of Rs. 4,78,78,842/- in the hands of the CPP was made. According to the TPO the Torrent Power Ltd. was not an eligible entity for comparing the price and therefore, adopted the cost of generation electricity by the Gujarat State Electricity Corporation Ltd. (GSECL). 5. Apart from that, according to the Revenue even if the manufacturing unit is taken as the tested party there will be a requirement of making multiple adjustments as per provision under Rule 10B of Income Tax Rules, 1962 on account of the charges incorporated in the electricity price paid for functions like distribution and transmission and different other losses and charges to arrive at the ALP which has not been performed by the assessee while undertaking the benchmarking analysis. 6. The Revenue relied upon the order of the TPO considering the CPP unit as tested party being less complex than the manufacturing unit and compared the rate at which power generation unit sold electricity to distribution and transmission unit which was tested by GERC. ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 6 - 7. During the year under consideration the appellant company entered into a number of domestic transaction and claimed deduction under Section 80IA of the Act. The case was referred by the Ld. AO to the Transfer Pricing Officer (TPO) with the determination of Arms Length Price (ALP). The TPO under Section 92CA(3) of the Act on 30.10.2011 proposed upward adjustment of Rs. 8,90,32,096/- to the total income of the assessee including the transaction of sale of electricity by CPP to manufacturing unit which was revised down by Rs. 4,78,78,842/-. The same was adopted by the Ld. AO in the final order of assessment. The Ld. CIT(A) deleted such downward adjustment made by the TPO/AO. Hence, the instant appeal before us. 8. The case of the assessee is this that as per the provision of Section 80IA (4) the market value in relation to any goods or services are to be taken as the price that such goods or services would ordinarily fetch in the open market or the Arms Length Price as defined under Section 92F of the Act. Further adopting the market rate for sale by CPP to the processing house was already accepted by the Ld. AO in the earlier assessment year. The appellant relied upon the following judgments: a) CIT Kolkata-IV vs. Kanoria Chemicals & Industries Ltd. [2013] 35 taxmann.com 566 (Calcutta) b) Excel Cotspin (India) (P.) Ltd. vs. Deputy Commissioner of Income-tax [2012] 25 taxmann.com 418 (Chennai – Trib.) c) In ITAT Mumbai Bench ‘G’ West Coast Paper Mills Ltd. vs. Additional Commissioner of Income-tax [2014] 52 taxmann.com 268 (Mumbai – Trib.) d) Commissioner of Income-tax-LTU vs. Reliance Industries Ltd. [2019] 102 taxmann.com 372 (Bombay) ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 7 - e) Principal Commissioner of Income-tax – Vadodara-1 vs. Gujarat Alkalies & Chemicals Ltd. [2017] 88 taxmann.com 722 (Gujarat) f) Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara [2018] 97 taxmann.com 10 (Ahmedabad – Trib.) 9. We have considered the judgment passed by the Hon’ble Gujarat High Court in the case of Principal Commissioner of Income-tax – Vadodara-1 vs. Gujarat Alkanlies & Chemicals Ltd. reported in, (2017) 88 taxmann.com 722 (Gujarat) wherein it has been held that deduction under Section 80IA (4) is allowable to the assessee for generation of power for captive consumption and the steam was to be computed considering rate of power on which the electricity buyer supplied power to its consumer. 10. We have further considered the judgment passed by the Coordinate Bench in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara reported in, (2018) 97 taxmann.com 10 (Ahmedabad – Trib.) on the similar issue pertaining to A.Y. 2012-13 i.e. after the insertion of domestic TP provisions. We find that relying upon the judgment passed by the Hon’ble Jurisdictional High Court in the case of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara (supra) the Coordinate Bench was pleased to hold that in case of Captive Power Plant eligible for deduction under Section 80IA, the market rate at which the receiving unit is procuring the electricity can be adopted as the sale price by the CPP. The relevant portion whereof is as follows: “"29. Brief facts of the case are that the assessee has captive power plants at Ranjinagar and Dahej. At Dahej, assessee has coal based captive power plant and gas based captive power plant. According to the AO, it did not claim deduction under section 80IA originally in the assessment year 2013-14. However, after the decision of Hon'ble Chhattisgarh High Court in the case of CIT Vs. Godawari Power & Ispat Ltd., 223 TAXMANN 234 it has filed a submission claiming deduction. It also revised return of income on 31.3.2015 in the assessment year ITA No. 805 and 2744/Ahd/2017 2013-14. Similarly, in the assessment year 2012-13, it has enhanced ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 8 - its claim by way of a loiter pointing out that the rate for determining the valuation of power generated by it for the purpose of allowing deduction, the rate should be adopted equivalent to the rate at which Madhya Gujarat Vij Company Ltd. ("MGVCL" for short) and Dakshin Gujarat Vij Company Ltd. ("DGVCL" for short) etc. are supplied the electricity to the assessee's manufacturing unit. The Id.AO did not adjudicate the issue in the assessment year 2012-13 for the enhancement of deduction in the draft assessment order. Before the ld.DRP, the assessee raised specific objection about the non- adjudication of the issue by the AO. Also it raised that enhanced rate should be adopted for determining the value of electricity at which deduction under section 80IA has to be granted. The Id.DRP rejected the contentions of the simply for the reason that the AO cannot entertain any claim for allowing deduction resulting in reduction in the total income returned by the assessee. The Id.DRP placed reliance upon the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra). It further rejected the contentions of the assessee that the identical issue was decided by the ld.CIT(A) in the assessment year 2011-12 and the matter is pending before the Tribunal. Thus, according to the DRP, the issue has not attained finality therefore, the deduction under section 80IA cannot be granted on the enhanced amount claimed by the assessee during the assessment proceedings. With regard to the assessment year 2013-14, the Id.DRP has observed that there is a little change in the statutory provision by virtue of section 80IA(8). The arm's length price of the goods sold by the assessee in the alleged captive power plant has to the determined. The ld.DRP thereafter observed that the TPO has determined value of the goods and services sold by its eligible units. According to the TPO captive power plant and electricity distributing companies are to be ITA No.805 and 2744/Ahd/2017pitted at different pedestal. According to the DRP, there is a material difference between captive power plant as a seller and distribution/transmission entity. Thus, 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. It 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 ld.DRP under this misconception construed that the rate at which electricity supply- companies are purchasing the electricity should be applied for benchmarking the value of electricity sold by the CPP to its manufacturing units. In other words, the DRP was of the view (hat non-eligible units cannot be taken for the benchmarking for determining the value at which electricity was sold by the CPP. DRP has emphasized that manufacturing units could have different source of procurement of electricity, say - from CPP or from electricity boards. But as electricity producer, in a CPP, it could only be sold to distribution licensee holder. In this way, the ld. DRP observed that value of electricity cannot be benchmarked by adopting the rate at which manufacturing units of the assessee has been purchasing the electricity, rather, according to the DRP, the rate at which supplier companies ate purchasing the electricity ought to be applied. ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 9 - Before us, the ld. counsel for the assessee contended that this controversy has been silenced by the Hon'ble Gujarat High Court in the case of CIT, Gujarat Alkalis and Chemicals Ltd. He placed on record copy of the Hon'ble High Court's decision and contended that for the ITA No.805 and 2744/Ahd/2017 purpose of computation of deduction admissible under section 80IA market price of the electricity supplied by a CPP if to be determined by adopting rate at which manufacturing unit has been purchasing the electricity from the open market. The ld.DR, on the other hand relied upon the order of the DRP, but unable to controvert the contentions raised by the assessee. 30. We have duly considered rival submissions and gone through the record carefully before us the dispute has two dimensions. In the first fold of dispute the issue is whether the claim of the assessee for enhanced deduction can be entertained during the assessment proceedings by way of a letter. The Id.DRP after putting reliance on the judgment of Hon'ble Supreme Court in the case of Geotze India Ltd (supra) did not accept the claim of the assesses in the assessment year 2012-13. it has boon hi ought to our notice that such claim can be made even before the Id.DRP in the form of objection, A reference to the decisions of ITAT, Mumbai and Bangalore Benches have been made: Asian Paints Vs. DOIT, Mumbai 88 taxmann.com 677, and Himalaya Drug Co. Vs. DCIT, Bangalore, 48 taxmann.com 65 (2017). The ld. counsel for the assessee also put reliance upon the decision of the Hon'ble Gujarat High Court in the cases of Mitesh Impex, 270 CTR 66. This decision propounds that when the taxability of the assessee is going to be effected, then it can raise a fresh plea before the appellate authorities. Taking a leaf from this reasoning, ITAT, Mumbai and Bangalore have propounded that fresh claim can be made even before the DRP. Thus, respectfully following these decisions, we uphold that in the assessment year 2012-13, the DRP ought to have entertained the claim of the assessee. ITA No.805 and 2744/Ahd/2017 31. So far as the issue on merit is concerned, the Hon'ble Gujarat High Court in the of Gujarat Alkalies and Chemicals Ltd. has considered the following question: Whether the Tribunal was right in law in allowing the assessees claim of deduction of Rs. 1954 crores u/s. 80IA(4) of the l. T. Act, 1961, when the assessee had adopted rate power generation at Rs.4.73 per unit, rate on which the GEB supplied power to its consumers, ignoring me rate of Rs.2.36 per unit, the rate on which power generating company supplied its power to GEB?" 32. The Hon'ble High Court has replied this question by recording the following finding: '"3. Since both the Issues are covered by various judgments of this Court, we do not find it 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: ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 10 - "3. With respect to Question [8], the issue pertains to sub Section (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which v/as supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs. 5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (3) of Section 80IA restricted the same to Rs. 5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessor under Section 80IA 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 the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the customers. ITA No. 805 and 2744/Ahd/2017 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(8) 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 80IA 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 info 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 80IA 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 unit. 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 ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 11 - consumer, the price being paid remains 5.40 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 ITA No.805 and 2744/Ahd/2017 value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) in terms recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee- This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to G£B 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 801 A(8) of the Act what lr> 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 sucn goods or services will ordinarily fetch in the open market. 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. Since 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 vs Alembic Ltd. in Tax Appeal No. 471/2009 and connected appeals. The Division Bench referring to earlier judgments of the Court held as under. "11. We have considered the submissions made by the /earned counsel for the parties. We have also considered the case laws cited by the learned counsel for the assessee. Taking into consideration the judgments of this court and other High Courts, ITA No. 805 and 2744/Ahd/2017 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 ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 12 - do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of t/ie 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." This judgment of Hon’ble High Court is directly on the issue. Hon’ble Court has considered section 80IA(8), therefore, it is not justifiable at the end of ld. DRP to ignore the judgment of Hon’ble jurisdictional High Court. 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.” We find from the order passed by the Ld. CIT(A) that apart from the above judgment passed by the Coordinate Bench in the case of Gujarat Fluorochemicals vs. DCIT (Supra) the Ld. CIT(A) further considered the judgment passed in the matter of CIT - LTU vs. Reliance Industries Ltd., reported in (2019) 102 taxmann.com 372 (Bombay). Further the identical ratio laid down by the Hon’ble Jurisdictional High Court in the case of PCIT- Vadodara-1 vs. Gujarat Alkalies & Chemicals Ltd. was duly considered by the Ld. CIT(A) and finalized the order as follows:- “4.4 The facts of the case and the facts in the case of Gujarat Flurochemicals Ltd. referred supra are exactly the same hence, respectfully following the binding judgment of Hon’ble ITAT, Ahmedabad in this case it has to be held that the market rate charged by CPP from the processing house in this year is the correct rate which is in compliance with the condition specified in the explanation to section 80IA of the Act. Accordingly, the adjustment and the subsequent additions made by the AO towards sale of electricity by CPP amounting to Rs. 4,78,78,842/- is deleted AO is directed to delete the same.” Considering the entire aspect of the matter we find that the judgment particularly passed in the matter of Gujarat Fluorochemicals Ltd. vs. DCIT, Vadodara passed by the Coordinate Bench on the similar issue, the judgment passed by the Hon’ble Jurisdictional High Court in the case of CIT-Vadodara-1 ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 13 - vs. Gujarat Alkalies & Chemicals Ltd. (Supra), the Ld. CIT(A) deleted the downward adjustment and subsequent additions made by the TPO/AO holding that in case of Captive Power Plant (CPP) eligible for deduction under Section 80IA the market rate at which the receiving unit is procuring the electricity can be adopted as sale price by the CPP which in our considered opinion is just and proper so as to warrant interference. Thus, the ground of appeal preferred by the Revenue is found to be devoid of any merit and found to be dismissed. 11. Ground Nos. 9&10 relate to deletion of adjustment of Rs. 4,10,81,113/- made by the TPO towards Sale of steam by CPP to Power House relying upon the decision of Hon’ble Tribunal in assessee’s own case for A.Y. 2012-13. 12. The Ld. AO made an addition of Rs. 4,10,81,113/- towards adjustment in the sales of steam by CPP to processing house. In fact, the CPP supplies steam to the power house @Rs. 1.35 per kg. as against the cost of Rs. 1.22 per kg., the total steam sold is 12,32,25,800 kg. @1.35 per kg. for a total consideration of Rs. 16,63,66,963/-. As per the Ld. TPO the appellant has marked up the profit of Rs. 32.78%; on the other hand, according to the appellant its profit is only around 11% which is in conformity with the earlier years profits. Further that the same was upheld by the appellant authorities including the Coordinate Bench of Hon’ble Tribunal in appellant’s own case for A.Y. 2012-13 & 2013-14. However, the TPO rejected the value of the appellant and reduced the ALP by a sum of Rs. 4,10,81,113/- which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us. 13. We have heard the respective parties, we have also perused the relevant materials available on record. ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 14 - 14. The case made out by the assessee is this the claim of the assessee is not the first year of claim made under Section 80IA of the Act rather the assessee is claiming the deduction since A.Y. 2006-07 which was allowed by the First Appellate Authority and in turn confirmed by the Hon’ble Benches. Before the First Appellate Authority the assessee submitted the same: “With regard to Steam: 1.1 We have already submitted detailed reply inasmuch as the evidences in support of the claim made by the Assessee in earlier submission, and therefore, the same is not repeated here. 1.2 We would like to further submit that the yea/ under consideration is not the first year of claim made u/s SOLA of the Act. The Assessee has been claiming the deduction since A Y 2006-07. It is further submitted that claim of the Assessee tins been allowed by the higher authorities CIT(A) as well as the Hon'ble Income Tax Appellate Tribunal, details of winch is given hereunder: Assessment Year Claim allowed by : Remarks 2011-12 CIT(A) Copy of the order is' enclosed herewith marked as Annx. A 2012-13 CIT(A) Copy of the order is enclosed herewith marked as Annx. 2013-14 CIT(A) ; Copy of the order is enclosed herewith marked as Annx. A 2014-15 CIT(A) Copy of the order is enclosed herewith marked as Annx. 2011-12 ITAT Copy of the order is enclosed herewith marked as Annx. 1.3 Therefore, Your Goodself is requested to follow the order of the CIT(A) / ITAT in own case of the Assessee and not to make any addition as has been proposed in the SCN. 1.4 Further to clarify, generated steam having cost at Rs. 1.22 per Kg. assessee is submitting herewith the third party cost certificate. Further to note that same matter is already dealt by the Honourable CIT(A) and ITAT in previous year and it is a covered matter. 1.1 Further to add that the benchmark conversion rate of 4. 7Kg steam = 1 unit of power is well established and part of previous appellate orders. However the certificate for same is enclosed herewith. Further to state that the steam is not sold at Rs. 8.04/ unit. Your assessee has submitted the pricing comparison for your better understanding that even after conversion of steam into power and as if sold as power, the sales value of steam sold is much lesser than the power sold value. The same is reproduced below, ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 15 - Steam transfer to Process Total Sale value Conversion at 4.7 Kg / Total sale price at at Rs. 1.35 per kg = 1 unit of power Rs. 8.04 123225800Kg 166366963/- 26218255 units If the steam is converted into the power and then sold to the process division then the sales value will be Rs.2A.08 Cr where asassessee has followed the cost plus method and derived the sales value of Rs. 16.36 Cr which is much lower than the comparable method. • The Assessee has installed flow meters at the plant location which measures the steam in MT/Hour unit and power in MW so generated. The Assessee herewith submits few images of output display of the flow meters installed at the plant location have been submitted as Annexure 2 and 3 to the submission dated 12 October 2018 from the images submitted, it can be observed that the flow meters installed at Assessee's plants provides the exact value of steam and power being generated. It is important to note that these flow meters are installed at all the relevant outlets to ensure that steam is measured at each outlet and, a/so the power generated from power plant ts captured appropriately. • With respect to Independent Certificate for production and transfer of steam, the Assessee would like to slate that it does not have am independent certificate which can provide unit wise details of steam production and conversion into power. The Assessee has transferred steam to caustic division at INR 1127per MT: • A copy of cost audit report has already been submitted to your good self as Annexure 1 to the submission dated 12 October 2018. 29. As per the provision of section 801A(8), the value of steam has to be recognized at market value. It is observed that the assertion made in the TP Report that the same is priced at cost plus mark up of 32.78% is unsubstantiated. Further decisions of ITAT in the case of assessee are of earlier assessment years and not related with the transfer prising adjustment, The following is the summary of the transaction: Value in 3CEB Mark-up (%) Vishal Fabrics Limited 163202684 1.350 16.63.66.963 . 32.78 From the above mentioned table based on the submission of the assessee. it is clear that the mark up of 32.78% is not substantiated by the assessee, from, the alxn e mentioned data analysis based on the data provided by the assesses, it is crystal clew-that the assessee had not carried out proper benchmarking analysis in transfer pricing report Hence, the transfer pricing analysis carried out by the assessee with respect to the above mentioned transaction is faulty. In view of the above, the information as v ei as the data used in computation of the arms length price is not reliable and correct. The provisions of Sec. 920 3)(c) are invoked and the TP document is proposed to be rejected. As, the assessee has failed to discharge its onus, the TPO proceeds to determine ami's length price of sale of steam as under: 30. Determination of the ALP In view of the above mentioned discussion, the ALP rate of sale of steam is determined by adopting CUP as MAM and the mark up charged is thus disallowed. ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 16 - The assessee failed to provide supporting evidences and proper benchmarking analysis regarding the mark up charged to the cost of generation of steam, Hence, the assessee failed to discharge the onus and thus could not substantiate the mark up charged. Thus, the mark up charged b\ the assessee for sale of steam remains unsubstantiated- Hence, this office disallows the mark up charged on sale of steam transaction. Particulars Quantity Value in 3 CL 11 Cost as 100% 32. 78% Mark-up ALP Adjustment Vishal Fabrics Limited 163202.684 16636696 125285830 41081133 41081133 Thus the transactions of sale of steam by CPP are revised down as under: particulars transaction Value in 3CEB Revised down ALP adjustment Vishal Fabrics Limited Steam sale 166366963 41081133 The AO should take into account this revision in the computation of deduction and computation of income for AY 2015-16."” 15. We find the Ld. CIT(A) taking into consideration this particular aspect of the matter deleted the addition made by the TPO/AO observed as follows: “5.1 Before the TPO appellant has submitted that the cost of steam per kg is Rs. 1.22 and the sales effected by the CPP to the processing house was at Rs. 1.35 per kg. For the sake of better understanding appellant also converted t he steam into power i.e. electricity as per the standard formula which comes to 2,62,18,255 units. TPO adopted the quantity of such converted power and the rate of steam and held that appellant has marked up 32,78 % profits on the steam. The fact that appellant had a cost of Rs.1.22 per kg of steam is not disputed. No reasons whatsoever has been given by (he TPO for downward adjustment of Rs.4,10,81,113/--. It is observed that appellant has been adopting the cost + around 10% profit on sale of steam by CPP to processing house consistently for last many years. Infacl, the Hon'ble ITAT in appellant's own case pertaining to A.Y.2010-11 in ITA No.125/Ahd/2015 dated 24,01.2018 and case pertaining to A.Y.2012-13 in ITA No.1734/Ahd/2016 dated 29.04.2019 have upheld such mark up. In A.Y.2011-12 appellant's cost was 0.92 per kg and the sale prico of CPP to processing house was 1.15 per kg. AO adopted the sales at cosl price which was deleted by the CIT(A) , in further appeal Hon'ble ITAT upheld the order of CIT(A) and also followed the same in A.Y.2012-13. Pacts of the case continue to be identical and also no basis whatsoever has been given by the TPO while rejecting the appellant's sale price. In view of these facts and respectfully following the decision of Hon'ble ITAT in appellant's own case I do not find any justification in the ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 17 - action of AO and accordingly, the adjustments in the value of steam sold by CPP to Power House is deleted. AO is directed to delete the same.” 16. We find that the issue has already been considered by the Coordinate Bench in assessee’s own case for A.Y. 2011-12 and 2012-13 in ITA No. 125/Ahd/2015 and 1734/Ahd/2016 respectively. While dealing with the issue in assessee’s own case for A.Y. 2012-13 the Coordinate Bench was pleased to observe as follows: “4. We have heard the Ld. Counsel appearing for the respective parties, we have also perused the relevant materials available on record and also carefully considered the judgment passed by the Co-ordinate Bench in assessee’s own case in appeal preferred by Revenue in ITA No. 125/Ahd/2015 for A.Y. 2011-12. The identical issue has been considered by the Co-ordinate Bench in the said judgment, the relevant whereof is as follows:- “6. In earlier years, on the basis of such valuation, deduction u/s. 80IA (4)(iv) of the Act were allowed from A.Y. 2006-07. In our considered opinion, assessee is therefore on the principle of consistency, eligible for such deduction. Further as required assessee filed a certificate inform 10CCB from a charted accountant for claim and therefore the reasonableness and valuation of steam is certified through that certificate is eligible deduction. In support of its contention, assessee also filed a rate chart at Page No. 13 of Paper Book and same is reproduced as under: VISHAL FABRICS PRIVATE LIMITED STATEMENT OF COMPUTATION OF COST OF STEAM AND POWER SN PARTICULARS 2010-11 2009-10 20008-09 2007-08 2006-07 2005-06 A QUANTITATIVE DETAILS 1 TOTAL STEAM GENERATION KGS 157762938 KGS 159223900 KGS 154169059 154614653 155172583 146106760 2 STREAM TO PROCESS KGS 117695051 KGS 11433615 KGS 109171082 107678291 110573541 106190960 3 STEAM POWER PLANT KGS 49967887 KGS 44890285 KGS 44997977 46936360 44599042 39915800 4 FUEL COSUMED (LIGNITE) KGS 46007204 KGS 43078021 KGS 43371340 38118207 37910326 35607106 5 STEM/FUEL RATIO A1/A3 3.43 3.70 3.55 4.06 4.09 4.10 0 TOTAL POWER GENERATED UNITS 14023208 UNITS 15220300 UNITS 14708800 14889700 14890900 14060310 POWER PLANT CONSUMPTION UNITS 3011739 UNITS 3035967 UNITS 2960203 3032648 3047536 2952422 POWER TO PROCESS UNITS 11011469 UNITS 12184333 UNITS 11748597 11857052 11843364 11107888 B EXPRENSES INCURRED TOTAL RS/ KC TOTAL RS/ KC TOTAL *S/ KG 1 LIGNITE & COAL RS. 117202086 RS. 111244176 RS. 125388619 88141936 73476124 58649912 2 MAINTENANCE EXPENSES RS. 13569303 RS. 7530700 RS. 11263070 8103337 7048532 625896 3 SALARIES & WAGES RS. 3371517 RS. 3459680 RS. 3096961 3730681 2906145 1977572 4 INTEREST RS. 361661 RS. 859515 RS. 1495029 2321120 2382390 2845500 5 DEPRECIATIO N RS. 11149377 RS. 11149458 RS. 11149556 11149446 11107858 11107858 0 TOTAL EXPENSES RS. 145653944 0 . RS. 134243523 0.34 RS. 152393235 0.99 113446520 0.73 96921049 0.62 75206738 0.51 ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 18 - 9 2 C COST PER KG OF STEAM RS. RS. RS. 0.73 0.62 0.51 D STEAM USED IN PROCESS KGS 117695051 KGS 114333615 KGS 109171082 107678291 110573541 106190960 E STEAM COST CHARGED TO PROCESS RS. 135349309 1 . 1 5 RS. 131483657 1.15 RS. 128546744 1.15 86142633 0.80 71872809 0.65 47785932 0.45 GENERATING POWER RS. 10304635 RS. 2759866 RS. 26846491 27303887 25048240 27420806 7. We have also gone through the assessment order in details in that there is a finding of the AO in Page No. 9 Para ii, wherein she has stated that 80IA(4) is an allowable deduction on steam and there is no dispute on it, steam has already been held to be power within the meaning of Section 80IA(4) of the Act. When on one hand AO herself is accepting the steam is eligible for deduction and on the other hand she is disallowing the deduction, it itself is contradictory, when once the AO is of the opinion that deduction is available on steam then no disallowance should have been made only on assumptions basis. The assessee has submitted several decisions in support of its contention and same are stated therein, the steam was transferred at a higher price. Further assessee has submitted engineering certificate at Page No. 10 of Paper Book in which also the cost of generation of steam can be considered in the range of Rs. 1.16/- to 1.25 per kg of steam. Further the saving in cost due to Captive production also cannot be ruled out which has been elaborated discussed by the Ld. CIT(A). 8. We therefore, relying on various decision in support of the claim made by the assessee and acceptance by the AO that steam is a form of power and eligible for deduction and for the basis of deduction relying on the engineers certificate as well different case laws held. CIT(A) has rightly deleted the addition and profit and margin kept by the assessee in Captive consumption is fair and reasonable. In our considered opinion on the basis of consistency and Ld. CIT(A) has passed a detailed and reasoned order. We upheld the order of Ld. CIT(A). 5. Respectfully, following the same we find no infirmity in the order passed by the Ld. CIT(A) in deleting such addition made by the Ld. AO following the decision taken by his predecessor in the earlier year in allowing the deduction u/s. 80IA of the Act taking in consideration of the judgment passed by the Co-ordinate Bench a discussed above, hence the same is confirmed. Revenue’s appeal is found to be devoid of any merit and hence dismissed.” ITA No.1820/Ahd/2019 DCIT vs. Vishal Fabrics Ltd. Asst.Year –2015-16 - 19 - Since the issue is identical to that the issue as already discussed hereinabove in assessee’s own case for A.Y. 2012-13 & 2013-14 we find no reason to deviate from the stand taken by the Coordinate Bench in upholding the order passed by the Ld. CIT(A) in deleting the order of upward adjustment of Rs. 4,10,81,113/-. Hence, respectfully relying upon the same, the order passed by the Ld. CIT(A) is upheld. The ground of appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed. 17. In the result, the appeal preferred by the Revenue is dismissed. This Order pronounced in Open Court on 07/01/2022 Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 07/01/2022 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 02.12.2021 2. Date on which the typed draft is placed before the Dictating Member 03.12.2021 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .01.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .01.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 07 .01.2022 7. Date on which the file goes to the Bench Clerk 07.01.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................