SANGHI INDUSTRIES LIMITED,HYDERABAD V. DCIT, CIRCLE -3 (1), HYDERABAD

ITA 104/HYD/2022

AI Insights

Sanghi Industries Limited appealed against the assessment order for the Assessment Year 2017-18, which included significant adjustments to their income based on transfer pricing adjustments. The primary contention was regarding the domestic transfer pricing adjustments made by the TPO, which included a downward adjustment of INR 154,38,00,527 to the final assessable income. The adjustments were related to the transfer of power and fly ash between different units of the company, which were considered specified domestic transactions under Section 92CA of the Income Tax Act. The Tribunal examined the application of the CUP method for these transactions and the relevance of Section 80IA(8) in determining the ALP.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29136 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Other Referred Cases: Star Paper Mills Limited vs. DCIT, Jindal Steel and Power Limited vs. DCIT, Godawari Power and Ispat Limited vs. DCIT, Shah Alloys Ltd vs. DCIT, ACIT vs. M/s. Tamilnadu Newsprint and Papers Ltd, ACIT vs. M/s. Philips Carbon Black Ltd, DCIT vs. M/s. Balrampur Chini Mills Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K.HARITHA
• Assessee Lawyers: VARTIK CHOKSI
• Keywords: Business income; Transfer pricing; International transaction; Depreciation; Fair market value; Cost of acquisition; TDS; Unabsorbed depreciation; Scheme of amalgamation; Arm length price; Related party transaction
• Section: 143(3); 195; 22; 92CA; 2; 92; 144C; 10B; 10AA; 80IA; 207; 92C; 92E; 92D; 92F; 20

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER ITA (TP) No.104/Hyd/2022 Assessment Year: 2017-18 Sanghi Industries Limited, Hyderabad. PAN No. AAECS5510Q Vs. DCIT, Circle-3(1), Hyderabad. (Appellant) (Respondent) Assessee by: Shri Vartik Choksi, AR Revenue by: Ms. K. Haritha, CIT-DR Date of hearing: 04/12/2024 Date of pronouncement: 23/01/2025 O R D E R PER LALIET KUMAR, J.M: The present appeal has been filed by the assessee feeling aggrieved by the assessment order passed by the Ld. Assessing Officer / Ld. Dispute Resolution Panel for the AY 2017-18 on the following grounds of appeal: “1. That the order of the Assessment framed by eh Ld. AO, pursuant to the direction of the Hon’ble DRP U/s. 143(3) r.w.s. 144C(13) of the Act is not correct either in law or on facts and in both. 2. That the facts and in the circumstances of the case and in law, the Ld. DRP is not justified in confirming the specified domestic transfer pricing adjustments made by the lower authorities, totalling Rs. 154,38,00,527/- U/s. 92CA of the Act without appreciating the fact that owing to losses, there is no claim of 2 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited deduction U/s. 80IA in return of income, and no addition whatsoever was warranted to the total income. 3. That in the facts and circumstances of the case, the Ld. AO is not justified in making addition of downward adjustment of Rs. 154,38,00,527/- to the final assessable income instead of re-computing the deduction U/s. 80IA(8) afresh, without appreciating the fact the appellant did not claim any deduction U/s. 80IA in the return of income. 4. That the DRP-1 and the AO / TPO has erred on facts and law by rejecting the internal comparable uncontrolled price (CUP) method adopted for transfer of power from the power unit to the cement unit, and making an adjustment of INR Rs. 114,14,28,568/-. 4a. By erroneously recalculating and re-computing the market value at a rate which is contrary to the provisions of section 80IA(8) and mandates of judicial authorities. 4b. By rejecting the comparable market rate for procurement of power from Paschim Gujarat Vij Company Limited (PGVCL) and determining the Arm’s Length Price at Rs. 2.97/- per unit, being the median of the various sale prices charged by the power unit to the independent third parties. 4c. By not appreciating the fact that the sale transaction to outside parties is not comparable under CUP method and is also a controlled transaction. 5a. That on the facts and in the circumstances of the case, the Ld. DRP failed to appreciate the fact that the reallocation of employee benefit and other expenses to the tune of Rs. 39,62,81,129/- to power unit on the basis of turnover alone, is incorrect and unscientific. 5b. The Ld. DRP erred in confirming the reallocation of employee benefit and other expenses of Rs. 39,62,81,129/- made by the TPO to the power unit, without appreciating the nature of expenditure incurred and its nexus to the eligible unit. 6. That the facts and circumstances of the case, DRP is not justified in confirming the ALP of fly ash at Rs. 65.76/- per ton, determined without considering the freight component s part of landed cost of fly-ash, and making an adjustment of Rs. 60,90,830/-. 7. That in the facts and circumstances of the case, the Ld. AO is not justified in determining the total income at Rs. 109,96,72,896/- as per computation sheet instead of Rs. 104,99,80,729/- as per assessment order, thereby making excess disallowance of Rs. 4,96,92,167/-, without assigning any reason therefor. 3 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 8. That in the facts and circumstances of the case, the Ld. AO is not justified in determining the tax payable including interest Rs. 60,06,68,444/- without adjusting brought forward losses and unabsorbed depreciation of earlier assessment years. 9. That in the facts and circumstances of the case, the Ld. AO is not justified in considering short credit of TDS to the tune of Rs. 30,211/- without assigning any reasons therefor. 10. The appellant craves leave to add, amend or alter any of the grounds during the course of hearing.” 2. Brief facts of the case are that the assessee-company is engaged in manufacturing of Clinker and Ordinary Portland Cement. The assessee, being the third largest cement manufacturer in western India, sells its ordinary Portland cement under the name and style of “Sanghi Cement” in India as well as in foreign markets. The assessee’s cement manufacturing unit is located in Kutch, Gujarat. During the AY under consideration, the assessee has furnished a report in Form No. 3CEB as per the provisions of section 92E of the Act. Thereafter, the case was referred to the Transfer Pricing Officer (“TPO”) on 25/10/2019 for determining the Arm’s Length Price (“ALP”) after obtaining the necessary approvals from the Ld. Pr. CIT-3, Hyderabad, dated 18/10/2019. Accordingly, notice U/s. 92CA(2) of the Act was issued on 26/11/2019 and subsequent notice / questionnaire was also issued on 29/12/2020. In response, the assessee filed its submissions on 23/10/2020 and 12/12/2020. Thereafter, on 11/01/2021 a detailed show-cause notice was issued to the assessee U/s. 92C(3) of the Act. In reply, the assessee furnished the details as called for vide its letter dated 25/01/2021. On a perusal of the submissions of the assessee and after going through the material available before him, the learned TPO determined the adjustment to be made to the income of the assessee on account of the Specified Domestic Transactions entered into by the assessee at Rs. 4 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 154,38,00,527/-. Thus, the Ld. TPO passed the order U/s 92CA(3) of the Act, dated 30/01/2021. Accordingly, giving effect to the Ld. TPO’s order, the Ld. AO passed the Draft Order U/s. 143(3) r.w.s 144C of the Act, dated 10/04/2021 and determined the total income of the assessee at Rs. 104,99,80,729/- which includes (i) adjustment towards Specified Domestic Transactions Rs. 154,38,00,527/- and (ii) Disallowance of CSR expenses of Rs. 1,42,97,133/- against the returned income of Rs. 50,81,16,931/-. 2.1 Feeling aggrieved, the assessee raised certain objections before the Ld. DRP. The Ld. DRP, after considering the submissions of the assessee and also going through the material available on record, dismissed the objections raised by the assessee. Thereafter, the Ld. AO passed the final assessment order U/s. 143(3) r.w.s 144C(13) r.w.s 144B of the Act, dated 03/02/2022 and assessed the total income at Rs. 104,99,80,729/-. While passing the assessment order, the Ld. AO also initiated the penalty proceedings U/s. 270A of the Act for under- reporting of income. Feeling aggrieved by the directions of the Ld. DRP / Assessment Order, the assessee preferred the present appeal before the Tribunal by raising the above-extracted grounds. 3. The Ld. AR has submitted that the assessee has not claimed deduction U/s. 80IA of the Act in the return of income filed by it; therefore, AR contended that the provisions of section 92BA are not attractive. Further, it was also submitted that the assessee has raised this ground before the lower authorities however, the lower authorities have failed to take cognizance of the above said grounds and have decided the issue against the assessee. The Ld. AR has drawn our 5 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited attention to para 6.5.1, 6.5.2, 6.5.3 and 6.5.4 of the Ld. TPO’s order which is to the following effect: “6.5.1. Taxpayer’s objections: Adjustment under SDT are not applicable to the facts of the assessee as there is no claim of deduction U/s. 80IA in its return of income. The assessee argued that the transactions pertaining to transfer of power and transfer of fly ash are not specified domestic transactions as the power unit of the company though an eligible unit did not claim deduction U/s. 80IA for the year under consideration, as the company incurred losses during the FY 2016-17. 6.5.2. TPO’s comments: The taxpayer reported the specified domestic transactions pertaining to transfer of power and transfer of fly ash in column No. 23 of Form 3CEB. Captive Power Unit of the assessee is an eligible unit for the purpose of Sec. 80IA. Further, as per sec 92BA, provisions of specified domestic transactions are applicable to any undertaking or unit or enterprise or eligible business of the assessee (as referred to in section 80A(6), 80IA(8) or section 10AA). The word used is “eligible business”. Therefore, irrespective of the fact whether the assessee claims deduction U/s 80IA or not for the year under consideration, the provisions of section 92BA are applicable as the transactions mentioned in the Form 3CEB pertain to eligible business of the assessee. Therefore, the objection of the assessee is not valid. 6.5.3. Taxpayer’s objections The net effect of any adjustments made under SDT is NIL, result in tax neutrality as there is no tax arbitrage. The assessee argued that the transactions are entered between two units belonging to the same assessee. Both the units are two arms of the same tax entity and hence the substitution of ALP value (market value) in respect of inter-unit transactions U/s. 92 of the Act is a tax neutral exercise and it also needs to be highlighted that since the company has not claimed any deduction U/s. 80IA, it has no effect even otherwise, after application of the ALP, and the Transfer Pricing adjustment contemplated in section 92 of the Act. 6.5.4. TPO’s comments As seen from the above, the assessee is of the opinion that since it has not claimed deduction U/s. 80IA due to loss disclosed under eligible unit, any adjustment made towards specific domestic transactions would be of no consequence insofar as reduction in taxable income and taxes payable thereof. This particular view point of the assessee is baseless and devoid of merits in the given set of facts and in the light of the provisions of sub- 6 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited section (5) of 80IA r.w. sub-section (8) thereof. To be precise, the main purpose of section 92BA r.w.s 80IA(8) is to find out whether the transfer of goods or services held in the name of eligible business / unit are transferred to any other business / non-eligible unit carried on by the assessee at the market value of such goods or services as on date of transfer. Accordingly, it is imperative on the part of the TPO to find out the market value / arm’s length price of goods of services transferred from eligible business / unit to non-eligible business / unit by applying various methods, prescribed under Chapter X of the Act r.w. Explanation below section 80IA(8). After arriving at the market value / arm’s length price of goods or services, the profits and gains of eligible business / unit shall be computed by applying such value / price in respect of specified domestic transactions with non-eligible business / unit. Also, it is important to note that as per section 80IA(5), the quantum of in respect of profits of eligible business / unit shall be computed as if such eligible business / unit were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year upto and including assessment year for which the deduction is to be computed. Accordingly, notwithstanding the fact that the assessee is not claiming deduction U/s. 80IA for the current year under consideration, but if such assessment year falls within the tax holiday period of 10 assessment year beginning with the initial assessment year, then increase in loss of eligible business / unit on account of adjustment to specific domestic transaction will have an impact on the computation of deduction U/s. 80IA in the subsequent assessment years of tax holiday period. To be precise, if in the initial years of the tax holiday period, the assessee has disclosed loss under eligible business / unit, then by virtue of section 80IA(5), in the subsequent years when the assessee claims deduction on account of disclosure of profits under eligible business / unit, it is mandatory to adjust/reduce/set-off the losses of previous years of tax holiday period against such profits of eligible business / unit. Accordingly, in case, if the loss disclosed under eligible business / unit in respect of particular assessment year falling under the tax holiday period is enhanced on account of adjustment to specific domestic transactions U/s. 92BA r.w.s 80IA(8) in the subsequent years, before claiming deduction U/s. 80IA, the enhanced loss shall be set-off giving rise to reduction in the quantum of allowable deduction. In view of the above, it is imperative on the part of the TPO to carry out TP study with regard to specific domestic transactions notwithstanding the fact that the assessee has not claimed ay deduction U/s. 80IA due to disclosure of loss under eligible business/unit. Similarly, if the assessing officer makes any additions on account of non- transfer pricing issues which convert the entity level loss into income, then the TP adjustment would be assumed relevance since the assessee may then claim deduction U/s. 80IA. Therefore, the observation of the assessee is not correct.” 7 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 4. On the basis of the above, it was submitted that the Ld. TPO, while adjudicating the grounds, have failed to take into consideration that the assessee has not claimed deduction U/s. 80IA of the Act. The Ld. AR has drawn our attention to pages No.242 to 244 of the paper book, whereby the assessee has raised specific grounds before the lower authorities, however, the Ld. DRP at paras 2.1.3 to 2.1.7 of their had dealt with the contention of the assessee and dismissed the objections raised by the assessee. Contention of the assessee before us: 5. The contention of the assessee before us is that the conjoined reading of section 80IA with section 92BA of the Act, makes it abundantly clear that the fulfilment of the requisite pre-condition as required U/s. 80IA is essential. It was submitted that since the assessee is a loss-making company and therefore, it has not claimed the deduction U/s. 80IA of the Act, and as such, the assessee is not an eligible assessee for claiming the deduction U/s. 80IA of the Act. It was also submitted that once the assessee ceases to be the eligible assessee within the meaning of section 80IA of the Act, then the occasion of application of section 92BA does not arise. 5.1 To buttress his arguments, the ld.AR has drawn our attention to the decision of the ITAT, Kolkata Bench in the case of Star Paper Mills Limited vs. DCIT in ITA No. 127/Kol/2021 (AY 2016-17), dated 26/10/2021 (Pages 275 to 306 of the paper book). While referring to the said decision of the Kolkata Bench (supra), the Ld AR has drawn our attention to Ground No.6 of that appeal wherein the issue has been captured as under: 8 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited “6. For that on the facts and in the circumstances of the case and in law and without prejudice to the preceding grounds, the lower authorities erred in making addition on account of transfer pricing adjustment of Rs. 13,71,40,567/- computed in respect of the transaction referred to in section 92BA(iii) & (v) read with section 80IA(8) & (10) of the Act without appreciating the jurisdictional fact that the appellant did not claim any deduction U/s. 80IA in the return of income and in that view of the matter no addition whatsoever was warranted to the total income.” 6. Further, the Ld. AR with respect to the finding of the Tribunal over the said Ground No.6, drawn our attention to paras 30, 31 and 33 of the decision of the Tribunal, which is the following effect: “30. “Having considered the rival submissions of both the parties, it is noted that, in view of our findings on merits, this issue has now become of academic interest; but for the sake of completeness of the matter, we proceed to decide this question as well. 31. For the AY 2016-17, the assessee had disclosed Gross Total Income of Rs.20,68,23,313/- before setting-off of brought forward business losses. After setting off the losses brought forward from the earlier years, the Gross Total Income in terms of Section 80A of the Act was NIL. Accordingly, the assessee could not have claimed any deduction under Part-C of Chapter VI-A of the Act, because as per the provisions of Section 80A(2), the deduction permissible under Chapter VI-A cannot exceed the gross total income, which in the present case was NIL. Hence, when no deduction for Rs.19,03,49,419/- has been claimed u/s 80-IA(4)(ii) of the Act, then even if, any transfer pricing adjustment is made to the transactions of the eligible unit referred to u/s 80-IA(8)/(10), the same will not have any bearing on the computation of total income, as the revised claim u/s 80-IA of the Act, even after the transfer pricing adjustment, would continue to remain NIL. The manner of computation of income, had the downward adjustment made u/s 80-IA(8)/(10) of the Act been upheld, as explained by the assessee in the above illustration, is thus held to be justified and in accordance with law. 32. We agree with the Ld. AR of the assessee that the ALP determined u/s 92BA, is in the context of Section 80-IA(8) of the Act, and thus the consequent transfer pricing adjustment, if any, has to be made to the quantum of the eligible deduction u/s 80-IA of the Act and not to the ‘Business Income’ as held by the Ld. DRP. In the garb of making downward adjustment to the quantum of profits of the CPP eligible for deduction, the AO cannot artificially enhance the returned income, by making adjustment which is in excess of the deduction claimed under Chapter VI-A i.e. Section 80-IA of the Act. Such action is held to be unwarranted.” 9 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 7. It was submitted by the Ld. AR that the decision made the Ld. TPO, despite the fact that the assessee has not claimed the deduction U/s. 80IA of the Act, by referring the matter to the determination of the ALP on account of supply being made by it, is wholly erroneous. The Ld.AR had drawn our attention to the submissions made before the DRP, which are to the following effect “1.3 It is submitted that Sec 92BA takes into its ambit the transactions referred to in Section 80A and each of the transactions therein are linked to deductions claimed under section 801A and others. Each of Sections 80A(6), 801A(8) and 80IA(10) permit or necessitate re- computation only for the purposes of deduction. Hence, in the absence of claim for deduction, the transactions need not be tested and hence application of the provisions of Sec 92BA fails. 1.4 The Assessee derives support for the said proposition from the intention of enactment of Sec 92BA which is submitted as below: a. Generally, tax entities reduce and manage the effective tax rates by availing benefits of incentives, shifting of profits to tax holiday units (i.e. eligible units \"EU\") from non-tax holiday units (i.e.. non eligible units — \"NEU\")two legal entities having differential tax rates (or even a loss-making group entity). b. The provisions of section 92BA were introduced in order to determine the Arm's Length Price of specified domestic transactions, consequent to the suggestions given by Hon'ble Supreme Court in the case of CL/ v. GlaxoSinithkline Asia (P.) Ltd. f 2010] 195 Taxman 35 (SC). d. This necessitated the introduction of Specified Domestic Transaction (\"sun u/s 92BA in Finance Act 2012 by borrowing the transfer pricing regulations to establish arm's length nature of such inter-unit transactions with reference to provisions under Section 80IA(8) or 80IA(10)as applicable for 10AA exempted units or deductions under Chapter VI-A of Income Tax Act, 1961 (\"the Act\"). e. Explanatory Memorandum to Finance Bill, 2012, reads as under: \"The application and extension of scope of transfer pricing regulations to domestic transactions would provide objectivity in determination of income from domestic related party transactions and determination of reasonableness of expenditure between related domestic parties. It will create legally enforceable obligation on ass essees to maintain proper documentation. However, extending the transfer pricing requirements to 10 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited all domestic transactions w:l! lead to increase in compliance burden on all assessees which may no: be desirable.\" Hence the intent behind introduction of Transfer pricing provisions for Specified Domestic Transactions is to curb the practice of shifting of profits where there is tax arbitrage. 1.4 The specified domestic transactions are tested as per the provisions of Section 80A(6), 801A(81 and 801A(I0J of the IT Act. subject to prov isions of Section 80A. The test is for the claim of deduction and whether the profits for which deduction is claimed were computed after considering the transactions at ALP. In the absence of any claim, there is no test to be conducted. a. These provisions require that the inter unit transfer of goods or set vices between eligible and other units of the same taxpayer should be recognised at market value of such goods or services as on date of transfer for the purpose of computing deduction admissible to the taxpayer under specified sections of Chapter V1-A. b. It is humbly submitted that the application of domestic TP is merely to examine whether the profit linked deduction was claimed on income received at fair market value (FMV) and if not, proceed to recompute the Arm's Length Price of the transaction and the profits eligible for deduction u/s 80IA from the total income of the taxpayer. 1.5 NO CLAIM OF PROFIT-LINKED DEDUCTION FOREVER a) As mentioned in our earlier part of submissions, the total income of the company resulted in negative and on account of applicability of Section 80A(2) that deduction under Chapter VI cannot exceed gross total income, there is no claim of deduction under Section 80IA (4), with respect to profits of power undertaking. b) The assesse has not claimed deduction 80IA from initial AY 2013-14 to AY 2019-20, on account of losses carried forward from earlier years. c) In the AY 2020-21, the company opted for taxation under section 115BAA and thereby foregone the opportunity to claim deduction u/s 80IA forever. In the Assessee's case, effectively in the absence of any claim of deduction under Chapter VI-A, both the cement and power unique non-eligible, though power unit may be carrying on business classified as eligible. Hence the re computation of profits of power unit is unwarranted. 1.6 Assessee not entitled to claim any deduction under Chapter VI-A. c. C. The Assessee submits that, owing to the losses in the current year and brought forward losses from earlier years, it is 11 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited disqualified from claiming a deduction under Chapter VI-A, more so u/s 80(1A) at the initial eligibility stage itself as per provisions of Section 80A of the IT Act. ………………………………… 1.8.1. Reporting of Transactions in 3CEB The TPO at para 6.5.2 justified the applicability of SDT provisions stating that the Assessee company itself has reflected the transactions of eligible unit in form 3CEB. The observations are as under ''The taxpayer reported the specified domestic transactions pertaining to transfer of power and transfer of fly ash in column no. 23 of Form 3CEB. Captive Power Unit of the assessee is an eligible unit for the purpose of Sec. 80IA. Further, as per Sec. 92BA, provisions of specified domestic transactions are applicable to any undertaking or unit or enterprise or eligible business of the assessee (as referred to in Sec. 80A(6), 80 IA(8) or Sec. 80(I)4,. The word used is \"eligible business\". Therefore, irrespective of thefact whether the assessee claims deduction under 80IA or not for the year under consideration, the provisions of Sec. 928A are applicable as the transactions mentioned in the Form 3CEB pertain to eligible business of the assessee. Therefore, the objection of the assessee is not valid.\" In this regard, it is humbly submitted that the Assessee-company filled the Accountant's report In F01111 3CEB under section 92E of the Act only out of abundant caution and the fact remained the same that it has not claimed any Profit linked deduction. The TPO could not appreciate the difference between eligibility to claim a benefit and actual claim of profit linked deduction 1.9 Summing up, in view of the above facts and decided case laws, it is once again submitted that the adjustments under SOT are not to be applied in the case of the Assessee where no deduction is claimed. The entire exercise of assessment under TRP is only academic and will have NO IMPACT on actual assessment, tax payable, or carried forward losses and is totally revenue neutral 8. On merits, ld.AR submitted that the issue is covered in favour of the assessee. In support of its case, ld.AR filed written submissions on 27/2/2024 and on 3/12/2024. 12 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 9. Per contra, the Ld. DR had submitted that section 92BA provides the definition of the Specified Domestic Transaction, which is to the following effect: “Meaning of specified domestic transaction. 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, \"specified domestic transaction\" in case of an assessee means any of the following transactions, not being an international transaction, namely:— (i) [***] (ii) any transaction referred to in section 80A; (iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI- A or section 10AA, to which provisions of sub-section (8) or sub- section (10) of section 80-IA are applicable; or (va) any business transacted between the persons referred to in sub- section (6) of section 115BAB; 22[(vb) any business transacted between the assessee and other person as referred to in sub-section (4) of section 115BAE;] (vi) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees.” 10. Section 92BA of the Act refers to the Specified Domestic Transaction which is also referred to in section 80IA of the Act. It was submitted that section 92BA only provides the determination of ALP in respect of specified domestic transactions and the specified domestic transaction has been defined and provided U/s. 80IA of the Act. Therefore, it was submitted that even if the assessee has not claimed the deduction U/s. 80IA, then also, the provisions of section 92BA can be invoked and the Revenue was within its right in determining the ALP of the energy received as per Rule 10B of income Tx rules. The 13 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Ld. DR had also filed the following written submissions in respect of the Revenue’s contention that the provisions of section 92BA can be invoked irrespective of the fact that the assessee has claimed deduction U/s. 80IA or not. “ a) The assessee's argument that TP provisions are not applicable in this case stem from their reliance on section 80IA(5) and that they have not claimed 80IA deduction in the year. However, applicability of TP provisions and whether ALP adjustment can be done is not with reference to section 80IA(5). ALP adjustment has been done under section 92 treating the transactions of the assesseess as specified domestic transactions. Section 92BA deals with this aspect of what is specified domestic transaction in respect of section 92. In this context, section 92BA(iv) applies which refers to section 80IA(10) as under:- \" any business transacted between the assessee and other person as referred to in sub-section(10) of section 80IA.\" Section 80IA(10) states thus: \"Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.\" It can be seen that only reference is to eligible business and its transactions that result in more than ordinary profits as it appears to the AO. There is no condition or contention that the assessee should be claiming deduction u/s 801A. The eligible business is defined in section 80IA(1) with reference to the section 80IA(4). Nowhere in any of these sub-sections, does eligible business mean business claiming the deduction u/s 80IA. Therefore, the argument that assessee is not claiming any deduction in the year concerned is of no relevance. (b)Whether or not the 80IA deduction is claimed in the year, the impact of the business transactions of the year will be there in the future years for claims under section 80IA. Para 6.5.4. (page 7-8 )of AO's order( paper book of assessee page 19-20) deals with how transaction will affect in other years where the 80IA can be claimed, as losses will have to be given effect. Thus, the very argument of the assessee that deduction is necessary in the year fails, as the deduction can be affected in any other year, by this year's transactions. 14 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited (c)The assessee's contention is that the above argument of the AO is incorrect because it has never claimed the deduction u/s 80IA. However, that is the position now. At the time of the TP assessment, it is not known what will be the future stand. Thinking in the future, there will no effect as to the deduction, does not preclude the right of the income tax officer to scrutinise the transactions. 2) Is the rate applied to third parties by the captive power unit the correct ALP and correct interpretation of CUP? Rule 10B(1)(a)(i) reads thus: (a) comparable uncontrolled price method, by which,— (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; Emphasis is on comparable uncontrolled transactions or a number of transactions - hence median price for other parties charged by power unit is CUP and the AO was right in applying the same. Para 6.5.7 of the TPO order ( page 9 of TPO order and page 21 of the paper book), the various things included in the Paschim Gujarat V ij company Ltd power price shows that it does not make a proper comparable. CUP is based strict comparability unlike other methods and therefore, the power bought from third party that includes other costs and duties, is not a comparable for purposes of CUP 3) Is reallocation of employee benefit and other expenses correct? Para 8 of the TPO order (page 14 of TPO order and page 26 of the paperbook) - show that segmental accounts not commensurate with the turnover. Reference is invited to Page 126 of the paper book, other expenses - printing, consultancy, audit, postage, vehicle running etc all of which are listed as) for the captive power unit, the eligible business. Power unit is running without using a single paper, without a vehicle, without posting anything ever. There are no inventories, no other fuel or water expenses. It is not possible. It shows that many expenses are being absorbed by the other unit and hence, the reallocation by TPO is justified 11. The Revenue had further submitted that in the present case, the assessee has set up a captive thermal plant, which is eligible for deduction U/s. 80IA of the Act. The details of the power consumption by the non-eligible units and transferred to other units are given by the Ld. AO / TPO in a chart. For the above-said purposes, the Ld. DR had drawn our attention to the order of the Ld. TPO wherein the above 15 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited noted fact has been captured in para 6.2 of his order which is to the following effect:- “6.2. It is noticed that the P & L Account that the assessee sold power of Rs. 17,52,28,216/- apart from captive consumption. Therefore, vide this office notice dated 29/12/2020, the assessee was asked to furnish the details of Rs. 17,52,28,216/- received on sale of power by the power generating unit along with copies of invoices raised for sale of power and details of purchasers. In response to the notice, vide its letter dated 07/01/2021, the assessee furnished the details of the power sold to third parties along with the copies of the following invoices (Annexure-3).” 12. On the basis of para 6.2 of the TPO’s order, it was submitted that the assessee was supplying the surplus electricity to the 14 companies at a price of Rs. 2.97/- whereas when it called for variations of the price with the assessee, it has shown at the price of Rs. 7.85/- per unit. It was submitted that by increasing the price of power purchase, the assessee sought to increase the profit of the captive power generation usage, but since the internal comparable was available, therefore, the Ld. TPO / DRP have exercised the internal CUP method as per Rule 10B of the Income Tax Rules, 1962 and had determined the ALP and made the addition of Rs. 114,14,28,268/-. 12.1 It was submitted that the decisions given by the Tribunal referred to by the assessee do not apply to the facts of the assessee as the amendment has been brought in by the Act, whereby it is necessary for the Authorities to compute the ALP in accordance with law. Further, it was submitted that the Hon’ble Supreme Court, in the case of Jindal Steel and Power Limited reported in [2023] 157 taxmann.com 207 (SC), had not discussed the scope and applicability 16 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited of determining the ALP post amendment in the Electricity Act, 2003. The relevant portion of the said order reads as under : “32. Revenue has relied upon the decision of the Calcutta High Court in ITC Ltd. (supra). In that case, the High Court rejected the first contention of the revenue that the assessee therein was not entitled to the benefit under section 80-IA of the Act because the power generated was consumed at home or by other business of the assessee. After holding so, the High Court however, answered the question on the point of computation of profits and gains of the eligible business against the assessee. On going through the judgment, we find that facts of that case are clearly distinguishable from the facts of the present batch of appeals. It is noticeable that though an opportunity was granted by the assessing officer to the assessee to adduce evidence to justify the price of electricity sold by it to its paper unit, the same could not be availed of by the assessee. The electricity generated was sold by the assessee entirely to its paper unit. There was no surplus electricity to be supplied to the State Electricity Board and consequently, there was no contract between the assessee and the State Electricity Board determining the rate of tariff for the electricity supplied by the assessee to the State Electricity Board. On the other hand, it was noticed that the Electricity Act, 2003 had come into force whereby and whereunder, the rate at which electricity could be supplied is determined, notably by Sections 21 and 22 thereof. That apart, there is the tariff regulatory commission which has the mandate for fixing the rates for sale and purchase of electricity by the distribution licensee. Thus it was noted that there is an inbuilt mechanism to ensure permissible profit both to the generating companies and to the distribution licensees. Therefore, it was held by the High Court that the assessee's generating unit could not claim any benefit under section 80-IA of the Act computing the profits and gains on the basis of the rate chargeable by the distribution licensee from the consumer and that the benefit could only be claimed on the basis of the rates fixed by the tariff regulatory commission for sale of electricity by the generating company. Facts being clearly distinguishable, this decision can be of no assistance to the revenue. 12.2 It was submitted that once the internal comparable is available, then the lower authorities were right in adjusting. The Ld. DR has also submitted that this argument of non-applicability of section 92BA is fallacious .The following submissions were filled by the revenue in this regard:- 17 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited “I. Sale of power by eligible unit to non-eligible units: 4. During the year under consideration, eligible unit has received an amount of Rs. 184,74,66,856 from non-eligible unit for transfer of power at the rate of Rs.7.85/unit. (23,53,46,096 units * 7.85 = 184,74,66,857/-). 5. For the purpose of benchmarking the above transaction, the assessee has selected CUP as MAM and considered the tariff rate per unit rate charged by Gujarat State Electricity Board. 1. The assessee, being a private limited company, is engaged in the business of manufacturing of clinker and ordinary Portland cement at Kutch, Gujarat and it sells the finished goods under the brand name of 'Sanghi Cement' in domestic as well as in foreign markets. 2. In order to serves its internal needs, it has set up a captive power plant and such unit is eligible for deduction under section 80-IA. Summary of adjustments: S.No. Particulars Amount (Rs.)_ 1 Transfer of power by eligible unit to non eligible unit 2 Transfer of fly ash by EU to NEU Allocation of expense Total 114,14,28,568 60,90,830 _ 39,62,81,129 1,54,38,00,57 As per the TP Study: 3. In the TP Study, it is mentioned that the power generation unit is an eligible unit under section 80IA, and transactions between the e!igible and non-eligible units are considered as specified domestic transactions. 18 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Order of the TPO: 6. During the course of TP proceedings, the TPO has found that no proper basis has been provided in arriving at rate of Rs.7.85/-unit for transfer of power. Further, it is pointed out that rate per unit includes various additional charges such as demand charges, energy charges, peak hour charges, electricity duty which are applicable to general customers who purchases the power from electricity board through the grid. However, above mentioned charges are not applicable to the assessee. 7. Hence, the benchmarking analysis of the assessee has been rejected and the TPO proceeded to benchmark the transaction. 8. It is pertinent to mention that during the year, the assessee has sold powers to various third parties at an average rate of Rs.2.97/ unit. 9. As internal comparable is available, the TPO proceeded to compute the arm's length price of the transaction by using CUP as MAM (internal CUP). As the assessee has sold power to various persons (14 members with different rates), as number of comparables are more than 6, median of the comparables is considered as arm' length price. The Median of the comparables comes to Rs.3.00/unit. 10. Accordingly, an adjustment of Rs.114,14,28,568/- has been made. DRP Directions: DRP vide its order dated 28.01.2022 upheld the action of the AO. Before the ITAT: Aggrieved by the order of the TPO/DRP, the assessee has filed an appeal before the Hon'ble ITAT, Hyderabad. Arguments of the assessee: · During the year, the assessee has not claimed any deduction under section 80IA. Hence, provisions of domestic transfer pricing are not applicable. Arguments of the Revenue: · The assessee is an eligible unit as per the provisions of section 80-IA and satisfied the conditions therein. Further, the assessee has not claimed exemption only because it has huge accumulated losses during the previous years. · Once it is finalized that that the assessee is an eligible unit and transferred certain goods/services to non-eligible unit or related party, domestic transfer pricing provisions shall be applicable and arm's length price shall be computed for those transactions 19 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited · Further, reduction of price in the case of eligible unit should not result in corresponding adjustment in the case of non-eligible unit. Arguments of the assessee: · Rate charged by Paschim Gujarat Vij Company Limited shall be considered as arm's length price (the assessee has procured power from Paschim Gujarat Vij Company Limited at Rs. 7,85/ unit). Arguments of the Revenue: · As the price charged by the Paschim Gujarat Vij Company Limited contains various other charges which are not applicable to the captive power plant, such rate shall not be considered for the purpose of computation of ALP. · Further, the assessee sold the power to various third parties Hence, such a price shall be considered as an internal comparable.” 13. The Ld. AR, in rebuttal, had submitted that the assessee has not taken the notional value of Rs. 7.85/- per unit as mentioned in para 6.3 of the Ld. TPO’s order. However, to the contrary, the assessee has only taken the actual value at which the electricity was supplied by the assessee to the other 14 companies. 14. We have heard the rival submissions and perused the material available on record. Section 92BA of the Act provides as under: “Meaning of specified domestic transaction. 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, \"specified domestic transaction\" in case of an assessee means any of the following transactions, not being an international transaction, namely:— (i) [***] (ii) any transaction referred to in section 80A; (iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub- 20 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited section (8) or sub-section (10) of section 80-IA are applicable; or (va) any business transacted between the persons referred to in sub- section (6) of section 115BAB; 22[(vb) any business transacted between the assessee and other person as referred to in sub-section (4) of section 115BAE;] (vi) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees.” 15. Section 80IA of the Act provides as under: “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines : Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub-section (4), the provisions of this sub-section shall have effect as if for the words \"fifteen years\", the words \"twenty years\" had been substituted. (2A) Notwithstanding anything contained in sub-section (1) or sub- section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub- 21 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited section (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (3) This section applies to an undertaking referred to in clause (ii) or clause (iv) of sub-section (4) which fulfils all the following conditions, namely :— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board referred to in clause (7) of section 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or reconstruction or reorganisation of the Board under Part XIII of that Act. Explanation 1.—For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :— (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the assessee. Explanation 2.—Where in the case of an undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. (4) This section applies to— (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely:— 22 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place: Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. Explanation.—For the purposes of this clause, \"infrastructure facility\" means— (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea; (ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, 23 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2005. Explanation.—For the purposes of this clause, \"domestic satellite\" means a satellite owned and operated by an Indian company for providing telecommunication service; (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006: Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking : Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words \"31st day of March, 2006\", the figures, letters and words \"31st day of March, 2011\" had been substituted; (iv) an undertaking which,— (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2017; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2017: Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017. Explanation.—For the purposes of this sub-clause, \"substantial renovation and modernisation\" means an 24 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004; (v) an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant, if— (a) such Indian company is formed before the 30th day of November, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before the 31st day of December, 2005 by the Central Government for the purposes of this clause; (b) such undertaking begins to generate or transmit or distribute power before the 31st day of March, 2011; (vi) [***] (5) ………. (6) Notwithstanding anything contained in sub-section (4), ……………………………………………………………….. (7) The deduction ……………………………………………… such accountant. (8) 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, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.—For the purposes of this sub-section, \"market value\", in relation to any goods or services, means— (i) the price that such goods or services would ordinarily fetch in the open market; or 25 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. (9) ………. (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F. (11) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertaking or enterprise with effect from such date as it may specify in the notification. (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger— (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007. (13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after the 1st day of April, 2005 in accordance with the scheme referred to in sub-clause (iii) of clause (c) of sub-section (4). Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State 26 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Government) and executed by the undertaking or enterprise referred to in sub-section (1).” 16. From a plain reading of section 92BA of the Act, it is clear that what is required for invoking the provisions of section 92BA of the Act is that the assessee transactions should be covered in any of the clauses mentioned at Sl. No. ii to vi of 92BA , either with it any of its associates or with any person having a close connection with the assessee. If the assessee is having the specified domestic transaction with itself or its close associate as per section 92 BA, then the arm- length price in relation to the specified domestic transaction is required to be determined by following Most Appropriate Methods as mentioned in section 92C of the Income Tax Act. Section 80IA (8) read as under : (8) 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, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : 17. Section 80 IA (8) refers to the transfer of any goods or services of the eligible business carried out by the assessee to any other business carried out by it. Similarly, section 80IA(10) reads as under : Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them 27 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: 18. Section 80 IA (8) refers to the assessee carrying on the eligible business with the other person with whom the assessee has a close connection, and the business is so arranged so as to produce more than an ordinary profit which might have expected to arise in such eligible business. 19. On plain reading of the above sections, it is clear that to attract the rigours of section 92BA, it is required that the transaction should either fall within the realm of 80IA(8) or 80IA(10). For the applicability of Section 92BA, either the transaction of goods and services entered between the assessee and the other person is to be examined, or it is required to be examined whether any business transaction between the assessee carrying on the eligible business with the other person has resulted into extraordinary profit by arranging the business. 20. In the present case, admittedly, the power-generating unit of the assessee is connected with the assessee within the meaning of section 80IA (8) and (10), and it is not disputed that in the course of business, they had entered into the agreement for the supply of electricity. On account of this understanding of the agreement, the extraordinary profit was shifted by the assessee to its power- generating unit. In other words, the assessee, by purchasing the power at a higher rate, has increased its expenditure and thereby entered into reducing its income/profit. In our view, the relationship 28 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited between the two is squarely covered by the provision of sections 80IA(8) and 80IA(10). Hence, the transaction is a qualified transaction within the meaning of section 92BA. 21. It is amply clear that for the invocation of section 92BA, there is no necessity for the assessee for opting the deduction U/s. 80IA during the AY under consideration. The option is with the assessee to claim the deduction U/s. 80IA for any 10 consecutive assessment years out of the 15 years, as per section 80IA(2) of the Act. Merely because the assessee has not exercised the option will not make the eligible transaction falling either in section 80IA(8) or section 80IA(10) become ineligible. The eligible business is defined in section 80IA(4) which is not dependent upon the exercise of option by the assessee. Furthermore, the decision relied upon by the assessee in the case of Star Paper Mills Limited vs. DCIT (supra) does not apply to the facts of the case as the co-ordinate Bench of the Tribunal has failed to consider the provision noted hereinabove and therefore, the decision relied upon by the assessee is not binding on this Tribunal. As held by us the determination of ALP adjustment under Section 92BA is not dependent upon seeking the direction under Section 80IA by the assessee. Both provisions operate in different fields and were inserted for different reasons. 22. In view of the above, the argument of the assessee that the assessee has not claimed deduction U/s. 80IA, therefore, the provisions of section 92BA are not attracted, are devoid of any merit and the objection is dismissed. We concur with the view of the Ld. 29 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited DRP on this aspect is given in para 2.1.3 to 2.1.7 of the impugned order. Arm’s Length Price: The Ld. TPO in para-5 of the order has noted out the Specified Domestic Transaction reported by the assessee in Form-3CEB / TP document. As per the said document, the assessee has chosen the comparable uncontrolled price (CUP Method) as the most appropriate method to benchmark the transaction pertaining to the sale of power by power generating unit (eligible for deduction U/s. 80IA of the Act) to cement manufacturing unit and other unit of SIL (the assessee).The assessee has adopted the rate of tariff as per the Gujarat State Electricity Board (GSEB) as CUP and accordingly mentioned the realizable market value of the power for captive consumption. The assessee had arrived at the per unit price of Rs. 7.85/-. The assessee has not furnished any documentary evidence for arriving at unit rate of Rs. 7.85/- as CUP. 23. It was noticed by the Ld. TPO that the assessee has sold power of Rs. 17,52,28,216/- to 14 power users apart from its captive consumption. The table of 14 power users are reproduced by the Ld. TPO at page 5 of his order which is to the following effect : S.No. Name of the Buyer HSN Code Quantity UoM Amount (Rs.) Rate per unit (Rs.) 1 Cadilla Healthcare Ltd 2716000 422400 Kwh 12,67,200 3.000 2 Cadilla Healthcare Ltd 2716000 461250 Kwh 13,83,750 3.000 3 Cadilla Healthcare Ltd 2716000 468000 Kwh 14,04,000 3.000 4 Gujarat fluorochemicals Limited 2716000 1344000 Kwh 36,01,920 2.680 30 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 5 Gujarat fluorochemicals Limited 2716000 1176000 Kwh 35,28,000 3.000 6 Gujarat fluorochemicals Limited 2716000 1344000 Kwh 38,30,400 2.850 7 Piramal Glass Ltd 2716000 768000 Kwh 23,80,800 3.100 8 Piramal Glass Ltd 2716000 537600 Kwh 16,66,560 3.100 9 Piramal Glass Ltd 2716000 594900 Kwh 18,44,190 3.100 10 PTC India Ltd 2716000 707950 Kwh 21,30,929.50 3.010 11 PTC India Ltd 2716000 83000 Kwh 2,49,830 3.010 12 PTC India Ltd 2716000 768000 Kwh 22,34,880 2.940 13 Swiss Glasscoat Equipments Ltd 2716000 853200 Kwh 25,08,408 2.940 14 Swiss Glasscoat Equipments Ltd 2716000 28800 Kwh 84,672 2.940 Average Rate 2.97 24. Based on the above table, the Assessing Officer found that the assessee company sold power to independent third party at per unit rate of Rs. 2.97/- whereas the unit rate at which the power was sold for captive consumption (self consumption) was at Rs. 7.87/- per unit. The Ld. TPO had issued the show cause notice to the assessee and, after considering the reply of the assessee, had benchmarked the transaction by making the adjustment of Rs. 114,14,268/- for transfer of power. The argument of the assessee that the rate of the GSEB is required to be considered at Rs. 7.85/- per unit as against the internal comparables at Rs. 2.97/-was rejected by the Ld. TPO as well as the Ld. DRP. During the course of argument, the Ld. LD.AR of the assessee had only argued the first part, i.e., the applicability of section 92BA and non-claim of deduction U/s. 80IA. For the remaining issues, the Ld. LD.AR relied upon the written submissions filed before us. 31 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 25. Per contra, the ld.DR had filed the written submissions and submitted that the Electricity Act 2003 provides the mechanism for determining the electricity tariff by the Electricity Regulatory Commission. For that, it was submitted that once the assessee does not dispute the CUP method, and the internal comparables are available, then the power per unit rate at which the Electricity was supplied to 14 users by the power generating unit of the assessee would be the appropriate comparable. It was submitted that the rate at which electricity is being provided by the state utility cannot be compared with the rate at which the capital generator power supply is supplying the electricity to itself. 26. We have heard the rival submissions of the parties and perused the material available on record. Admittedly, the assessee himself had benchmarked the specified domestic transaction by taking the CUP as Most Appropriate Method for determining the ALP. For the above said purposes, the assessee has taken the State Distribution Company (GSEB) as comparable for benchmarking the transaction in terms of clause (ii) of Explanation to Section 80IA(8) of the Act. The learned TPO has accepted the CUP as the most Appropriate Method; however, it has rejected the (GSEB) as an appropriate comparable for benchmarking the transaction. In our view, the decision of the TPO for rejecting the GSEB as appropriate comparable is correct. Before we deal with the correctness of the rejection of the GSEB comparable, it would be appropriate to refer to Explanation to Section 80IA(8) of the Act. The Explanation to Section 80IA(8) was inserted w.e.f. 01.04.2013 and it has provided as under : 32 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited “Explanation.—For the purposes of this sub-section, \"market value\", in relation to any goods or services, means— (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. 27. A plain reading of the above explanation clearly indicates for determination of market value either on the basis of the price that such goods or services would ordinarily fetch in the open market or the ALP as defined under Section 92F(ii) of the Act where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. Prior to the insertion of this explanation, the definition of market value was not available in the Income Tax Act. In the absence of the definition of the market value, various High Courts and the Tribunals have considered the per unit price of the electricity as charged by the public utility as market value. In the present case, as mentioned hereinabove and also in the order of TPO that assessee itself has taken the CUP method as most appropriate method in terms of 92C read with 92F of the Income Tax Act and has benchmarked the transactions. Thus, it is not the case of the assessee that the transaction is to be benchmarked on the basis of (i) of Explanation to Section 80IA(8) of the Act. 28. In the present case, the question which arises is whether the electricity sold by the assessee to 14 consumers would be the market value of the goods or services supplied by the assessee or not. 33 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 29. In the present case, assessee has not given the value of the electricity sold in open market and had merely relied upon the prices charged by the State Distribution Company namely, GSEB. 30. Admittedly, the assessee has not sold the electricity in the open market either to the State Utility or the Electricity Power Exchange or to any other person through the open access as per Section 42 of the Electricity Act. Quiet contrary to this, the assessee had sold the surplus electricity to 14 individuals by way of a Power Purchase Agreement with them. In the absence of any availability of price of the electricity in the open market, the best alternative available with the TPO was to benchmark the transactions under the Act in accordance with the computation of Arm Length Price Principle as mentioned in Section 92C r.w. Rule 10B of Income Tax Rules. There is another reason to apply the principle as referred in Section 92C r.w. Rule 10B of I.T. Rules is that the prices charged by the State Distribution Utility from the consumer is dependent upon to various factors and are not comparable on FAR analysis. The assessee is a power generator, and the prices charged by the assessee are required to be compared with the prices charged by an independent third party having the thermal power plant and not with the transmission company or the distribution company. 31. In view of the above, we are of the opinion that the learned lower authorities were right in computing the arm-length price on the basis of the internal comparable available in the form of supplying electricity to 14 electricity consumers. 34 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 32. The Licenses are required for the generation, transmission and distribution of power under the Electricity Act, 2003. The generation of power can take place by using Hydropower, Solar, Thermal, Gas, Nuclear, Wind etc. The assessee is producing the power and is a capital user and is also supplying surplus power to other bulk consumers. The electricity tariff for the generator, transmitter and distribution utility is required to be separately determined by the Regulatory Commission as all three utilities are discharging different functions. The tariff charged by the generator of electricity cannot be compared with the tariff charged by the distributor. Further, the tariff charged by the State distributor cannot be compared with the Captive Power Generator like assessee before us. There is no comparison between the functions performed by the state utility with that of the assessee. To demonstrate the disparity in the functioning of the State Utility and determination of electricity tariff per unit by the State Electricity Regulatory Commission, it is necessary to mention the various provisions of the Electricity Act and Tarif Policy notified by the Central Government. Section 61 – Tarif Regulations: The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing so, shall be guided by the following, namely:-- (a) the principles and methodologies specified by the Central Commission for determination of the tariff applicable to generating companies and transmission licensees; (b) the generation, transmission, distribution and supply of electricity are conducted on commercial principles; (c) the factors which would encourage competition, efficiency, economical use of the resources, good performance and optimum investments; 35 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited (d) safeguarding of consumers' interest and at the same time, recovery of the cost of electricity in a reasonable manner; (e) the principles rewarding efficiency in performance; (f) multi year tariff principles; 1 [(g) that the tariff progressively reflects the cost of supply of electricity and also, reduces cross-subsidies in the manner specified by the Appropriate Commission;] (h) the promotion of co-generation and generation of electricity from renewable sources of energy; (i) the National Electricity Policy and tariff policy: Provided that the terms and conditions for determination of tariff under the Electricity (Supply) Act, 1948 (54 of 1948), the Electricity Regulatory Commission Act, 1998 (14 of 1998) and the enactments specified in the Schedule as they stood immediately before the appointed date, shall continue to apply for a period of one year or until the terms and conditions for tariff are specified under this section, whichever is earlier. Section 62 - Determination of tariff. (1) The Appropriate Commission shall determine the tariff in accordance with the provisions of this Act for-- (a) supply of electricity by a generating company to a distribution licensee: Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or purchase of electricity in pursuance of an agreement, entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity; (b) transmission of electricity; (c) wheeling of electricity; (d) retail sale of electricity: Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity. 36 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited (2) The Appropriate Commission may require a licensee or a generating company to furnish separate details, as may be specified in respect of generation, transmission and distribution for determination of tariff. (3) The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required. (4) No tariff or part of any tariff may ordinarily be amended, more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified. (5) The Commission may require a licensee or a generating company to comply with such procedures as may be specified for calculating the expected revenues from the tariff and charges which he or it is permitted to recover. (6) If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee. Tariff Policy - 2006 8.3 Tariff design : Linkage of tariffs to cost of service It has been widely recognised that rational and economic pricing of electricity can be one of the major tools for energy conservation and sustainable use of ground water resources. In terms of the Section 61 (g) of the Act, the Appropriate Commission shall be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity. The State Governments can give subsidy to the extent they consider appropriate as per the provisions of section 65 of the Act. Direct subsidy is a better way to support the poorer categories of consumers than the mechanism of cross subsidizing the tariff across the board. Subsidies should be targeted effectively and in transparent manner. As a substitute of cross-subsidies, the State Government has the option of raising resources through mechanism of electricity duty and giving direct subsidies to only needy consumers. This is a better way of targetting subsidies effectively. 15 Accordingly, the following principles would be adopted: 1. In accordance with the National Electricity Policy, consumers below poverty line who consume below a specified level, say 30 units per month, may receive a special support through cross subsidy. Tariffs for such designated 37 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited group of consumers will be at least 50% of the average cost of supply. This provision will be re-examined after five years. 2. For achieving the objective that the tariff progressively reflects the cost of supply of electricity, the SERC would notify roadmap within six months with a target that latest by the end of year 2010-2011 tariffs are within ± 20 % of the average cost of supply. The road map would also have intermediate milestones, based on the approach of a gradual reduction in cross subsidy. For example if the average cost of service is Rs 3 per unit, at the end of year 2010-2011 the tariff for the cross subsidised categories excluding those referred to in para 1 above should not be lower than Rs 2.40 per unit and that for any of the cross-subsidising categories should not go beyond Rs 3.60 per unit. 3. While fixing tariff for agricultural use, the imperatives of the need of using ground water resources in a sustainable manner would also need to be kept in mind in addition to the average cost of supply. Tariff for agricultural use may be set at different levels for different parts of a state depending of the condition of the ground water table to prevent excessive depletion of ground water. Section 62 (3) of the Act provides that geographical position of any area could be one of the criteria for tariff differentiation. A higher level of subsidy could be considered to support poorer farmers of the region where adverse ground water table condition requires larger quantity of electricity for irrigation purposes subject to suitable restrictions to ensure maintenance of ground water levels and sustainable ground water usage. 4. Extent of subsidy for different categories of consumers can be decided by the State Government keeping in view various relevant aspects. But provision of free electricity is not desirable as it encourages wasteful consumption of electricity besides, in most cases, lowering of water table in turn creating avoidable problem of water shortage for irrigation and drinking water for later generations. It is also likely to lead to rapid rise in demand of electricity putting severe strain on the distribution network thus adversely affecting the quality of supply of power. Therefore, it is necessary that reasonable level of user charges are levied. The subsidized rates of electricity should be permitted only up to a preidentified level of consumption beyond which tariffs reflecting efficient cost of service should be charged from consumers. If the State Government wants to reimburse even part of this cost of electricity to poor category of consumers the amount can be paid in cash or any other 16 suitable way. Use of prepaid meters can also facilitate this transfer of subsidy to such consumers. 5. Metering of supply to agricultural / rural consumers can be achieved in a consumer friendly way and in effective manner by management of local distribution in rural areas through commercial arrangement with franchisees with involvement of panchayat institutions, user associations, cooperative societies etc. Use of self closing load limitors may be encouraged as a cost effective option for metering in cases of “limited use consumers” who are eligible for subsidized electricity. 38 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 8.4 Definition of tariff components and their applicability 1. Two-part tariffs featuring separate fixed and variable charges and Time differentiated tariff shall be introduced on priority for large consumers (say, consumers with demand exceeding 1 MW) within one year. This would also help in flattening the peak and implementing various energy conservation measures. 2. The National Electricity Policy states that existing PPAs with the generating companies would need to be suitably assigned to the successor distribution companies. The State Governments may make such assignments taking care of different load profiles of the distribution companies so that retail tariffs are uniform in the State for different categories of consumers. Thereafter the retail tariffs would reflect the relative efficiency of distribution companies in procuring power at competitive costs, controlling theft and reducing other distribution losses. 3. The State Commission may provide incentives to encourage metering and billing based on metered tariffs, particularly for consumer categories that are presently unmetered to a large extent. The metered tariffs and the incentives should be given wide publicity. 4. The SERCs may also suitably regulate connection charges to be recovered by the distribution licensee to ensure that second distribution licensee does not resort to cherry picking by demanding unreasonable connection charges. The connection charges of the second licensee should not be more than those payable to the incumbent licensee.” 8.5 Cross-subsidy surcharge and additional surcharge for open access - 8.5.1 National Electricity Policy lays down that the amount of cross-subsidy surcharge and the additional surcharge to be levied from consumers who are permitted open access should not be so onerous that it eliminates competition which is intended to be fostered in generation and supply of power directly to the consumers through open access. A consumer who is permitted open access will have to make payment to the generator, the transmission licensee whose transmission systems are used, distribution utility for the wheeling charges and, in addition, the 17 cross subsidy surcharge. The computation of cross subsidy surcharge, therefore, needs to be done in a manner that while it compensates the distribution licensee, it does not constrain introduction of competition through open access. A consumer would avail of open access only if the payment of all the charges leads to a benefit to him. While the interest of distribution licensee needs to be protected it would be essential that this provision of the Act, which requires the open access to be introduced in a time-bound manner, is used to bring about competition in the larger interest of consumers. 39 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Accordingly, when open access is allowed the surcharge for the purpose of sections 38,39,40 and sub-section 2 of section 42 would be computed as the difference between (i) the tariff applicable to the relevant category of consumers and (ii) the cost of the distribution licensee to supply electricity to the consumers of the applicable class. In case of a consumer opting for open access, the distribution licensee could be in a position to discontinue purchase of power at the margin in the merit order. Accordingly, the cost of supply to the consumer for this purpose may be computed as the aggregate of (a) the weighted average of power purchase costs (inclusive of fixed and variable charges) of top 5% power at the margin, excluding liquid fuel based generation, in the merit order approved by the SERC adjusted for average loss compensation of the relevant voltage level and (b) the distribution charges determined on the principles as laid down for intra-state transmission charges. Surcharge formula: S = T – [ C (1+ L / 100) + D ] Where S is the surcharge T is the Tariff payable by the relevant category of consumers; C is the Weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power D is the Wheeling charge L is the system Losses for the applicable voltage level, expressed as a percentage The cross-subsidy surcharge should be brought down progressively and, as far as possible, at a linear rate to a maximum of 20% of its opening level by the year 2010-11. 33. Sections 61 and 62 of the Electricity Act read in conjunction with the Tariff Policy, 2006, make it abundantly clear that the tariff determined by the State Electricity Regulatory Mission is required to factor in various parameters as mentioned hereinabove. The various factors which are required to be considered are the cross subsidy to the domestic consumers who are using the electricity upto the threshold limit, cross subsidy to agriculture, industrial users and commercial users, who are using the electricity on high voltage. The tariff is further dependent upon the geographical position of any area, the nature of supply and the purpose for which the supply is required. The State Regulatory Commission are bound by the direction issued by the State Government for determining the tariff under section 108 of Electricity Act, 2003, which is to the following effect : 40 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited “Directions by State Government. (1) In the discharge of its functions, the State Commission shall be guided by such directions in matters of policy involving public interest as the State Government may give to it in writing. (2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the State Government thereon shall be final.” 34. From the reading of the provisions of the Electricity Act, National Electricity Policy and National Tariff Policy, it is clear that the tariff determined by the State Regulatory Commission is dependent upon various factors like purpose of electricity, usages of electricity, time of electricity (time of day tariff), type of industry, supply of voltage, power factor, cross subsidy for domestic as well as agriculture user, welfare of the employees of the utility by making provision for health, education and post retirement benefits, further to abide by the direction of the State Government etc. For the above said reasons, the electricity tariff charged by the State distribution utility cannot be compared with the tariff charged by the assessee for supplying the electricity to itself. 35. In view of the above, we are of the opinion that due to the functions performed, asset employed and the risk assumed by the State Utility were materially different than that of the assessee power generator, we do not find that the State Utility is comparable with the power generator of the assessee. Needless to say for the purpose of comparing the transaction of a third party with the assessee under the comparable uncontrolled price (CUP) method, it is necessary though the transaction should be parametria similar to each other with no difference in FAR and analysis. Lastly, the assessee has 41 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited brought to our notice that the tariff charged by any power generator company who has set up the thermal power plant to show that the prices charged by the said thermal power plant can be comparable with the price of Rs.7.85 per unit benchmarked by the assessee. In view of the above, we found that the argument of the assessee that State Utility which is supplying the electricity at Rs.7.85 paise is not comparable with the assessee and therefore, the argument of the ld.AR is rejected. 36. Further, we have also examined the agreement for purchase and sale of power entered into between Sanghi Industries Limited and Gujarat Fluorochemicals Limited page 131 of the paper book. In the said agreement, Sanghi Industries Limited and Gujarat Fluorochemicals Limited have agreed @ Rs. 2.68 per /kWh with the surcharge as mentioned therein. Similar is the agreement at page 142 of the paper book which also provided the tariff at Rs. 3.10 kWh. 37. Thus, in sum and substance, it is clear that the assessee was supplying the power to the other units at an average of Rs. 2.97/- whereas in the TP study, the assessee has adopted the rate at Rs. 7.85/- per unit as per GSEB tariff. The argument that the rate of electricity as charged by the State Electricity Board is required to be considered for benchmarking the power supply between the related parties, is not applicable to the facts of the present case, as the internal comparable in the form of the power supply to the 14 companies were available with the Ld. TPO and therefore, TPO had rightly applied the arithmetic mean of power supply by it to 14 consumers. 42 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 38. In support of its case, the assessee has relied upon the following decisions as mentioned hereinabove. i. DCIT Vs. M/s. Balrampur Chini Mills Ltd. ii. ACIT Vs. M/s. Philips Carbon Black Ltd. iii. ACIT Vs. M/s. Tamilnadu Newsprint and Papers Ltd. iv. Shah Alloys Ltd Vs. DCIT. v. Godawari Power and Ispat Ltd Vs. DCIT. 39. The first judgment relied upon by the assessee is DCIT Vs. M/s. Balarampur Chini Mills Ltd in ITA No.1672/Kol/2019 dated 05.05.2021. In this case, the Tribunal has adopted the rate charged by power generating unit and benchmarked the transactions accordingly. However, while doing so, the Tribunal has relied upon the decisions of jurisdictional High Court in the case of M/s. Electrosteel Casting Limited, Graphite India Ltd., M/s. Kanoria Chemicals and Industries Ltd, decision of Hon'ble Gujarat High Court in the case of Gujarat Alkalies and Chemicals Limited and also the decision of Hon'ble Chhattisgarh High Court in the case of Godawari Power and Ispat Limited. Ironically all the decisions relied upon by the co-ordinate Bench of the Tribunal, on the basis of which the above said decision has been taken were passed prior to the insertion of Explanation to Section 80IA(8) of the Act and therefore, none of the judgments relied upon by the Kolkata Bench of the Tribunal in the case of M/s. Balarampur Chini Mills Ltd are applicable to the facts of the present case. Moreover, in the present case, assessee itself had benchmarked the transactions by following the CUP method under 43 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Section 92C of the Act and therefore, also, this judgment is not applicable to the facts of the case. 40. The second decision relied upon by the assessee is ACIT Vs. M/s. Philips Carbon Black Limited in ITA No.2628/Kol/2019 dt.05.07.2022. In the said case, again the Tribunal in Para 5.7 had only relied upon the finding given by the Tribunal in the case of DCIT Vs. Balrampur Chini Mills Ltd (supra) and other the decision of Hon'ble High Courts referred hereinabove, which are not taken into account the Explanation to Section 80IA(8) inserted w.e.f. 01.04.2013 and has further taken into account the financial dissimilarity between the assessee and the State Electricity Board. Moreover, in the present case, assessee itself had benchmarked the transactions by following the CUP method under Section 92C of the Act and therefore, also, this judgment is not applicable to the facts of the case 41. Third decision relied upon by the assessee is ACIT Vs. M/s. Tamilnadu Newsprint and Papers Ltd in IT(TP)A No.47/Chny/2022 dt.30.11.2023. In this case also, the Tribunal has relied upon the decisions in the case of DCIT Vs. M/s. India Cements Ltd., in ITA 737/Chny/2018 wherein the decision of Hon'ble Bombay High Court in the case of CIT vs. Reliance Industries Ltd was followed. Both the decisions i.e., M/s. India Cements Ltd (supra) and the Reliance Industry Limited (supra) were passed prior to the insertion of the Explanation to Section 80IA(8) of the Act and therefore, the same cannot be said to be followed. Moreover, in the present case, assessee itself had benchmarked the transactions by following the CUP method under Section 92C of the Act and therefore, also, this judgment is not applicable to the facts of the case. 44 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited 42. Similarly, the fourth decision relied by the assessee is Shah Alloys Limited Vs. DCIT in ITA No.1417/Ahd/20190 dt.21.06.2023. This case is also not applicable on account of distinguished facts in the present case wherein the assessee itself had benchmarked the transactions by following the CUP method under Section 92C of the Act and therefore, also, this judgment is not applicable to the facts of the case 43. The last decision relied upon by the assessee is Godawari Power and Ispat Limited Vs. DCIT in ITA No.42/RPR/2022 dt.24.04.2023 for AY.2017-18. Interestingly, much water has been flown after A.Y.2017- 18 by way of insertion of the Explanation to Section 80IA(8) of the Act whereby the decision of the market value has been provided by the assessee. In view of the above, none of the judgments relied upon by the assessee are applicable to the facts of the present case. Recently, the hon'ble Supreme Court in the case of Jindal Power Steel (supra) has held in Para 32 reproduced hereinabove whereby it has been held that in the absence of definition of market value, the prices determined by the State Utility what represented the market value of the goods and services. However, now the Act is clear which guides how to determine the market value and how the goods and services and for that purposes, either the prices which the goods and services in open market and in the absence of availability of that data, the arms length price as determined u/s 92F is required to be computed by the mechanism provided u/s 92C of the Act on receipt of Rule 10B of the Income Tax Rules 1962. Furthermore, in the present case, assessee itself had benchmarked the transactions by following the 45 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited CUP method under Section 92C of the Act and therefore, also, this judgment is not applicable to the facts of the case 44. In the light of the above, we do not find merit in the appeal of the assessee and accordingly, the appeal of the assessee is dismissed. The assessee has not raised any other grounds before us and therefore, we deem it appropriate not to adjudicate the remaining grounds. Before we part with, we would like to record our appreciation for the valuable assistance given by the ld.CIT-DR in this matter. Thus, the appeal of the assessee is dismissed. 45. In the result, the appeal of the assessee is dismissed. Order pronounced in the Open Court 23rd January, 2025. Sd/- Sd/- Sd/- (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 23.01.2025. OKK/sps 46 ITA (TP) 104/Hyd/2022 Sanghi Industries Limited Copy to: S.No Addresses 1 Sanghi Industries Limited, Sanghi Nagar, Koheda, R.R. District, Telangana – 501511. 2 DCIT, Circle-3(1), Hyderabad. 3. The Deputy Commissioner of Income Tax, (Transfer Pricing)-2, Hyderabad. 4 Dispute Resolution Panel (DRP), Bengaluru 5 The Director of Income Tax (IT & TP), Hyderabad. 6 Prl.CIT (Central), Hyderabad. 7 DR, ITAT Hyderabad Benches 8 Guard File "