THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. ATUL LIMITED

ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr. M.R. Bhatt for M.R. Bhatt and Co. for the appellant Revenue.

“3. With respect to Question [B], the issue pertains to subSection (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs.5.40 ps. per unit from the general unit. The Assessing Officer applying subSection (8) of Section 80IA restricted the same to Rs.5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 80IA of the Act. This restriction was primarily on the basis that the rate of Rs.5.40 ps. charged by Gujarat Electricity Board (“ GEB” for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining

market

value

of the electricity generated by the CPP Unit and supplied to its general unit.

“7. To our mind, Tribunal has committed no error. Assessing Officer and CIT(Appeals) while adopting Rs.4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT(Appeals) in terms recorded that Rs.4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs.4.17 per unit which was the cost of electricity generation and Rs.0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs.4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term “Market Value” is further explained in explanation to said subsection to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs.4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs.5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs.4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs.5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs.4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed.”

“11. We have considered the submissions made by the learned counsel for the parties. We have also considered the case laws cited by the learned counsel for the assessee. Taking into consideration the judements of this court and other High Courts, cited above, we are of the opinion that the Tribunal has rightly allowed the claim of the assessee. In that view of the matter, we do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of the assessee and against the revenue.”