SARANYA TEXTILES,COIMBATORE vs. ACIT NON CORPORATE CIRCLE-2, COIMBATORE

This is an appeal filed by the assessee directed against the order of the learned Commissioner of Income Tax (Appeals)-2, Coimbatore (hereinafter called as ‘CIT(A)’) in Appeal No.104/17-18 dated 05.04.2019 for the assessment year 2015-16.

It was submitted by the learned Authorized Representative that the assessee is a partnership firm which is running spinning mills. It was a submission that the assessee had generated electricity from its wind mills and captive consumption of the said power was done. For the purpose of quantification, the assessee had adopted a cost of Rs.5.50 paise per unit which was the rate at which the Tamil Nadu Electricity Board was supplying electricity to the assessee. It was a submission that the Assessing Officer adopted a figure of Rs.2.90 paise per unit which being the purchase price of power by the Tamil Nadu Electricity Board from other wind mill owners. It was a submission that by captive consumption, the assessee had saved at the rate of the purchase price and for determining the actual profit generated by the assessee on account of the captive consumption of the power generated from its wind mills, the rate at which the assessee was supplied electricity by the Tamil Nadu Electricity Board was to be adopted which was Rs.5.50 paise per unit. It was a submission that the learned CIT(A) dismissed the assessee’s appeal without accepting the contention of the assessee. It was a submission that in respect of the transfer pricing calculations, the Co-ordinated Bench of this Tribunal had in the case of M/s.K.P.R. Mill Limited Vs. The Assistant Commissioner of Income Tax in dated 24th January, 2018 held that the assessee ought to have purchase power from the Tamil

In reply, the learned Departmental Representative vehemently supported the order of the learned Assessing Officer and the learned CIT(A).

We have considered the rival submission and perused the materials available on record.

By investing in the wind mill, the assessee has saved itself from the cost of purchasing power from the Tamil Nadu Electricity Board. Obviously, it is what the assessee saves that is to be considered and not the price at which the Tamil Nadu Electricity Board would have purchase power from the assessee’s wind mill. The Tamil Nadu Electricity Board could purchase power at Rs.2.90 paise per unit and then there would be add-on cost and service charge which would result in the cost of power reaching to Rs.5.50 per unit cost to the assessee. The differential would be the actual infrastructural cost incurred by the Tamil Nadu Electricity Board. Contrary to the infrastructure of TNEB is the infrastructural cost of the assessee representing the investment in the wind mill which is a depreciable asset also. Therefore, it is not the price at 4 -: which the Tamil Nadu Electricity Board would purchase the power from the assessee that is to be adopted but the price and costs that the assessee saves by making the investment and doing captive consumption. In the circumstances, the Assessing Officer is directed to re-compute the deductions u/s.80IA by adopting the figure of Rs.5.50 per unit as against Rs.2.90 per unit adopted by the Assessing Officer.

In the result, the appeal of the assessee is allowed.