S. 80IA : Industrial undertakings-Enterprises engaged in infrastructure development-Captive power plant-Specified domestic transaction – Transfer Pricing -ALP of inter-unit transfer of electricity -For benchmarking transfer of power from captive power plant to assessee’s own manufacturing units, the proper CUP is the tariff at which State Electricity Distribution Company supplies power to industrial consumers and not the lower rate at which it procures power from generators – TPO was not justified in adopting MSEDCL purchase rate and making downward TP adjustment-Relief granted by CIT(A) upheld. [S. 10B, 80A(6), 80IA(8), 92BA, 92C, 92F(ii)]
The assessee was engaged in the business of manufacturing and trading in power, steel and energy and had a captive power plant (CPP) supplying electricity to its own industrial units. For AY 2017–18, being the first year of claim, the assessee claimed deduction u/s 80-IA in respect of profits of the CPP and reported specified domestic transaction in Form No. 3CEB in respect of inter-unit transfer of electricity. For benchmarking the transfer, the assessee adopted the CUP method and considered the tariff charged by Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) to industrial consumers at Rs. 7.21 per unit / Rs. 7.07 per unit. The TPO rejected the benchmarking adopted by the assessee and held that the correct comparable was the rate at which MSEDCL purchased power from independent generators, i.e., Rs. 3.79 per unit, on the ground that the industrial tariff represented a distribution price and included distribution margin. Accordingly, a downward adjustment of Rs. 28.22 crore was proposed and the AO made the addition. The CIT(A) deleted the adjustment by following the decision of the Supreme Court in CIT v. Jindal Steel & Power Ltd. ( 2024 ) 297 Taxman 253/ 460 ITR 162 ( SC).The Tribunal held that the issue was squarely covered by the decision of the Supreme Court in Jindal Steel & Power Ltd., wherein it was held that for determining market value of electricity transferred by an eligible power unit, the relevant benchmark is the rate at which electricity is supplied by the State Electricity Board to industrial consumers and not the rate at which power is purchased from generating companies. The Tribunal also followed the decisions in CIT v. Reliance Industries Ltd. (Bom),(HC) PCIT v. Gujarat Alkalies & Chemicals Ltd. (Guj)(HC) and the Third Member decision in Aditya Birla Nuvo Ltd. v. DCIT, ITA No. 563/Mum/2018 dated 18.09.2025 wherein similar objections of the Revenue based on FAR analysis, section 80A(6) and SDT provisions were rejected. Accordingly, the Tribunal held that the tariff at which the assessee’s industrial units purchased power from MSEDCL constituted a valid CUP for determining ALP / market value of electricity supplied by the CPP to the non-eligible units and the TPO was not justified in substituting the generator procurement rate. Therefore, the deletion of TP adjustment by the CIT(A) was upheld and all the Revenue’s appeals were dismissed.( AY..2017–18, 2018–19, 2020–21 & 2021–22) (ITA Nos. 138 to 141/Nag/2025, dt. 27-03-2026.)
Dy. CIT v. Gopani Iron and Power (India) Pvt. Ltd. (Nag.)(Trib.) www.itatonline.org.
[Coram : Hon’ble Shri Pawan Singh, JM and Shrikhettra Mohan Roy, AM]