The assessee transferred electricity generated from its Captive Power Plants (CPPs) to its non-eligible units and benchmarked the specified domestic transaction by adopting the internal CUP method, using the average annual landed cost of electricity paid by its manufacturing units to State Electricity Boards (SEBs). The Transfer Pricing Officer held that the arm\u2019s length price should be determined based on average tariff orders applicable to independent power producers supplying electricity to SEBs and proposed an adjustment. The Commissioner of Income Tax (Appeals) deleted the adjustment, and the Tribunal affirmed the same. On appeal, the Hon\u2019ble Calcutta High Court held that CPPs are established for captive consumption and not for sale of power to SEBs. Accordingly, the internal CUP method adopted by the assessee, based on the landed cost of electricity purchased from SEBs, constituted the most appropriate method for determining the arm\u2019s length price. The Court noted that the issue was squarely covered by its earlier decisions in Star Paper Mills Ltd. [2025] 172 taxmann.com 391 (Calcutta) and Rungta Mines Ltd. [2025] 176 taxmann.com 410 (Calcutta) and answered the substantial questions of law against the Revenue.With regard to the corporate guarantee issued by the assessee on behalf of its associated enterprise, the assessee adopted the CUP method for benchmarking said transactions.. The TPO on the basis of a broad functional comparability approach under the CUP Method, computed the interest savings by applying the percentile approach at 137.5 bps and assuming that 50 per cent benefit ought to have been paid by the associated enterprise to the assessee in the form of a corporate guarantee fee, the ALP of the corporate guarantee fee was computed at 69 bps. The Hon\u2019ble Tribunal restricted the arm\u2019s length guarantee fee to 0.5 per cent. The High Court upheld this finding, observing that the Tribunal had followed settled judicial precedent and, in fact, applied the very rate contended by the Revenue before the Tribunal. The Court held that no substantial question of law arose on this issue.(AY. 2015-16)<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 92C: Transfer pricing-Arm\u2019s length price-Avoidance of tax-International transaction-Captive Power Plants (CPPs)-Internal CUP method-Average landed cost of electricity paid to SEBs-Most appropriate method-Corporate guarantee-Arm\u2019s length guarantee fee-0.5 per cent-Order of Tribunal affirmed. [S. 92BA, Rule 10B]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-59559","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-fuD","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59559","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=59559"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59559\/revisions"}],"predecessor-version":[{"id":59560,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59559\/revisions\/59560"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=59559"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=59559"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=59559"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}