Commissioner Of Income Taxchennai v. M/S.opg Metals P Ltd26, Mooker Nalla Muthu Street

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 16.09.2013 Coram The Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Appeal) No.332 of 2013 Commissioner of Income TaxChennai ... Appellant -vs- M/s.OPG Metals P Ltd26, Mooker Nalla Muthu Street 2[nd] Floor, Chennai-600 001 ... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal, Chennai'C' Bench dated 22.11.2012 in ITA.BNo.1095/Mds/2012. Against theproceedings of the Income Tax Appellate Tribunal 'C' Bench, Chennaiin I.T.A.No.1095/Mds/2012 for the assessment year 2008-2009 dated22.11.2012, against the order of the Commissioner of Income Tax(Appeals) in I.T.A.No.143/2010-11 for the assessment year 2008-2009order dated 23.2.12 against the order of Deputy Commissioner ofIncome Tax, Company Circle V(1), Chennai 34 dated 13.12.2010 passedin PAN.No: AACCS 9725 P. For appellant: Mr.N.V.Balaji Standing Counsel for Income Tax Dept. (The Judgment of the Court was made byCHITRA VENKATARAMAN, J.) Following questions of law are raised by the Revenue in seekingadmission of the above Tax Case (Appeal) filed for the assessmentyear 2008-09. "1. Whether in the facts and circumstances of the case, theIncome Tax Appellate Tribunal is right in holding that price paid bythe assessee for purchase of electricity from its group companyM/s.OPG Energy Private Limited is not excessive and no disallowance https://hcservices.ecourts.gov.in/hcservices/ could be made under Section 40A ? 2. Is the finding of the Tribunal that single isolated instanceof sale by M/s.OPG Energy Private Limited to M/s Meridian anunrelated party at a price of Rs.3.0417 per unit cannot be a basisfor arriving reasonability of the price paid by the assessee notperverse, especially when the said M/s.Meridian had purchased morethan 50% of the power sold by M/s.OPG Energy Private Limited ?" 2. The Assessing Officer disallowed a sum of Rs.96,18,175/- asexcess payment on purchase of power from M/s.OPG Energy P.Ltd, agroup company, under Section 40 A of the Income Tax Act, 1961, afterconsidering the excess arrived at in the assessment of the income inthe case of M/s.OPG Energy P Ltd. 3. On appeal before the First Appellate Authority, on aconsideration of the material, the Commissioner of Income Tax(Appeals) came to the conclusion that price paid by the assessee tosister concern was not excessive, thus, the appeal was allowed. 2. The Assessing Officer disallowed a sum of Rs.96,18,175/- asexcess payment on purchase of power from M/s.OPG Energy P.Ltd, agroup company, under Section 40 A of the Income Tax Act, 1961, afterconsidering the excess arrived at in the assessment of the income inthe case of M/s.OPG Energy P Ltd. 3. On appeal before the First Appellate Authority, on aconsideration of the material, the Commissioner of Income Tax(Appeals) came to the conclusion that price paid by the assessee tosister concern was not excessive, thus, the appeal was allowed. 4. Aggrieved by this, Revenue went on appeal before the IncomeTax Appellate Tribunal. On a study of the materials furnished beforethe Income Tax Appellate Tribunal, as regards the rate at which thesister concern sold the electricity to various parties, the IncomeTax Appellate Tribunal came to the conclusion that out of total teninstances, excluding the assessee, only in two cases, the rates werelower; the average rate at which electricity was supplied by the saidcompany to unrelated parties came to Rs.3.266 per unit. The IncomeTax Appellate Tribunal further pointed out that the average rate ofsale to unrelated parties had been pulled down to Rs.3.266 per uniteven if one has taken out the case of M/s.Meridian IndustriesLimited, the rate was at Rs.3.041 per unit. Thus, the Income TaxAppellate Tribunal viewed that such an isolated instance could not bea basis for making a meaningful comparison. On facts, thus, theIncome Tax Appellate Tribunal held that the supplier had reasons forcharging different rates. The Income Tax Appellate Tribunal furtherpointed out that the rate at which, the assessee purchasedelectricity from M/s OPG Energy Pvt. Ltd., was lower than thetariff fixed by the Tamil Nadu Electricity Board. Taking note of theoverall picture, the Income Tax Appellate Tribunal held that thequestion as to what was the commercial consideration which permittedthe assessee to purchase electricity at that rate could not be takenas a good ground for considering the question in favour of theRevenue. Consequently, the Income Tax Appellate Tribunal rejectedthe Revenue's appeal. 5. Considering the pure findings of fact, we do not find any substantial question of law for admitting the Tax Case. Accordingly,the Tax Case (Appeal) stands dismissed. No costs. Sd/-Assistant Registrar/True Copy/Sub Assistant Registrar nvsriTo1. The Commissioner of Income Tax, Chennai.2. The Commissioner of Income Tax (Appeals-V), Nungambakkam, Chennai-343. The Income Tax Appellate Tribunal, Chennai Bench 'C'. + One CC to M/s.N.V.Balaji, Advocate, Sr.No.48513Tax Case (Appeal) No.332 of 2013 RK(CO)DRL : 07/10/2013