In So Doing, The Appellate Tribunal Relied Onthe Decision Of This Court In Principal Commissionerof Income Tax-Vadodara-1 v. The Tribunal In Paragraph 46, Extensively Quotedthe Law From Gujarat Alkalies & Chemicals Ltd.the Law From Gujarat Alkalies & Chemicals Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 424 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 VersusATUL LIMITED ========================================================== Appearance:M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 12/09/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr. M.R. Bhatt forM.R. Bhatt and Co. for the appellant Revenue. 2.The present appeal under Section 260A of theIncome Tax Act arise out of order dated 23.02.2022 ofthe Income Tax Appellate Tribunal, Ahmedabad 'D'Bench, Ahmedabad in Income Tax Appeal No. 1681 of2011 in respect of Assessment Year 2005-06. 3.Noticing the basic facts, respondent-assesseecompany claimed deduction under section 80IA of theIncome Tax Act, 1961 (hereafter referred to as the'Act') in respect of the profits earned on captivepower plant to the tune of Rs. 9,62,10,765/-. TheAssessing Officer observed in his order that the basis for computing the profits was the selling priceof the electricity of Gujarat Electricity Board atRs. 5.766 per unit. According to the AssessingOfficer, at this rate, the assessee had earned profitat Rs. 37.75%, which was fixed at Rs. 6,26,51,076/-,as against Rs. 9,62,10,765/-, claimed by theassessee. The Assessing Officer reduced the claim ofdeduction on captive power plant by Rs.3,35,59,689/-. 3.1 The assessee preferred appeal before theCommissioner of Income Tax (Appeals), which upheldthe decision of the Assessing Officer. The IncomeTax Appellate Tribunal, as per the impugned order,deleted the allowances. 3.2 In so doing, the appellate Tribunal relied onthe decision of this Court in Principal Commissionerof Income Tax-Vadodara-1 vs. Gujarat Alkalies &Chemicals Ltd. [(2017) 395 ITR 247 Gujarat]. Relyingon several earlier decisions of the the DivisionBench of this Court, it was held that the profits andgains from the infrastructure undertakings for whichthe deduction under section 80IA(4) of the Act wasallowable to the assessee for generation of power forcaptive consumption and the same was to be computedconsidering the rate of power on which theelectricity board supplied power to its consumers. 3.3 The Tribunal in paragraph 46, extensively quotedthe law from Gujarat Alkalies & Chemicals Ltd.the law from Gujarat Alkalies & Chemicals Ltd. (supra). 4.In the appeal, the appellant has proposed thefollowing question claiming to be arising assubstantive question of law, Whether the Appellate Tribunal has erred in alwand facts in allowing the assessee's claim ofdeduction u/s 80IA(8) of the Act when theassessee had adopted rate on which the GEBsupplied power to its consumers ignoring therate on which power generating company suppliedits power to GEB? 5.There is no gainsaying that the issue raised bythe appellant herein is covered by the said decisionin Gujarat Alkalies & Chemicals Ltd. (supra). Thequestion of law as is raised in the present appeal,it would be fruitful to extract the observations fromGujarat Alkalies & Chemicals Ltd. (supra) made by theDivision Bench, "3...Division Bench of this Court by judgementdated 22.11.2011 in Tax Appeal No.2092/2010 insomewhat similar controversy observed as under : Whether the Appellate Tribunal has erred in alwand facts in allowing the assessee's claim ofdeduction u/s 80IA(8) of the Act when theassessee had adopted rate on which the GEBsupplied power to its consumers ignoring therate on which power generating company suppliedits power to GEB? 5.There is no gainsaying that the issue raised bythe appellant herein is covered by the said decisionin Gujarat Alkalies & Chemicals Ltd. (supra). Thequestion of law as is raised in the present appeal,it would be fruitful to extract the observations fromGujarat Alkalies & Chemicals Ltd. (supra) made by theDivision Bench, "3...Division Bench of this Court by judgementdated 22.11.2011 in Tax Appeal No.2092/2010 insomewhat similar controversy observed as under : “3. With respect to Question [B], the issuepertains to subSection (8) of Section 80IAof the Income Tax Act, 1961. The assesseehad a CPP Unit generating electricity,which was supplying it to a general unit.The electricity generated is being suppliedto other consumers also. The CPP unitcharged Rs.5.40 ps. per unit from thegeneral unit. The Assessing Officerpertains to subSection (8) of Section 80IAof the Income Tax Act, 1961. The assesseehad a CPP Unit generating electricity,which was supplying it to a general unit.The electricity generated is being suppliedto other consumers also. The CPP unitcharged Rs.5.40 ps. per unit from thegeneral unit. The Assessing Officer applying subSection (8) of Section 80IArestricted the same to Rs.5.32 ps. per unitand, thereby, restricted the deductionsclaimed by the assessee under Section 80IAof the Act. This restriction was primarilyon the basis that the rate of Rs.5.40 ps.charged by Gujarat Electricity Board (“GEB” for short) was inclusive of 8 paiseper unit of electricity duty. Thiscomponent of electricity duty the AssessingOfficer discarded for the purposes ofascertaining market value of theelectricity generated by the CPP Unit andsupplied to its general unit. 4. CIT (Appeals) confirmed the view of theAssessing Officer on the same line ofreasoning. The Tribunal, however, onfurther appeal by the assessee, reversedthe orders passed by the Revenueauthorities referring to and relying uponthe decisions of other Tribunals. TheTribunal was of the opinion that the marketvalue of the electricity supplied by theCPP Unit to the general unit would be thesame being charged by GEB from theconsumers. 5. Counsel for the Revenue contended thatthe component of 8 paise per unit was theelectricity duty which GEB was notauthorized to retain but had to pass on tothe Government. In essence, GEB was onlycollecting 8 paise per unit as electricityduty for and on behalf of the Government.He submitted that the market value of theelectricity should be reckoned on Rs.5.32ps. per unit as was done by the Revenueauthority. 6. Under subSection(8) of Section 80IA ofthe Act, if it is found that where anygoods or services held for the purposes of the eligible business are transferred toany other business carried on by theassessee or where any goods or servicesheld for the purposes of any other businesscarried on by the assessee are transferredto the eligible business and in either casethe consideration for such transfer doesnot correspond to the market value of suchgoods as on the date of the transfer, thenfor the purposes of deduction under Section80IA in case of the eligible business as ifthe transfer had been made at the marketvalue of such goods or services. It is inthis context that the question ofsubstituting the actual consideration bythe market value comes into picture. 6. Under subSection(8) of Section 80IA ofthe Act, if it is found that where anygoods or services held for the purposes of the eligible business are transferred toany other business carried on by theassessee or where any goods or servicesheld for the purposes of any other businesscarried on by the assessee are transferredto the eligible business and in either casethe consideration for such transfer doesnot correspond to the market value of suchgoods as on the date of the transfer, thenfor the purposes of deduction under Section80IA in case of the eligible business as ifthe transfer had been made at the marketvalue of such goods or services. It is inthis context that the question ofsubstituting the actual consideration bythe market value comes into picture. 7. We may notice that the Tribunal did notaccept the contention of the assessee thatthe electricity is neither goods norservices and that, transfer of electricity,therefore, would not be covered under sub-Section (8) of Section 80IA of the Act.However, in so far as the Tribunal'sreasoning to adopt the market value of thegoods at Rs.5.40 ps. per unit is concerned,we find no error. Undisputedly, GEBsupplied the electricity to its consumersat the same rate. This, therefore, was amarket value of the electricity supplied bythe CPP Unit to the general unit. The factthat this amount of Rs.5.40 ps. comprisesof a component of 8 paise, which waselectricity duty, to our mind, would makeno difference in so far as the market valueis concerned. To a consumer, the pricebeing paid remains 5.40 ps. per unit. Thefact that the seller retains only Rs.5.32ps. out of the said collection and passeson 8 paise per unit to the Government inthe form of electricity duty, to our mind,would make no difference. This question is,therefore, not required to be considered.” 4. This was followed in case of Commissioner ofIncometax v. Shah Alloys Limited in Tax AppealNo.2093/2010. This was reiterated in Tax AppealNo.1646/2010 in case of ACIT Bharuch Circle,Bharuch Through Commissioner v. Pragati GlassWorks Pvt Ltd. (order dated 30.1.2012), in whichfollowing observations were made : “7. To our mind, Tribunal has committed noerror. Assessing Officer and CIT(Appeals)while adopting Rs.4.51 per unit as thevalue of electricity generated by eligibleunit of assessee and supplied through itsnon eligible unit only worked out cost ofsuch electricity generation. In factCIT(Appeals) in terms recorded that Rs.4.51was computed as the reasonable value of theelectricity generated by eligible unit ofassessee. This amount included Rs.4.17 perunit which was the cost of electricitygeneration and Rs.0.34 per unit which wasduty paid by the assessee to GEB for suchpower generation. Thus the sum of Rs.4.51per unit only represented the cost ofelectricity generation to the assessee. InSection 80IA(8) of the Act what is requiredto be ascertained is the market value ofthe goods transferred by the eligiblebusiness, when such transfer is by eligiblebusiness to another non eligible businessof the same assessee and the considerationrecorded in the accounts of the eligiblebusiness does not correspond to marketvalue of such goods. Term “Market Value” isfurther explained in explanation to saidsubsection to mean in relation to any goodsor services, price that such goods orservices will ordinarily fetch in the openmarket. To our mind sum of Rs.4.51 per unitof electricity only represented cost ofelectricity generation to the assessee andnot the market value thereof. It is not in dispute that the GEB charged Rs.5 per unitfor supplying electricity to otherindustries including non eligible unit ofthe assessee itself. Tribunal therefore,while adopting the said base figure andexcluding excise duty therefrom to work outRs.4.90 as the market value of theelectricity generated by the assessee, toour mind, committed no error. It can beeasily seen that if the assessee were tosupply such electricity or was allowed todo so in the open market, surely it wouldnot fetch Rs. 4.51 per unit but Rs.5 perunit as was being charged by GEB. Since theexcise duty component thereof would not beretained by the assessee, Tribunal reducedthe said figure by the nature of exciseduty and came to the figure of Rs.4.90 toascertain the market value of electricitygenerated by the eligible unit and suppliedto non eligible business of the assessee.No error was committed by the Tribunal. Noquestion of law therefore, arises. TaxAppeal is dismissed.” 5. Issue once again reached the Division Benchof this Court in case of Commissioner of Income-taxI v. Alembic Limited in Tax AppealNo.471/2009 and connected appeals. The DivisionBench referring to earlier judgments of theCourt held as under : “11. We have considered the submissionsmade by the learned counsel for theparties. We have also considered the caselaws cited by the learned counsel for theassessee. Taking into consideration thejudements of this court and other HighCourts, cited above, we are of the opinionthat the Tribunal has rightly allowed theclaim of the assessee. In that view of thematter, we do not find any infirmity in theorder of the Tribunal. Therefore, we answer question (C) and (D) in favour of theassessee and against the revenue.” 6. Issues are thus considered on number ofoccasions by the Court and held against theRevenue. Questions are answered against theRevenue. Both the tax appeals are therefore,dismissed. 6.In view of the above law holding the field, noquestion of law much less substantial question of lawarise in this appeal. Challenge to the order of theIncome Tax Appellate Tribunal stands meritless. 7.The appeal is dismissed. (N.V.ANJARIA, J) BIJOY B. PILLAI (BHARGAV D. KARIA, J)