##PAGE1##

आयकर अपील(cid:9)य अ(cid:10)धकरण, ‘डी’ (cid:14)यायपीठ, चे(cid:14)नई

IN THE INCOME TAX APPELLATE TRIBUNAL

‘D’ BENCH, CHENNAI

(cid:21)ी मनु कुमार (cid:10)गtiर, (cid:14)या(cid:26)यक सद(cid:29)य एवं (cid:21)ी एस. आर. रघुनाथा, लेखा सद(cid:29)य के सम$

BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND

SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.: 2308/Chny/2025

(cid:26)नधा%रण वष % / Assessment Year: 2020-21

ACIT, Loyal Textile Mills Ltd,

Circle -1, vs. New No 21, Old No. 4,

Tirunelveli. Mill Street,

Kovilapatti,

Tuticorin – 628 501.

[PAN: AAACL-2632-C]

(अपीलाथ’/Appellant) ()*यथ’/Respondent)

अपीलाथ’ क+ ओर से/Appellant by : Shri. ARV Sreenivasan, CIT

)*यथ’ क+ ओर से/Respondent by : Shri. Bhupendran, Advocate (Virtual)

सुनवाई क+ तार(cid:9)ख/Date of Hearing : 18.12.2025

घोषणा क+ तार(cid:9)ख/Date of Pronouncement : 04.03.2026

आदेश /O R D E R

PER S. R. RAGHUNATHA, AM:

This appeal by the Revenue is directed against the order of the Commissioner

of Income Tax (Appeals) – 16, Chennai [in short, “ld.CIT(A)”] dated 26.06.2025,

relating to the assessment years 2020-21 against the order of the Assessing

Officer passed u/s.143(3) r.w.s. 144C(3) r.w.s.144B of the Act dated

30.09.2023.

:-2-: ITA No: 2308/Chny/2025

2. Facts in brief emanating from the records are that the assessee filed its

return of income on 07.01.2021 declaring total income of Rs.NIL. A reference

u/s.92CA was made on 02.02.2022 to the Transfer Pricing Officer (TPO) who,

vide order dated 10.03.2023, proposed a downward adjustment of

Rs.16,70,60,764/– in relation to the claim of deduction u/s.80IA of the Act. The

Assessing Officer (AO), in the order passed u/s.143(3) r.w.s. 144C(3) dated

30.09.2023, assessed the income at Rs.22,07,36,266/-, making additions

(i)Rs.21,29,06,078/- towards difference in deduction u/s.80IA of the Act;

(ii)Rs.42,48,536/- towards disallowance u/s.40(a)(ia) of the Act for non-

deduction of tax on domestic commission (iii) Rs.10,56,694/- towards

disallowance u/s.40(a)(i) for non-deduction of tax on commission paid to non-

resident agents and (iv) Rs.25,24,958/- towards disallowance u/s.40(a)(ia) for

non-deduction of tax on professional fees. Aggrieved by the additions and

disallowances made the AO the assessee preferred an appeal before the

ld.CIT(A).

3. The ld.CIT(A), after considering the submissions of the assessee, deleted

disallowance on both commission payments and partly deleted the

disallowance on professional fees. In so far as deduction u/s.80IA of the Act,

the ld.CIT(A), by relying on the decisions by Supreme Court reported in 157

taxmann.com 207 and by Tribunal, Hyderabad upheld the determination of ALP

of captive consumption of power at the rate at which the assessee purchased

power from the distribution company and ruled in favour of the assessee for the

A.Y.2020-21.

4. In respect of disallowance u/s.40(a)(ia) of the Act, the First Appellate

Authority, by placing reliance on the decisions by the Madras High Court

reported in 48 taxmann.com 48, directed the AO to delete the additions on

expenses incurred towards sales commission outside India. Aggrieved, the

Revenue is in appeal before us.

:-3-: ITA No: 2308/Chny/2025

5. The Revenue has challenged two issues:

a. The deletion of transfer pricing adjustment in respect of captive power

valuation for the purpose of deduction u/s.80IA of the Act.

b. The deletion of disallowance u/s.40(a)(ia) of the Act on domestic

commission.

The learned Departmental Representative (ld.DR) reiterated the grounds taken

by the Revenue, contending that the ld.CIT(A) erred in relying upon the decision

of the Hon’ble Supreme Court in Jindal Steel & Power Ltd. [(2022) 460 ITR 162

(SC)] without appreciating that the Explanation to section 80IA(8) of the Act

inserted by the Finance Act, 2012 required determination of market value as

per the arm’s length price mechanism prescribed u/s.92F read with Rule 10B.

He also relied upon the Judgments of the following judgments:

1. The Hon’ble Supreme Court order in M/s. SAP Labs [TS-225-SC-

2023-TP]

2. ITAT