The market value of electricity supplied by a captive power plant to an industrial unit for section 80-IA deduction is the rate charged by state electricity boards to industrial consumers; cost allocation methods once accepted by revenue must be followed consistently barring material changes.

ORDER / आदेश

Per Rajesh Kumar, AM:

These are the appeals of Revenue against two different assessees' against the orders of the Commissioner of Income-tax (Appeals)-22, Kolkata (hereinafter referred to as the "Ld. CIT(A)"] for the AYs 2020-21 & 2021-22.

2. Since these appeals relate to the related companies and issues involved are mostly common, therefore these are being decided by this common order for the sake of convenience and brevity. First of all, we shall take up ITA No. 2663/KOL/2025 for A.Y. 2020-21 in case of Shyam Sel & Power Ltd.

ITA No. 2663/KOL/2025 (Revenue’s appeal)

3. The issue raised in Ground Nos.1 to 11 is against the order of ld. TPO/AO making downward adjustment of Rs.39,79,08,552/- in respect of transfer value of power by the captive power plants at Mangalpur & Jamuria.

4. Facts in brief are that, the assessee had set up three captive power plants, with one located in Mangalpur and two located in Jamuria in order to meet the power requirements of its manufacturing units at the same location. The assessee claimed tax holidays as per section 80IA in respect of their profits from generation of electricity from captive power plants. The details of the transactions were duly mentioned in Form 3CEB filed by the assessee.The assessee company had originally claimed deduction of Rs.216,44,56,783/- u/s.80IA of the Act for the eligible units against the specified domestic transactions, whose details are as follows:-

5. The above claim was subsequently revised to Rs.196,83,82,588/-. As per the revised working, the assessee benchmarked the transfer of power from the eligible units to the assessee on the tariffs charged by the respective SEBs i.e. Rs.4.58/unit [Jamunia CPP- I & II] and Rs.4.39/unit for Mangalpur CPP-II, whose break-up is as under:-

6. The ld. TPO in his order dated 05.04.2023 passed u/s 92CA(3) accepted the revised transfer price of power relating to the CPPs at Jamuria and therefore the corresponding TP adjustment of Rs.13,75,36,212/- offered by the assessee in the revised working was not disputed by both the parties. The ld. TPO however benchmarked the transfer price of power of Mangalpur Unit at Rs.2.53 unit. Accordingly, the ld. TPO reduced the deduction claimed u/s 80-IA of the Act in respect of Mangalpur Unit by Rs.26,03,72,340/-. Overall therefore, the ld. TPO made downward adjustment of Rs.39,79,08,552/- to the transfer value of power of these eligible CPPs.

7. In the appellate proceedings, the ld. CIT(A) deleted the transfer pricing adjustment of Rs.26,03,72,340/- made to the Mangalpur Unit by holding that the assessee had rightly adopted the benchmarking methodology of valuing the transfer of power from their captive power plants eligible for deduction u/s 80-IA to its manufacturing units at the average annual landed cost at which the non-eligible manufacturing units procured power from the electricity distribution company.

8. At the outset, the ld. AR for the assessee submitted that the issue is squarely covered by the decision of the coordinate bench in its own case in IT(SS)A Nos.129, 91 & 130/Kol/2023 wherein the issue has been decided in favour of the assessee. Therefore, the issue in the in