- (1.) The Court: The subject matter of challenge in the appeal is a judgment and order dated 30th June, 2006 pertaining to the assessment year 2002-03. The facts briefly stated are that the assessee is engaged, inter alia, in the manufacture of paperboard. For the purpose of supplying uninterrupted power to the manufacturing unit, the assessee installed power-generating plant. The entire production of such plant was supplied to the paperboard manufacturing unit. Question arose (A) whether the assessee is entitled to the benefit under Section 80-IA ? (B) If so, whether the benefit can be computed at the rate at which electricity was supplied by the Andhra Pradesh State Electricity Board to the paperboard manufacturing unit? The assessing officer held that the question of any benefit being derived by the assessee under Section 80-IA would not arise because the assessee did not earn any profit from out of the power-generating plant. He was also of the opinion that the assessee did not also qualify for the benefit under Section 80-IA. The reasoning advanced by the assessing officer to show that the assessee did not make any profit from out of the power-generating plant is as follows:-- "Without prejudice to the above discussion, the market rate taken by the assessee for determining the revenue of the claimed power undertaking is highly illogical. In the original return the assessee has taken the average rate of power purchased by it during the financial year 2001-02 but in the revised return only the rate charged by APSEB has been taken ignoring the rate charged by APGPCL. As per Section 80-IA the market value in relation to any goods or services transferred by the assessee to any other business means the price that such goods or services would ordinarily fetch in the open market. In the instant case, the assessee has not taken the rate which would have been received by it, had it sold the power to outsiders. The purchase rate of power by the assessee cannot be taken as the market rate within the meaning of Section 80-IA because the market value of the goods is to be determined on the basis of rate on which the goods/services can be sold in the open market. As the assessee has not sold the power generated by it to any outsider the market rate is not available. The assessee was requested to furnish the rate at which the power could have been sold to outsiders but the assessee has not furnished the same. M/s. Indian Aluminium Co. Ltd. is assessed under this Circle and it also has a power undertaking in Orissa. During the course of assessment proceedings for the assessment year 2002-03 the said company submitted that it has sold power to the Grid Corporation of Orissa Ltd. at 0.77 paise per unit. As the assessee has not submitted the market rate, i.e. the rate at which the power could have been sold to an outsider, the rate received by M/s. Indian Aluminium Co. Ltd. for its power undertaking can be taken as a comparable market rate at which the assessee could have sold the same in the open market. By taking the market rate at 0.77 paise per unit the profit or loss of the power undertaking is recomputed and it is noticed that there is a loss in the power undertaking considering the expenses determined by the assessee and consequently, no deduction u/s. 80-IA is available to the assessee." In an appeal preferred by the assessee, the CIT(A) held that there was in fact profit from the power-generating plant and he also held that the rate at 77 paise per unit adopted by the assessing officer was incorrect for the following reasons:-- "In this order, the Assessing Officer has without prejudice to the denying of benefit deduction u/s. 80-IA of the Income-tax Act 1961 to the appellant has observed that the market rate taken by the appellant for determining the revenue of the claimed power undertaking is highly illogical. Mentioning that the appellant had not furnished the rate at which the power could have been sold to the outsiders, the Assessing Officer has drawn reference from the case of the Indian Aluminium Company Limited which sold power to the Grid Corporation of Orissa @ Rs. 0.77 unit and observed that if the same was applied in the case of the appellant and the profit or loss of the Power undertaking was recomputed the same would have resulted in a loss to the power undertaking considering the expenses determined by the assessee and no deduction U/s. 80-IA of the Income-tax Act 1961 was available to the appellant. The appellant - on the other hand - has pleaded that the Assessing Officer's view regarding the unusually low Indian Aluminium rate of Rs. 0.77 per unit could not be applied to the appellant's case because of the special arrangements between Indian Aluminium and Orissa State Electricity Board for sale of surplus power beyond the captive power consumption because of the special arrangement between Indian Aluminium and Orissa State Electricity Board which the assessee did not have with the Andhra Pradesh State Electricity Board. Placing reliance on the decision of the Hon'ble Supreme Court in Thiru Aruran Sugars Ltd. v. CIT (223 ITR 432), the appellant has pleaded that the market price should imply the price the appellant would have to pay for getting the power requirement from an unrelated supplier at that particular place. Based on these observations the appellant has pleaded that the market value would have to be computed @ 4.45 per unit being the rate at which power was supplied by the Andhra Pradesh State Electricity Board. The contention of the appellant has been examined. A perusal of the records show that based on the Andhra Pradesh State Electricity Board Rates the total fixed charges (in the nature of Demand Charges and additional Demand charges) are Rs. 5,98,64,526/- and variable charges amount to Rs. 56,25,94,466/- aggregating to Rs. 62,24,58,992/- after taking into consideration the amount of cost incurred by the appellant shown at Rs. 17,53,44,000/- (after rounding off), the revenue generated or the profit derived by the said power undertaking would work out to Rs. 44,71,14,992/- (i.e. Rs. 62,24,58,992/- minus Rs. 17,53,44,000/-). As such, the deduction claimed u/s. 80-IA of the Income-tax Act 1961 is allowed to the extent of Rs. 44,71,14,000/- (rounded off). This ground of appeal is partly allowed."
(2.) The learned Tribunal has affirmed the order of the CIT(A). Therefore, the revenue is once again before us in appeal. In so far as the question as regards the eligibility of the assessee to claim the benefit is concerned, reference may be made to Sub-section (8) of Section 80-IA which reads as follows:-- "(8) Where any goods [or services] held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods [or services] held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods [or services] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods [or services] as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. [Explanation. - For the purposes of this sub-section, "market value", in relation to any goods or services, means - (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA."
(3.) The aforesaid provision contemplates or does not militate against supply of electricity by the eligible unit to any other business of the assessee. Therefore the contention that the unit is not eligible because "the assessee has not sold power generated by the power undertaking to any outsider but has consumed 10096 generated by its unit" does not appear to be logical. The premise for claiming the benefit according to Clause (iv) of Sub-section (4) of Section 80-IA is a setting up of an undertaking for the generation of power during the specified period. The fact that the unit was set up within the specified period is not in dispute.;