Aditya Birla Real Estate Ltd. (“the assessee”), transferred electricity from its captive power plants to its cement units, which also purchased electricity from Chhattisgarh State Power Distribution Company Limited (CSPDCL) and Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (MPPKVVCL). The assessee used these consumer-side rates as internal CUPs, while the TPO adopted lower generator-side rates, resulting in TP adjustments of ₹63.89 crore for AY 2013-14 and ₹43.10 crore for AY 2016-17.
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
The assessee contended that the actual rates paid by the cement units to CSPDCL and MPPKVVCL were reliable internal CUPs, as the same units purchased electricity from independent suppliers during the relevant period. | The Revenue argued that the captive power plants were generators, whereas CSPDCL and MPPKVVCL were distribution companies performing additional functions involving transmission, wheeling, distribution and network maintenance. | The ITAT held that the rates actually paid by the cement units to CSPDCL and MPPKVVCL constituted valid internal CUPs, as they represented the price at which the same units could obtain electricity from an independent supplier. |
It submitted that the consumer-side rates represented the actual market price available to the receiving units and relied on Jindal Steel & Power Ltd., DCM Shriram Ltd., Rungta Mines Ltd. and Aditya Birla Nuvo Ltd. | It contended that the appropriate benchmark should therefore be the generator-side rate at which distribution companies procured electricity, rather than the consumer tariff paid by the cement units. | The ITAT held that generator-side procurement rates related to a different stage of the supply chain and were not shown to be available to the assessee’s consuming units. Accordingly, it upheld deletion of the ₹63.89 crore and ₹43.10 crore TP adjustments for AYs 2013-14 and 2016-17 respectively. |
Ruling Summary:
Mumbai ITAT held that the actual consumer-side electricity rates paid by the cement units to State distribution companies were valid internal CUPs for benchmarking captive electricity transfers.
ITAT dismissed the Revenue’s appeals and upheld deletion of the ₹63.89 crore TP adjustment for AY 2013-14 and ₹43.10 crore TP adjustment for AY 2016-17, holding that generator-side procurement rates were not the prices available to the consuming units.
