In a recent landmark judgment, the Supreme Court bench presided over by Hon'ble Ms. Justice B. V. Nagarathna and Hon'ble Mr. Justice Ujjal Bhuyan, delivered a significant decision in favor of Jindal Steel and Plant Limited. The ruling addresses a critical issue surrounding the determination of the market value of electricity, specifically in the context of computing deductions under Section 80-IA of the Income Tax Act, 1961.

The dispute centered around the reassessment of deductions under Section 80-IA by the assessing officer, challenging the per-unit price of electricity supplied by the assessee to both the State Electricity Board and its captive plants. The assessing officer argued that the profits were inflated and should be based on the rate at which electricity was supplied to the State Electricity Board, rather than the rate charged to industrial units.

The Income Tax Appellate Tribunal (ITAT) supported the assessee's stance, contending that the price charged to industrial units represented the market value for Section 80-IA. This decision was upheld by the High Court, leading the revenue to file appeals, eventually reaching the Supreme Court.

The Supreme Court conducted a detailed analysis of Section 80-IA of the Income Tax Act, providing clarity on the provisions related to deductions for profits and gains from industrial undertakings. The focus was on Section 80-IA (4) (iv), which pertains to deductions for industrial undertakings involved in power generation and distribution in India.

The Court rejected the revenue's contention and upheld the High Court's determination that the market value of electricity supplied by the assessee's captive power plants to industrial units should be based on the rate charged by the State Electricity Board in the open market. This decision was favored over comparing it with the rate at which the assessee sold power to the State Electricity Board, which was determined under statutory regulations and a contractual agreement.

In addition to the market value issue, the Court clarified that there is no statutory requirement for a specific mode of exercise regarding the option to adopt the Written Down Value (WDV) method. It emphasized that exercising the option when filing the return is sufficient, citing relevant precedents.

The judgment also addressed the deletion of an addition made by the assessing officer for payments to Shri S.K. Gupta and his group of companies. The Court found the revenue unjustified in disallowing the claim of professional expenses without considering retracted statements during search operations, highlighting the denial of the opportunity for cross-examination.

Lastly, the Court briefly touched upon the question of whether carbon credit is a capital or revenue receipt but declined to answer, noting that the revenue had not challenged the Tribunal's decision on this matter before the High Court.

In conclusion, the Supreme Court's dismissal of the appeals solidifies the principle that the rate at which the State Electricity Board supplies power to industrial consumers should be considered the market value for computing deductions under Section 80-IA of the Income Tax Act. This ruling provides clarity and guidance on a critical aspect of tax law, impacting businesses involved in power generation and distribution in India.

Case: Commissioner of Income Tax vs. M/s Jindal Steel & Power Limited,

Civil Appeal No. 13771 of 2015 and other connected matters.

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