Sec. 92BA Applies to All Assessees Regardless of Section 80-IA Deduction Is Claimed | ITAT

Case Details: Sanghi Industries Ltd. vs. Deputy Commissioner of Income-tax - [2025] 170 taxmann.com 716 (Hyderabad-Trib.)

Judiciary and Counsel Details

• Laliet Kumar, Judicial Member & Madhusudan Sawdia, Accountant Member
• Vartik Choksi, AR for the Appellant.
• Ms K. Haritha, CIT-DR for the Respondent.

Facts of the Case

The assessee was engaged in the manufacturing of Clinker and Ordinary Portland Cement. It had a power-generating unit that was eligible for deduction under section 80-IA. Assessee entered into specified domestic transaction of sale of power by power-generating unit to cement manufacturing unit and had not claimed deduction under section 80-IA for the year under consideration.

The case was referred to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price (ALP), and the TPO determined the adjustment to be made to the assessee’s income on account of the Specified Domestic Transactions entered into by the assessee. The TPO passed the order under section 92CA(3).

The matter reached the Hyderabad Tribunal.

ITAT Held

The Tribunal held that section 92BA requires invoking its provisions that the assessee’s transactions should be covered in any of the clauses mentioned at Sl. No. (ii) to (vi) of Section 92BA, either with it any of its associates or with any person having a close connection with the assessee.

If the assessee has the specified domestic transaction with itself or its close associate as per section 92BA, then the arm-length price in relation to the specified domestic transaction is required to be determined by following Most Appropriate Methods as mentioned in section 92C.

On a plain reading of the above sections, it is clear that to attract the rigours of section 92BA, it is required that the transaction should either fall within the realm of 80-IA(8) or 80-IA(10).

In the present case, the power-generating unit of the assessee is connected with the assessee within the meaning of section 80-IA(8) and (10), and it is not disputed that in the course of business, they had entered into the agreement for the supply of electricity. The assessee shifted the extraordinary profit to its power-generating unit.

In other words, by purchasing the power at a higher rate, the assessee increased its expenditure, reducing its income/profit. The relationship between the two is squarely covered by the provisions of sections 80-IA(8) and 80-IA(10). Hence, the transaction is a qualified transaction within the meaning of section 92BA.

It is amply clear that for the invocation of section 92BA, there is no necessity for the assessee to opt for the deduction under section 80-IA during the assessment year under consideration. The option is with the assessee to claim the deduction under section 80-IA for any 10 consecutive assessment years out of the 15 years, as per section 80-IA(2). Merely because the assessee has not exercised the option will not make the eligible transaction falling either in section 80-IA(8) or section 80-IA(10) become ineligible.

List of Cases Reviewed

• Star Paper Mills Limited v. DCIT in ITA No. 127/Kol/2021, DCIT v. M/s. Balarampur Chini Mills Ltd in ITA No.1672/Kol/2019 dated 05.05.2021 [Para 39]
• ACIT v. M/s. Philips Carbon Black Limited in ITA No.2628/Kol/2019 dt.05.07.2022[Para 40]
• ACIT v. M/s. Tamilnadu Newsprint and Papers Ltd in IT(TP)A No.47/Chny/2022 dt.30.11.2023[para 41]
• Shah Alloys Limited v. DCIT in ITA No.1417/Ahd/20190 dt.21.06.2023. [Para42]
• Godawari Power and Ispat Limited v. DCIT in ITA No.42/RPR/2022 dt.24.04.2023 [Para 43] distinguished.

List of Cases Referred to

• Star Paper Mills Limited v. DCIT ITA No. 127/Kol/2021 (para 5.1)
• CIT v. Jindal Steel & Power Ltd. [2023] 157 taxmann.com 207/[2024] 297 Taxman 253/460 ITR 162 (SC) (para 12.1)
• DCIT v. M/s. Balarampur Chini Mills Ltd ITA No.1672/Kol/2019 (para 39)
• ACIT v. M/s. Philips Carbon Black Limited ITA No.2628/Kol/2019 (para 40)
• Shah Alloys Limited v. DCIT ITA No.1417/Ahd/20190 (para 42)
• Godawari Power and Ispat Limited v. DCIT ITA No.42/RPR/2022 (para 43).