COMMISSIONER OF INCOME TAX versus M/S JINDAL STEEL & POWER LIMITED THROUGH ITS MANAGING DIRECTOR

Citation: [2023] 16 S.C.R. 484 · Decided: 06-12-2023 · Supreme Court of India · Bench: B.V. NAGARATHNA · Disposal: Dismissed

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Judgment (excerpt)

[2023] 16 S.C.R. 484 : 2023 INSC 1053
484
CASE DETAILS
COMMISSIONER OF INCOME TAX
v.
M/S JINDAL STEEL & POWER LIMITED THROUGH ITS 
MANAGING DIRECTOR
(Civil Appeal No.13771 of 2015)
DECEMBER 06, 2023
[B. V. NAGARATHNA AND UJJAL BHUYAN, JJ.]
HEADNOTES
Issue for consideration: All the appeals are by the revenue assailing 
orders of various high courts dismissing its appeals fi led u/s. 260A of the 
Income Tax Act, 1961 – The core and common issue raised in all the appeals 
is the recomputation of deduction u/s. 80 IA of the Income Tax Act, 1961 
by the assessing offi  cer which was set aside by the Income Tax Appellate 
Tribunal and upheld by the High Courts by accepting the contention of the 
assessee.
Income Tax Act, 1961 – s.80-IA – The assessing offi  cer accepted 
the claim of the assessee for deduction u/s. 80-IA of the Income Tax 
Act, 1961, he, however, did not accept the profi ts and gains of the 
eligible business computed by the assessee on the ground that those 
were infl ated by showing supply of power to its own industrial units 
for captive consumption at the rate of Rs. 3.72 per unit – Assessing 
offi  cer took the view that there was no justifi cation on the part of the 
assessee to claim electricity charge at the rate of Rs. 3.72 for supply to 
its own industrial units when the assessee was supplying surplus power 
to the State Electricity Board at the rate of Rs 2.32 per unit – Finally, 
the assessing offi  cer held that Rs. 2.32 per unit was the market value 
of electricity and on that basis, reduced the profi ts and gains of the 
assessee thereby restricting the claim of deduction of the assessee u/s. 
80-IA of the Act – Propriety:
Held: In the instant case, since electricity from the State Electricity 
Board to the industrial units of the assessee was inadequate, the assessee 
485
had set up captive power plants to supply electricity to its industrial units 
– For disposal of the surplus electricity, the assessee could not supply the 
same to any third-party consumer – Therefore, in terms of the provisions 
of s.43A of the Electricity (Supply) Act, 1948 the assessee had entered 
into an agreement with the State Electricity Board as per which, the 
assessee had supplied the surplus electricity to the State Electricity Board 
at the rate of Rs. 2.32 per unit determined as per the agreement – Thus, 
for the assessment year under consideration, the assessee was paid at the 
rate of Rs. 2.32 per unit for the surplus electricity supplied to the State 
Electricity Board – It may also be mentioned that the State Electricity 
Board had supplied power (electricity) to the industrial consumers at 
the rate of Rs. 3.72 per unit – The price for supply of electricity by the 
assesse to the State Electricity Board was fi xed at Rs.2.32 per unit as per 
contract and there was no elbow space for negotiation – Market value 
of the power supplied by the assessee to its industrial units should be 
computed by considering the rate at which the State Electricity Board 
supplied power to the consumers in the open market and not comparing 
it with the rate of power when sold to a supplier i.e., sold by the assessee 
to the State Electricity Board as this was not the rate at which an 
industrial consumer could have purchased power in the open market – 
Assessee had also computed the profi ts and gains by taking Rs.3.72 as 
the price of electricity per unit supplied by its captive power plants to 
its industrial units – Thus, this Court is of the view that the market value 
of the power supplied by the State Electricity Board to the industrial 
consumers should be construed to be the market value of electricity – It 
should not be compared with the rate of power sold to or supplied to the 
State Electricity Board since the rate of power to a supplier cannot be 
the market rate of power sold to a consumer in the open market – The 
State Electricity Board’s rate when it supplies power to the consumers 
have to be taken as the market value for computing the deduction u/s. 
80-IA of the Act – Issue answered in favour of the assesse and against 
the revenue. [Paras 17, 20, 28, 30]
Words and Phrases – ‘Market Value’ – Discussed.
Income Tax Act, 1961 – Income Tax Rules, 1962 – r.5 - Whether the 
Tribunal could ignore compliance to the statutory provisions relating 
COMMISSIONER OF INCOME TAX v. M/S JINDAL STEEL & POWER 
LTD. THROUGH ITS MANAGING DIRECTOR
486 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
to exercise of option to adopt Written Down Val

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