DEPUTY COMMISSIONER OF INCEME TAX vs GODAWARI POWER AND ISPAT LTD.

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2026:CGHC:25834-DB
NAFR
HIGH COURT OF CHHATTISGARH AT BILASPUR
TAXC No. 168 of 2023
Deputy Commissioner Of Income Tax National Informatics Centre, Delhi
... Appellant (s)
versus
Godawari Power And Ispat Ltd. Godawari Power And Ispat, Lt Siltara, PMlot
No. 428/2, Phase-1, Sankara, Raipur- 493221, PAN- AAAC17189K
... Respondent(s)

For Appellant : Mr. Ajay Kumrani Advocate
For Respondent : Mr. Ashish Mittal, Advocate
D.B. : Hon'ble Shri Justice Parth Prateem Sahu &
n'ble Shri Justice Sachin Singh Rajput Ho
Judgment on Board
23/06/2026
Per Parth Prateem Sahu, J.
1. Appellant – Department has filed this appeal under Section 260-A of
the Income Tax Act, 1961 (hereinafter referred to as the “Act of 1961”)
Digitally
signed by
PRAVEEN
KUMAR
SINHA
Date:
2026.06.30
11:10:35
+0530

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questioning the legality and sustainability of the order dated 24.04.2023
passed by the Income Tax Appellate Tribunal, Raipur (hereinafter
referred to as “ITAT”) in Income Tax Appeal (ITA) No.42/RPR/2022.
2. This appeal was admitted for hearing on following substantial question
of law:
“Whether the ITAT was justified in dismissing the appeal
relying upon the decision rendered by this Court in TAXC
Case No.31/2012 without considering the appeal on
merits, by recording a finding which is perverse to the
record ?”
3. Learned counsel for the appellant would submit that respondent –
assessee is engaged in business of mining of iron ore, manufacturing
of iron ore pellets, sponge iron, other iron and steel products and
generation of electricity. Assessee has filed its return of income for
assessment year 2017-18 electronically on 30.11.2017 disclosing total
income at Rs. (-)149,90,51,848/-. Subsequently, the return was revised
by the assessee on 17.12.2018 disclosing total income at Rs.51,000/-
(income from other sources) with losses to be carried forward at
Rs.149,70,60,412/-. He further submits that in the assessment
proceedings, Assessing Officer (A.O.) noted that during the year under
consideration, the assessee has undertaken specified domestic
transactions with its associated enterprises and the total transactions
has been shown at Rs.123,31,49,341/- as also reported in Form 3-CEB
and the transaction being transfer of electricity produced by the eligible
unit of assessee company to the non-eligible steel producing unit.
Eligible unit taking benefit of deduction under Section 80 -IA of the Act
of 1961 and non-eligible unit claimed the expense on account of

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purchase of the electricity. Reference was made under Section 92- CA
of the Act of 1961 to the Transfer Pricing Officer (TPO) for determining
the arm’s length price of domestic transactions unit by the assessee
with the associated enterprises. TPO passed an order under Section
92-CA (3) of the Act of 1961 on 30.01.2021 wherein the amount
towards adjustment was determined as Rs.49,52,68,006/- to the value
of specified domestic transactions (SDT). Upon comparison, it revealed
that assessee deposited the rate at Rs.4.63 to Rs.5.48 per unit and
accordingly value towards the electricity transferred was valued at
Rs.123,31,49,341/- and total downward adjustment amount is of
Rs. 49,52,68,006/- based upon which draft order dated 30.01.2021
under Section 143 (3) read with Section 144 C (1) of the Act of 1961
proposing assessment of total income of Rs. (-)100,17,92,406/- was
issued by the Assessing Officer. He contended that TPO in its letter
stated that assessee has transferred the power from Unit-2 at
Rs.61,72,090,010/- and downward adjustment amounting to
Rs.24,94,76,749/- is made to the income of eligible units of the
assessee company. Assessing Officer vide letter dated 25.01.2022
modified the draft order dated 31.03.2021 to that extent and added
back an amount of Rs.24,94,76,749/- to the income of assessee.
Against the order of Commissioner of Income Tax (Dispute Resolution
Panel) [ CIT – DRP] assessee has preferred an appeal before the ITAT
which was allowed by impugned order. It is contended that order
passed by ITAT is bad in law. He further contended that Chhattisgarh
State Power Distribution Company Ltd. (for short “CSPDCL”) is a
power distribution company which purchases the power from power
generation companies and distributes it to end users. The rate of

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electricity charges by CSPDCL from the end users includes the cost of
generation, transmission and distribution. Electricity to be charged by
CSPDCL is fixed and approved by Chhattisgarh Electricity Regulatory
Commission (CERC) and therefore the rate at which eligible unit (Bio
mass power unit) of assessee as sold power to non-eligible unit is not
comparable to the rate of power charged by CSPDCL from its
customers/consumers. He contended that ITAT without analyzing
transfer pricing documentation of Functions performed, Assets
employed, Risks assumed (FAR) allowed the assessee’s appeal
mechanically relying upon the judgment of High Court of Chhattisgarh
in case of Commissioner of Income Tax, Raipur Vs. Godawari
Power & Ispat Ltd. reported in [2014] 42 Taxmann.com 551 . ITAT
erred in mechanically extending the ratio of Section 80-IA decision to
transfer pricing matters without analyzing statutory differences,
rendering its finding perverse and contrary to law. He also contended
that ITAT ignored Chapter-X procedures; failed to examine FAR;
comparables and benchmarking; and relied upon a precedent
concerning a completely different legal regime. In support of his
contention he relied upon decision in case of SAP Labs India (P) Ltd
Vs. Income-tax Officer (and other appeals) reported in (2023) 454
ITR 121.
4. On the other hand, learned counsel for respondent- assessee
vehemently opposes submission of learned counsel for the appellant.
He contended that respondent is engaged in business of
manufacturing and sale of iron ore pellets, steel billets, ferro alloys,
wire rod HB wire etc. Respondent also set up power plant for captive

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consumption and the power generated from such plants are utilized by
the respondent in its manufacturing operations. Three Units from
which power is generated being Unit No.1 which is thermal power unit,
Unit No.-2 which is waste heat recovery and Unit No.3 which is Bio
mass power. From aforementioned three Units, Unit No.2 & 3 are
eligible for deduction under Section 80 -IA of the Act of 1961. He
contended that respondent in its revised return filed on 17.12.2018
reported loss of Rs.149,70,60,412/- and therefore it is apparent that
respondent has not claimed deduction under Section 80-IA of the Act
of 1961. Gross income of the respondent was Nil on account of losses
incurred in the overall business. He also contended that since the
respondent has not availed the benefit of Section 80-IA of the Act of
1961 and has not taken any deduction, there is no need to compute the
arm’s length price. He next contended that market value of goods is
defined as the price that such goods or services would ordinarily fetch
in the open market or the arm’s length price as defined in Clause (ii) of
Section 92-F, where the transfer of such goods or services is a
specified domestic transaction. The market value taken by the
respondent was doubted by the revenue authorities and appellant
referred the case of respondent to Transfer Pricing Officer (TPO) to
calculate arm’s length price of the power supplied by respondent from
its power plant to its manufacturing units. He contended that order of
Dispute Resolution Panel (DRP) was challenged before the ITAT on the
ground that the market value was computed wrongly of the power
transferred by respondent from its power plants to manufacturing unit.
He submits that power transfer is to be computed at the market value
and market value is to be considered at a rate which was being

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charged by CSPDCL . The issue as to what would be the market value
was considered and decided by a Coordinate Bench of this Court in
case of Commissioner of Income- Tax, Raipur Vs. M/s Godawari
Power & Ispat Ltd. in TAX Case No.31 of 2012 with connected
matters, wherein it was concluded that market value of power supplied
should be computed, considering the rate of power to a consumer in
open market. As the aforesaid decision of Coordinate Bench in case of
Godawari Power & Ispat Ltd. (supra) was affirmed by Hon’ble
Supreme Court and it is held that rate at which power was supplied to a
supplier, could not be the market rate of electricity purchased by
consumer in open market. Rate at which such electricity Board
supplied power to industrial consumers has to be taken as market
value for computing deduction under Section 80-IA of the Act of 1961
and therefore ITAT has passed the reasoned order relying upon the
decision in case of Godawari Power & Ispat Ltd. (supra).
5. In this appeal, question with regard to manner and procedure based
upon which market value for supply of electricity by the respondent to
its own steel manufacturing unit is raised by learned counsel for
appellant-department.
6. It is not in dispute that respondent has transferred the power from its
power plant to its own manufacturing unit and computed the market
value of power at the price at which CSPDCL sales to its consumers in
open market. The Transfer Pricing Officer (TPO) computed arm’s
length price at the rate of power when it is sold to the supplier
(Electricity Board).

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7. Sub-section (8) of Section 80- IA of the Act of 1961 provides as under:
[80-IA. Deductions in respect of profits and gains
from industrial undertakings or enterprises engaged
in infrastructure development etc -
x x x
x x x
x x x
(8) Where any goods [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 [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 [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 [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-

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(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 92 F, where the transfer of such
goods or services is a specified domestic
transaction referred to in section 92 BA]”
8. Explanation appended to sub-Section (8) of Section 80-IA explains
“market value” in relation to any goods or services and clearly provides
that the price of such goods and services ordinarily fetch in the open
market.
9. In case of Godawari Power & Ispat Ltd . (supra) wherein also there
was dispute of rate of supply of electricity and what would be its market
value was considered and it was observed thus :
“31. The market value of the power supplied to the Steel-
Division should be computed considering the rate of
power to a consumer in the open market and it should not
be compared with the rate of power when it is sold to a
supplier as this is not the rate for which a consumer or the
Steel-Division could have purchased power in the open
market. The rate of power to a supplier is not the market
rate to a consumer in the open market.
32. In our opinion, the AO committed an illegality in
computing the market value by taking into account the
rate charged to a supplier: it should have been compared
with the market value of power supplied to a consumer.
33. It is admitted by the Department that in Chhattisgarh
the power was supplied to the industrial consumers at the
rate of Rs. 3.20/- per unit for the AY 2004-05 and Rs.
3.75/- per unit for the AYs 2005-06 and 2006-07. It was
this rate that was to be considered while computing the
market value of the power. ”

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10. Hon’ble Supreme Court in case of Commissioner of Income Tax Vs.
M/s Jindal Steel & Power Ltd. through its Managing Director (Civil
Appeal No.13771 of 2015 and connected matters, decided on
06.12.2023) as considered the market value of supply of electricity and
observed thus :
“28. Thus, 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. It is clear that the rate at
which power was supplied to a supplier could not be
the market rate of electricity purchased by a consumer
in the open market. On the contrary, the rate at which
the State Electricity Board supplied power to the
industrial consumers has to be taken as the market
value for computing deduction under Section 80 IA of
the Act.
x x x
30 . Thus on a careful consideration, we are 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

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the market value for computing the deduction under
Section 80-IA of the Act.
31. That being the position, we hold that the Tribunal
had rightly computed the market value of electricity
supplied by the captive power plants of the assessee
to its industrial units after comparing it with the rate of
power available in the open market i.e., the price
charged by the State Electricity Board while supplying
electricity to the industrial consumers. Therefore, the
High Court was fully justified in deciding the appeal
against the revenue.”
11. ITAT has decided the appeal taking into consideration the decision in
case of M/s. Mahendra Sponge & Power Pvt. Ltd passed in ITA
No.197/RPR/2017 dated 29.07.2022 wherein the decision in case of
Godawari Power & Ispat Ltd. (supra) was considered, and allowed
the appeal of assessee observing thus :
“8 . Respectfully following the judgment of the Hon'ble
Jurisdictional High Court in assessee's own case,
referred to supra, which has been followed by the
different coordinate benches of the Tribunal in the
cases cited above including this Bench of the Tribunal,
we are of the view that binding decision laid down by
the Hon'ble Jurisdictional High Court shall be followed
in the present case. Admittedly, the aforesaid judgment
of the Hon'ble Jurisdictional High Court in assessee's
own case has been challenged by the department by
filing an SLP before the Hon'ble Supreme Court and the
same is yet to be decided, therefore, the order of the
Hon'ble High Court still holds the ground and have
binding precedence for us. In terms of our
observations, respectfully following the judicial
precedence, we are persuaded to accept the contention

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of the assessee regarding the method adopted by the
assessee as upheld by the Hon'ble Jurisdictional High
Court, for transfer of captive power from eligible units to
non-eligible units. Thus, ground Nos. 1 to 6 in the
present appeal of the assessee are allowed.
9. Ground No.7 relates to levy of penalty u/s.270A of
the Act. Since we have allowed the issues raised in
ground no 1 to 6 of this appeal by the assessee on
quantum addition, therefore, the penalty levied
u/s.270A of the Act which is consequential holds no
ground to stand and thus deleted. Consequently,
ground 7 of the appeal of assessee is also allowed.”
12.
For the foregoing discussions and decision of Hon’ble Supreme Court
in case of M/s. Jindal Steel & Power Ltd. (supra), we are of the
considered view that there is no error or infirmity in the impugned order
passed by ITAT. Accordingly, the substantial question of law is
answered against Revenue. Consequently, the appeal stands
dismissed.
S Sd/- /- Sd/- S-
(Parth Prateem Sahu) (Sachin Singh Rajput)
Judge Judge
Praveen