ITAT Holds SEB Tariffs as Proper Benchmark for Section 80-IA Deductions and Deletes Double Disallowances and Excess Corporate Guarantee Adjustments
Meetu Kumari | Dec 20, 2025 |
ITAT Rejects IEX Rates for Captive Power and Orders Correction of AO’s Computational Errors
SRF Limited, engaged in chemical manufacturing, operates Captive Power Plants (CPPs) in Rajasthan and Gujarat and claimed deductions under Section 80-IA on profits from power generation. For AYs 2017-18, 2018-19 and 2021-22, the Assessing Officer and Transfer Pricing Officer made large additions by benchmarking captive power transfers at Indian Energy Exchange (IEX) rates instead of State Electricity Board (SEB) industrial tariffs.
The department also enhanced the corporate guarantee fee, denied MAT credit, and made computational errors, including double disallowance of Section 80-IA claims. As no effective relief was granted by the DRP, SRF approached the ITAT.
Issue Before Tribunal: Whether captive power transfers should be valued at SEB industrial tariffs or IEX rates; whether double disallowance of Section 80-IA was permissible; whether enhancement of corporate guarantee fee from 0.25% to 0.50% was justified; whether revised deduction claims on steam transfer could be examined; and whether interest under Section 234A was leviable for AY 2021-22 despite COVID-related extensions.
ITAT’s Decision: The ITAT allowed substantial relief. Relying on the Supreme Court ruling in Jindal Steel & Power Ltd., the Tribunal held that SEB industrial tariffs, not volatile IEX rates, are the correct benchmark for captive power transfers. Therefore, the reduction of the Section 80-IA deduction based on IEX pricing was set aside.
The Tribunal also found clear computational errors, as there was double disallowance and denial of MAT credit exceeding Rs. 187 crore, and later rectification. The Bench restored the rate of 0.25% and rejected the enhanced rate of 0.50%. Issues relating to enhanced deduction claims for steam transfer and levy of interest under Section 234A for AY 2021-22 were remanded to the AO with directions to apply CBDT COVID-extension circulars and settled law. The Tribunal emphasised that tax demands cannot survive on mathematical mistakes or in disregard of binding precedents.
To Read Full Judgment, Download PDF Given Below
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