16 November 2013
My Company is availing deduction u/s.80-IA(4)(iv)of the Inc. Tax Act w.r.t power generation through Wind Mills. The power generation goes to the Grid of the Electricity Board. The Electricity Board bills us for total electricity consumed LESS credit for the power generation through our windmills. For instance, suppose our windmills are generating 75,000 units of power which are wheeled through Electricity Boards' Grids for our captive consumption. Now, suppose we are consuming 1,00,000 units in total of the electricity in our production units, Elec. Board (suppose unit rate is Rs.10/-) will be billing as follows:-
Total Units consumed by us 1,00,000 units Less: Credit for units generated by our Windmills 75,000 units NET Units 25,000 units
Thus, Elec. Board bill amount will be 25,000 units X Rs.10/ unit = Rs.2,50,000/-.
Our internal auditors are of the opinion that provisions of domestic tranfer pricing will be applicable in our case. But, in my opinion, it is not applicable since we do not have any control on the price charged by the Elec. Board and we are not consuming the power generated through our windmills as it goes to the Elec.Board's grid and we only get the credit of it. Please give your valued opinion at the earliest. THIS IS VERY URGENT as you know we have to comply with the said provisions (if applicable) on/ before 30th November, 2013 for FY 12-13 (AY 13-14). Please note that we have already filed the return of income for the year under question in the month of Sept.13.
23 September 2015
If you are claiming Deduction u/s 80IA for captively consuming electricity by showing in your books that one unit is selling to another unit then Domestic transfer pricing shall be applicable.
If you are not claiming deduction on windmill, then Transfer Pricing is not applicable but I believe you are losing a good way for tax planning. If you wish , you can give me a call for Tax Planning.
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