ITAT Mumbai Upholds Consumer-Side Tariff as Valid Internal CUP for Captive Power Transfers — Transfer Pricing Adjustments Deleted for AY 2013–14 and AY 2016–17
Case Overview
Case Name: ACIT Vs Aditya Birla Real Estate Limited (ITAT Mumbai)
Appeal Numbers: ITA No.7766/Mum/2026 & ITA No.7767/Mum/2026
Date of Order: 30/09/2026
Assessment Years: 2013–14 and 2016–17
Forum: Income Tax Appellate Tribunal, Mumbai Bench
Background and Factual Matrix
The Mumbai Bench of the Income Tax Appellate Tribunal adjudicated two Revenue appeals arising from orders dated 27 April 2026 passed by the Commissioner of Income-tax (Appeals)-55, Mumbai, in the case of Aditya Birla Real Estate Limited — formerly operating as Century Textiles and Industries Limited. Both appeals involved an identical core controversy: the determination of the arm's length price of electricity transferred from the assessee's captive thermal power plants to its cement manufacturing units. Since the underlying facts and legal questions were substantively the same for both years, the Tribunal heard and disposed of the appeals through a common order.
The assessee, engaged in cement manufacturing and power generation among other activities, had established two captive thermal power plants to meet the electricity demands of its cement units:
- Century Cement Thermal Power Plant (CCTPP) situated at Raipur, Chhattisgarh — supplying electricity to the cement unit at Baikunth/Raipur
- Maihar Cement Thermal Power Plant (MCTPP) situated at Maihar, Madhya Pradesh — supplying electricity to the cement unit at Satna/Maihar
Since the captive plants could not fully satisfy the total electricity demand of the cement units, the units supplemented their requirements by purchasing electricity from:
- Chhattisgarh State Power Distribution Company Limited (CSPDCL) — for the Raipur unit
- Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (MPPKVVCL) — for the Satna unit
For benchmarking the inter-unit electricity transfers, the assessee applied the actual monthly consumer tariffs that its cement units paid to these independent State distribution companies, treating those rates as a direct internal comparable uncontrolled price (CUP).
Transfer Pricing Adjustments by the TPO
AY 2013–14
The assessee filed its return of income on 26 November 2013, declaring nil total income and carried forward losses of ₹1,63,41,17,771. The Transfer Pricing Officer (TPO), upon reference, passed an order under Section 92CA(3) on 3 November 2016.
The assessee's benchmarked rates were:
- **CCTPP (Raipur)😗* ₹5.74 per unit
- **MCTPP (Maihar)😗* ₹6.44 per unit
The TPO, however, rejected these consumer-side rates and instead gathered information under Section 133(6) from the relevant electricity authorities:
- CSPDCL reported procurement from CSPGCL generating stations at ₹2.27 per unit
- MPPKVVCL reported an average power-purchase cost from various sources at ₹3.05 per unit
Applying these generator-side procurement rates, the TPO computed the following upward adjustments:
- CCTPP adjustment: ₹19,16,82,180
- MCTPP adjustment: ₹44,72,41,299
- Aggregate adjustment for AY 2013–14: ₹63,89,23,479
A draft assessment order under Section 143(3) read with Section 144C(1) was passed on 23 December 2016. The assessee did not file objections before the Dispute Resolution Panel, and the final assessment order under Section 143(3) read with Section 144C(3) was passed on 24 February 2017.
AY 2016–17
The assessee filed its return on 29 November 2016 and subsequently revised it on 24 October 2017, declaring an overall loss of ₹4,42,35,98,424. The TPO, by order dated 30 September 2019 under Section 92CA(3), made an upward adjustment of ₹43,10,44,227 in respect of the specified domestic transactions.
The consumer-side rates adopted by the assessee were:
- **CCTPP (Raipur)😗* ₹7.20 per unit
- **MCTPP (Maihar)😗* ₹6.62 per unit
The TPO instead applied:
- CSPDCL procurement rate: ₹3.09 per unit
- MPPKVVCL procurement rate: ₹3.74 per unit
This resulted in:
- CCTPP adjustment: ₹26,52,16,536
- MCTPP adjustment: ₹16,58,27,691
- Aggregate adjustment for AY 2016–17: ₹43,10,44,227
The final assessment order under Section 143(3) read with Section 144C(3) was passed on 19 December 2019. The AO noted that while the assessee's Section 80-IA position relating to the power plants was examined, no separate addition was made on that account as the assessee had not claimed the deduction in its income computation.
CIT(A)'s Decision and Revenue's Appeal
The assessee challenged both adjustments before the CIT(A), maintaining that the rates paid by its cement units to CSPDCL and MPPKVVCL — being actual prices paid to unrelated, independent parties — constituted a reliable and contemporaneous CUP for the electricity transferred by the captive plants. The CIT(A) accepted this position for both assessment years and directed deletion of the transfer pricing adjustments. This led to the Revenue's appeals before the Tribunal.
Revenue's Arguments Before the Tribunal
The Revenue, through the learned CIT-DR, advanced the following principal contentions: