DCM Shriram Wins Major Tax Relief as Tribunal Rejects ₹30 Cr Transfer Pricing Adjustment

DCM Shriram Ltd has scored a significant legal victory after the Income Tax Appellate Tribunal (ITAT) ruled in its favor, quashing a ₹30.83 crore transfer pricing adjustment proposed by the Transfer Pricing Officer (TPO). The case pertained to Assessment Year 2014–15, where the company had transferred electricity from its eligible power units to non-eligible units and claimed deductions under Section 80IA of the Income Tax Act.

 

The TPO had benchmarked the internal power transfers using Indian Energy Exchange (IEX) rates, arguing that DCM’s internal pricing was inflated. However, the ITAT ruled that State Electricity Board (SEB) rates—not IEX spot prices—were the appropriate benchmark for determining the arm’s length price (ALP) of such transactions.

 

Key Highlights:

 

- Relief Granted: ₹30.83 crore adjustment on power transfer deleted

- Core Issue: Whether IEX rates or SEB tariffs should be used as ALP benchmark

- Tribunal’s View: SEB rates reflect real market conditions better than volatile IEX prices

- Legal Basis: Section 92F read with Section 80IA of the Income Tax Act

- Additional Relief: Tribunal also rejected a ₹103.57 crore adjustment related to steam transfer, which the TPO had valued at nil

- Impact: Strengthens DCM’s tax position and sets precedent for similar intra-company power transfers

 

The ruling is expected to benefit other infrastructure firms claiming 80IA deductions and reinforces judicial skepticism toward using IEX rates as a universal benchmark.

 

Source: Indian Kanoon, CaseMine, DCM Shriram Exchange Filings