Tax Street – November 2023

Focus Point

Determination of market value in an inter-unit transfer in the context of profit-linked incentive deduction - end to disputes or beginning of new one?

As per the Income-tax Act (the Act), eligible taxpayers can claim a deduction under Section 80-IA (8) with respect to power generation subject to fulfilling certain conditions. One such critical criteria is determination of appropriate market value while computing the deduction as per provisions of the Act.

Section 80-IA (8) of the Act

The Act provides tax holiday in respect of profits of eligible businesses by setting up an industrial undertaking in India for the generation and distribution of power.

The profits eligible for tax holiday in case of transfer of goods between taxpayer's eligible business to any other business of the same taxpayer (interunit transfer) would be computed by considering the transfer to be at the market value of such goods.