ALP of Steam Transfer from Eligible Power Unit to Non-eligible Units Cannot be NIL | ITAT

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ALP steam transfer pricing

Case Details: DCM Shri Ram Industries Ltd. vs. Deputy Commissioner of Income-tax [2026] 184 taxmann.com 679 (Delhi-Trib.)

Judiciary and Counsel Details

  • Challa Nagendra Prasad, Judicial Member & S. Rifaur Rahman, Accountant Member
  • Pradeep Dinodia, Ravi Kumar & Ms Shruti Gupta, CAs for the Appellant.
  • Ms Anima Barnwal, CIT DR for the Respondent.

Facts of the Case

The assessee company was engaged in manufacturing activities and operated an eligible power unit that supplied steam to its non-eligible units. For this specified domestic transaction, the assessee adopted the ‘other method’ and valued the transfer of steam at its cost of production without any mark-up.

During the transfer pricing proceedings, the Transfer Pricing Officer rejected the methodology adopted by the assessee and determined the arm’s length price of steam at nil on the ground that generation of steam was incidental to power generation and its cost was subsumed therein, resulting in a transfer pricing adjustment of about Rs. 107.01 crores. Accordingly, a transfer pricing adjustment was made and incorporated in the final assessment. Aggrieved, the assessee filed an appeal before the Tribunal.

ITAT Held

The Tribunal held that steam is a commercially viable product and cannot be treated as having nil value. Reliance was also placed on decisions in the assessee’s own case for earlier assessment years and in the case of group concerns, wherein similar adjustments had been deleted.

The issue was covered by earlier decisions in the assessee’s own case and that steam, like electricity, is a commercial and marketable product. It was held that the cost of steam cannot be taken as nil merely because it arises during the process of power generation. The Tribunal further noted that ignoring the value of steam would lead to an unrealistic determination of arm’s length price.

Accordingly, the Tribunal held that the transfer pricing adjustment made by the TPO by determining the arm’s length price of steam at nil was unsustainable in law. The addition was deleted, and the issue was decided in favour of the assessee.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied