2019 (8) TMI 1201 - AT - Income Tax

Tribunal Upheld 10% Husk Allocation for Power Plant: Section 80IA Deduction Valid

The Tribunal upheld the assessee's allocation method of 10% husk consumption to the power plant, rejecting the AO's recalculated 55% allocation. It ... Deduction u/sec. 80IA - allocation of consumption of husk in between the power plant and the rice mill - attribution of husk consumption to the power plant by the assessee at 10% is correct or not - HELD THAT:- There is no logic in sagregating the cost into two parts and allocating the normal loss in the generation of steam at 50-50 and therefore allocating the husk expenses at 15.75% to the power generation plant and 84.25% to the rice mill. Once we come to our conclusion that 10% of the steam is utilized by the power generation plant, then all the cost i.e. attributable and relatable to the generation of steam has to be allocated only on that basis. The cost of steam cannot be saggregated into that which is incurred up to a particular point and cost incurred after a particular point. This to our mind is not logical. Thus the allocation made by the assessee to our mind is justified. Hence, we allow this ground of the assessee Issues Involved:1. Allocation of husk consumption between the power plant and the rice mill.2. Validity of the deduction claimed under Section 80IA.3. Requirement of maintaining separate books of accounts for the eligible unit.4. Filing of Form No. 10CCB for claiming deduction under Section 80IA.Detailed Analysis:1. Allocation of Husk Consumption:The primary issue revolves around the allocation of husk consumption between the power plant and the rice mill. The assessee allocated 10% of the total husk consumption to the power plant and 90% to the rice mill based on a technical calculation provided by the machinery vendor. This method was previously upheld by the Tribunal for the assessment years 2008-09 and 2009-10. However, the Assessing Officer (AO) recalculated the husk consumption for the power plant at 55% based on prior assessment orders for the years 2008-09, 2009-10, and 2011-12, which was not accepted by the department and was appealed to the High Court under Section 260A.2. Validity of Deduction under Section 80IA:The assessee claimed a deduction of Rs. 3,87,08,175/- under Section 80IA for profits derived from the co-generation power plant. The AO questioned the allocation method, arguing that the husk is the raw material for steam generation, which is then used for power generation. The AO contended that the true profits and gains could only be determined by considering the entire cost of husk. The CIT(A), however, followed the Tribunal's earlier orders and allowed the deduction based on 10% husk consumption for the power plant.3. Requirement of Separate Books of Accounts:The AO noted that the assessee failed to maintain separate books of accounts for the power generation unit and the rice mill unit. The AO cited the Supreme Court's decision in Arisudana Spinning Mills Ltd. Vs. Commissioner of Income-Tax, which emphasized the necessity of maintaining separate accounts to clearly indicate the income and corresponding expenditure of the eligible unit.4. Filing of Form No. 10CCB:The AO argued that filing Form No. 10CCB is a mandatory requirement for claiming deductions under Section 80IA, drawing support from the decision of the Punjab & Haryana High Court in the case of CIT Vs. Jaideep Industries. The Tribunal, however, did not consider the filing of Form No. 10CCB as mandatory for the assessment proceedings.Tribunal's Judgment:1. Husk Consumption Allocation: The Tribunal upheld the assessee's method of allocating 10% of the husk consumption to the power plant. It found no logic in segregating the cost of steam generation into parts and allocating the expenses differently. The Tribunal concluded that the allocation made by the assessee was justified.2. Deduction under Section 80IA: The Tribunal found no infirmity in the CIT(A)'s order, which allowed the deduction claimed by the assessee under Section 80IA based on the 10% husk consumption allocation.3. Separate Books of Accounts: The Tribunal did not specifically address the issue of maintaining separate books of accounts in its final decision, focusing instead on the allocation of husk consumption and the validity of the deduction claimed.4. Form No. 10CCB: The Tribunal did not consider the filing of Form No. 10CCB as a mandatory requirement for claiming deductions under Section 80IA, contrary to the AO's argument.Conclusion:The Tribunal dismissed the appeal filed by the Revenue and upheld the CIT(A)'s order, allowing the deduction claimed by the assessee under Section 80IA. The cross-objection filed by the assessee was dismissed as infructuous. The Tribunal's decision was pronounced in open court on August 23, 2019.