TaxTMI 
TaxTMI 
2014 (4) TMI 1229
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....uction u/s 80IA of the Act on the profits of the power generation unit. 3. The assessee filed its return of income for the assessment year 2008- 09 on 27.9.2008 declaring book profit on total income of Rs. 2,20,23,373/- as per MAT provisions. For the assessment year 2009-10, the assessee filed its return of income on 29.9.2009 declaring book profits as per MAT of Rs. 8,67,881/-. For the assessment year 2008-09, the assessing officer passed an order u/s 143(3) of the Act on 27.12.2010 determining the total income at Rs. 2,91,00,560/- under the regular provisions of the income tax act, inter alia making the following additions/disallowances. 1. Capitalization of interest expenditure on the new asset (new driers) put to use during the accounting year relevant for the A.Y.2008-09 - Rs. 8,81,163/-; 2. Disallowance of Bank expenses relating to Plant & machinery - Rs. 7,59,177/- 3. Disallowance of expenditure debited to Bank - Rs. 7,740/-; 4. Addition towards godown rent - Rs. 2,29,600/-; 5. Addition towards gunnies - Rs. 2,00,000/- 6. In respect of addition made u/s.40(a)(ia) - Rs. 2,41,238/-; 7. Addition made default on 4....
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....Sudha Agro and Chemicals Ltd is 4 MW capacity. As stated above Sudha Agro and Chemicals is purchases raw material from outside whereas the assessee uses husk generated by its own rice mill. In the case of assessee the steam which is coming out of power plant is used in Para-boiling in drying of paddy. Further the allocation of husk cost @ 10% of total husk utilization is based on experts opinion." 7. The Ld. Counsel for the assessee referred to the order of the AO and the order of the CIT(A) and argued that the working made by the CIT(A) is erroneous as there was no need to amend the husk allocation at 10% as was done by the assessee. His submissions on this aspect are as follows: "a) Firstly, the loss of 10.7% is with reference to steam at inlet of the turbine and the loss of steam within the turbine. However, the same loss when expressed as a percentage of calorific value of husk translates to 9.62% only and not 10.7%. As there is already a heat loss of 10.09% during generation of steam, the heat value at the inlet of the turbine is only 89.91% and the loss of steam within the turbine is 10.7% of 89.91% that works out to 9.62% when compared with the calorific value of....
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....deducting the entire expenses in computing the profit from the power plant. Thus, the expenditure allocated by the appellant is actually on a higher side. Therefore, even on this score the appellant is justified in allocating only 10% of the cost of husk to the power plant. ln the light of the above stated facts, the appellant respectfully submits that it is sufficient if 9.62% of husk cost is allocated to the Power Plant. Once, it is accepted that the loss of heat of steam within the turbine is only 10.7% {9.62% when expressed as a percentage on the calorific value of husk) then the entire value of steam (cost of husk) is required to be distributed in the same ratio between the power plant and the rice mill. As the cost of husk allocated by the appellant @10% is higher than 9.62% no adjustment is required with regard to this amount in computing the deduction in respect of profit of the power plant." 8. On the issue of administrative expenses, he submitted that the Ld. CIT(A) while deciding the appeal for the assessment year 2009-10 has taken a view that the apportionment of the administrative expenses is to be made on the basis of turnover of rice mill and power plant ....
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....profit in the steam account would be eligible for deduction u/s 80IA(4), which effectively means that there is no difference in the quantum of exemption u/s 80IA(4) of the Act. He submits that the assessee could have actually allocated 10.7% of the other expenses incurred in generation of steam, but this was not done. He argued that the allocation of expenditure made by the assessee to the power plant on the higher side and therefore the same should be accepted. 11. He summed up his submission by submitting that it would be appropriate if 9.62% of the husk caused is allocated to the power plant and that the entire value of steam including the loss incurred prior to husk becoming steam, is required to be distributed in the same ratio between the power plant and rice mill. He prayed for relief. 12. After hearing rival contentions and considering the papers on record and the orders of the authorities below, we hold as follows. 13. The Ld. CIT(A) with the help of technical data accepted the contention of the assessee that steam consumed by the power plant is only 10.7%. He did this by recording from the technical data that the heat of steam at inlet of the turbine is 777.5K Ca....
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....or power generation. To put it in a simple language if Y is the amount of heat of steam going into the turbine, the amount of heat of the steam coming out of turbine after power generation is \9x' that is to say that 10% of heat is converted into power and the remaining 90% of heat is let out which is used for rice milling purposes. Thus it is argued by the assessee that the allocation of husk expenditure in the ratio of 90:10 between rice milling and power generation is justified. The power generation thermal calculations given by Triveni Engineering are reproduced on page 10 of this order. A careful examination of those calculations reveal that Triveni Engineering calculated the heat drop only across the turbine without considering loss of heat across the boiler and the loss of heat in generation of power. For generation of power, paddy husk is burnt and the resultant heat is used for boiling water and generating the steam. This steam goes into turbine and after power generation the steam with reduced temperature/pressure goes to the rice milling unit. Assessee calculated the difference in total heat of steam across the turbine and attributed the same to power generation." ....
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....ions) Actual heat drop calculation = Total Heat converted as power (%) = Heat utilized in the Turbine x 100/Total Heat supplied =83.2 x 100/777.5 =10.70 However it needs to be emphasized tat this 10.70% is only the heat drop across the turbine. Heat loss before the steam gets into turbine also needs to be calculated and factored in. If rice husk having total heat of 100 Kilo calories is burnt, heat generated out of it in the furnace may vary from 90 Kilo calories to 80 K.Cal. depending on the efficiency of furnace. Assuming that 90 K.Cal. is supplied to the boiler only 75 to 80 kilo calories of heat is taken up by the water in the process of heat generation. Assuming that 80 K. Cal, the total heat of such inlet steam which goes into turbine out of that 10.7% i.e 8.56 K.Cal heat is used for power generation including the loss in turbine. Thus the total heat of the steam which comes out from the turbine will be 71.44 K.Cal. This shows that there will be heat loss in the process." 15. Thereafter, after a detailed discussion, he concluded as follows: I have considered the argume....
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....efore 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 segregated 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. 17. On the issue of administrative expenses, the Ld. CIT has applied the decision of the Pune Bench of the Tribunal in the case of Khinvasara inwarsa Investment Pvt. Ltd. Vs. JCIT (supra) while adjudicating the very same issue for the assessment year 2009-10. We direct the assessing officer to adopt the same for the impugned assessment year 2008-09 and allow this ground of the assessee. 18. In the result, the appeal of the assessee is allowed in part. 19. The revenue appeal is on the following grounds: 1. The learned CIT(A) erred in utilizing the comparable cases relied upon by....
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....ed at the time of appeal hearing before the Hon'ble Tribunal. 20. After hearing the rival contentions, we hold as follows. 21. Ground no.1,2 & 3 are on the issue that has been adjudicated as ground no.6 in the assessee's appeal. The D.R. could not place on record any technical data to support the allocation of husk @55% to the power plant as made by the assessing officer. Consistent with the view taken hereinabove we dismiss ground nos.1,2 & 3. Ground nos.4 to 6 are against the finding of the CIT(A) that filing of a report u/s 10CCB within time is not mandatory. This issue is covered in favour of the assessee and against the revenue by the decisions of the Hon'ble Delhi High court in the case of CIT Vs. Container Electricals Pvt. Ltd. 317 ITR 248 and the judgements of the Hon'ble Karnataka High Court in the case of CIT Vs. Ace Multiaxes Systems Pvt. Ltd. 217 ITR 207. This was followed by the Visakhapatnam bench of the ITAT in the case of P.V. Ramanaiah in ITA No.348 and 385 of 2006. Consistent with the view taken therein we uphold the order of the CIT and dismiss these grounds of the revenue. 22. Ground no.7 is on the issue of the CIT accepting additional evidence. The add....
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....T requires to be upheld. Therefore, ground no.9 is dismissed. 25. Ground no.10 is general in nature. 26. In the result, the revenue's appeal is dismissed. 27. ITA 325/Vizag/2013 is the assessee's appeal for the assessment year 2009-10. Ground no.1 is general in nature. Ground nos.2 &3 and ground nos.5 & 6 are not pressed by the assessee for the reason that the amounts involved are very small. In the result, these grounds are dismissed. 28. Ground no.4(a) is also dismissed as not pressed. Ground no.4B is identical to the ground no.6 raised for the assessment year 2008-09. Consistent with the view taken therein, we uphold the contentions of the assessee. Coming to the observations of the assessing officer that there is no difference in technical specifications of the turbine used by the assessee and Sudha Agro, the learned Counsel submitted that the very method of generation of power by these two entities are different and cannot be compared. It was submitted that in the case of Sudha Agro out of 30 tonnes of steam, 10 tonnes is absorbed in the turbine and out of the balance, part of the steam is passed through condensation unit and the steam condensed to 20 tonnes only b....
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....ditional evidence in respect of husk consumption for generation of steam by way of power generation. thermal calculations obtained from M/s. Triveni Engineering Industries, which were not submitted before the Assessing Officer. 8. The CIT(A) failed to give detailed reasons as to how the AO was wrong in adopting the husk consumption rate by making a comparative study with similar concern like Sudha Agro Oils and Gowthami Solvents. 9. The CIT(A) failed to appreciate the finding of the assessing officer that non-maintenance of separate set of books of account would disentitle the assessee from making a claim u/s. 80IA of the Act, since it failed to meet the statutory and mandatory requirement . 10. The Ld. CIT(A) erred in directing the AO to apportion the administrative and maintenance expense based on the turnover of both the units contradicting his own decision delivered to apportion the administrative and maintenance expenses based on its profits relying on the decision of Hon'ble Pune Bench of ITAT in the case of Khinvasara Investment (P) Ltd. Vs. JCIT 110 ITD 198. Whereas the said decision of Hon'ble Pune Bench of ITAT in the case of Khinvasara Investme....