TaxTMI 
TaxTMI 
2019 (8) TMI 1201
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....he CBDT Instruction No. 5/2017, dated 07/07/2017. Accordingly, notice u/sec. 143(2) dated 19/09/2017 was issued and the assessment was completed u/sec. 143(3) of the Act dated 18/01/2018. In the assessment order, the Assessing Officer has noted that the assessee has claimed deduction of Rs. 3,87,08,175/- u/sec. 80IA(iv) in respect of profits derived from co-generation power plant. The assessee furnished the details of income from co-generation plant. It is noticed from the division-wise profit & loss account that total sales of the power has been admitted at Rs. 5,10,96,045/- and sale of steam at Rs. 4,07,92,800/-. Against the above receipts, the assessee claimed expenditure under various heads like husk consumption, power plant maintenance, power plant spares & repairs and power plant salaries etc. and arrived at a net profit of Rs. 3,61,44,742/-. After making adjustment towards depreciation to the said net profit, the assessee has claimed deduction of Rs. 3,87,08,175/-u/sec. 80IA. During the course of assessment proceedings, the assessee was asked to substantiate the claim of deduction u/sec. 80IA. In response, the assessee furnished a note, which was furnished for the earlier....
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....o power generating unit and rice milling unit at 10% and 90% of the husk cost respectively. In our case the power plant is subsequently established and the rice mill is being run since the past and the heat of steam requirement is more for the parboiled process and only a portion of the heat of steam is being utilized for the power generation. The turbine capacity of our power plant requires only 10% of the steam generated in our boiler and -hence the cost of husk is taken at 10% of the total husk utilized in the boiler section. Also the remaining 90% of the steam is utilized by the rice mill in its manufacturing activity. Hence the cost of husk is taken at 10% only for arriving at the cost of production in power generation unit. The process of steam generation and its utilization in the turbine is supported / explained by the steam utilization sheet from our Equipment Supplier - Triveni Engineering. The technical calculation of Steam Utilization is annexed herewith. Power Generation Thermal Calculations Total Heat supplied = Heat Utilized for power Generation + Heat output utilized for process at Turbine Extraction. Total heat at turbin....
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....the procedure laid down in section 80/A of the Income Tax Act, 1961, the company has been claiming the deduction as per the provisions of the Act accordingly." 4.2 The above submission filed by the assessee has been perused. On examination of the Profit & Loss a/c relating to power plant, it is seen that the assessee has debited total cost of husk of Rs. 4,53,25,333/- under the head "Husk Consumption" and credited 90% of the cost of husk, i.e. Rs. 4,07,92,8001- as "sale of steam". In the earlier years, the assessee has debited only 10% of the total cost of husk to the Profit & Loss a/c and has not shown any income towards sale of steam. Thus, during the current year also, the assessee has apportioned 10% of the total cost of husk towards power plant and the balance 90% towards rice mill. The issue is the allocation of cost of power and fuel. It is observed that the assessee is relying on a mere technical calculation given by a vendor of machinery. The technical calculation reflects the picture of steam utilization for generation of power. The only dispute arose is with regard to allocation of consumption of husk in between the power plant and the rice mill. The assessee ha....
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....ccording to sec. 801A(5), the quantum of deduction shall be computed as if the eligible business"power generation" is the only source of income of the assessee during the previous year relevant to assessment year. In treating the "power generation" as only source of income, the corresponding expenditure i.e. all costs attributable and relatable in arriving at the income need to be accounted for in the heads of the eligible business. The section 801A (1) specifically mention that eligible profits & gains should be derived by and undertaking form its business of "Power generation". (iii) The assessee failed to maintain separate books of account for the eligible unit of Power generation. As decided by the Apex Court in Arisudana Spinning Mills Ltd. Vs. Commissioner of Income-Tax (3481TR 385) (SC), The assessee ought to have maintained a separate account in respect of Power unit and Rice Mill unit. If the assessee had maintained a separate account, then, in that event, a clear picture would have emerged which would have indicated the income accrued form the eligible unit with corresponding expenditure. There is no known reason why separate accounts were not maintained by the a....
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....0% of the cost of husk i.e. Rs. 4,07,92,800/- as 'sale of steam'. In the earlier years, the assessee has debited only 10% of the total cost of husk to the profit & loss account and has not shown any income towards sale of steam. Thus, during the current year also, the assessee has apportioned 10% of the total cost of husk towards power plant and the balance 90% towards rice mill. The issue is the allocation of cost of power and fuel. It is observed that the assessee is relying on a mere technical calculation given by the vendor of machinery. The technical calculation reflects the picture of steam utilization for generation of power. The only dispute arose is with regard to allocation of consumption of husk in between the power plant and the rice mill. The assessee has debited only 10% of the total husk as expenditure, based on thumb role method. The Assessing Officer further noted that the issue of husk consumption in the case of power plant of the assessee for the A.Y. 2008-09, 2009-10 & 2011-12 was analyzed in detail in the respective assessment orders and husk consumption for the power generation plant was recasted at 55% of the total husk consumption. The assessee has stated th....
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....facts of the case, we find that the only issue involved in this appeal is attribution of husk consumption to the power plant by the assessee at 10% is correct or not. The coordinate bench of the tribunal in the A.Ys. 2008-09 & 2009-10 has considered the issue and held as under:- "16. On a careful examination, we are inclined to accept the submissions of the Ld. Counsel for the assessee for the reason that the cost of steam is what is to be allocated between the power plant and the rice mill. 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, w....