TaxTMI 
TaxTMI 
2019 (8) TMI 1201
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....017. 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 years also. The relevant portion of the note a....
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....ectively. 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 turbine inlet = 777.5 k. cal. Total heat output at the turbine outlet = 694.3 k.cal. In Let Steam Flow = Outlet Steam F....
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....y 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 has debited only 10% of the total husk as an expenditure based on thumb rule method. 4.3 The issue of husk consumption in the case of power plant of the assessee for the A.Y.2008-09, 2009-10 and 2011-1....
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.... "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 assessee. (iv) The basic undisputed fact is that assessee company requires steam for both power generation and rice milling. Assessee by using back pressure turbine technology is utilizing the same steam both for the purpose of power....
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....he 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 that claim of 10% husk utilization in the previous years was upheld by the tribunal and filed copy of the Tribunal order. The Hon'ble ITAT restricted the husk consumption to 10% for the A.Ys. 2008-09 & 2009-10. However, the said ITAT order was not accepted by the....