TaxTMI 
TaxTMI 
2014 (4) TMI 1250
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....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 43B payments - Rs. 7,272/- 8. Addition u/s.HA of I.T.Act - 25,000/- 9. Disallowance of 80IA deduction of power pla....
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....e 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 husk the cost of which is the subject matter of allocation. Therefore, the loss of heat within the turbine is only 9.62% of the calorific value of husk and not 10.7%. b) Secondly, the loss of 10.09% be....
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.... 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 by following the decision of the Pune bench of the Tribunal in the case of Khinvasara inwarsa Investment Pvt. Ltd. Vs. JCIT 110 ITD 198. He prayed that the same yardstick should be applied for the assessment year 2008-09 by following ....
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....% 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 Cal/pg. of steam and the loss while passing through the power turbine is 83.2 K.Cal/pg which when expressed in terms of loss of steam works out to 10.7%. The Ld. CIT(A) at page 14 in last para observed as follows: "The undisputed fact is that the....
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.... 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." 14. Thereafter, the Ld. CIT(A) held as follows: "A Vital thing that is missed out by the assessee is that the entire calorific value of paddy husk is not converted into heat energy. There is loss of heat at the time of burning and loss of heat in the boiler a....
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....e 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 argument of the assessee. From the assessee's reply it is evident that there is loss of heat in the process. This loss has to be allocated between power generation unit and rice milling unit. Assessee's argument that loss cannot be shared is not an acceptable proposition. Hence, I go on to allocate these losses equally between the power generatio unit and rice milli....
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....curred 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 the assessee for the purpose of pegging down the rice husk utilization to 15.75% as against 55% calculated by the assessing officer. 2. The learned CIT(A) failed to adopt a scientific approach and accepted basis for computing the rice husk utilization but arbitrarily reduced the utilization rate without any valid base, and hence the same is not correct, 3. The CIT(A) failed to take cognizance in respect of the technical spec....
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....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 additional evidence in question is technical data given by M/s. Triveni Engineering and Industries Ltd. who are the manufacturers of the turbine used by the assessee. In our view this technical data goes to the root of the matter and the Ld. CIT(A has rightly admitted the same. We also find that the CIT(A) sent the matter to the file of the assessing officer and asked him to give his comments on the same. As the assessing officer remained silent on the merits of this additional evidence, the CIT(A) e....
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.....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 before being used in the rice mill. We are unable to comment on this factual differences brought out by the Ld. Counsel for the assessee. As we have already taken a view that allocation of husk @10% is reasonable, suffice to say that consistent with the view taken on this issue for the earlier assessment year, we allow this ground of the assessee. 29. Ground no.7 is dismissed as general in nature. 30. In the result, the appeal of the assessee is allowed in part. 31. ITA 342/Vizag/2012 is revenue's appeal fo....
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....uld 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 Investment (P) Ltd. Vs. JCIT 110 ITD 198 has not yet been treated as conclusive. 11. Any other ground that may be urged at the time of appeal hearing before the Hon'ble ITAT." 32. After hearing rival contentions, we hold as follows: 33. Ground no.1 is general in nature. Ground no.2 is on the issue of disallowance u/s 40(a)(ia). The Ld. CIT(A) applied the decision of the Visakhapatnam special bench of the Tribunal in the case of Merilyn Shipping and Transport Vs. ACIT. This decision has since been suspended and the Hon'ble Kolkata High Court in the case of CIT Vs. Crescent Export Syndicat....