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2014 (4) TMI 1250 - AT - Income TaxDeduction u/s 80IA on the profits of the power generation unit - HELD THAT - We are inclined to accept the submissions of 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 segregating 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 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. On the issue of administrative expenses, the CIT has applied the decision of the Pune Bench of the Tribunal in the case of Khinvasara inwarsa Investment Pvt. Ltd. Vs. JCIT 2006 (6) TMI 198 - ITAT PUNE-A 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 Allocation of husk @55% to the power plant as made by the assessing officer - HELD THAT - This issue is covered in favour of the assessee and against the revenue as relying on CONTIMETERS ELECTRICALS PVT. LTD. 2008 (12) TMI 4 - HIGH COURT DELHI and ACE MULTITAXES SYSTEMS PVT. LTD. 2009 (1) TMI 260 - KARNATAKA HIGH COURT Adoption of husk consumption rate - HELD THAT - CIT(A) held that the assessing officer had not pointed out errors nor rejected the data as per the records maintained by the assessee, before taking up comparable cases such as M/s. Sudha Agro Oils and Gautam Solvents for coming to such conclusions. We find that this conclusion of the Ld. CIT(A) is as per law for the reason that no estimates can be made without rejection of the books of accounts and without pointing out errors in those books of accounts. When the assessee is maintaining detailed records of husk consumption, electricity production, etc., the assessing officer has to point out errors in these records, reject the same and then only go for comparable cases. As the assessing officer has not done the same, CIT(A) is right in his finding. Non-maintenance of separate books of accounts for power generation business - AO was of the view that this would disentitle the assessee for making the claim u/s 80IA - HELD THAT - It is pointed out that in the assessment year 2009-10 the assessing officer, on the very same set of facts, accepted that books of accounts maintained by the assessee on the ground that they fulfill the requirements of separate books of accounts as the purpose of having separate books of accounts, is to enable the assessing officer to ascertain the profits from power generation business. When this objective is fulfilled and when the assessing officer in the subsequent year holds so, we are of the considered opinion that the finding of the Ld. CIT(A), which is in consonance with circular no.1 of 13 dated 17.1.2013 issued by the CBDT requires to be upheld. Therefore, ground no.9 is dismissed. 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 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. Disallowance u/s 40(a)(ia) - HELD THAT - CIT(A) applied the decision of the Visakhapatnam special bench of the Tribunal in the case of Merilyn Shipping and Transport Vs. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM . This decision has since been suspended and the Hon ble Kolkata High Court in the case of CIT Vs. Crescent Export Syndicate 2013 (5) TMI 510 - CALCUTTA HIGH COURT held that the law laid down in the case of Merilyn Shipping and Transport (Supra) is not a good law. Further, it was held that the provisions of S.40(a)(ia) are applicable even when the expenditure is paid during the year and not payable as at the end of previous year. Disallowance made of certain expenditure - HELD THAT - Assessee produced the details of payments made to the sundry creditors which were also produced before the AO. In almost all the cases some amount out of the purpose consideration was paid before March and the balance payable was paid in the month of April. AO neither disputed the fact of purchase of paddy nor pointed out any instances of either quantitative difference or rate difference. Test-check made by AO by recording sworn statements of three of the creditors also turned out in favour of the assessee. Under these circumstance AO is not correct in making an adhoc disallowance only because confirmation letters are not produced without finding any other discrepancy either in the purchases or in the names and addresses of the sundry creditors.
Issues Involved:
1. Capitalization of interest expenditure on new assets. 2. Disallowance of bank expenses related to plant and machinery. 3. Disallowance of expenditure debited to the bank. 4. Addition towards godown rent. 5. Addition towards gunnies. 6. Addition under section 40(a)(ia) for non-deduction of tax. 7. Addition under section 43B for default payments. 8. Disallowance of section 80IA deduction for the power plant. 9. Allocation of administrative expenses. 10. Filing of audit report under section 10CCB. 11. Maintenance of separate books of accounts for power generation business. 12. Admission of additional evidence. Detailed Analysis: 1. Capitalization of Interest Expenditure on New Assets: The assessing officer capitalized interest expenditure on new driers amounting to Rs. 8,81,163/-. This was not contested by the assessee in the appeal. 2. Disallowance of Bank Expenses Related to Plant and Machinery: The assessing officer disallowed bank expenses related to plant and machinery amounting to Rs. 7,59,177/-. The assessee did not press this issue in the appeal. 3. Disallowance of Expenditure Debited to the Bank: An amount of Rs. 7,740/- was disallowed by the assessing officer. This issue was not pressed by the assessee in the appeal. 4. Addition Towards Godown Rent: The assessing officer added Rs. 2,29,600/- towards godown rent. This issue was not contested by the assessee in the appeal. 5. Addition Towards Gunnies: An addition of Rs. 2,00,000/- was made towards gunnies. This issue was not pressed by the assessee in the appeal. 6. Addition Under Section 40(a)(ia) for Non-Deduction of Tax: For the assessment year 2008-09, the assessing officer made an addition of Rs. 2,41,238/- under section 40(a)(ia). The CIT(A) remanded the issue for reconsideration. For the assessment year 2009-10, the CIT(A) applied the decision of the Visakhapatnam special bench of the Tribunal in the case of Merilyn Shipping and Transport Vs. ACIT, which has since been suspended. The Kolkata High Court in CIT Vs. Crescent Export Syndicate held that provisions of section 40(a)(ia) apply even when expenditure is paid during the year. Thus, the CIT(A)'s decision was reversed, and the ground of the revenue was allowed. 7. Addition Under Section 43B for Default Payments: An addition of Rs. 7,272/- was made under section 43B. This issue was not contested by the assessee in the appeal. 8. Disallowance of Section 80IA Deduction for Power Plant: The assessing officer disallowed the deduction claimed under section 80IA for the power plant. The CIT(A) reallocated the profits from the power generation unit after allocating 15.75% of the expenditure of the boiler unit towards power generation instead of 10% as taken by the assessee. The Tribunal found the allocation made by the assessee justified and allowed the ground of the assessee. 9. Allocation of Administrative Expenses: The CIT(A) applied the decision of the Pune Bench of the Tribunal in Khinvasara Investment Pvt. Ltd. Vs. JCIT for the assessment year 2009-10 and directed the assessing officer to adopt the same for the assessment year 2008-09. The Tribunal upheld this decision. 10. Filing of Audit Report Under Section 10CCB: The CIT(A) held that filing of the audit report under section 10CCB within time is not mandatory. This issue is covered in favor of the assessee by the decisions of the Delhi High Court in CIT Vs. Container Electricals Pvt. Ltd. and the Karnataka High Court in CIT Vs. Ace Multiaxes Systems Pvt. Ltd. The Tribunal upheld the CIT(A)'s decision. 11. Maintenance of Separate Books of Accounts for Power Generation Business: The assessing officer was of the view that non-maintenance of separate books of accounts would disentitle the assessee from making a claim under section 80IA. The CIT(A) found that the books maintained by the assessee fulfilled the requirements for separate books of accounts. The Tribunal upheld this finding. 12. Admission of Additional Evidence: The CIT(A) admitted technical data from M/s. Triveni Engineering and Industries Ltd. as additional evidence. The Tribunal found no infirmity in this act of the CIT(A) and upheld the decision. Conclusion: The appeals were partly allowed in favor of the assessee and partly in favor of the revenue. The Tribunal upheld several findings of the CIT(A) and provided detailed reasoning for the allocation of expenses and the admissibility of deductions under section 80IA.
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