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TMI Blog2014 (4) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 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. Report u/s 10CCB within time is not mandatory - Held that:- 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. CONTIMETERS ELECTRICALS Pvt. Ltd. [2008 (12) TMI 4 - HIGH COURT DELHI]. Adoption of husk consumption rate - 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 - Held that:- We find that this conclusion of the Ld. CIT(A) is as per law for the reason that no estimates can be made without rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar Reddy, Accountant Member:- These are cross appeals filed for the assessment years 2008-09 and 2009-10. As the issues arising in both these appeals are common for the sake of convenience they are heard together and disposed of by way of this common order. 2. Brief facts of the case are that the assessee is a Private Limited company, engaged in the business of procurement and processing of paddy and sale of rice, broken, husk. In addition to earning income from sales and exports of these products, the assessee also derives profit from a power generation unit run by it. Assessee claims deduction 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 ₹ 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 ₹ 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 ₹ 2,91,00,560/- under the regular provisions of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive ground argued by the assessee is ground no.6, which is extracted for the ready reference. 6. i) a. The lower authority should have accepted net profit from power plant should have been accepted. b. The lower authorities should not have compare the appellant case with that of - a) Sudha Agro and Chemicals Ltd., Samarlakota; and b) Sri Gowthami Solvent Oils Ltd., ii) The said companies purchased raw material from others, whereas appellant company utilizing its own husk i.e. from milling to paddy in its mill. Sudha Agro and Chemical Ltd., is a solvent extract plant and its power generation with a bio-mass based with an extraction cum turbine. The process of the appellant s power plant is entirely different from that of Sri Sudha Agro and Chemicals P Ltd. As the assessee uses a back pressure turbine. The appellant s turbine has 1 MW capacity whereas 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. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of husk as an income in the profit and loss account of the rice mill would not have arisen. d) Lastly, steam is also one of the types of power as contemplated u/s 80(IA)(iv) of the Act as it was so held by the hon'ble Apex Court in the case of CIT Vs. Tanfac Industries Limited SLP (C) No.18537 of 2009 319 1TR (st) 8. Therefore, any increase in the value of steam to be deducted in arriving at the profit of the power plant would increase the profit in the steam account by an amount .equal to the amount of reduction in the profit in power account. Therefore, there is effectively no difference in the amount of deduction available u/s 80(IA)(iv) in as much as both power and steam are considered as eligible for deduction u/s 80(IA)(iv}. Thus, the appellant could have actually allocated only 10,7% of even the other expenses incurred in generation of steam as against 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an unavoidable process for running the para boiled rice mill and but for the consumption of a part of the steam by the power plant, the entire cost of steam ought to have been borne by the rice mill. In other words, he contended that, had the power plant not been put up, the entire cost in question has to be incurred by the rice mill and the question of apportionment would not arise. 10. Alternatively, he submitted that steam is also a type of power as contemplated u/s 80IA(4) of the Act and for this proposition, he relied on the decision of the apex court in the case of CIT Vs. Tanfac Industries Ltd. SLP (c) (18537) of 2009, 319 ITR (st) 8. He submitted that any increase in the value of steam to be deducted in arriving at the profit of the power plant would increase the profit in the steam account to the extent of the deduction of profits in the power plant and this 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going steam value is credited to the power generation unit or only a part of husk is treated as input cost of power generation unit. Having accepted that the input cost of husk is to be bifurcated between rice milling unit and power generation unit the only contentious issue would be the allocation of the expenditure between milling unit and power generation unit. The question thus boils down to whether 10% expenditure allocation to power plant by the assessee based on the calculation of heat loss is correct or not. Assessee was asked to explain the basis for allocating only 10% of husk expenditure to power plant, Assessee furnished the heat drop calculation from M/s.Triveni Engineering and Industries Limited. According to those calculations there is a total heat drop of 10.05% across the turbine, which means that only 10.05% of total heat is used by turbine for 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rop and such losses have to be allocated between the power generation and rice milling units. Hence the calculation of 10.05% heat drop given by assessee is not correct. From Column 10 11 of Triveni Engineering's calculations it can be seen that actual heat drop across the turbine is 83.2 Kilo calories. However total heat converted into power is taken at 78.2 kilo calories by factoring in 6% losses in power generation. However at the time of final power generation thermal calculation heat drop across the turbine is taken at 78.2 Kilo calories instead of 83.2 kilo calories. Thus, even after taking only the heat drop across the turbine the percentage works out to 10.7% instead of 10.05% as calculated by the assessee. The detailed calculation is shown as below: Calculation as given by the assessee 83.2 (as per column 10 of Power Generation Thermal Calculations) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculations given by the assessee do not reflect the correct picture of apportionment in so far as they did not take into account the loss of heat across the system. ( e)AO is directed to allocate 15.75% of husk expenses towards power generation instead of 10% as adopted by assessee. ( f)AO is directed to calculate depreciation on power plant equipment as per I.T. Rules. ( g) AO is thus directed to calculate profits attributable to the power generation unit by proportionately allocating all administrative and miscellaneous expenditures and after correctly calculating depreciation of power plant equipment. This ground of assessee is thus partly allowed. 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 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 util ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the provisions of 80J and 80IA are akin, the CIT(A) ought to have drawn support from this decision to hold that the filing of 10CCB report is a mandatory requirement. 7. The CIT(A) is not correct in accepting the additional evidence in respect of husk consumption for generation of steam by way of power generation thermal calculations obtained from M/s.Triveni Engineering Industries, Bangalore which were not submitted before the Assessing Officer. 8. The CIT(A) failed to give detailed reasons as to how the Assessing Officer was wrong in adopting the husk consumption rate by making a comparative study with similar concerns 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. Any other ground that may be urged 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 adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases. As the assessing officer has not done the same, CIT(A) is right in his finding. We uphold the same and dismiss the ground no.8.. 24. Ground no.9 is on the issue of non-maintenance of separate books of accounts for power generation business. The assessing officer was of the view that this would disentitle the assessee for making the claim u/s 80IA of the Act. 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. 25. Ground no.10 is general in nature. 26. In the result, the revenue s appeal is dismissed. 27. ITA 325/Vizag/2013 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee produced self-made vouchers in proof of payment wherein the signature/thumb impression of the farmers has been obtained. 4. The 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. 5. The 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. 6. The CIT(A) failed to take cognizance in respect of the technical specifications and differential parameters like turbine inlet heat, turbine outlet heat and heat drop etc., of the assessee-company with that of the details supplied by M/s. Triveni Engineering Industries and furnished by the assessee before the CTT(A) which play a typical role in utilization of husk. . 7. The CTT(A) is not correct in accepting the additional 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases. He held as follows: I have considered the arguments of the assessee. 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 circumstances, I am of the opinion that 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. In view of the above I hold that the adhoc addition made by AO deserves to be deleted. Thus I direct AO to delete the addition made. 36. The Ld. DR could not controvert these factual findings. 37. In the result, we uphold the same and dismiss this ground of the revenue. 38. Ground nos.4 to 6 and ground no.8 are on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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