The case pertains to the disallowance of deduction claimed u/s ...

Deduction under 80IA allowed for power unit supplying steam to paper unit after considering total fuel cost.

Case Laws     Income Tax

November 5, 2024

The case pertains to the disallowance of deduction claimed u/s 80IA by an assessee operating two units, one for paper manufacturing and another for power generation. The Assessing Officer disallowed the deduction by considering the cost of steam supplied to the paper unit as income for the power plant, thereby enhancing its profits eligible for deduction. However, the Assessing Officer computed the steam cost based solely on the average cost of raw materials disclosed in the Director's Report, arriving at Rs. 1200 per ton of fuel consumption. The assessee contended that the Director's Report only disclosed material costs and not other overheads like stores, spares, and other expenses required for steam generation. The Tribunal found merit in the assessee's argument and observed that the Assessing Officer failed to consider these additional costs. While the Assessing Officer allocated 39% of the basic fuel cost, the assessee allocated 49% of the total fuel cost. Considering the other costs, the Tribunal deemed the assessee's rate of Rs. 1500 per ton of fuel as reasonable. Consequently, the Tribunal allowed the deduction claimed u/s 80IA by the assessee.

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