Appeal details
Counselvise Citation
[2014] 120 COUNSELVISE.COM (IT) 6840 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-04-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Assessment Year
2009-2010
Appeal Filed On
11-09-2012
Judgement Text
ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.48/VIZAG/2012 ASSESSMENT YEAR : 2008-09 SREE MURALI MOHANA BOILED & RAW RICE MILL (P) LTD. KOMARIPALEM VS. ADDL. CIT, KAKINADA RANGE KAKINADA (APPELLANT) (RESPONDENT) PAN NO.AAHCS 7807F ITA NO.63/VIZAG/2012 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE-1 KAKINADA VS. SREE MURALI MOHANA BOILED & RAW RICE MILL (P) LTD. KOMARIPALEM (APPELLANT) (RESPONDENT) ITA NO.325/VIZAG/2012 ASSESSMENT YEAR : 2009-10 SREE MURALI MOHANA BOILED & RAW RICE MILL (P) LTD. KOMARIPALEM VS. ACIT KAKINADA RAGE KAKINADA (APPELLANT) (RESPONDENT) ITA NO.342/VIZAG/2012 ASSESSMENT YEAR : 2009-10 ACIT, CIRCLE-1 KAKINADA VS. SREE MURALI MOHANA BOILED & RAW RICE MILL (P) LTD. KOMARIPALEM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SMT. KOMALI KRISHNA, ADDL. CIT DATE OF HEARING : 03.03.2014 DATE OF PRONOUNCEMENT : 28.04.2014 ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 2 ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER:- THESE ARE CROSS APPEALS FILED FOR THE ASSESSMENT YE ARS 2008-09 AND 2009-10. AS THE ISSUES ARISING IN BOTH THESE APPEA LS ARE COMMON FOR THE SAKE OF CONVENIENCE THEY ARE HEARD TOGETHER AND DIS POSED 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 EARN ING INCOME FROM SALES AND EXPORTS OF THESE PRODUCTS, THE ASSESSEE ALSO DERIVE S PROFIT FROM A POWER GENERATION UNIT RUN BY IT. ASSESSEE CLAIMS DEDUCTI ON 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 INC OME OF RS.2,20,23,373/- AS PER MAT PROVISIONS. FOR THE ASSESSMENT YEAR 2009-1 0, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.9.2009 DECLARING BOOK PROFIT S AS PER MAT OF RS.8,67,881/-. FOR THE ASSESSMENT YEAR 2008-09, TH E 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 PROVIS IONS OF THE INCOME TAX ACT, INTER ALIA MAKING THE FOLLOWING ADDITIONS/DISA LLOWANCES. 1. CAPITALIZATION OF INTEREST EXPENDITURE ON THE NE W 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/-; ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 3 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.7,27 2/- 8. ADDITION U/S.HA OF I.T.ACT - 25,000/- 9. DISALLOWANCE OF 80IA DEDUCTION OF POWER PLANT. 4. FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSING O FFICER DETERMINED THE TOTAL INCOME AT RS.3,30,00,807/- UNDER THE REGULAR PROVISIONS OF THE ACT INTER ALIA MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES. 1. DISALLOWANCE OF EXPENSES U/S 40(A)(IA) : RS. 2,84,529/- 2. DISALLOWANCE OF EXCESS RENT CLAIMED : RS.1, 35,000/- 3. DISALLOWANCE OF EXPENDITURE U/S 14A : RS.1, 61,573/- 4. DISALLOWANCE OF FREIGHT EXPENDITURE U/S 40A(3): RS.14,00,986/- 5. ADDITION ON A/C OF VALUATION OF GUNNY BAGS : RS.2,00,000/- 6. DISALLOWANCE OF PADDY PURCHASES : RS.11,02 ,376/- 7. DISALLOWANCE OUT OF 80IA 5. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL. THE FIRST APPELLATE AUTHORITY FOR BOTH THE ASSESSMENT YEARS G RANTED PART RELIEF. ON THE ISSUES WHERE THE FIRST APPELLATE AUTHORITY UPHELD E ITHER FULLY OR PARTLY, THE FINDINGS OF THE ASSESSING OFFICER, THE ASSESSEE HAS FILED THE APPEALS. ON THOSE ISSUES WHERE THE FIRST APPELLATE AUTHORITY GRANTED RELIEF THE REVENUE HAS FILED APPEALS. WE FIRST TAKE UP THE ASSESSEES APPEAL IN ITA NO.48/VIZAG/2012 FOR THE ASSESSMENT YEAR 2008-09. 6. GROUND NO.1 IS GENERAL IN NATURE AND GROUND NOS. 2,3,4&5 ARE NOT PRESSED BY THE ASSESSEE FOR THE REASONS THAT THE AM OUNTS INVOLVED ARE VERY SMALL. THUS, THESE GROUNDS ARE DISMISSED AS NOT PR ESSED. THE EFFECTIVE GROUND ARGUED BY THE ASSESSEE IS GROUND NO.6, WHICH IS EXTRACTED FOR THE READY REFERENCE. ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 4 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 TH E APPELLANT CASE WITH THAT OF - A) SUDHA AGRO AND CHEMICALS LTD., SAMARLAKOTA; A ND 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 SOLVE NT EXTRACT PLANT AND ITS POWER GENERATION WITH A BIO-MASS BASED WITH AN EXTRACTION CUM TURBINE. THE PROCESS OF THE APPELLANTS POWER PLANT IS ENTIRELY DIFFERENT FROM THAT OF SRI SUDHA AGRO AND CHEMICALS P LTD. AS THE ASSESSEE USES A BACK PRESSURE TURBINE. THE APPELLA NTS 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 ASS ESSEE 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 MAD E BY THE CIT(A) IS ERRONEOUS AS THERE WAS NO NEED TO AMEND THE HUSK AL LOCATION AT 10% AS WAS DONE BY THE ASSESSEE. HIS SUBMISSIONS ON THIS ASPE CT 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 VA LUE 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 I NLET OF THE TURBINE IS ONLY 89.91% AND THE LOSS OF STEAM WITHIN THE TURBIN E IS 10.7% OF 89.91% THAT WORKS OUT TO 9.62% WHEN COMPARED WITH T HE CALORIFIC VALUE OF HUSK THE COST OF WHICH IS THE SUBJECT MATTER OF ALLOCATION. THEREFORE, THE LOSS OF HEAT WITHIN THE TURBINE IS O NLY 9.62% OF THE CALORIFIC VALUE OF HUSK AND NOT 10.7%. B) SECONDLY, THE LOSS OF 10.09% BEFORE THE HUSK IS CONVERTED TO STEAM IS A NORMAL LOSS THAT GETS ABSORBED INTO THE VALUE OF ST EAM GENERATED IN THE BOILER. THE COST OF STEAM THAT ENTERS AT THE INLET OF THE TURBINE IS INCLUSIVE OF ALL SUCH LOSSES THAT TAKE PLACE PRIOR TO THIS EVENT AND HENCE NO SEPARATE ALLOCATION IS REQUIRED. ASSUMING THAT THE STEAM IS NOT INTERNALLY GENERATED BUT PURCHASED FROM OUTSIDE EVEN THEN THE COST OF STEAM RELATABLE TO THE TURBINE WOULD BE ONLY 10.7% OF THE COST OF STEAM. THEREFORE, THE LEARNED CIT(A) MISSED OUT THIS IMPOR TANT ASPECT AND ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 5 COMMITTED A GRAVE ERROR IN ALLOCATING THE NORMAL LO SS IN THE GENERATION OF STEAM IN THE RATIO OF 50:50. C) THE ARGUMENT OF THE LEARNED DR THAT BURNING OF H USK IS NECESSARY PROCESS FOR GENERATION OF POWER AND THEREFORE A MAJOR PART OF THE LOSS HAS TO BE ABSORBED BY POWER PLANT IS COMPLETELY ERRONEOUS. IN FACT, THE BURNING OF HUSK AND GENERATION OF STEAM IS AN INEVITABLE PROCE SS 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. TO PUT IT IN OTHER TERMS, IN THE ABSENCE OF P OWER PLANT THE ENTIRE HUSK GENERATED AS BYE PRODUCT WOULD HAVE BEEN CONSU MED IN GENERATION OF STEAM FOR RUNNING THE RICE MILL AND AS SUCH RECOGNI ZING THE VALUE OF HUSK AS AN INCOME IN THE PROFIT AND LOSS ACCOUNT OF THE RIC E 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 PR OFIT IN THE STEAM ACCOUNT BY AN AMOUNT .EQUAL TO THE AMOUNT OF REDUCT ION IN THE PROFIT IN POWER ACCOUNT. THEREFORE, THERE IS EFFECTIVELY NO D IFFERENCE IN THE AMOUNT OF DEDUCTION AVAILABLE U/S 80(IA)(IV) IN AS MUCH AS BO TH POWER AND STEAM ARE CONSIDERED AS ELIGIBLE FOR DEDUCTION U/S 80(IA)(IV}. THUS, THE AP PELLANT 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 PLA NT. THUS, THE EXPENDITURE ALLOCATED BY THE APPELLANT IS ACTUALLY ON A HIGHER SIDE. THEREFORE, EVEN ON THIS SCORE THE APPELLANT IS JUST IFIED IN ALLOCATING ONLY 10% OF THE COST OF HUSK TO THE POWER PLANT. LN THE LIGHT OF THE ABOVE STATED FACTS, THE APPELLA NT RESPECTFULLY SUBMITS THAT IT IS SUFFICIENT IF 9.62% OF HUSK COST IS ALLOCATED TO TH E 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 PLA NT 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 I N COMPUTING THE DEDUCTION IN RESPECT OF PROFIT OF THE POWER PLANT. 8. ON THE ISSUE OF ADMINISTRATIVE EXPENSES, HE SUBM ITTED 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 PLA NT BY FOLLOWING THE DECISION ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 6 OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KH INVASARA INWARSA INVESTMENT PVT. LTD. VS. JCIT 110 ITD 198. HE PRAYE D THAT THE SAME YARDSTICK SHOULD BE APPLIED FOR THE ASSESSMENT YEAR 2008-09 BY FOLLOWING THE VERY SAME DECISION OF PUNE BENCH OF THE TRIBUNAL. 9. THE LD. DR ON THE OTHER HAND ARGUED THAT THE BUR NING OF HUSK IS A NECESSARY PROCESS FOR GENERATION OF POWER AND THERE FORE MAJOR PART OF THE LOSS HAS TO BE ABSORBED BY THE POWER PLANT. HE SUB MITTED THAT THE CIT(A) HAS RIGHTLY PLACED RELIANCE ON TECHNICAL DATA PROVI DED BY THE SUPPLIER OF THE TURBINE AND AS PER THIS DATA, THE LOSS OF HEAT WHIL E STEAM PASSES THROUGH THE TURBINE IS 10.7%. HE REFERRED TO THE HEAT OF STEAM AT THE INLET OF THE TURBINE AND THE HEAT OF STEAM AT THE OUTLET OF THE TURBINE AND POINTED OUT THAT THE LOSS IS ONLY (777.5 K.CAL/KG. (-) 694.3 K.CAL/KG.) 83.2 K.CAL/KG. AND SUBMITTED THAT THE PERCENTAGE WORKS OUT TO 10.7% AND SUBMITTE D THAT THE BASIS OF ALLOCATION OF HUSK COST WAS MADE ON THIS BASIS. HO WEVER, HE ARGUED THAT THE HEAT LOSS OF 10.09%, PRIOR TO THE HUSK BECOMING STE AM, HAS TO BE ALLOCATED BETWEEN THE RICE MILL AND POWER PLANT EQUALLY. HE ARGUED THAT THE CIT(A) HAS RIGHTLY ARRIVED AT THESE FIGURES ON VERIFICATIO N OF THE ACCOUNTS AND THUS IT HAS TO BE UPHELD. ON THE ISSUE OF ALLOCATION OF AD MINISTRATIVE EXPENSES, HE RELIED ON THE ORDER OF THE FIRST APPELLATE AUTHORIT Y. 9.1. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE BURNING OF HUSK AND GENERATION OF STEAM IS AN UNAVOIDABLE P ROCESS FOR RUNNING THE PARA BOILED RICE MILL AND BUT FOR THE CONSUMPTION O F A PART OF THE STEAM BY THE POWER PLANT, THE ENTIRE COST OF STEAM OUGHT TO HAVE BEEN BORNE BY THE ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 7 RICE MILL. IN OTHER WORDS, HE CONTENDED THAT, HAD THE POWER PLANT NOT BEEN PUT UP, THE ENTIRE COST IN QUESTION HAS TO BE INCUR RED 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 PR OPOSITION, HE RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. T ANFAC 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 PR OFIT OF THE POWER PLANT WOULD INCREASE THE PROFIT IN THE STEAM ACCOUNT TO T HE EXTENT OF THE DEDUCTION OF PROFITS IN THE POWER PLANT AND THIS PROFIT IN TH E STEAM ACCOUNT WOULD BE ELIGIBLE FOR DEDUCTION U/S 80IA(4), WHICH EFFECTIVE LY 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 D ONE. HE ARGUED THAT THE ALLOCATION OF EXPENDITURE MADE BY THE ASSESSEE TO T HE POWER PLANT ON THE HIGHER SIDE AND THEREFORE THE SAME SHOULD BE ACCEPT ED. 11. HE SUMMED UP HIS SUBMISSION BY SUBMITTING THAT IT WOULD BE APPROPRIATE IF 9.62% OF THE HUSK CAUSED IS ALLOCATE D TO THE POWER PLANT AND THAT THE ENTIRE VALUE OF STEAM INCLUDING THE LOSS I NCURRED PRIOR TO HUSK BECOMING STEAM, IS REQUIRED TO BE DISTRIBUTED IN TH E SAME RATIO BETWEEN THE POWER PLANT AND RICE MILL. HE PRAYED FOR RELIEF. ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 8 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 PL ANT 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 1 4 IN LAST PARA OBSERVED AS FOLLOWS: THE UNDISPUTED FACT IS THAT THE ASSESSEE REQUIRES STEAM FOR BOTH POWER GENERATION AND RICE MILLING. ASSESSEE BY USIN G BACK PRESSURE TURBINE TECHNOLOGY IS UTILIZING THE SAME STEAM BOTH FOR THE PURPOSE OF POWER GENERATION AND FOR THE PURPOSE OF RICE BOILING / DR YING. AS LONG AS THIS FACT IS NOT DISPUTED AND AS LONG AS IT IS NOT STATED THAT THE S TEAM WHICH IS LET OUT AFTER THE POWER GENERATION IS NOT USED FOR ANY OTHER PURP OSE, IT IS REASONABLE TO ALLOCATE THE EXPENDITURE ON STEAM GENERATION TO BOT H POWER PLANT AND RICE MILLING PLANT. EVEN IF IT IS ARGUED THAT POWER PLAN T IS TO BE SEEN AS SEPARATE UNIT AND THE ENTIRE CONSUMPTION OF HUSK SHOULD BE T REATED AS UTILIZED FOR THE PURPOSE OF POWER GENERATION, IT CANNOT BE DISPUTED THAT STEAM IN THIS CASE IS A BYPRODUCT OF POWER GENERATION AND THE SAME IS CAPABLE OF BEING UTILIZED BY RICE PLANT. AS THE HUSK GENERATED BY RICE MILLER IS AN INPUT FOR THE POWER PLANT, SIMILARLY STEAM GENERATED BY THE POWER PLANT IS AN INPUT FOR RICE MILL. IF ENTIRE HUSK IS TREATED AS INPUT COST OF POWER GENER ATION UNIT THE ASSESSEE IS ENTITLED TO CLAIM THE SALE VALUE OF STEAM AS INCOME AND THIS INCOME WOULD HAVE TREATED AS INCOME DERIVING FROM THE INDUSTRIAL UNDERTAKING. THUS IT WOULD MAKE NO DIFFERENCE WHETHER THE ENTIRE COST OF HUSK IS DEBITED AND THE OUT GOING STEAM VALUE IS CREDITED TO THE POWER GENE RATION UNIT OR ONLY A PART OF HUSK IS TREATED AS INPUT COST OF POWER GENERATION U NIT. 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 GENERATI ON UNIT. THE QUESTION THUS BOILS DOWN TO WHETHER 10% EXPENDI TURE ALLOCATION TO POWER PLANT BY THE ASSESSEE BASED ON THE CALCULATION OF H EAT LOSS IS CORRECT OR NOT. ASSESSEE WAS ASKED TO EXPLAIN THE BASIS FOR ALLOCAT ING 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 TUR BINE, WHICH MEANS THAT ONLY ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 9 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 A FTER POWER GENERATION IS \9X' THAT IS TO SAY THAT 10% OF HEAT IS CONVERTED I NTO POWER AND THE REMAINING 90% OF HEAT IS LET OUT WHICH IS USED FOR RICE MILLI NG PURPOSES. THUS IT IS ARGUED BY THE ASSESSEE THAT THE ALLOCATION OF HUSK EXPENDITUR E IN THE RATIO OF 90:10 BETWEEN RICE MILLING AND POWER GENERATION IS JUSTIFIED. THE POWER GENERATION THERMAL CALCULATIONS GIVEN BY TRIVENI ENGINEERING ARE REPRO DUCED ON PAGE 10 OF THIS ORDER. A CAREFUL EXAMINATION OF THOSE CALCULATIONS REVEAL THAT TRIVENI ENGINEERING CALCULATED THE HEAT DROP ONLY ACROSS THE TURBINE WI THOUT CONSIDERING LOSS OF HEAT ACROSS THE BOILER AND THE LOSS OF HEAT IN GENERATIO N OF POWER. FOR GENERATION OF POWER, PADDY HUSK IS BURNT AND THE RESULTANT HEAT I S 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. TH ERE IS LOSS OF HEAT AT THE TIME OF BURNING AND LOSS OF HEAT IN THE BOILER AND LOSS OF HEAT IN POWER GENERATION. THESE LOSSES HAVE TO BE CONSIDERED WHILE ALLOCATING THE EXPENDITURE BASED ON TOTAL HEAT OF THE SYSTEM. ASSESSEE DID NOT CONSIDER ANY OF THESE LOSS ES. IT CAN BE SEEN THAT ASSESSEE'S CALCULATION STARTS WITH TOTAL HEAT AT TURBINE INLET WHICH IS TAKEN AT 777.5 CALORIES. THUS THESE CALCULATIONS PRESUPPOSE THAT PADDY HUSK OF CALORIFIC VALUE OF 777.5 IS USED AND THE ENTIRE HEAT DIRECTLY GOES INTO TURBINE. THIS IS NOT PRACTICALLY POSSIBLE. IF 777.5 CALORIES OF HEAT IS REQUIRED AT THE TURBINE INLET MUCH MORE PADDY HUSK HAS TO BE BURNT. TO PUT IT SIMPLY, IF 1 KILO CALORIE OF HEAT IS REQUIRED ONE HAS TO BURN RAW-MATERIAL HAVING TOTAL HEAT OF MORE THAN 1 KILO CALORIE, AS THERE WILL BE HEAT LOSS WHILE BURNING, BOILING TRANSMISSION OF STEAM. THERE IS NO FURNACE WHICH CONVERTS THE HEAT OF RAW- MATERIAL INTO CENT PERCENT HEAT FOR BOILING. SIMILARLY THERE IS NO BOILER WHIC H CONVERTS 100% HEAT GIVEN TO STEAM. THIS MEANS THAT THERE ARE HEAT LOSSES AT EVE RY STAGE BEFORE THE STEAM COMES INTO TURBINE INLET. IN VIEW OF THE ABOVE ASSE SSEE IS NOT CORRECT IN CALCULATING THE HEAT DROP ONLY ACROSS THE TURBINE. THE LOSS OF HEAT AT VARIOUS STAGES LIKE BURNING, % BOILING ETC HAVE TO BE FACTORED IN WHILE CALCULATI NG THE HEAT DROP AND SUCH LOSSES HAVE TO BE ALLOCATED BETWEEN T HE 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 KI LO 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 POWE R GENERATION THERMAL CALCULATION HEAT DROP ACROSS THE TURBINE IS TAKEN A T 78.2 KILO CALORIES INSTEAD OF 83.2 KILO CALORIES. THUS, EVEN AFTER TAKING ONLY TH E 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 BELO W: CALCULATION AS GIVEN BY THE ASSESSEE ACTUAL HEAT DROP CALCULATION = 83.2 (AS PER COLUMN 10 OF POWER GENERATION ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 10 THERMAL CALCULATIONS) TOTAL HEAT CONVERTED AS POWER (%) = HEAT UTILIZED I N THE TURBINE X 100/TOTAL HEAT SUPPLIED =83.2 X 100/777.5 =10.70 HOWEVER IT NEEDS TO BE EMPHASIZED THAT THIS 10.70% IS ONLY THE HEAT DROP ACROSS THE TURBINE. HEAT LOSS BEFORE THE STEAM GETS INTO T URBINE 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 S UPPLIED TO THE BOILER ONLY 75 TO 80 KILO CALORIES OF HEAT IS TAKEN UP BY THE WATER I N 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. TH IS SHOWS THAT THERE WILL BE HEAT LOSS IN THE PROCESS. 15. THEREAFTER, AFTER A DETAILED DISCUSSION, HE CON CLUDED AS FOLLOWS: I HAVE CONSIDERED THE ARGUMENT OF THE ASSESSEE. FR OM THE ASSESSEES REPLY IT IS EVIDENT THAT THERE IS LOSS OF HEAT IN THE PRO CESS. THIS LOSS HAS TO BE ALLOCATED BETWEEN POWER GENERATION UNIT AND RICE MI LLING UNIT. ASSESSEES ARGUMENT THAT LOSS CANNOT BE SHARED IS NOT AN ACCEP TABLE PROPOSITION. HENCE, I GO ON TO ALLOCATE THESE LOSSES EQUALLY BET WEEN THE POWER GENERATIO UNIT AND RICE MILLING UNIT. THUS, THE LOSS ALLOCAT ED TO POWER GENERATION UNIT IS WORKED OUT TO 5.05%. THIS COUPLED WITH THE HEAT US ED FOR POWER GENERATION OF 10.70% (AS ALREADY DISCUSSED) WORKS OUT TO 15.75 %. THUS, THE PERCENTAGE OF RICE HUSK UTILIZATION FOR POWER GENER ATION IS PEGGED AT 15.75% INSTEAD OF 10% AS CALCULATED BY THE ASSESSEE. THUS AO IS DIRECTED TO REALLOCATE THE PROFITS FROM POWER GENERATION UNIT A FTER ALLOCATING 15.75% OF THE EXPENDITURE OF BOILER UNIT TOWARDS POWER GENERA TION INSTEAD OF 10% AS TAKEN BY THE ASSESSEE. TO SUM-UP, IT IS HELD AS UNDER: (A)THE PROFITS FROM POWER PLANT ARE IN PRINCIPAL EL IGIBLE FOR DEDUCTION UNDER 80IA. (B)THE COMPARISON DRAWN BETWEEN SUDHA AGRO OIL AND THE ASSESSEE'S PLANT AND THE CONSEQUENTIAL ESTIMATION OF HUSK UTILIZATION BY THE POWER PLANT IS NOT CORRECT. (C)ASSESSEE'S APPORTIONMENT OF EXPENDITURE OF HUSK UTILIZATION ON THE BASIS OF THERMAL CALCULATIONS IS HELD TO BE PRI NCIPALLY CORRECT. ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 11 (D)THE THERMAL CALCULATIONS GIVEN BY THE ASSESSEE D O 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 EXPENS ES TOWARDS POWER GENERATION INSTEAD OF 10% AS ADOPTED BY ASSESSEE. (F)AO IS DIRECTED TO CALCULATE DEPRECIATION ON POWE R PLANT EQUIPMENT AS PER I.T. RULES. (G) AO IS THUS DIRECTED TO CALCULATE PROFITS ATTRIB UTABLE TO THE POWER GENERATION UNIT BY PROPORTIONATELY ALLOCATING ALL ADMINISTRATIVE AND MISCELLANEOUS EXPENDITURES AND A FTER CORRECTLY CALCULATING DEPRECIATION OF POWER PLANT EQUIPMENT. THIS GROUND OF ASSESSEE IS THUS PARTLY ALLOWED. 16. ON A CAREFUL EXAMINATION, WE ARE INCLINED TO AC CEPT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE FOR THE REASON THA T 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 ALLOCATI NG THE NORMAL LOSS IN THE GENERATION OF STEAM AT 50-50 AND THEREFORE ALLOCATI NG 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 UTI LIZED BY THE POWER GENERATION PLANT, THEN ALL THE COST I.E. ATTRIBUTAB LE AND RELATABLE TO THE GENERATION OF STEAM HAS TO BE ALLOCATED ONLY ON THA T BASIS. THE COST OF STEAM CANNOT BE SEGREGATED INTO THAT WHICH IS INCUR RED 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. 17. ON THE ISSUE OF ADMINISTRATIVE EXPENSES, THE LD . CIT HAS APPLIED THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF KHINVASARA INWARSA ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 12 INVESTMENT PVT. LTD. VS. JCIT (SUPRA) WHILE ADJUDICA TING THE VERY SAME ISSUE FOR THE ASSESSMENT YEAR 2009-10. WE DIRECT THE ASS ESSING OFFICER TO ADOPT THE SAME FOR THE IMPUGNED ASSESSMENT YEAR 2008-09 A ND 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 COMPARABL E CASES RELIED UPON BY THE ASSESSEE FOR THE PURPOSE OF PEGG ING 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 APP ROACH AND ACCEPTED BASIS FOR COMPUTING THE RICE HUSK UTILIZAT ION BUT ARBITRARILY REDUCED THE UTILIZATION RATE WITHOUT AN Y VALID BASE, AND HENCE THE SAME IS NOT CORRECT, 3. THE CIT(A) FAILED TO TAKE COGNIZANCE IN RESPECT OF THE TECHNICAL SPECIFICATIONS AND DIFFERENTIAL PARAMETER S LIKE TURBINE INLET HEAT, TURBINE OUTLET HEAT AND HEAT DR OP ETC., OF THE ASSESSEE-COMPANY WITH THAT OF THE DETAILS SUPPL IED BY M/S. TRIVENI ENGINEERING INDUSTRIES AND FURNISHED B Y THE ASSESSEE BEFORE THE CIT(A) WHICH PLAY A TYPICAL ROL E IN UTILIZATION OF HUSK. 4. THE CIT(A) IS NOT CORRECT IN HOLDING THAT THE FILIN G OF 10CCB REPORT IS NOT MANDATORY AND THAT IT CAN BE FILED AT ANY TIME DURING THE ASSESSMENT PROCEEDINGS. 5. THE CIT(A) OUGHT TO HAVE HELD THAT THE STRINGENCY A ND MANDATORY REQUIREMENT OF FILING OF THE AUDIT REPORT IN 10CCB WAS NOT MET BY THE ASSESSEE AND HENCE THE CLA IM OF EXEMPTION U/S.80IA IS NOT MAINTAINABLE. 6. THE CIT(A) OUGHT TO HAVE DRAWN SUPPORT IN THIS REGA RD FROM THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. JAIDEEP INDUSTRIES REPORTED IN 180 ITR 81 WHEREIN I T WAS HELD THAT AUDIT REPORT U/S.SOJ WAS A MANDATORY REQUIREMENT. SINCE THE PROVISIONS OF 80J AND 80IA A RE AKIN, THE CIT(A) OUGHT TO HAVE DRAWN SUPPORT FROM THIS DE CISION ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 13 TO HOLD THAT THE FILING OF 10CCB REPORT IS A MANDAT ORY REQUIREMENT. 7. THE CIT(A) IS NOT CORRECT IN ACCEPTING THE ADDITION AL EVIDENCE IN RESPECT OF HUSK CONSUMPTION FOR GENERATION OF STEAM B Y WAY OF POWER GENERATION THERMAL CALCULATIONS OBTAINED FRO M 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 AS SESSING 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 ST ATUTORY AND MANDATORY REQUIREMENT. 10. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF AP PEAL HEARING BEFORE THE HONBLE TRIBUNAL. 20. AFTER HEARING THE RIVAL CONTENTIONS, WE HOLD AS FOLLOWS. 21. GROUND NO.1,2 & 3 ARE ON THE ISSUE THAT HAS BEE N ADJUDICATED AS GROUND NO.6 IN THE ASSESSEES APPEAL. THE D.R. COUL D NOT PLACE ON RECORD ANY TECHNICAL DATA TO SUPPORT THE ALLOCATION OF HUSK @5 5% TO THE POWER PLANT AS MADE BY THE ASSESSING OFFICER. CONSISTENT WITH THE VIEW TAKEN HEREINABOVE WE DISMISS GROUND NOS.1,2 & 3. GROUND NOS.4 TO 6 A RE AGAINST THE FINDING OF 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 HONBLE DELHI HIGH COURT IN TH E CASE OF CIT VS. CONTAINER ELECTRICALS PVT. LTD. 317 ITR 248 AND THE JUDGEMENT S OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ACE MUL TIAXES SYSTEMS PVT. LTD. 217 ITR 207. THIS WAS FOLLOWED BY THE VISAKHAPATNA M BENCH OF THE ITAT IN ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 14 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 C IT AND DISMISS THESE GROUNDS OF THE REVENUE. 22. GROUND NO.7 IS ON THE ISSUE OF THE CIT ACCEPTIN G ADDITIONAL EVIDENCE. THE ADDITIONAL EVIDENCE IN QUESTION IS TECHNICAL DA TA GIVEN BY M/S. TRIVENI ENGINEERING AND INDUSTRIES LTD. WHO ARE THE MANUFACT URERS OF THE TURBINE USED BY THE ASSESSEE. IN OUR VIEW THIS TECHNICAL DA TA GOES TO THE ROOT OF THE MATTER AND THE LD. CIT(A HAS RIGHTLY ADMITTED THE S AME. WE ALSO FIND THAT THE CIT(A) SENT THE MATTER TO THE FILE OF THE ASSES SING 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) EXAMINED THE SAME AND CAME TO THE SAID CONCLUSIONS. WE FIND NO INFIRMITY IN THIS ACT OF THE LD. CIT(A). THUS, GROUND NO.7 IS DISMISSED. 23. GROUND NO.8 IS ALSO ON THE ISSUE OF ADOPTION OF HUSK CONSUMPTION RATE. THE 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 T HAT THIS CONCLUSION OF THE LD. CIT(A) IS AS PER LAW FOR THE REASON THAT NO EST IMATES CAN BE MADE WITHOUT REJECTION OF THE BOOKS OF ACCOUNTS AND WITH OUT POINTING OUT ERRORS IN THOSE BOOKS OF ACCOUNTS. WHEN THE ASSESSEE IS MAIN TAINING 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 ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 15 COMPARABLE CASES. AS THE ASSESSING OFFICER HAS NOT DONE THE SAME, CIT(A) IS RIGHT IN HIS FINDING. WE UPHOLD THE SAME AND DISMI SS 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 ASSESSI NG OFFICER WAS OF THE VIEW THAT THIS WOULD DISENTITLE THE ASSESSEE FOR MA KING THE CLAIM U/S 80IA OF THE ACT. IT IS POINTED OUT THAT IN THE ASSESSMENT Y EAR 2009-10 THE ASSESSING OFFICER, ON THE VERY SAME SET OF FACTS, ACCEPTED TH AT 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 ASC ERTAIN 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 I S IN CONSONANCE WITH CIRCULAR NO.1 OF 13 DATED 17.1.2013 ISSUED BY THE C BDT REQUIRES TO BE UPHELD. THEREFORE, GROUND NO.9 IS DISMISSED. 25. GROUND NO.10 IS GENERAL IN NATURE. 26. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 27. ITA 325/VIZAG/2013 IS THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2009-10. GROUND NO.1 IS GENERAL IN NATURE. G ROUND NOS.2 &3 AND GROUND NOS.5 & 6 ARE NOT PRESSED BY THE ASSESSEE FO R THE REASON THAT THE AMOUNTS INVOLVED ARE VERY SMALL. IN THE RESULT, TH ESE GROUNDS ARE DISMISSED. ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 16 28. GROUND NO.4(A) IS ALSO DISMISSED AS NOT PRESSED . GROUND NO.4B IS IDENTICAL TO THE GROUND NO.6 RAISED FOR THE ASSESSM ENT YEAR 2008-09. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD T HE CONTENTIONS OF THE ASSESSEE. COMING TO THE OBSERVATIONS OF THE ASSESS ING OFFICER THAT THERE IS NO DIFFERENCE IN TECHNICAL SPECIFICATIONS OF THE TURBI NE USED BY THE ASSESSEE AND SUDHA AGRO, THE LEARNED COUNSEL SUBMITTED THAT THE VERY METHOD OF GENERATION OF POWER BY THESE TWO ENTITIES ARE DIFFE RENT AND CANNOT BE COMPARED. IT WAS SUBMITTED THAT IN THE CASE OF SUDH A 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 T HE 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 ASSESS EE. 29. GROUND NO.7 IS DISMISSED AS GENERAL IN NATURE. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. 31. ITA 342/VIZAG/2012 IS REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009- 10 ON THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED BOTH IN LAW AND ON FACTS OF THE C ASE. 2. THE CIT(A) OUGHT NOT TO HAVE REMANDED THE ISSUE OF DISALLOWANCE OF AUDIT EXPENSES OF RS.80,000/-U/S.40(A)(IA) FOR NON-DEDUCT ION OF TAX AT SOURCE IN VIEW OF THE FACT THAT PROVISIONS OF SECTION 40(A)(I A) SHALL APPLY TO ALL PAYMENTS COVERED BY SECTION 194C WHETHER OR NOT THEY HAVE ALREADY BEEN PAID OR REMAINED PAYABLE AT THE END OF THE RELEVANT FINANCIAL YEAR AND IN VIEW OF THE FACT THAT THE DEPARTMENT CONTESTED THE DECISION OF ITAT, VISAKHAPATNAM SPECIAL BENCH IN ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 17 THE CASE OF MERILYN SHIPPING TRANSPORT AND THE ISSU E IS NOT YET BECOME FINAL. 3. THE CITCA) FAILED TO APPRECIATE THE FACT THAT MERE CONFIRMATION BY THREE CREDITORS CANNOT BE A BASIS FOR ACCEPTING THE GENUI NENESS OF ENTIRE EXPENDITURE COUPLED WITH 'THE FACT THAT ASSESSEE PR ODUCED 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 R ICE HUSK UTILIZATION TO 15.75% AS AGAINST 55% CALCULATED BY THE ASSESSING OFFICER. 5. THE CIT(A) FAILED TO ADOPT A SCIENTIFIC APPROACH AN D 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 TUR BINE INLET HEAT, TURBINE OUTLET HEAT AND HEAT DROP ETC., OF THE ASSESSEE-COM PANY 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 ADDITI ONAL 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 BE FORE THE ASSESSING OFFICER. 8. THE CIT(A) FAILED TO GIVE DETAILED REASONS AS TO HO W THE AO WAS WRONG IN ADOPTING THE HUSK CONSUMPTION RATE BY MAKI NG A COMPARATIVE STUDY WITH SIMILAR CONCERN 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. 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 DELIV ERED TO APPORTION THE ADMINISTRATIVE AND MAINTENANCE EXPENSES BASED ON IT S PROFITS RELYING ON THE DECISION OF HONBLE PUNE BENCH OF ITAT IN TH E CASE OF KHINVASARA INVESTMENT (P) LTD. VS. JCIT 110 ITD 198. WHEREAS THE SAID DECISION OF HONBLE 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 A PPEAL HEARING BEFORE THE HONBLE ITAT . 32. AFTER HEARING RIVAL CONTENTIONS, WE HOLD AS FOL LOWS: ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 18 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 BE EN SUSPENDED AND THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. C RESCENT EXPORT SYNDICATE IN ORDER DT.3 RD APRIL, 2013 HELD THAT THE LAW LAID DOWN IN THE CAS E 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 W HEN THE EXPENDITURE IS PAID DURING THE YEAR AND NOT PAYABLE AS AT THE END OF PR EVIOUS YEAR. 34. RESPECTFULLY FOLLOWING THE DECISION OF THE CALC UTTA HIGH COURT, WE REVERSE THIS DECISION OF THE CIT(A) AND ALLOW THE G ROUND OF THE REVENUE. 35. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOW ANCE MADE OF CERTAIN EXPENDITURE. THE LD. CIT(A) AT PARA 3.6 CONSIDERED THE SAID DISALLOWANCE OF PADDY PURCHASES. HE HELD AS FOLLOWS: I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE. A SSESSEE PRODUCED THE DETAILS OF PAYMENTS MADE TO THE SUNDRY CREDITOR S WHICH WERE ALSO PRODUCED BEFORE THE AO. IN ALMOST ALL THE CASES SOM E 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-C HECK MADE BY AO BY RECORDING SWORN STATEMENTS OF THREE OF THE CREDITOR S 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 D ISALLOWANCE ONLY BECAUSE CONFIRMATION LETTERS ARE NOT PRODUCED WITHO UT FINDING ANY OTHER DISCREPANCY EITHER IN THE PURCHASES OR IN THE NAMES AND ADDRESSES OF THE SUNDRY CREDITORS. IN VIEW OF THE A BOVE 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 F INDINGS. ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 19 37. IN THE RESULT, WE UPHOLD THE SAME AND DISMISS TH IS GROUND OF THE REVENUE. 38. GROUND NOS.4 TO 6 AND GROUND NO.8 ARE ON THE IS SUE OF ALLOCATION OF HUSK COST. THIS ISSUE HAS BEEN ADJUDICATED WHILE D ISPOSING OF GROUND NO.6 FOR THE ASSESSMENT YEAR 2008-09 CONSISTENT WITH THE VIEW TAKEN THEREIN, THESE GROUNDS OF THE REVENUE ARE DISMISSED. GROUND NO.7 IS ON THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE. CONSISTENT WITH THE VIEW TAKEN ON THIS ISSUE IN THE EARLIER ASSESSMENT YEAR, WE DISMISS TH IS GROUND. 39. GROUND NO.9 IS ON THE ISSUE OF MAINTENANCE OF S EPARATE SET OF BOOKS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA OF T HE ACT. CONSISTENT WITH THE VIEW TAKEN BY US ON THE SIMILAR VIEW IN THE EAR LIER ASSESSMENT YEAR, WE DISMISS THIS GROUND OF THE REVENUE. 40. GROUND NO.10 IS ON THE ISSUE OF ALLOCATION OF A DMINISTRATIVE AND MAINTENANCE EXPENSES. 41. THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF KHINVASARA INWARSA INVESTMENT P VT. LTD. VS. JCIT 110 ITD 198 AND ADJUDICATED THE ISSUE. RESPECTFULLY FOLLOW ING THE COORDINATE BENCH DECISION, WE UPHOLD FINDING OF THE DECISION AND DIS MISS THIS GROUND OF THE REVENUE. 42. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL14 SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS MANGA/SPS VISAKHAPATNAM, DATED 28 TH APRIL, 2014 ITA NOS.48 & 63/VIZAG/2012 AND ITA NOS.325 & 342/VIZAG/2012 SREE MURALIMOHANA BOILED & RAW RICE MILL(P) LTD., K OMARIPALEM 20 COPY TO 1 SREE MURALI MOHANA BOILED & RAW RICE MILL (P) LTD ., KOMARIPALEM, BICCAVOLU MANDALAM, KOMARIPALEM. 2 ACIT, KAKINADA RANGE, KAKINADA 3 ACIT CIRCLE-1, KAKINADA 4 THE CIT, VISAKHAPATNAM 5 THE CIT(A), VISAKHAPATNAM 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM
