THE ACIT, RAJAHMUNDRY vs. M/S SREE MURALI MOHAN BOILED AND RAW RICE MILL PVT. LTD., KOMARIPALEM

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ITA 509/VIZ/2016Status: DisposedITAT Visakhapatnam21 February 2018AY 2011-20125 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, following its own previous orders. It held that allocating 10% of husk expenditure to power generation was reasonable and logical.

What were the facts?

The assessee, a rice mill with a captive power plant, allocated 10% of husk cost to power generation. The AO recomputed this to 55%, reducing the deduction under Section 80IA. The CIT(A) allowed the assessee's plea for 10% allocation.

What were the issues?

The primary issue was the correct allocation of husk cost between the rice mill and the captive power plant for the purpose of calculating deduction under Section 80IA.

Which sections of the Income-tax Act were involved?

Section 80IA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI V. DURGA RAO & SHRI D.S. SUNDER SINGH

For Appellant: Shri Sesha Srinivas, DR
For Respondent: Shri G.V.N. Hari, AR
Hearing: 07.02.2018

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals)-3 {CIT(A)}, Visakhapatnam

dated 24.10.2016 for the assessment year 2011-12.

ITA No.509/Vizag/2016 M/s. Sree Murali Mohan Boiled and Raw Rice Mill Pvt. Ltd., Komaripalem 2. The revenue filed the appeal raising the following grounds:

1.

The Ld. CIT(A) in the facts and circumstances of the case, erred in accepting the assessee’s plea that it had maintained separate books of accounts. 2. The Ld. CIT(A), in the facts and circumstances of the case, is not correct in deciding that it is only the cost of steam which is to be allocated between Rice mill and Power Plant business and not the cost of Husk, the basic raw material. 3. Ground Nos.1 & 4 are general in nature which does not require

specific adjudication.

4.

Ground No.3 does not emanate from the order of the Ld. CIT(A).

In this ground the revenue has raised the issue with regard to filing of

form No.10CCB report during the course scrutiny proceedings. No such

issue was discussed in the order of the Ld. CIT(A). This fact has been

admitted by the Ld. D.R. during the appeal proceedings. Therefore,

ground No.3 is dismissed as infructuous.

5.

Ground No.2 is related to the allocation of cost of husk between

the steam generation and power plant. During the assessment

proceedings the assessing officer found that the assessee had claimed

the deduction of ` 2,70,92,891/- u/s 80IA of the Income Tax Act, 1961

(hereinafter called as 'the Act'). The assessee is running rice mill and

having captive power plant generating steam and power. The company

has installed captive power plant in the premises of rice mill and put into

operation during the assessment year 2004-05 and since then the 2

ITA No.509/Vizag/2016 M/s. Sree Murali Mohan Boiled and Raw Rice Mill Pvt. Ltd., Komaripalem company was producing power and steam and the same is being utilized

internally to run the rice mill. The assessee has allocated 10% of the

husk of the total husk utilized and the remaining 90% of the husk cost

being allocated to the generation of the steam by rice mill in its boiled

milling unit. Therefore, husk cost was proportionately apportioned to

power generation unit to rice mill. Accordingly, the assessee has

computed the net profit of ` 2,51,17,309/- against the estimated sales

of power at ` 3,68,52,300/- and the total expenditure as worked out by

the assessee was ` 1,17,34,991/-. The A.O. not being satisfied with the

allocation made by the A.O, after going through the assessee’s record

and comparable cases, estimated the cost of consumption of husk at

55% of the total husk consumed in relation to the power generated by

the power plant. Accordingly, recomputed the profit at ` 2,02,44,192/-

and allowed the deduction.

6.

Aggrieved by the order of the A.O., the assessee went on appeal

before the CIT(A), and the Ld. CIT(A) allowed the appeal of the

assessee following the order of this Tribunal in assessee’s own case for

the assessment year 2008-09 and 2009-10 and directed the A.O. to

allocate husk at 10%.

7.

Aggrieved by the order of the CIT(A), the revenue is in appeal

before this Tribunal. During the appeal hearing, the Ld. D.R. has

ITA No.509/Vizag/2016 M/s. Sree Murali Mohan Boiled and Raw Rice Mill Pvt. Ltd., Komaripalem supported the orders of the lower authorities and the Ld. A.R. relied on

the orders of this Tribunal in the assessee’s own case for the

assessment year 2008-09 and 2009-10 in ITA Nos.48, 63, 325 &

342/Vizag/2012 dated 28.4.2014. The Hon’ble ITAT after considering

the issue in detail and the orders of the Ld.CIT(A) allowed the appeal of

the assessee holding that allocation of husk cost at 10% is reasonable.

For ready reference, we extract relevant in para No.16 of the order cited

(supra) as under:

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 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.

8.

Respectfully following the view taken by this Tribunal, we hold that

allocation of husk expenditure at 10% is reasonable and accordingly we

uphold the order of the CIT(A) and dismiss the appeal of the revenue.

ITA No.509/Vizag/2016 M/s. Sree Murali Mohan Boiled and Raw Rice Mill Pvt. Ltd., Komaripalem 9. In the result, the appeal of the revenue is dismissed. The above order was pronounced in the open court on 21st Feb’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 21.02.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-

1.

अपीलाथ� / The Appellant – The ACIT, Central Circle-1, Rajahmundry 2. ��याथ� / The Respondent – M/s. Sree Murali Mohana Boiled and Raw Rice Mill Pvt. Ltd., D.No.1-54, Komaripalem, Biccavolu Mandal, East Godavari. 3. आयकर आयु+त / The Pr. CIT(Central), Visakhapatnam, 4. आयकर आयु+त (अपील) / The CIT (A)-3, Visakhapatnam 5. #वभागीय ��त�न.ध, आय कर अपील�य अ.धकरण, #वशाखापटणम / DR, ITAT, Visakhapatnam 6. गाड� फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM

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