Income recognition

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Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2016 A manufacturing company has a solar power plant in the same state. Units generated by the solar plant are deducted from the units consumed by mfg activity and the net units are billed by the Electricity co. The company calculates the Electricity bill (including Electricity duty)without considering the deduction of solar units & the said (gross)amount is debited to power charges. The diff. between net bill & gross bill is recognised as income from solar plant. Usual accounting is done on net of taxes basis. Is it correct?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 September 2016 Yes, the accounting is correct.

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2016 Will it be accepted by ITO to allow deduction u/s 80IA

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 September 2016 Yes, It will be accepted and ITO will allow deduction u/s 80IA. In our power generating company such inter unit adjustments are allowed for 80IA claim.

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2016 What about notional addition of electricity duty? Especially when revenue is accounted on net of taxes. Mfgr activity power expenses are debited with Electricity duty and exp is claimed. The same is shown as solar Income & 80 IA deduction is claimed.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 September 2016 If we buy power from out side agencies such duty is payable, hence it is proper to show it as solar income as the benefit arise due to solar generation.

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