Parry Enginnering & Electronics Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD)Circle-5, Ahmedabad

CO 44/AHD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6897 (ITAT-AHMEDABAD)
• Duration Of Justice: 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: G C PIPARA
• Keywords: Depreciation; Opportunity of being heard; Additional depreciation; Earning of tax free income
• Section: 14A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !'# !'# !'# !'#, , , , $ $ $ $ %& %& %& %& , , , , &' ( & &' ( & &' ( & &' ( & # # # # BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) ITA NO.3317/AHD/2011 WITH CO NO.44/AHD/2012 [ASSTT.YEAR : 2007-2008] ACIT (OSD) AHMEDABAD 380 015. /VS. PARRY ENGINEERING & ELECTRONICS P. LTD. HARKUVER HAVELI OPP: JAIN TEMPLE GANDHI ROAD AHMEDABAD. PAN : AAACP 6747 J ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI RAHUL KUMAR, SR.DR 1% . / &/ ASSESSEE BY : SHRI G.C.PIPARA. 2 . %3'/ DATE OF HEARING : 29 TH FEBRUARY, 2012 456 . %3'/ DATE OF PRONOUNCEMENT : 02-03-2012 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS IS REVENUES APPEAL AND THE ASSESSEES CO DIRECTED AGAINST THE O RDER OF THE ITA NO.3317/AHD/2011 WITH CO NO.44/AHD/2012 -2- COMMISSIONER OF INCOME TAX (APPEALS)-XI, AHMEDABAD DATED 31.10.2011 FOR THE ASSESSMENT YEAR 2007-2008. ITA NO.3317/AHD/2011 (REVENUES APPEAL) 2. THE ONLY GROUND RAISED IN THIS APPEAL OF THE REV ENUE READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION OF RS.56,85,621/- AND ADDITIONAL DEPRECIATION OF RS.35 ,66,299/- ON WINDMILL. 3. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS C LAIMED DEPRECIATION ON CIVIL WORK UNDERTAKEN BY IT ON THE INSTALLATION OF WINDMILL AT THE RATE OF 80%. HE SUBMITTED THAT THE DISALLOWANCE OF DEPRECIATION ON CIVIL AND ELECTRICAL WORKS, PAYMENT TO GEDA AND CAPITALIZED INTEREST WAS RIGHTLY MADE BY THE AO. H E SUBMITTED THAT AS PER THE PROVISIONS OF INCOME TAX RULES, DEPRECIATIO N AT THE RATE OF 80% WAS ALLOWABLY ONLY ON THE DEVICE OF WINDMILL AN D NOT ON THE ENTIRE COST INCLUDING CIVIL WORKS, ELECTRICAL INSTA LLATION, DEVELOPMENT EXPENSES AND OTHER MACHINERY ETC. HE SUBMITTED THA T IT IS NOT CLEAR THAT WHETHER THE INTEREST CAPITALIZED REPRESENTS CE RTAIN LOAN AMOUNT INVESTED IN THE PURCHASE OF LAND ALSO. THIS PART N EEDS VERIFICATION BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE HAS O PPOSED THE SUBMISSIONS OF THE LEARNED DR. HE SUBMITTED THAT A S PER THE PROVISIONS OF THE ACT, DEPRECIATION AT THE RATE OF 80% IS ALLOWABLE ON THE ENTIRE DEVICE WHICH IS CAPABLE OF GENERATING EL ECTRICITY USING THE WIND ENERGY. HE SUBMITTED THAT THE CIVIL AND ELECT RICAL WORKS ARE NECESSARY FOR THE INSTALLMENT OF THE WINDMILL AND T HEREFORE THE ITA NO.3317/AHD/2011 WITH CO NO.44/AHD/2012 -3- DEPRECIATION AND ADDITIONAL DEPRECIATION ON THE SAM E WAS RIGHTLY ALLOWED BY THE LEARNED CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). THE DEPRECIATION IS ALLOWA BLE ON RENEWABLE ENERGY DEVICE WHICH ALSO INCLUDES WINDMILL. THE DE PRECIATION AT THE RATE OF 80% IS ALLOWABLE ON THE ENTIRE DEVICE WHICH IS CAPABLE OF GENERATING ELECTRICITY USING WIND ENERGY. THERE IS NO PROVISION IN THE ACT TO BIFURCATE THE DEVICE INTO SEVERAL PARTS AND ALLOW DEPRECIATION THEREON AT DIFFERENT RATES OF DEPRECIATION. THE FO UNDATION, CIVIL AND ELECTRICAL WORKS ARE NECESSARY FOR THE INSTALLATION OF THE WINDMILL AND IS CLEARLY PART AND PARCEL OF THE WINDMILL PROJECT ON WHICH DEPRECIATION AT THE RATE OF 80% IS ALLOWABLE. THE CIT(A) HAS REFERRED TO THE DECISIONS OF THE HIGH COURTS WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE GROUND TAKEN IN THE APPEAL OF THE REVENUE WITH REGARD TO THE DEPRECIATION AND ADDITIO NAL DEPRECIATION ON THE FOUNDATION, CIVIL & ELECTRICAL WORKS, INSTAL LATION, PAYMENT TO GEDA IS DISMISSED. HOWEVER, WITH REGARD TO DEPRECI ATION ON THE CAPITALIZED INTEREST, THERE IS NO FINDING IN THE OR DERS OF THE AO AND THE CIT(A) THAT NO PART OF THE BORROWED AMOUNT WAS UTIL ISED FOR THE PURCHASE OF THE LAND. ACCORDINGLY, THIS LIMITED IS SUE IS RESTORED TO THE FILE OF THE AO WITH THE DIRECTIONS TO VERIFY THE FA CTS AND IN CASE THE BORROWED AMOUNT HAS BEEN UTILISED FOR THE PURPOSE O F PURCHASE OF THE LAND, THEN TO DISALLOW THE DEPRECIATION ON THE CAPI TALIZED INTEREST TO THAT EXTENT. WE DIRECT ACCORDINGLY. CO NO.44/AHD/2012 (ASSESSEES CO) ITA NO.3317/AHD/2011 WITH CO NO.44/AHD/2012 -4- 5. THE GROUND OF THE ASSESSEES CO READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.90,115/- MADE BY THE AO U/S.14A R.W.S. 8D WIT HOUT APPRECIATING THE FAT THAT INTRODUCTION OF RULE 8D I S W.E.F. AY 2008-09 AND IS NOT APPLICABLE FOR THE YEAR UNDER CO NSIDERATION I.E. AY 2007-08 AND THAT NO INTERNET BEARING FUNDS HAVE BEEN USED FOR EARNING EXEMPT INCOME. IN VIEW OF ELABORA TE SUBMISSIONS FILED AND THE LEGAL POSITION LAID DOWN BY VARIOUS COURTS OF LAW INCLUDING THE HONBLE APEX COURT INT HE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS P. LTD. 326 I TR 1 (SC), THE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED IN CSE OF THE APPELLANT IN ABSENCE OF ANY PROXIMATE CAUSE FOR DIS ALLOWANCE. ACCORDINGLY, THE LD.CIT(A) OUGHT TO HAVE DELETED TH E IMPUGNED ADDITION OF RS.90,115/- 6. WE HAVE HEARD BOTH THE PARTIES. IN THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE TO THE FILE OF T HE AO WITH DIRECTIONS TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECIS ION RELIED UPON BY THE ASSESSEE IN THE GROUND OF THE CO AND TO ALLOW D UE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSE AND THE CO OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %& %& %& %& / TEJ RAM MEENA) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !'# !'# !'# !'# /VICE-PRESIDENT