ACIT, Virudhunagar V. M/s. Paprika Oleo's (India) Ltd., Virudhunagar

ITA 1058/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51722 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI.U.B.S. BEDI, J.M. & SHRI. N.S. SAINI, A .M. I.T.A. NO. 1058/MDS/2011 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, VIRUDHUNAGAR. VS. M/S. PAPRIKA OLEOS (INDIA) LTD., 36, M.C. CHIDAMABARA NADAR STREET, VIRUDHUNAGAR 626 001. [PAN:AACCP9340F] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, SR. DR ASSESSEE BY : NONE DATE OF HEARING : 24.08.2011 DATE OF PRONOUNCEMENT 24.08.2011 ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) II, MADURAI DATED 24.02.2011 RELEVANT TO THE ASSESSMENT YEAR 2006-07, WHEREIN FOLLOWING 2 EFFECTIVE GROUNDS HAVE BEEN RAI SED: 2. THE CIT(A) OUGHT TO HAVE NOTED THAT THE COST O F TRANSFORMER AND CIVIL WORKS DONE IN CONNECTION WITH WIND MILLS ARE INDIVI DUAL ITEMS AND DOES NOT FORM PART OF WIND MILL. THE ELIGIBLE RATE OF DEPREC IATION ON THOSE ITEMS IS ONLY AT 15% AND NOT AT THE HIGHER RATE OF DEPRECIATION A S ELIGIBLE TO WIND MILL. 3. THE ITAT DECISION IN THE CASE OF ASIAN HANDLOOM VS. DCIT IN ITA NO. 2291/MDS/2008 FOLLOWED BY THE CIT(A) HAS NOT BE CAME FINAL. 2. THIS APPEAL OF THE DEPARTMENT IS FOUND TO HAVE BEEN FILED LATE BY 29 DAYS, FOR WHICH DEFECT MEMO WAS ISSUED TO THE DEPARTMENT. IN RESPONSE THERETO, THE ASSESSING OFFICER HAS FILED AN AFFIDAVIT TAKING THE PLEA THAT DUE TO MIXING-UP OF APPEAL PAPERS RECEIVED FROM THE LD. CIT, MADURAI WI TH SOME OTHER FILES, WHICH WERE I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO.10 1010 1058 5858 58/MDS/ /MDS/ /MDS/ /MDS/11 1111 11 2 RETRIEVED AFTER STRENUOUS EFFORTS IN A PERIOD OF AB OUT A MONTH. SO, THE DELAY IS NEITHER WILLFUL NOR WANTON BUT DUE TO THE CIRCUMSTA NCES EXPLAINED ABOVE. THEREFORE, THE SAME SHOULD BE CONDONED. 2.1 DESPITE NOTICE, NOBODY APPEARED ON BEHALF OF TH E ASSESSEE AND WE HAVE CONSIDERED THE REASONS EXPLAINED BY THE ASSESSING O FFICER SUPPORTED BY AFFIDAVIT AND WE ARE SATISFIED THAT THERE WAS SUFFICIENT CAUS E FOR NON-FILING OF APPEAL WITHIN TIME, AS SUCH, WE CONDONE THE DELAY AND ADMIT THE A PPEAL FOR HEARING. 3. BRIEF FACTS, INDICATE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF FOOD PROCESSING. IT FILED IS RETURN OF INCOME FOR THE AS SESSMENT YEAR 2006-07 ON 27.11.2006 ADMITTING TOTAL LOSS OF ` .1,14,70,997/- AND BOOK PROFIT UNDER SECTION 115JB OF THE ACT WAS COMPUTED AT ` .1,35,10,038/- FOR THE REASONS RECORDED IN THE ASSESSMENT ORDER. SCRUTINY ASSESSMENT WAS COMPLETED AFTER MAKING ADDITIONS ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON COST OF TRANSFORMER INCLUDED IN THE WIND MILL COST AMOUNTING TO ` .22,75,000/- AND DISALLOWANCE OF ADDITIONAL DEPRECI ATION ON WINDMILL CLAIMED BY THE ASSESSEE AT ` .64,20,000/-. AGGRIEVED BY THIS ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL AND CH ALLENGED SUCH ADDITIONS. 4. THE LD. CIT(A), WHILE CONSIDERING THE ISSUE AND RELEVANT DETAILS SUBMITTED BY THE ASSESSEE IN THIS REGARD HAS CONCLUDED TO DELETE BOTH THE ADDITIONS, FIRST ADDITION BY FOLLOWING ITAT DECISION AND 2 ND ADDITION BY FOLLOWING THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. VIR UDHUNAGAR TEXTILE MILLS LTD. (2009) 319 ITR 336, AGAINST WHICH THE DEPARTMENT IS IN APPEAL. 5. DESPITE SENDING NOTICE OF HEARING, THE ASSESSEE DID NOT APPEAR AND WE HAVE PROCEEDED TO DECIDE THE APPEAL OF THE DEPARTME NT EX-PARTE QUA THE ASSESSEE I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO.10 1010 1058 5858 58/MDS/ /MDS/ /MDS/ /MDS/11 1111 11 3 BY CONSIDERING THE MATERIAL ON RECORD AND ARGUMENTS AS ADVANCED BY THE LD. DR. 6. THE LD. DR HAS STRONGLY RELIED UPON THE GROUNDS RAISED AND PLEADED FOR SETTING ASIDE THE ORDER OF THE LD. CIT(A) AND RESTO RING THAT OF THE ASSESSING OFFICER AND WHEN SPECIFICALLY ASKED THAT BOTH THE ISSUES AR E COVERED AGAINST THE DEPARTMENT, HE COULD NOT CONTROVERT THIS FACTUAL AS PECT AND INSISTED UPON RESTORING THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIAL ON RECORD AND FIND THAT BOTH THE ISSUES AS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) HAVE BEEN DEALT WITH AND CONSIDERED BY THE LD. CIT(A) AS PER PARA 5.1.1 TO 5.2.2 OF HIS ORDER, WHICH READS AS UNDER: 5.1.1 I HAVE CAREFULLY CONSIDERED THE ABOVE ISSUE AND THE RELEVANT DETAILS SUBMITTED BY ASSESSEE IN THIS REGARD. 5.1.2 EXPENDITURE ON CIVIL WORKS AND ELECTRICAL INS TALLATION HAD TO BE NECESSARILY INCURRED SO AS TO MAKE THE WIND ENERGY GENERATOR (WEG) FUNCTIONAL. ALSO THESE CIVIL AND ELECTRICAL WORKS A RE INTEGRAL PART OF INSTALLATION OF WEG. WINDMILLS COULD NOT BE DISSECT ED BY VARIOUS COMPONENTS AND ALL SUCH ITEMS TOGETHER ALONE ENABLED THE WIND MILL OPERATIONS. 5.1.3 HONBLE ITAT BENCH A CHENNAI IN ITA NO.2291 /MDS/2008 ASSESSMENT YEAR 2005-06 IN THE CASE OF ASIAN HANDLO OM VS. DEPUTY CIT, CIRCLE II, TRICHY IN ITS ORDER DT. 20 TH NOVEMBER 2009 HELD THAT ASSESSEE WAS ENTITLED TO ITS CLAIM OF DEPRECIATION ON THE TOTAL COST. RELEVANT PORTION OF THE ITAT ORDER IS REPRODUCED: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPA RATUS THAT HARNESSES WIND POWER, FOR A VARIETY OF USES LIKE PU MPING WATER, DRIVING OF SAW MILL, GRINDING CONE AND/OR DRIVING E LECTRICAL TURBINES. A TYPICAL WIND MILL, AS INSTALLED BY THE ASSESSEE, WHICH IS OF SUZLON CORPORATION, WOULD CONSIST OF A SPECIALIZED FOUNDAT ION, ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONNECTED IN THE TOP IS A REVOLVING APPARATUS TO WHICH DIFFERENT NUM BERS OF ARMS ARE ATTACHED. WHEN IT IS USED FOR PRODUCING ELECTRICITY , THESE ARE CALLED WIND TURBINES AND SERVES AS A SIGNIFICANT SOURCE OF ELECTRICAL ENERGY. BEING A NON-CONVENTIONAL SOURCE OF ENERGY WITH RENE WABLE INPUTS AND I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO.10 1010 1058 5858 58/MDS/ /MDS/ /MDS/ /MDS/11 1111 11 4 WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAV E BEEN GIVEN SPECIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THER E IS NO DOUBT THAT FOR A WINDMILL TO BE SUSTAINABLE IT HAS TO BE EREC TED IN A PLACE WHERE SUSTAINABLE WIND FLOW IS AVAILABLE WITH A LAND SUIT ABLE TO A FOUNDATION ON WHICH, A STRUCTURE STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AN D SPECIALIZED AREA SPECIFICALLY EAR-MARKED TO FACILITATE A FLOW OF WIN D WITHOUT HINDRANCE, AND SPECIALIZED ELECTRICAL FITTINGS AND HIGH TENSIO N LINES ARE ALL BASIC REQUIREMENTS FOR A WIND MILL PLANT. NONE OF THESE R EQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN DETACHED FROM WH AT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE ESS ENTIAL. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH W IND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALLY DEMARCATED AP PURTENANT THERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUILDING WHICH IS ADJUNCT TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS. ON THE OTHER HAND THESE CAN BE DEEMED ONLY A PART O F A WINDMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCLUSIO N WE ARE FORTIFIED BY DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION (247 ITR 268) WHERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WA S A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUILDING HA S BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECHNICAL REQUIREMENT, IT WOULD QUALIFY TO BE TREATED AS A PL ANT. IN OUR OPINION, THE EXPENSES RELATING TO THE LAND AND FOUNDATION SP ECIALLY INCURRED WITH A VIEW TO SERVE THE TECHNICAL REQUIREMENTS WOU LD ALSO BECOME A PART OF THE PLANT IN A CASE THAT OF A WIND MILL. S IMILARLY, IN THE CASE OF CIT V. HERDILIA CHEMICALS (216 ITR 742), HONBLE JU RISDICTIONAL HIGH COURT HELD THAT HUGE LAND MEASURING 360 ACRES TAKEN ON EASE FOR THE PURPOSE OF ERECTION OF PLANT AND MACHINERY WHERE TH E ENTIRE FACTORY WAS TO BE CONSTRUCTED IN THIS LAND AND EXPENSES INC URRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND FOR T HE PURPOSE OF LEVELING THE LAND, FORMED A PART OF THE COST OF THE PLANT. IF WE LOOK AT APPENDIX I TO THE INCOME-TAX RULES, PRESCRIBING THE RATES OF DEPRECIATION, IT CAN BE SEEN THAT LEGISLATURE HAS G IVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI-POLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARENTLY, THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFF-SETTING THE IMPAIRMENT IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE SUCH ENTRE PRENEUAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF R ENEWABLE ENERGY SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMI TED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES , IT WOULD DEFEAT THE VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION W AS PROVIDED FOR. THEREFORE, IN OUR OPINION, ASSESSEES CLAIM FOR DEP RECIATION SHOULD NOT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSI NG OFFICER. THEREFORE, DISALLOWANCE OF RS. 1,17,00,000/-, 13 LA KHS, 23,51,576/- AND RS. 5,73,824/- ON ACCOUNT OF DEPRECIATION CLAIM STANDS CANCELLED. I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO.10 1010 1058 5858 58/MDS/ /MDS/ /MDS/ /MDS/11 1111 11 5 GROUND NOS. 5 TO 19 OF THE ASSESSEE STAND ALLOWED. 5.1.4 IN MY VIEW, THE ABOVE DECISION OF THE HONBLE ITAT IS SQUARELY APPLICABLE TO ASSESSEES CASE AS FACTS ARE SIMILAR. HENCE I HAVE TO HOLD THAT ASSESSEE IS ENTITLED FOR DEPRECIATION AS CLAIMED BY IT ON TRANSFORMER. THE APPEAL ON THIS IS SUE IS ALLOWED. ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF ` .22,75,000/- MADE IN THIS REGARD. 5.2 ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF ` .64,20,000/- AND FILED NECESSARY CERTIFICATE IN FORM NO.3AA (RULE 5A) IN S UPPORT OF ITS CLAIM. ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE CONDITIONS SPECIFIED IN SECTION 32(I)(IIA) ARE CUMULATIVE IN N ATURE AND GENERATION OR PRODUCTION FOR ONES OWN CONSUMPTION WOULD NOT END IN ANY FORM OF BUSINESS AND HENCE ALL THE CONDITIONS WERE NOT SATISFIED. 5.2.1 I HAVE CAREFULLY CONSIDERED THE RELEVANT SUBM ISSIONS IN THIS REGARD. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VI RUDHUNAGAR TEXTILE MILLS LTD. (2009) 319 ITR 336 (MADRAS) HELD THAT A SSESSEE ENGAGED IN MANUFACTURE OF TEXTILE GOODS HAVING INSTALLED NEW W INDMILL WAS ENTITLED TO ADDITIONAL DEPRECIATION U/S 32(I)(IIA). IN THE CASE OF CIT VS. HI TECH ARAI LTD. (2010) 32 1 ITR 477 (MAD), HONBLE MADRAS HIGH COURT HELD AS FOLLOWS: FOR THE APPLICATION OF SECTION 32(I)(IIA), THERE IS NO REQUIREMENT THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ART ICLE OR THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE ; THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OF OIL SEEDS, ETC. WAS ENTITLED TO ADDITIONAL DEPRECIATION IN RES PECT OF WINDMILLS INSTALLED BY IT. 5.2.2 IN VIEW OF THE ABOVE JURISDICTIONAL HIGH COUR T DECISIONS, I HOLD THAT ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION. H ENCE I DIRECT THE ASSESSING OFFICER TO DELETE ADDITION OF ` .64,20,000/- MADE IN THIS REGARD. 8. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE AND THE LD. DR COULD NOT ABLE TO GIVE ANY CONTRARY DECISION OF ANY HIGHER AUTHORITY WITH RESPECT TO BOTH THE ISSUES, THEREFORE, WE DO NOT FIND ANY REAS ONABLE BASIS OR GROUND TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), WH ICH IS CONFIRMED AND THE APPEAL OF THE DEPARTMENT IS DISMISSED. I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO.10 1010 1058 5858 58/MDS/ /MDS/ /MDS/ /MDS/11 1111 11 6 9. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STA NDS DISMISSED. ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEAR ING ON 24.08.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 24.08.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.