DCIT, Coimbatore V. KDS Wind Farms Pvt Ltd., Pollachi

ITA 1261/CHNY/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0405 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-03-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 19-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 1261/CHNY/2017 / ASSESSMENT YEAR:2013-14 & C.O. NO. 112/CHNY/2017 [IN I.T.A. NO. 1261/CHNY/2017] THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1, 63-A, RACE COURSE ROAD, COIMBATORE. VS. M/S. KDS WIND FARMS PVT. LTD., 75/1, DR. ANSARI STREET, POLLACHI 642 001. [PAN:AAECK7320E] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT /RESPONDENT BY : SHRI T. BANUSEKAR, C.A. / DATE OF HEARING : 15.11.2018 /DATE OF PRONOUNCEMENT : 27.11.2018 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1, COIMBATORE DATED 22.02.2017 RELEVANT TO THE ASSESSMENT YEAR 2013-14. THE TWO EFFECTIVE GROUNDS RAISED IN THE APPEAL OF THE REVENUE IS THAT (I) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] SINCE THE SAME PLANT AND MACHINERY INSTALLED BY M/S. KALYANI DISTRIBUTION SERVICES IS STILL CONTINUED I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 2 WITH THE ASSESSEE COMPANY AND (II) THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEPRECIATION FOR MAT. 2. THE APPEAL FILED BY THE REVENUE IS DELAYED BY FIVE DAYS, FOR WHICH, THE REVENUE HAS FILED PETITION FOR CONDONATION OF THE DELAY, TO WHICH; THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, THE SHORT DELAY IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.09.2013 ADMITTING INCOME OF .58,253/-. THE ASSESSEE HAS CLAIMED EXEMPTION OF .1,29,40,450/- UNDER SECTION 80IA OF THE ACT. SINCE THE CONDITIONS LAID DOWN UNDER SECTION 80IA(3) OF THE ACT WERE NOT FULFILLED, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT AND BROUGHT TO TAX. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) HELD THAT THE ASSESSEE HAS FULFILLED THE CONDITIONS PRESCRIBED UNDER THE ACT AND ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR SUBMITTED THAT M/S. KALYANI DISTRIBUTION SERVICES WAS DEALING WITH WHOLESALE I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 3 PHARMACEUTICALS AS WELL AS WINDMILLS. SUBSEQUENTLY, THE FIRM GOT SPLIT UP INTO TWO ENTITIES AND ONLY THE WINDMILL DIVISION SUBSEQUENTLY GOT CONVERTED INTO A PRIVATE COMPANY AND THE WHOLESALE PHARMACEUTICAL ENTITY WAS TRANSFERRED TO ANOTHER ENTITY. THESE FACTS CLEARLY PROVE THAT THE WINDMILL WHICH HAS BEEN PURCHASED BY M/S. KALYANI DISTRIBUTION SERVICES WAS NOT DIRECTLY TRANSFERRED TO M/S. KDS WIND FARMS PVT. LTD., BUT, IT WAS TRANSFERRED ONLY THROUGH THE FIRM M/S. KDS FARMS. MOREOVER, THE PHARMACEUTICAL DIVISION WAS NOT TRANSFERRED TO THE COMPANY M/S. KDS WIND FARMS PVT. LTD. IN VIEW OF THE ABOVE, THE CONDITIONS LAID DOWN IN SECTION 80IA OF THE ACT WERE NOT FULFILLED AND THE LD. DR PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED AND RESTORED THAT OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW ALONG WITH PAPER BOOKS AND CASE LAW. M/S. KALYANI DISTRIBUTION SERVICES (ASSESSED TO TAX WITH PAN: AAIFK6480E), A FIRM, CONSTITUTED ON 19.08.2007 TO CARRY ON THE BUSINESS OF WHOLESALE PHARMACEUTICAL DISTRIBUTION HAD ALSO INSTALLED WINDMILLS DURING THE ASSESSMENT YEARS 2008-09, 2010-11 AND 2011-12. ON 11.3.2012, M/S. KALYANI DISTRIBUTION SERVICES WAS SPLIT UP INTO TWO ENTITIES, ONE ENTITY DEALING WITH PHARMACEUTICAL UNDER PAN AAMFK0290Q AND THE I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 4 OTHER ENTITY DEALING WITH WIND MILL UNDER THE NAME AND STYLE M/S. KDS WIND FARMS. HOWEVER, WITHIN A SPAN OF TWELVE DAYS I.E., ON 23.3.2012, THE FIRM M/S. KDS WIND FARMS WAS CONVERTED INTO A PRIVATE LIMITED COMPANY. SINCE ALL THE CONDITIONS AS LAID DOWN IN SECTION 80IA(3) OF THE ACT WAS NOT FULFILLED, THE ASSESSING OFFICER DISALLOWED THE ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT AMOUNTING TO .1,29,40,450/-. ON APPEAL, THE LD. CIT(A) OBSERVED THAT M/S. KALYANI DISTRIBUTION SERVICES WERE A FIRM, CONSTITUTED ON 19.08.2007 INSTALLED WIND MILLS. THE FIRM WAS RENAMED AS M/S. KDS WIND FARMS AND WAS SUBSEQUENTLY CONVERTED INTO A PRIVATE LIMITED COMPANY. THE ELIGIBLE BUSINESS, BEING THE WINDMILL INSTALLED BY THE FIRM IS CONTINUED BY THE PRIVATE LIMITED COMPANY. THE WINDMILLS WERE PURCHASED IN THE FIRMS NAME AND WERE TRANSFERRED TO THE PRIVATE LIMITED COMPANY. IT IS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. THE LD. CIT(A) FURTHER OBSERVED THAT IN THE CASE OF THE ASSESSEE, THE ELIGIBLE INDUSTRIAL UNDERTAKING BEING THE THREE WINDMILLS ARE NOT FORMED BY SPLITTING OR RECONSTRUCTING OF BUSINESS AND NEITHER A NEW BUSINESS. THE SAME PLANT AND MACHINERY INSTALLED BY THE FIRM IS STILL CONTINUED WITH THE PRIVATE LIMITED COMPANY. IN VIEW OF THE ABOVE, THE LD. CIT(A) HELD THAT THE ASSESSEE HAS FULFILLED THE CONDITIONS PRESCRIBED UNDER THE INCOME TAX ACT AND ARE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA OF THE ACT. I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 5 6.1 IT IS AN ADMITTED FACT THAT THE FIRM, M/S. KALYANI DISTRIBUTION SERVICES, WHO WAS CARRYING ON THE BUSINESS OF WHOLESALE PHARMACEUTICAL DISTRIBUTION, HAD ALSO INSTALLED WINDMILLS IN VARIOUS ASSESSMENT YEARS, WHICH WAS PURCHASED IN FIRMS NAME. THUS, THE FINDINGS OF THE LD. CIT(A) THAT THE FIRM WAS RENAMED AS M/S. KDS WIND FARMS AND WAS SUBSEQUENTLY CONVERTED INTO A PRIVATE LIMITED COMPANY IS NOT FACTUALLY CORRECT. BECAUSE, WE FIND FROM THE ASSESSMENT ORDER THAT M/S. KALYANI DISTRIBUTION SERVICES (ASSESSED TO TAX WITH PAN: AAIFK6480E) DEALING WITH PHARMACY AND WINDMILLS HAD BEEN SPLIT UP ON 10.03.2012 INTO TWO ENTITIES VIZ., M/S. KALYANI DISTRIBUTION SERVICES (WITH DIFFERENT PAN: AAMFK0290Q ASSESSED TO TAX IN NCC-4, COIMBATORE) DEALING WITH ONLY PHARMACY AND THE OTHER ENTITY M/S. M/S. KDS WIND FARMS DEALING WITH ONLY WINDMILLS WAS SUBSEQUENTLY FORMED INTO A COMPANY BY NAME M/S. KDS WIND FARMS PVT. LTD. HAVING PAN: AAECK7320E. IF M/S. KALYANI DISTRIBUTION SERVICES IS SIMPLY RENAMED AS M/S. KDS WIND FARMS AND FUNCTIONING AN ORGANIZATION, THEN, M/S. KDS WIND FARMS SHOULD HAVE CONTINUED WITH ENTIRE BUSINESS OF PHARMACY AS WELL AS WINDMILL AND M/S. KALYANI DISTRIBUTION SERVICES WOULD NOT HAVE BEEN EXISTED ANYMORE. BY VIRTUE OF THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS NOT FULFILLED ALL THE CONDITIONS LAID DOWN UNDER SECTION 80IA(3) OF THE ACT. THE CASE LAW FILED BY THE ASSESSEE HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 6 ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. 7. THE SECOND ISSUE INVOLVED IN THIS CASE IS THAT THE ASSESSEE COMPANY WHILE COMPUTING MAT ADDED BACK DEPRECIATION OF .9,44,398/- AS PER THE COMPANIES ACT AND DEDUCTED DEPRECIATION OF .49,17,752/- AS PER THE INCOME TAX ACT. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER DISALLOWED THE EXCESS DEPRECIATION OF .39,73,354/-. ON APPEAL, THE LD. CIT(A) ALLOWED THE ASSESSEE'S APPEAL RELYING ON THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF M/S. MALAYALA MANORAMA CO. LTD V. CIT CITED IN [2008] 300 ITR 251. AS RIGHTLY HELD BY THE LD. CIT(A) THAT THE DECISION IN THE CASE OF MALAYALA MANORAMA CO. LTD. V. CIT (SUPRA) IS STILL VALID UNTIL THE DECISION OF THE LARGER BENCH IS AWARDED, WE ARE OF THE CONSIDERED OPINION THAT THE DECISION OF THE HONBLE SUPREME COURT IS BINDING TILL ANY CONTRARY DECISION IS AWARDED AND PLACED ON RECORD. THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, WE FIND THAT THE CO IS FILED BELATEDLY WITH A DELAY OF 18 DAYS AND NO CONDONATION PETITION HAS BEEN FILED AND THUS, THE CO IS NOT MAINTAINABLE. ACCORDINGLY, THE CO FILED BY THE ASSESSEE IS DISMISSED. I.T.A. NO. 1261/CHNY/17 & C.O. NO.112/CHNY/17 7 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 27 TH NOVEMBER, 2018 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 27.11.2018 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.