Appeal details
Counselvise Citation
126724514 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-02-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
05-10-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1267/PN/2011 (ASSESSMENT YEAR: 2007-08) ZAWAR SALES PVT. LTD. B 105, KALPA TARU PLAZA, 244, BHAWANI PETH, PUNE 411 042 PAN : AACCZ0593N . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 7, PUNE . RESPONDENT ITA NO.1465/PN/2012 (ASSESSMENT YEAR: 2008-09) ZAWAR SALES LIMITED, 302/303, MANISH COMMERCIAL PREMISES CO., OPERATIVE SOCIETY LIMITED, PLOT NO.216A, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 025. PAN : AACCZ0593N . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 7, PUNE . RESPONDENT APPELLANT BY : MR. S. N. PURANIK RESPONDENT BY : MR. P. L. PATHADE DATE OF HEARING : 20-12-2013 DATE OF PRONOUNCEMENT : 19-02-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED TWO APPEALS RELATE TO THE SAME ASSES SEE AND INVOLVE CERTAIN COMMON ISSUE THEREFORE THEY HAVE BEEN CLUBB ED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SA KE OF CONVENIENCE AND BREVITY. 2. ITA NO.1267/PN/2011 PERTAINING TO THE ASSESSMENT YEAR 2007-08 WAS ORIGINALLY DISPOSED-OFF VIDE ORDER OF THE TRIBUNAL DATED 25.06.2013. ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 SUBSEQUENTLY, VIDE ORDER IN MA NO.157/PN/2013 DATED 13.12.2013 THE SAID APPEAL WAS DIRECTED TO BE LISTED AGAIN BECAUSE ONE OF THE GROUND OF APPEAL, NAMELY, GROUND NO.1 (A) & (B) WERE INADVERTENTLY RE MAINED TO BE DISPOSED-OFF EARLIER. ACCORDINGLY, THE APPEAL HAS BEEN LISTED F OR THE LIMITED PURPOSE OF ADJUDICATING THE FOLLOWING GROUND OF APPEAL AFTER H EARING THE RIVAL PARTIES :- 1. COMMISSIONER (APPEALS) HAS ERRED IN NOT ALLOWIN G DEPRECIATION @ 80% ON WHOLE OF THE 'WINDMILL' AND RESTRICTING IT TO RS.16,68,04,451.00. APPELLANT PRAYS FOR DEPRECIATION ON RS.18,61,99,639 .00 @ 80%. A) COMMISSIONER (APPEALS) HAS ERRED IN TAKING PART OF THE WINDMILL ACCESSORIES UNDER GENERAL PLANT & MACHINER Y AND APPLYING RATE OF 15% ON RS.95,60,610.00. B. COMMISSIONER (APPEALS) HAS ERRED IN TREATING INS TALLATIONS ETC. AS CIVIL CONSTRUCTIONS AND APPLYING 10% RATE O F DEPRECIATION OF BUILDING ON RS.98,33,127.00. 3. IN SO FAR AS APPEAL OF ITA NO.1465/PN/2011 IS CO NCERNED, IT IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 28.02.2011 WHICH, IN TURN, HAS ARISEN FROM AN ASSESSMENT ORDER DATED 23.12.2009 PASSED BY THE ASSESSING OFFICER U/S 143( 3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR ASSESSMENT YEAR 2008- 09. 4. IN THIS APPEAL, THE FIRST GROUND RELATES TO ASSE SSEES CLAIM FOR DEPRECIATION OF WINDMILL WHICH IS SIMILAR TO THE IS SUE RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2007-08. 5. ACCORDINGLY, WE FIRST TAKE-UP THE APPEAL OF THE ASSESSEE ON GROUND OF APPEAL NO. 1 (A) & (B) FOR ASSESSMENT YEAR 2007-08. IN BRIEF, THE FACTS ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 2007-08, ASSESSEE INSTALLED AND COMMISSIONED THREE WINDMILLS FOR A TOTAL COST OF RS.18,61,99,639/-. IT WAS NOTICED THAT ASSESSEE HA D CLAIMED DEPRECIATION @ 80% ON THE TOTAL COST OF THE WINDMILLS AND SUCH CLA IM AMOUNTED TO RS.14,89,59,711/-. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT COMPONENTS OF CIVIL WORK/BUILDINGS AND PLANT & MACH INERY COULD NOT BE CONSTRUED AS PRIMARY COMPONENTS OF WINDMILL TURBINE GENERATOR, AND IT WAS ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 THE LATTER ALONE, WHICH WAS ENTITLED TO DEPRECIATIO N @ 80%. ACCORDING TO THE ASSESSING OFFICER, CIVIL WORK, BUILDINGS AND PLANT & MACHINERY CONSTITUTED SEPARATE BLOCKS ENTITLED TO DIFFERENT RATES OF DEPR ECIATION. SIMILARLY, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PRE-OPER ATIVE EXPENDITURE INCURRED FOR INSTALLING THE WINDMILL COULD NOT BE SUBJECTED TO DEPRECIATION @ 80% FULLY BUT IT WAS ALSO NEEDED TO BE ALLOCATED ON A PRO-RAT A BASIS TO THE DIFFERENT BLOCK OF ASSETS. ACCORDINGLY, THE EXPENDITURE INCURRED O N VARIOUS COMPONENTS WAS CATEGORIZED INTO DIFFERENT BLOCK OF ASSETS WITH PRE -OPERATIVE EXPENSES ALLOCATED ON A PRO-RATA BASIS TO EACH CATEGORY OF E XPENDITURE AND ACCORDINGLY THE DEPRECIATION ALLOWABLE WAS WORKED OUT. IN THIS MANNER, THE ASSESSING OFFICER WORKED OUT THE TOTAL DEPRECIATION ALLOWANCE AT RS.13,36,30,081/- AS AGAINST RS.14,89,59,711/- CLAIMED BY THE ASSESSEE W ITH RESULTED IN A DISALLOWANCE OF RS.1,53,29,630/-. ON AN APPEAL BY THE ASSESSEE, CIT(A) HAS ALLOWED PARTIAL RELIEF WHEREBY THE ASSESSEE WAS ALL OWED DEPRECIATION AT RS.13,58,60,965/- AS AGAINST RS.13,36,30,081/- DISA LLOWED BY THE ASSESSING OFFICER. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IN ORDER TO APPRECIATE THE POINT OF DIFFERENT BE TWEEN THE ASSESSEE AND THE REVENUE, THE FOLLOWING TABULATION IS HELPFUL WH ICH REFLECTS THE POSITION AFTER THE ORDER OF THE CIT(A) :- ZAWAR SALES LTD. CHART OF DEPRECIATION ON WIND MILLS ASSESSMENT YEAR 2007-08 COMPONENTS OF WINDMILL AMOUNT CATEGORIES APPLIED BY CIT BUILDINGS @ 10% PLANT & MACHINERY @ 15% WINDMILL @ 80% 1 TRANSFORMER 3,627,000.00 3,627,000.00 2 TABULAR TOWER 26,520,000.00 26,520,000.00 3 WINDMILL TURBINE GENERATOR 118,795,800.00 118,795,800.00 4 CIVIL WORK 9,240,000.00 9,240,000.00 5 ELECTRICAL MATERIAL 4,200,000.00 4,200,000.00 6 LABOUR CHARGES 5,100,000.00 5,100,000.00 7 MEDA PROCESSING FEES 1,886,250.00 99,782.00 96,765.00 1,689,703.00 8 INSTALLATION WITH MATERIAL 4,500,000.00 4,500,000.00 9 SERVICE TAX PAID TO SUZLON INFRA LTD. 1,223.625.00 401,730,.00 820,545.00 10 POWER EVACUATION CHARGES 9,375,000.00 9,375,000.00 11 PRE-OPERATING EXPENSES 1,731,964.00 91,615.00 88,845.00 1,541,404.00 TOTAL 186,199,639.00 9,833,127.00 9,560,610.00 166 ,794,452.00 ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 7. IN TERMS OF THE AFORESAID, ON THE ELEMENT OF COS T OF RS.16,67,94,452/- REPRESENTING WINDMILL THE CIT(A) HAS ALLOWED DEPREC IATION @ 80%. ON THIS ASPECT, THERE IS NO GRIEVANCE ON THE PART OF THE AS SESSEE. THE SECOND ASPECT IS IN RELATION TO THE ELEMENT OF COST OF RS.95,60,6 10/- ON WHICH DEPRECIATION HAS BEEN ALLOWED @ 15% CONSIDERING THEM TO BE BLOCK OF PLANT & MACHINERY ELIGIBLE FOR GENERAL RATE OF DEPRECIATION. THIRDLY , ON THE COST OF RS.98,33,127/- THE DEPRECIATION HAS BEEN ALLOWED @ 10% CONSIDERING THEM TO BE A PART OF THE BLOCK OF BUILDINGS. ON THE LATTER TWO ASPECTS, A SSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING, IT WAS COMMON POINT BETW EEN THE PARTIES THAT THE ISSUES RAISED ARE MORE OR LESS COVERED BY THE PRECE DENTS WHICH WE WILL DISCUSS HEREINAFTER. IN SO FAR AS POWER EVACUATIO N CHARGES ARE CONCERNED, THE CIT(A) HAS CONSIDERED IT TO BE A PART OF NORMAL PLANT & MACHINERY ENTITLED TO DEPRECIATION @ 15%. THE EXPENDITURE INVOLVED UN DER THIS HEAD IS FOR CONSTRUCTION OF POWER TRANSMISSION LINES ON COMMON SHARING BASIS AT THE SITE FOR EVACUATION OF POWER FROM THE WINDMILLS LOCATED IN THE AREA AND THE EXPENDITURE WAS DISTRIBUTED ON COMMON SHARING BASIS AND THE SHARE OF THE ASSESSEE CAME TO RS.93,75,000/-; AND AFTER ADDING P ROPORTIONATE COST OF MEDA PROCESSING FEES AND PRE-OPERATIVE EXPENSES THE TOTAL COST HAS BEEN COMPUTED AT RS.95,60,610/-. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE SAID ISSUE HAS BEEN DECIDED BY THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF DCIT VS. WESTERN PRECICAST PVT. LTD. VIDE I TA NO.890/PN/2011 DATED 31.12.2012 IN FAVOUR OF THE ASSESSEE. FURTHER, THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. RAKESH GUPTA, (201 3) 60 SOT 81 HAS ALSO HELD THAT THE COST OF POWER EVACUATION FACILITY COM PRISING OF THE COST OF TRANSMISSION OR DISTRIBUTION LINES, WAS ELIGIBLE FO R THE DEPRECIATION @ 80%, WHICH IS APPLICABLE TO WINDMILLS AND NOT AT THE NOR MAL RATES. CONSIDERING THE AFORESAID PRECEDENT AND IN THE ABSENCE OF ANY CONTR ARY DECISION, THE STAND OF THE ASSESSEE IS UPHELD AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 DEPRECATION @ 80% ON THE COMPONENT OF THE POWER EVA CUATION CHARGES AMOUNTING TO RS.95,60,610/-. 9. IN RELATION TO THE COMPONENT OF RS.98,33,127/- C ONSIDERED AS A PART OF BLOCK OF BUILDINGS, THE GRIEVANCE OF THE ASSESSEE IS THAT COST OF CIVIL FOUNDATION OF WINDMILL IS LIABLE TO BE CONSIDERED A S A PART OF WINDMILL AND IS ELIGIBLE FOR THE DEPRECIATION @ 80%. IN THIS CONNE CTION, REFERENCE HAS BEEN MADE TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. LTD. VIDE INCOME TAX APPEAL NO .1326 OF 2010 DATED 14.06.2011 AS ALSO THE DECISIONS OF PUNE BENCH OF T HE TRIBUNAL IN THE CASE OF DCIT VS. AMINITY DEVELOPERS & BUILDERS IN ITA NO.15 05/PN/2011 DATED 12.12.2012 AND IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. VS. ACIT, (2008) 118 TTJ 68 (PUNE). ON THIS ASPECT, THE LEAR NED COUNSEL SUBMITTED THAT IN THE AFORESAID PRECEDENTS ONLY A PORTION OF THE C OST OF CIVIL WORK HAS BEEN TREATED AS ELIGIBLE FOR HIGHER RATE OF DEPRECIATION BECAUSE THE ENTIRE COST WAS NOT RELATABLE TO THE CONSTRUCTION OF FOUNDATION FOR WINDMILL. IN THE CASE OF THE ASSESSEE, THE WINDMILL IS OF A TABULAR TYPE IN WHIC H THERE IS NO SEPARATE CIVIL STRUCTURE REQUIRED TO HOUSE THE ELECTRICAL METERS, ETC. . THEREFORE, THE ENTIRE EXPENDITURE IS INCURRED FOR CONSTRUCTION OF FOUNDAT ION OF WINDMILL. IN THIS CONNECTION, REFERENCE WAS MADE TO PAGES 249 TO 250 OF THE PAPER BOOK WHEREIN THE RELEVANT BILL RAISED BY M/S SUZLON INFR ASTRUCTURE LTD. IS PLACED ON RECORD. IT IS CONTENDED THAT AS PER THE SAID INVOI CE, THE COST RELATED TO CONSTRUCTION OF CIVIL FOUNDATION WORK, CONSTRUCTION OF TRANSFORMER, ETC. . IT WAS EXPLAINED BY THE LEARNED COUNSEL POINTED OUT THAT S O FAR AS THE COST OF LAND, APPROACH ROAD, ETC. IS CONCERNED, THE SAME HAVE BEE N SEPARATELY ACCOUNTED FOR AND DO NOT FORM PART OF THE LOCAL COST OF WINDM ILL FOR THE PURPOSE OF CLAIMING DEPRECIATION. 10. ON THIS ASPECT, THE LEARNED DEPARTMENTAL REPRES ENTATIVE HAS MERELY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 11. WE HAVE CONSIDERED THE RIVAL STANDS CAREFULLY. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COOPER FOUNDARY (SUPRA) H AS HELD THAT THE CONCRETE FOUNDATION OF A WINDMILL FORMED AN INTEGRAL PART OF THE WINDMILL, AND THE SAME IS ELIGIBLE FOR DEPRECIATION @ 80%. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AMINITY DEVELOPERS & BUILDERS (SUPRA) HAS A LSO LAID DOWN A SIMILAR PROPOSITION. IN SUM AND SUBSTANCE, THE RATIO OF TH E JUDGEMENT IS THAT THE FUNCTIONAL ASPECT HAS TO BE TAKEN INTO CONSIDERATIO N IN ORDER TO DECIDE WHETHER A PARTICULAR COST FORMS INTEGRAL PART OF THE COST O F WINDMILL OR NOT. ON THIS ASPECT, WE THEREFORE DEEM IT FIT AND PROPER TO DIRE CT THE ASSESSING OFFICER TO WORK OUT THE COST OF CIVIL WORK WHICH IS AN INTEGRA L PART OF THE COST OF THE WINDMILL FOLLOWING THE RATIO OF THE AFORESAID PRECE DENTS AND WORK OUT THE ALLOWANCE OF DEPRECIATION ACCORDINGLY. NEEDLESS TO SAY, ON THIS ASPECT, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD BEFORE DECIDING THE SAME AS PER LAW. THUS, O N THIS ASPECT, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 12. IN SO FAR AS ITA NO.1465/PN/2012 FOR ASSESSMENT YEAR 2008-09 IS CONCERNED, THE FIRST ISSUE RAISED IS RELATING TO CL AIM OF DEPRECIATION ON WINDMILL, WHICH IS IDENTICAL TO THAT CONSIDERED BY US IN THE AFORESAID PARAS FOR ASSESSMENT YEAR 2007-08. OUR DECISION IN ASSESSMEN T YEAR 2007-08 (SUPRA) IN EARLIER PARAS SHALL APPLY MUTATIS-MUTANDIS IN IT A NO.1465/PN/2012 ALSO. 13. THE ONLY OTHER GROUND IN ASSESSMENT YEAR 2008-0 9 RELATES TO THE DISALLOWANCE OF INTEREST-FREE ADVANCES GIVEN TO ZAW AR FOODS LTD. AND SHRI RAJKUMAR ZAWAR. THE SAID ISSUE IS COVERED BY THE D ECISION OF THE PUNE BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2007-08 VIDE ORDER DATED 25.06.2013 (SUPRA), AND THE ASSESS ING OFFICER IS DIRECTED TO DECIDE ACCORDINGLY. ITA NO.1267/PN/2011 ITA NO.1465/PN/2012 14. IN THE RESULT, THE GROUND OF APPEAL NO. 1 (A) & (B) FOR ASSESSMENT YEAR 2007-08 AND THE APPEAL FOR ASSESSMENT YEAR 2008-09 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 19 TH FEBRUARY, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE.
