Chand Fruit Company Pvt Ltd, Miraj V. Dy. CIT, Circle-2, Sangli

ITA 1293/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2468 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: S V DESHPANDE
• Keywords: Depreciation; Business expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1293/PN/2013 ASSESSMENT YEAR : 2008-09 CHAND FRUIT COMPANY PVT. LTD., GAT NO.154, 2A, 2B, BAGWAN AGRI FARM, TILAK ROAD, MIRAJ 416 410. PAN : AACCC3968Q . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, SANGLI. . RESPONDENT / APPELLANT BY : SHRI S. V. DESHPANDE / RESPONDENT BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 21.03.2016 / DATE OF PRONOUNCEMENT: 31.03.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAIN ST THE ORDER OF CIT(A), KOLHAPUR DATED 08.05.2013 RELATING TO ASSES SMENT YEAR 2008-09 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) (1), KOLHAPUR ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.1 0,12,043/- ON THE COST OF FOUNDATION OF A WIND TURBINE AND ON THE COST OF INS TALLATION AND COMMISSIONING OF THE WIND TURBINE WITHOUT PROPERLY APPRECIATING THE EXPLANATION FILED. 2. WHILE CONFIRMING THE DISALLOWANCE OF DEPRECIATIO N AMOUNTING TO RS.10,12,043/-, THE LEARNED CIT(A) CONVENIENTLY IGN ORED THE COPIES OF THE APPELLATE ORDER PASSED BY THE CIT (A) IN SIMILAR TYPE OF CASE AND ALSO IGNORED THE DECISIONS OF THE ITAT AND OF THE BOMBAY HIGH COURT WHEN COPIES O F THOSE DECISIONS WERE FILED 2 ITA NO.1293/PN/2013 BEFORE HIM ON 19TH OF MARCH, 2013 AND WHEN THE SAID DECISIONS WERE DIRECTLY ON THE ISSUE INVOLVED. 3. THE LEARNED CIT(A) FURTHER ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.1,03,815/- ON ACCOUNT OF ALLEGED PERSONAL USE WI THOUT PROPERLY APPRECIATING THE EXPLANATION FILED. 4. THE REASONS ASSIGNED FOR CONFIRMING THE DISALLOW ANCE OF DEPRECIATION OF RS.10,12,043/- AND DISALLOWANCE OF RS.1,03,815/- O N ACCOUNT OF ALLEGED PERSONAL USE ARE WRONG, INSUFFICIENT AND CONTRARY TO THE PRO VISIONS OF LAW AND FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY AND/OR DELETE ANY OF THE GROUNDS OF APPEAL. 3. IN THIS APPEAL, THE FIRST ISSUE BY WAY OF GROUND NOS.1 & 2 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF RS.10,12,043/- ON T HE COST OF FOUNDATION/ INSTALLATION OF THE WINDMILL. 4. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE ARE THAT THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS O F EXPORT OF FRUITS AND VEGETABLES. DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS SET UP NON- CONVENTIONAL WIND POWER GENERATION UNIT. THE TOTAL COST OF THE WINDMILL WAS RS.3,60,74,328/- ON WHICH A DEPRECIATION OF RS.1,44 ,29,731/- WAS CLAIMED. THE BREAKUP OF THE VARIOUS COMPONENTS OF WINDMILL W AS AS UNDER :- SR.NO. DESCRIPTION OF ASSETS COST OF ASSETS 1. LAND RS. 9,00,000 2. CIVIL WORK CONSISTING OF FOUNDATION AND ALLIED W ORK RS. 32,84,366 3. INSTALLATION AND COMMISSION RS. 10,47,338 4. WINDMILL MACHINERY RS. 3,29,37,300 TOTAL COST RS. 3,60,74,328 5. THE ASSESSING OFFICER HAS NOTICED THAT DEPRECIAT ION ON THE ENTIRE WINDMILL PROJECT HAS BEEN CLAIMED AT AN ACCELERATED RATE OF 80% APPLICABLE TO WINDMILLS WHEREAS DEPRECIATION OF 10% IS ALLOWABLE IN RESPECT OF CIVIL WORK AND DEPRECIATION @ 15% WAS ALLOWABLE ON THE COST OF INSTALLATION AND COMMISSIONING. THE ASSESSEE HAS OBJECTED TO THIS O BSERVATION AND CLAIMED HIGHER RATE OF 80% AVAILABLE ON THE ENTIRE PLANT RE LYING ON THE DECISION IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. VS. AC IT, 12 DTR 211 BY ITAT, PUNE. THE ASSESSEE ALSO RELIED ON DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA POWER CORPOR ATION, 247 ITR 268 (SC). 3 ITA NO.1293/PN/2013 THE CIT(A) HELD THAT CONTENTION RAISED BY THE ASSES SEE IS NOT ACCEPTABLE FOR THE SIMPLE REASON THAT THE EARTH WORK AND FOUNDATION IS NOTHING BUT CIVIL WORK AND NORMAL DEPRECIATION IS ALLOWABLE @ 10%. SIMILARLY, ERECTION AND COMMISSIONING IS THE CAPITAL EXPENDITURE MADE ON AC COUNT OF PLANT AND MACHINERY AND A NORMAL RATE OF 15% IS ALLOWABLE ON THE SAME. IN CONSEQUENCE, THE DEPRECIATION ON FOUNDATION WORK AN D CIVIL & COMMISSIONING WORK WERE DISALLOWED TO THE EXTENT OF RS.10,12,043/ - IN AGGREGATE. AGAINST THE AFORESAID DISALLOWANCE, THE ASSESSEE CARRIED THE MA TTER BEFORE THE TRIBUNAL. 6. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). THE LD. AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE FURTHER RELIED UPON THE DECISION OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. L TD. IN INCOME TAX APPEAL NO.1326 OF 2010, ORDER DATED 14.06.2011 (ORDER OF C OPY FILED) WHEREIN THE HONBLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE LOWER AUTHORITI ES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE FIND THAT THE CONTROVERSY IN THE PRESENT CASE IS SQUARELY COVERED BY THE RECENT DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHREE M ELECTRIC LIMITED VS. JCIT IN ITA NO.2107/PN/2013, ORDER DATED 30.11.2015 WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. T HE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL ON THE ISSUE IS REPRODUCED HE REINBELOW :- 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMISSIONS MADE ON BEHALF OF THE REVENUE. THE ONL Y ISSUE FOR ADJUDICATION BEFORE US IS ALLOWABILITY OF SIMILAR DEPRECIATION RATE AS APPLICABLE TO WINDMILLS, ALSO TO THE FOUNDATION & CIVIL WORK AND ERECTION & COMMISSIO NING WORK EXECUTED FOR THESE WINDMILLS. IT IS THE CASE OF THE ASSESSEE BEFORE T HE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) THAT ENTIRE EXPENDITURE TOGETHER WITH COST OF WINDMILL IS ENTITLED TO SAME RATE OF DEPRECIATION AT 80% AS THE OTHER EXPEN DITURE INCURRED TOWARDS FOUNDATION & CIVIL WORK AND ERECTION & COMMISSIO NING WORK, ETC. ARE INTEGRAL PART OF WINDMILLS AND ARE DIRECTLY ATTRIBUTABLE TO INSTALLATION AND OPERATIONAL FUNCTIONING OF WIND TURBINE. SINCE THE CIVIL WORK AND ERECTION & COMMISSIONING 4 ITA NO.1293/PN/2013 EXPENSES INCURRED ARE IN RELATION TO INSTALLATION O F WINDMILL, DEPRECIATION ON THE SAME SHOULD BE PROVIDED AT THE RATE APPLICABLE TO W INDMILL. WE FIND THAT THE AFORESAID ASSERTIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE REVENUE REMAINS UNCONTROVERTED. ACCORDINGLY, WE ARE OF THE FIRM VI EW THAT THE EXPENSES INCURRED ON ERECTION & COMMISSIONING, CIVIL WORK, ETC. BEING NE CESSARY ADJUNCT TO THE WINDMILL AND IS NOT MEANT FOR ANY OTHER PURPOSES OTHER THAN FOR OPERATIONAL FUNCTIONING OF WIND TURBINE AND THEREFORE CANNOT BE TREATED DIFFER ENTLY. THEREFORE, IMPUGNED CAPITAL EXPENDITURE TOWARDS CIVIL WORK & COMMISSION ING ETC. ALSO WILL QUALIFY FOR THE SAME RATE OF DEPRECIATION AS APPLICABLE TO WIND TUR BINE ITSELF. THE ISSUE IS NO LONGER RES-INTEGRA AND IS COVERED BY THE DECISION OF CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST & AGRO (P.) LTD. VS. ACIT, (2008) 118 TTJ 68 (PUNE) WHEREIN IT HAS BEEN CLEARLY HELD THAT THE CAPITAL E XPENDITURE INCIDENTAL TO THE WINDMILL HAS TO BE TESTED ON THE TOUCHSTONE OF THE FUNCTIONAL TEST AND THE ASSESSEE WILL BE ENTITLED TO HIGHER RATE OF DEPRECIATION ON SUCH INCIDENTAL EXPENDITURE, IF IT HAS NO OTHER USE EXCEPT FOR POWER GENERATION DONE B Y THE WINDMILL. OUR VIEW IS ALSO SUPPORTED BY ANOTHER DECISION OF THE CO-ORDINATE BE NCH OF PUNE TRIBUNAL IN THE CASE OF M/S D.J. MALPANI VS. ACIT IN ITA NOS.1148 T O 1154/PN/2013, ORDER DATED 30.10.2015. ACCORDINGLY, WE HOLD THAT THE REVENUE IS MISDIRECTED ITSELF IN LAW IN MAKING THE IMPUGNED DISALLOWANCE OF DEPRECIATION. 9. THE ISSUE BEING SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE THE DEPRECIATION AS CLAIMED BY THE ASSESSEE DESERVES TO BE ALLOWED. IN THE RESULT, GROUND NOS.1 & 2 ARE ALLOWED. 10. GROUND NO.3 OF THE APPEAL OF ASSESSEE RELATES T O DISALLOWANCE OF RS.1,03,815/- ON ACCOUNT OF ELEMENT OF PERSONAL USE R TOWARDS VEHICLE REPAIRS AND MAINTENANCE, TELEPHONE EXPENSES AND TRAVELLING EXPENSES, ETC. ON ESTIMATED BASIS. 11. IT IS THE CASE OF THE ASSESSEE THAT IN THE CASE OF A COMPANY ELEMENT OF PERSONAL USER OUT OF EXPENSES CANNOT BE INFERRED. WE FIND MERIT IN THE PLEA OF THE ASSESSEE. THE COMPANY BEING JURISTIC PERSON, IT IS DIFFICULT TO ACCEPT THE BASIS FOR DISALLOWANCE OF THE REVENUE. A COMPANY I S INCAPABLE OF HAVING ANY PERSONAL USER OF THE FACILITIES. THE DIRECTORS ARE SEPARATE FROM THE COMPANY. EVEN ASSUMING THAT FACILITIES WERE OCCASIONALLY USE D FOR PERSONAL PURPOSES, IT IS A BUSINESS EXPENDITURE IN SO FAR AS COMPANY IS C ONCERNED. SUCH USAGE OF FACILITIES AT ANY RATE CAN BE POSSIBLY TAXED IN THE HANDS OF THE USER AS PERQUISITE ALONE. THEREFORE, NO ESTIMATED DISALLOWANCE ON ACC OUNT OF PERSONAL USER IS CALLED FOR. IN THE RESULT, GROUND NO.3 IS ALSO ALL OWED. 5 ITA NO.1293/PN/2013 12. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 31 ST MARCH, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT-II, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE