ACIT, Ludhiana V. M/s Eastman International, Ludhiana

ITA 13/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86193 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-03-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.13/CHD/2015 ASSESSMENT YEAR: 2011-12 THE DCIT VS. M/S EASTMAN INTERNATIONAL CIRCLE I B-XXX-2185/6-203/1, PHASE VII LUDHIANA FOCAL POINT LUDHIANA PAN NO. AAAFE3449D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SH. ASHWANI KUMAR DATE OF HEARING : 16/03/2015 DATE OF PRONOUNCEMENT : 19/03/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 08/10/2014 PASSED BY THE CIT(APPEALS)-I, LUDHIANA 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS WHICH ARE AS UNDER : I) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF HIGHER DEPRECIATION @ 80% ON ACCOUNT OF EXPENDIT URE ON INSTALLATION OF ELECTRICAL LINE FOR POWER TRANSMISSION AND METERING TREATED AS NOT PART OF WIND MILL BY THE AO. II) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRAVANCORE COCHIN CHEMICAL LTD., VS. CIT 106 ITR 900 AND ALLOWING DEPRECIATION CONTRIBUT ION FOR POWER EVACUATION FACILITY EVEN THOUGH THE ASSESSEE HAS NO OWNERSHIP OF THE ASSET, BEING ONLY A CONTRIBUTOR FOR AVAILING THE FACILITY. III) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN TREATING THE POWER EVACUATION INFRASTRUCTURE AS PART OF WIND MILL AND AS RENEWABLE ENERGY DEVICE WHEREAS THE AO HAS BROUGHT ON RECORD SUFFICIENT MAT ERIAL TO PROVE THAT SAME WAS IN FACT NOT A RENEWABLE ENERGY DEVICE AND HENCE NOT ELIGIBLE FOR DEPRECIATION @ 80%. 2 IV) THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE A ND THAT OF THE A.O. BE RESTORED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS INSTAL LED A WIND MILL. FOR EVACUATION OF THE POWER, SOME CONTRIBUTION WAS MADE TOWARDS POWER EVACUATION INFRASTRUCTURE FACILITIES. ON THIS CONTR IBUTION ASSESSEE CLAIMED DEPRECIATION @ 80% THE DEPRECIATION WHICH WAS DISAL LOWED ON THE BASIS THAT ASSESSEE WAS NOT OWNER OF THIS FACILITY AND IN ANY CASE THIS FACILITY IS NOT IN THE NATURE OF RENEWABLE ENERGY DEVICE. IN THIS BACKGROU ND ASSESSING OFFICER ALLOWED DEPRECIATION ONLY @ 15%. 4. ON APPEAL, THE LD. CIT(A) WAS OF THE OPINION THA T POWER EVACUATION INFRASTRUCTURE FACILITIES IS ABSOLUTELY ESSENTIAL F OR THE WIND MILL TO GENERATE ELECTRICITY TO BE PRACTICALLY AVAILABLE TO THE EVEN TUAL CUSTOMERS. IN OTHER WORDS, WITHOUT SUCH FACILITY THE INSTALLATION OF WIND MILL WOULD BE MEANINGLESS. HE ALSO OBSERVED THAT POWER EVACUATION INFRASTRUCTURE FACIL ITIES BY ITSELF CANNOT BE DESCRIBED AS RENEWAL ENERGY DEVICE, HOWEVER, SAME A LONG WITH ASSOCIATION OF WIND MILL WOULD DETERMINE THE TRUE CHARACTER. ACCOR DINGLY HE ALLOWED THE DEPRECIATION @ 80%. 5. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 6. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL FOR AS SESSMENT YEAR 2008-09 AND 2009-10 IN ITA NOS. 821 & 1127 /CHD/2012. THIS DECI SION WAS FURTHER CONFIRMED BY THE HONBLE PUNJAB & HARYANA HIGH COURT. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y WE FIND THAT THIS ISSUE WAS DECIDED IN ASSEESSEES OWN CASE FOR THE EARLIER YEA R ORDER VIDE PARA 7 WHICH IS AS UNDER : 3 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION OF THE TR IBUNAL IN CASE OF ACIT V. EASTMAN IMPEX, LUDHIANA, ITAS NO. 8 19 & 820/CHD/2012 AND THE SAME HAS BEEN ADJOURNMENT VIDE PARA 10 WHICH IS AS UNDER: 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF TRUMAC ENGINEERING CO. PVT. LTD. MUMBAI VS. ITO(SUPRA) WHE REIN VIDE ORDER DATED 27.06.2008 RELEVANT FINDING GIVEN BY THE ITAT, MUMB AI BENCH I IN PARA 21 TO 24 READ AS UNDER: 21. COMING TO THE NEXT ITEM, I.E. DISALLOWANCE OF DEPRECIATION OF RS. 42,50,000/- IN RESPECT OF CONTRIBUTION MADE TO GEDA , LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND SUBMITTED THAT THE POWER GENERATED FROM THE WIND MILL FARM AT NAVADRA / BHOG AT SITE IS DELIVERED TO THE SUB-STATION OF GEDA THROUGH HT LINES. THIS POWER IN TURN IS TRANSFERRED TO GEDA FOR FURTHER TRANSMISSION. FOR THIS PURPOSE, CONNECTION OF GRID AT SUBSTATION IS REQUIRED. THE CONTRIBUTION MADE TO GEDA IS TOWARDS SETTING UP OF CENTRALIZED SUBSTATION AT LAMBA, THROUGH WHICH THE ELECTRICITY GENERATED BY T HE WIND FARM WOULD BE DELIVERED TO THE GRID. THE CLAIM WAS MADE ON THE BA SIS OF INFORMATION AVAILABLE. IN FACT, SUBSEQUENTLY, ASSESSEE RECEIVED CONFIRMATI ON, AS STATED IN THE PRECEDING PARA, FROM GEDA, FOR FIXING THE CONTRIBUTION OF RS. 35,60,862.75 OUT OF RS. 42,50,000/- FOR FORMATION OF SUBSTATION AND THE BAL ANCE, IT WAS INTIMATED, WILL BE UTILIZED TOWARDS RUNNING AND MAINTENANCE OF SUBSTAT ION. 22. IN THE ALTERNATE, LEARNED COUNSEL SUBMITTED THA T THE PAYMENT MADE TO GEDA AT LEAST TO BE TREATED AS REVENUE EXPENDITURE. IF T HE REVENUE TREATS THIS AS NOT SOMETHING OWNED BY THE ASSESSEE (SUBSTATION), THEN IT NATURALLY FOLLOWS THAT ASSESSEE CONTRIBUTED THE ABOVE AMOUNT FOR CREATION OF SUBSTATION, WHICH IS THE PROPERTY OF GEDA. IN THAT CASE, LEARNED COUNSEL SUB MITTED, THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BIRLA JUTE MANUFACTURING LTD., REPORTED IN 182 ITR 497 (CAL) IS CLEARLY APPLICABLE ; LEARNED COUNSEL SUBMITTED, THE SAME VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., REPORTED IN 122 ITR 995 (BOM). 23. LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT T HE ASSESSEE IS NOW IMPROVING THE METHOD OF TRANSACTION BY INSTALLING NEW MACHINE RIES, WITHOUT WHICH ALSO THE WINDMILL WILL CONTINUE TO OPERATE. THIS CANNOT BE T REATED AS AN INTEGRAL PART OF THE WINDMILL AS SUCH. THIS HAS INDEPENDENT STANDING. AS SESSEES WINDMILL WORKED EVEN WITHOUT THESE MACHINERIES. AS SUCH LD. DR FOR THE R EVENUE SUBMITTED THAT THE ORDERS OF THE REVENUE AUTHORITIES MAY BE UPHELD. 24. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF TH E VIEW THAT THE ASSESSEES APPEAL IS TO BE ALLOWED ON MERIT. FIRSTLY, IT IS TO BE SEEN THAT THESE MACHINERIES HAD NO INDEPENDENT FUNCTIONING AS SUCH. MERELY BECA USE IT IMPROVES THE WORKING SYSTEM OR CONTROLLING / MONITORING SYSTEM, IT CANNO T BE TREATED AS AN INDEPENDENT MACHINERY AND NOT PART OF THE INTEGRATED MACHINERY. THE SUBMISSION OF THE LEARNED COUNSEL IS THAT IF THE MACHINERY INSTALLED AT THE FIRST STAGE OF INSTALLING THE WINDMILL ITSELF, THE CLAIM OF THE ASESSEE; WOULD HA VE BEEN ALLOWED, MERELY BECAUSE FOR SOME REASON OR OTHER IT WAS SUBSEQUENTL Y INSTALLED, DOES NOT MEAN THAT IT IS NOT A PART OF THE MACHINERY AS SUCH,. SI NCE THE MACHINERY HAD NO INDEPENDENT FUNCTIONING, WE ARE OF THE VIEW THAT TH E DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BIRLA JUTE MANUF ACTURING; LTD. (SUPRA) IS CLEARLY APPLICABLE. IN THE CASE OF EXCEL INDUSTRIES LTD. (S UPRA), THE HONBLE BOMBAY HIGH COURT HELD; PAYMENT MADE FOR OVERHEAD SERVICE LINE, WHICH REMAINED THE PROPERTY OF ELECTRICITY BOARD, IS ALLOWABLE AS REVE NUE EXPENDITURE; ON FACTS, IN THE INSTANT CASE OF THE ASSESSEE, THE PAYMENT TO GEDA I S TO BE ALLOWED IN THE LIGHT OF THIS DECISION OF THE JURISDICTIONAL HIGH COURT. HEN CE, APPEAL BY THE ASSESSEE WITH REGARD TO GROUND NO. 1,2,3 AND 4 ARE ALLOWED. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE OF TRUMAC ENGINEERING CO . PVT. LTD. MUMBAI VS. ITO (SUPRA), SO, RESPECTFULLY FOLLOWING THE AFORESAID R EFERRED TO DECISIONS DATED 4 27.06.2008 OF ITAT, MUMBAI BENCH I, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). FURTHER THIS ORDER HAS BEEN CONFIRMED BY THE HONBL E PUNJAB & HARYANA HIGH COURT IN ITA NO. 99 OF 2014 VIDE ORDER DATED 1 8/12/2014. THEREFORE, FOLLOWING THE ABOVE ORDER WE DECIDE THIS ISSUE AGAI NST THE REVENUE. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 19/03/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19/03/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR