DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Maa Amba Infrastructure (P) Ltd., Kolkata

ITA 1309/KOL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1252 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 16-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Maximum Marginal Rate; Rule of consistency; Avoidance of tax
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1309/KOL/20 15 ASSESSMENT YEAR : 2012-1 3 DCIT, CIRCLE-10(1), KOLKATA -VS - M/S MAA AMBA INFRASTRUCTURE (P) LTD. [PAN: AAECM 6507 F] (APPELLANT) (RESPONDEN T) FOR THE APPELLANT : SHRI SAURABH KUMAR , ADDL. CIT SR. DR FOR THE RESPONDENT : SHRI AKKAL DUDHEWALA, AR DATE OF HEARING : 19.03.2018 DATE OF PRONOUNCEMENT : 23.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-4, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO.1941/CIT(A)/CIR-10(1)/14-15 DATED 10.08.2015 AG AINST THE ORDER PASSED BY THE DCIT, CIRCLE-10(1), KOLKATA [ IN SHORT THE LD AO] U NDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 14.03.201 5 FOR THE ASSESSMENT YEAR 2012- 13. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN TREATING THE WAREHOUSE RENT AS INCOME FROM BUSIN ESS INSTEAD OF HOUSE PROPERTY INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN IRON OR STEEL AND LETT ING OUT WAREHOUSE ON RENT. THE RETURN OF INCOME FOR THE ASST YEAR 2012-13 WAS FILE D BY THE ASSESSEE COMPANY ON 2 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 2 27.9.2012 DECLARING TOTAL INCOME OF RS 40,55,320/- . THE ASSESSEE RECEIVED RENT OF RS 1,33,03,110.60 FROM THE PROPERTY OWNED IN THE FORM OF WAREHOUSE SITUATED AT KHAPRAIL ROAD, NEMAI, MATIGARA, DIST. DARJEELING 734010 NE AR SILIGURI TOWN AND RENTED TO THE VARIOUS PARTIES (I) HINDUSTAN UNILEVER LIMITED , (II) FUTURE SUPPLY CHAIN SOLUTIONS LIMITED , (III) SIGMA SUPPLY CHAIN SOLUTIONS LIMITE D , (IV) AMRIT FEEDS LIMITED, (V) N.B.SUPPLIERS, (VI) KURSEONG CARRIERS PRIVATE LIMIT ED , (VII) GODREJ AGROBET LIMITED, (VIII) JAI TRADING, (IX) BIDYUT GHOSH AND (X) HATSU N AGRO PRODUCTS LIMITED DURING THE YEAR. THE ASSESSEE CLAIMED SUCH RENT FROM THE SAID WAREHOUSE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION BEING THE OWNER OF WAR EHOUSE (BUILDING). THE LD AO OBSERVED THAT THE RENTED AREA / PORTION OF THE BUIL DING HAS NOT BEEN USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THE LD A O DISCUSSED THE PROVISIONS OF SECTION 22 OF THE ACT AND HELD THAT THE WAREHOUSE WAS A PRO PERTY OWNED BY THE ASSESSEE AND NOT USED FOR BUSINESS AND THEREFORE THE INCOME EARN ED FROM LETTING OUT WAS IN NATURE OF HOUSE PROPERTY INCOME. ACCORDING TO LD AO, IT MA KES NO DIFFERENCE IF THE ASSESSEE IS FORMED WITH THE OBJECT OF DEVELOPING & OPERATING LA NDED PROPERTIES. THE LD AO OBSERVED THAT THE WAREHOUSE WAS NOT USED BY THE ASS ESSEE BUT HAD BEEN LET OUT AND THEREFORE IT COULD NOT BE SAID THAT IT WAS USED FOR BUSINESS. THE LD AO HELD THAT THE PRIMARY OBJECT OF THE COMPANY WAS TO LET OUT THE WA REHOUSE FOR WHICH IT HAD CHARGED A COMPOSITE RENT FOR LETTING OUT THE SPACES ALONG WIT H FIXTURES, PLANTS & AMENITIES. THE LD AO RELIED ON THE DECISIONS OF HONBLE SUPREME CO URT IN THE CASE OF S.G.MERCANTILE CORPORATION (P) LTD REPORTED IN 83 ITR 700 (SC) AND SHAMBHU INVESTMENT (P) LTD VS CIT (CIVIL APPEAL NO. 6459 TO 6460 OF 2001). THE LD AO ACCORDINGLY TREATED THE INCOME RECEIVED FROM LETTING OUT WAREHOUSE UNDER TH E HEAD HOUSE PROPERTY AND THEREBY NOT ALLOWING EXPENSES CLAIMED IN COMPUTING BUSINESS INCOME. 2.2. THE ASSESSEE SUBMITTED THAT IT WAS FORMED IN T HE YEAR 2006. THE MAIN OBJECT OF FORMING THE COMPANY WAS TO CONCEIVE, OWN, SET-UP, E STABLISH AND CONSTRUCT INFRASTRUCTURE FACILITIES OF ANY TYPE OR FORM AND A LSO TO OPERATE, MANAGE, CONTROL & 3 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 3 EXPLOIT THE BUILDING, COMPLEX OR THE SUPER STRUCTUR E BUILD BY IT. IN PURSUANCE OF ITS MAIN OBJECTS, THE ASSESEEE COMPANY ACQUIRED A LAND AT MATIGARA. AFTER CONDUCTING MARKET SURVEY AND TAKING INTO ACCOUNT THE ECONOMIC SCENARIO AND LOCAL DEMAND, THE ASSESSEE HAD CONCEIVED TO CONSTRUCT, SET-UP A WAREH OUSE / GODOWN WITH ALL THE NECESSARY INFRASTRUCTURE AND FACILITIES FOR STORAGE OF GOODS AND PRODUCTS. THE ASSESSEE ACCORDINGLY CONSTRUCTED A WAREHOUSE OF INTERNATIONA L STANDARDS WHICH IT EXPLOITED IN A COMMERCIAL MANNER BY PROVIDING STORAGE FACILITIES T O MULTINATIONAL COMPANIES. FOR CONSTRUCTING THE WAREHOUSE, THE ASSESSEE GOT LINE O F CREDIT SANCTIONED FROM THE STATE BANK OF INDIA AGAINST THE MORTGAGE OF THE LAND AND GUARANTEES FURNISHED BY ITS DIRECTORS. THE WAREHOUSE WAS CONSTRUCTED AS PER TH E STANDARD REQUIREMENTS OF MULTINATIONAL COMPANIES TO SERVE THEIR PRIME PURPOS E OF STORAGE OF GOODS IN SAFE AND EFFICIENT WAY. THE WAREHOUSE WAS CONSTRUCTED WITH PRE-FABRICATED STRUCTURES TO FACILITATE EASY HANDLING AND STORAGE OF GOODS. NEC ESSARY IN-ROADS AND TRACK LINES WERE CONSTRUCTED FOR EASIER LOADING & UNLOADING OF GOODS . FORKLIFTS ETC WERE ALSO INSTALLED AT THE WAREHOUSE . THE WAREHOUSE WAS CONSTRUCTED W ITH COMPLETE ELECTRICAL INSTALLATIONS HAVING AUTOMATED FEATURES WHICH WERE NECESSARY TO ENSURE PROPER AND SAFE HANDLING OF STORAGE OF GOODS AND PRODUCTS. SE CURITY & ALARM SYSTEMS WERE ALSO INSTALLED THEREIN. THE ASSESSEE INVESTED SUBSTANTI AL SUMS IN INSTALLING CENTRAL AIR- CONDITIONING PLANT, GENERATOR, WATER PUMPS, ELECTRI CAL FITTINGS AND VARIOUS MACHINERIES, COMPUTERS & FURNITURE TO MAKE THE STRUCTURE FIT TO BE USED AS AN EXCLUSIVE STORAGE FACILITY FOR FMCG COMPANIES. ACCORDINGLY IT WAS PL EADED THAT THE ASSESSEE HAD CONSTRUCTED A SPECIALIZED INFRASTRUCTURE FACILITY B Y WAY OF WAREHOUSE IN ORGANIZED MANNER SO AS TO BE EXPLOITED FOR COMMERCIAL GAINS. IT WAS PLEADED THAT THE ASSESSE HAD EMPLOYED A LARGE WORKFORCE SUCH AS NIGHT GUARDS, SW EEPERS, WATCHMEN, ELECTRICIANS AND OTHER STAFF MEMBER ETC FOR PROVIDING CONTRACTUA L AMENITIES AT THE WAREHOUSE. THE ASSESSEE WAS THUS IN THE OVERALL CONTROL, SUPERVISI ON AND MANAGEMENT OF THE PREMISES. IN CONSIDERATION FOR PROVIDING THE STORAGE SPACE IN THE WAREHOUSE ALONG WITH ATTENDANT ANCILLARY SERVICES AND AMENITIES, THE ASSESSEE CHAR GED A FIXED MONTHLY LICENSE FEE FROM 4 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 4 ALL THE TENANTS IN THE WAREHOUSE. ACCORDINGLY, IT WAS SUBMITTED THAT THE ASSESSEE WAS IN THE BUSINESS OF CONSTRUCTING, OPERATING AND MAIN TAINING A WAREHOUSE, WHEREIN THE DOMINANT MOTIVE WAS TO CONSTRUCT A WAREHOUSE AND EX PLOIT IT IN A PURELY COMMERCIAL MANNER TO EARN PROFITS. BASED ON THESE FACTS, THE ASSESSEE HAD OFFERED THE RECEIPT OF LICENSE FEE AS INCOME FROM BUSINESS. THE ASSESS EE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SES OF CIT VS NDR WAREHOUSING (P) LTD (TCA NO. 303 TO 305 & 812 OF 2013 DATED 1.1 2.2014) WHEREIN THE RENTAL INCOME EARNED BY THE ASSESSEE FROM WAREHOUSES WAS H ELD TO B ASSESSABLE AS BUSINESS INCOME. IT WAS ARGUED THAT IT WAS THE LD AOS VIE W THAT THE MAIN OBJECT OF THE COMPANY WAS TO CONSTRUCT AND LET OUT PROPERTIES WA S OF NO CONSEQUENCE. THE ASSESSEE DREW THE ATTENTION OF THE LD CITA TO THE R ECENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & I NVESTMENTS LTD REPORTED IN 56 TAXMANN.COM 465 (SC) . THE LD CITA APPRECIATED THE CONTENTIONS OF THE ASSESSEE AND BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES SUPRA AND THE DECISION OF CO-ORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF DUTTA PROPERTIES VS ITO IN ITA NO. 973 TO 9 79/KOL/2012 DATED 1.7.2015 , HELD THAT THE RENTAL INCOME IS TO BE TAXED UNDER THE HEA D INCOME FROM BUSINESS. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUND:- 1. TREATMENT OF WAREHOUSE RENT AS HOUSE PROPERTY IN COME INSTEAD OF BUSINESS INCOME. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY WAS FORMED WITH THE MAIN OBJECT AS STATED I N THE MEMORANDUM OF ASSOCIATION , TO CONCEIVE, PLAN, SURVEY, DESIGN, ST UDY AND EVALUATE ALL STEPS, PROCESS, TECHNIQUES AND METHODS FOR SETTING UP OF ALL TYPES OF INFRASTRUCTURE PROJECTS, FACILITIES OR WORKS, AND TO, BUILD, CONSTRUCT, INSTALL, ERECT, UNDERTAKE, COMMISSION, ESTABLISH, OWN, OPERATE, MANAGE, MAINTAIN , CONTROL AND ADMINISTER , LEASE, TRANSFER, ALL INFRASTRUCTURE PROJECTS, FACILITIES OR WORKS INCLUDING AGRICULTURA L, PARKS, GARDENS, ROADS, BRIDGES, FLYOVERS, HIGHWAYS, ROADWAYS, STRUCTURES AND FACILI TIES . IN PURSUANCE OF 5 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 5 ITS OBJECTIVE, THE ASSESSEE HAD ACQUIRED LAND AT MA TIGARA AND CONSTRUCTED A SPECIALIZED WAREHOUSE OF INTERNATIONAL STANDARDS PROVIDING AND / OR FOR RENDERING STORAGE FACILITIES TO MULTINATIONAL COMPANIES. THE WAREHOUSE IS FITTED WITH COMPLETE MACHINERIES, PRE- FABRICATED STRUCTURES, ELECTRICAL INSTALLATIONS AND SECURITY SYSTEMS. THE ASSESSEE HAS ALSO EMPLOYED A HUGE LABOUR FORCE TO RUN, OPERATE A ND MAINTAIN THE WAREHOUSE. PART OF THE WAREHOUSE WAS LET OUT IN THE ORDINARY COURSE OF ITS BUSINESS AND RENTAL INCOME DERIVED THEREON WAS OFFERED UNDER THE HEAD INCOME FROM BUSINESS. ACCORDINGLY, WE HOLD THAT THE ASSESSEE HAD CONSTRUCTED A SPECIALIZE D INFRASTRUCTURE FACILITY BY WAY OF WAREHOUSE IN ORGANIZED MANNER SO AS TO BE EXPLOITED FOR COMMERCIAL GAINS. WE HOLD THAT THE DECISIVE TEST IS THE TRUE NATURE OF ACTIVI TY CARRIED OUT BY THE ASSESSEE WHICH PRODUCES THE INCOME FROM WAREHOUSE AND NOT THE WAY IN WHICH IT IS MEASURED I.E WHETHER IT IS VARIABLE OR A FIXED MONTHLY SUM. T HE LD CITA HAD CATEGORICALLY OBSERVED THAT THE ASSESSEE HAD MADE SUBSTANTIAL INV ESTMENT IN CONSTRUCTION OF A BUILDING AND IN ACQUISITION AND INSTALLATION OF PLA NT AND MACHINERIES SO AS TO DEVELOP, OPERATE & MAINTAIN A MODERN WAREHOUSING FACILITY WH ICH COULD SIMULTANEOUSLY BE USED BY NUMBER OF FMCG COMPANIES FOR STORING NUMERO US TYPES OF CONSUMER PRODUCTS. THE RENT CHARGED BY THE ASSESSEE WAS THE REFORE NOT ONLY FOR LETTING OUT OF THE BUILDING SIMPLICITOR BUT FOR PROVIDING INCIDENTAL F ACILITIES AND AMENITIES FOR SAFE STORAGE AND HANDLING OF GOODS IN AN EFFICIENT MANNE R. THE AIR CONDITIONING PROVIDED WITHIN THE WAREHOUSING FACILITIES ENABLED THE OCCUP IERS TO PRESERVE THE GOODS WITHOUT BEING SUBJECTED TO VAGARIES OF NATURE. THE ASSESSE E HAD CARRIED ON AN ORGANIZED ACTIVITY WITH A VIEW TO COMMERCIALLY EXPLOIT THE CI VIC INFRASTRUCTURE SET UP BY IT AT SUBSTANTIAL COST . FOR SETTING UP SUCH CIVIC INFRA STRUCTURE, THE ASSESSEE HAD BORROWED SUBSTANTIAL SUMS ON WHICH THE ASSESSEE WAS PAYING I NTEREST AT COMMERCIAL RATES OF INTEREST. FOR CARRYING ON SUCH ORGANIZED ACTIVITY , THE ASSESSEE HAD EMPLOYED SKILLED AND SEMI SKILLED STAFF. 6 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 6 2.3.1. WE FIND THAT THE ISSUE UNDER DISPUTE IS SETT LED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & I NVESTMENTS LTD REPORTED IN 56 TAXMANN.COM 465 (SC). IN THAT CASE, THE ASSESSEE WAS A COMPANY INCORPORAT ED WITH THE MAIN OBJECT, AS STATED IN THE MEMORANDUM OF ASS OCIATION, TO ACQUIRE THE PROPERTIES AND TO LET OUT THOSE PROPERTIES. THE ASSESSEE HAD THEREFORE ACQUIRED CERTAIN PROPERTIES AND RENTED IT OUT AND THE RENTAL INCOME RECEIVED TH EREFROM WAS SHOWN AS INCOME FROM BUSINESS. THE AO HOWEVER ASSESSED THE RENTAL INCOM E UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS. WHEN THIS Q UESTION CAME UP FOR CONSIDERATION BEFORE THE HONBLE SUPREME COURT, THE COURT GAVE PA RAMOUNT IMPORTANCE TO THE MAIN OBJECTS LAID DOWN IN THE MEMORANDUM OF ASSOCIATION TO DETERMINE THE NATURE OF RENTAL INCOME. THE COURT FOUND THAT THE MAIN OBJECT OF TH E ASSESSEE WAS TO ACQUIRE AND RENT OUT PROPERTIES AND ACCORDINGLY IT HELD THAT THE REN TAL INCOME WAS EARNED IN THE REGULAR COURSE OF ASSESSEES BUSINESS AS SET OUT IN THE OBJ ECT CLAUSE OF ITS MEMORANDUM. THE HONBLE SUPREME COURT DISTINGUISHED THE DECISIONS O F ITS EARLIER CO-ORDINATE BENCH IN THE CASE OF EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD VS CIT REPORTED IN 42 ITR 49 (SC) AND SULTAN BROTHERS (P) LTD VS CIT REPO RTED IN 51 ITR 353 (SC) . INSTEAD THE SUPREME COURT FOLLOWED THE LAW LAID DOWN IN THE DECISION BY THE SAME COURT IN KARAMPURA DEVELOPMENT CO. LTD VS CIT REPORTED IN 44 ITR 362 (SC) . IN THE AFORESAID CASE, THE ASSESSEE WAS FORMED WITH THE PU RPOSE OF ACQUIRING AND DISPOSING COAL MINING RIGHTS. IN PURSUANCE OF ITS OBJECTIVE, THE ASSESSEE HAD ACQUIRED LONG TERM LEASES OF COALFIELDS WHICH WAS SUBSEQUENTLY LET OUT TO VARIOUS CUSTOMERS. THE RENTAL INCOME DERIVED FROM LETTING OUT COALFIELDS WAS HELD ASSESSABLE AS BUSINESS INCOME BY THE HONBLE SUPREME COURT. APPLYING THE RATIO LAID DOWN IN THE AFORESAID JUDGEMENT, THE HONBLE SUPREME COURT HELD WHERE LETTING OUT OF PROPERTIES IS THE BUSINESS OF AN ASSESSEE, THE RENTAL INCOME DERIVED THEREFROM IS BU SINESS INCOME. WE ALSO FIND THAT THE DECISION OF HONBLE SUPREME COURT RELIED UPON B Y THE LD AO IN THE CASE OF S.G.MERCANTILE CORPORATION (P) LTD VS CIT REPORTED IN 83 ITR 700 (SC) IS ACTUALLY IN 7 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 7 FAVOUR OF THE ASSESSEE , IN ASMUCH AS , IN THAT CAS E, THE INCOME WAS ASSESSED ONLY AS BUSINESS INCOME. 2.3.2. WE ALSO FIND THAT THE ASSESSEE WAS FORMED IN THE YEAR 2006 AND HAD BEEN DERIVING RENTAL INCOME FROM WAREHOUSE FROM THAT YEA R AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE UPTO ASST YEAR 2011-12 AS INCOME FR OM BUSINESS. THE LD AR ALSO STATED THAT THE ASSESSMENT FOR THE ASST YEAR 2011-1 2 WAS COMPLETED U/S 143(3) OF THE ACT, WHEREIN THE RENTAL INCOME WAS ASSESSED ONLY UN DER THE HEAD INCOME FROM BUSINESS. NO NEW MATERIAL WAS BROUGHT TO ON RECOR D TO ESTABLISH WITH SUFFICIENT EVIDENCE THAT THE POSITION ACCEPTED BY THE REVENUE IN EARLIER YEARS WAS UNTENABLE EITHER ON FACTS OR AS PER LAW. HENCE WHEN THERE IS NO CHAN GE IN FACTS DURING THE YEAR UNDER CONSIDERATION, THERE IS NO REASON FOR THE REVENUE T O TAKE A DIFFERENTIAL STAND BY TREATING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. TH E PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A GO BY EVENTHOUGH THE PRINCIPLE OF RESJUD ICATE DOES NOT STRICTLY APPLY TO INCOME TAX PROCEEDINGS. RELIANCE IN THIS REGARD IS MADE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT REPORTED IN 193 ITR 321 (SC) . 2.3.3. THE LD DR PLACED RELIANCE ON YET ANOTHER REC ENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIA TES REPORTED IN (2017) 81 TAXMANN.COM 193 (SC) WHICH WAS HELD IN FAVOUR OF THE REVENUE. THE LD AR STATED THAT THE SAID DECISION IS DISTINGUISHABLE ON FACTS. IN THE CASE OF RAJ DADARKAR SUPRA, THE ASSESSEE THEREIN, HAD LET OUT SHOPS / STALLS TO VAR IOUS OCCUPANTS ON MONTHLY RENT. THE ASSESSEE COLLECTED CHARGES FOR MINOR REPAIRS, MAINT ENANCE, WATER AND ELECTRICITY. AS PER THE TERMS OF ALLOTMENT BY THE BMC, THE ASSESSEE WAS BOUND TO INCUR ALL THESE EXPENSES AND ASSESSEE IN TURN COLLECTED EXTRA MONEY FROM THE ALLOTTESS. THE ASSESSEE COLLECTED 20% OF MONTHLY RENT AS SERVICE CHARGES. SUCH SERVICE CHARGES WERE ALSO USED FOR PROVIDING SERVICES LIKE WATCH AND WARD, EL ECTRICITY, WATER, ETC. THE TRIBUNAL 8 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 8 HELD THAT THE AMOUNTS COLLECTED TOWARDS SERVICES WE RE INSEPARABLE FROM BASIC CHARGES OF RENT. THE TRIBUNAL FURTHER HELD THAT THE ASSESS EE HAD NOT ESTABLISHED THAT IT WAS ENGAGED IN ANY SYSTEMATIC OR ORGANIZED ACTIVITY OF PROVIDING SERVICE TO THE OCCUPIERS OF THE SHOPS / STALLS SO AS TO CONSTITUTE THE RECEI PTS FROM THEM AS BUSINESS INCOME . IN OUR OPINION, THE ASSESSEE RECEIVED INCOME BY LETTIN G OUT SHOPS / STALLS, AND THEREFORE, THE SAME HAS TO BE HELD AS INCOME FROM HOUSE PROPER TY. THE HONBLE SUPREME COURT IN THE CASE OF RAJ DADARK AR SUPRA HAD PLACED HEAVY RELIANCE ON THE FINDING OF AFORESAID FACTS RECORDED BY THE TRIBUNAL. WHEREAS IN THE INSTANT CASE BEFORE US, THE LD CITA HAD CATEGORICAL LY STATED THAT THE ASSESSEE HAD CARRIED ON AN ORGANIZED ACTIVITY WITH A VIEW TO COM MERCIALLY EXPLOIT THE CIVIC INFRASTRUCTURE SET UP BY IT AT SUBSTANTIAL COST INC URRED OUT OF OWN FUNDS AS WELL AS BORROWED FUNDS. THIS FINDING IS NOT CONTROVERTED BY THE REVENUE BEFORE US. ACCORDINGLY WE HOLD THAT THE RELIANCE PLACED ON THE DECISION OF RAJ DADARKAR SUPRA DOES NOT ADVANCE THE CASE OF THE REVENUE AND IS FAC TUALLY DISTINGUISHABLE. IT IS NOT IN DISPUTE THAT THE WAREHOUSE HAS BEEN CONSTRUCTED BY THE ASSESSEE WITH SEVERAL INFRASTRUCTURE FACILITIES IN ACCORDANCE WITH THE RE QUIREMENTS OF THE SPECIFIC MULTINATIONALS SO AS TO STORE THEIR PRODUCTS IN THE WAREHOUSE. 2.3.4. IN VIEW OF THE AFORESAID FINDINGS IN THE FAC TS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES SUPRA, WE HOLD THAT THE LD CITA HAD RIGHTLY DIRECTED THE LD AO TO TREAT THE WAREHOUSE RENTALS AS INCOME FROM BUSINESS AND CONSEQUENTIALLY ALLOW THE EXPENDITURE CLAIMED IN THE RETURN AS BUSINESS EXPEN DITURE. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 3. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF COMMISSIO N PAID TO RELATED PARTIES BY INVOKING PROVISIONS OF SECTION 40A(2) OF THE ACT IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 9 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 9 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD A O OBSERVED THAT THE ASSESSEE HAS PAID SERVICE COMMISSION OF RS 1,47,26,906/- DURING THE Y EAR IN COMPARISON TO RS NIL IN THE EARLIER YEAR. THE ASSESSEE WAS REQUESTED TO EXPLAI N THE NATURE OF WORK ASSOCIATED WITH THE COMMISSION PAYMENT, THE CIRCUMSTANCES UNDER WHI CH THE PAYMENT BECAME NECESSARY WHEN NO SUCH PAYMENT WAS MADE EARLIER. T HE ASSESSEE REPLIED THAT THE UNIT WAS AT THE INCEPTION STAGE OF COMMERCIAL PRODUCTION AND HAS LESS IDEA ABOUT THE MARKET AVAILABILITY OF THE PRODUCE. THE COMPANY WAS UNABLE TO OBTAIN ORDERS FROM OPEN MARKET. THERE WAS DAILY PRODUCTION OF ITS PRODUCT AND A HUGE WORKING CAPITAL INVOLVEMENT WAS THERE. HENCE IT HAD TO APPOINT M/S R.S.ISPAT LTD (ITS HOLDING COMPANY) FOR OBTAINING ORDERS FOR AND ON BEHALF OF THE ASSESSEE FOR WHICH PAYMENT OF COMMISSION TO THEM WAS WARRANTED. THE ASSESSEE HA D THE FOLLOWING TRADING ACTIVITY DURING THE RELEVANT YEAR :- SALE OF FINISHED GOODS NON ALLOY STEEL INGOT RS 36,05,83,080/- SALE OF RAW MATERIALS & STORES - C.I. INGOT MOULD RS 29,26,980/- - FERRO SILICON RS 20,48,080/- ------------------------- RS 36,55,58,140/- SALE OF TRADING GOODS - M.S.SCRAP RS 6,3 8,154/- - M.S.WIRE RS 26,14,500/- - MISC. ITEMS RS 4,67,215/- -------------------------- RS 36,92,78,009/- OUT OF THE TOTAL SALE OF GOODS OF RS 36,92,78,009/- , THE FOLLOWING SALES HAVE BEEN MADE TO PERSONS SPECIFIED IN SECTION 40A(2)(B) OF THE AC T AND HAVING SAME OFFICE ADDRESS WITH THE ASSESSEE :- ASSOCIATES YEAR ENDED SALE OF GOODS R.S.ISPAT LTD 31.3.2012 RS 41,31,918/- R.S.CONCAST LTD 31.3.2012 RS 35,27,913/- 10 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 10 BAJRANGBALI ROLLING MILLS LTD 31.3.2012 RS 14,62 ,16,721/- -------------------------- RS 15,38,76,55 2/- -------------------------- THE LD AO OBSERVED THAT SINCE THE AFORESAID COMPANI ES WERE HAVING THE SAME ADDRESS AS THAT OF THE ASSESSEE, THE ASSESSEE HAD TO PAY CO MMISSION TO OBTAIN ORDERS FROM THE MARKET DOES NOT HOLD WATER. MOREOVER, IN THE EARL IER YEAR ENDED 31.3.2011, THE ASSESSEE HAD MADE NET SALE OF PRODUCTS TO THE TUNE OF RS 37,73,77,839.50 , ON WHICH NO COMMISSION WAS PAID. THE LD AO CONCLUDED THAT THIS PAYMENT OF COMMISSION TO RELATED PARTIES DURING THE YEAR UNDER APPEAL WAS MA DE ONLY WITH A VIEW TO INFLATE THE EXPENDITURE AND REDUCE THE TAXABLE INCOME OF THE AS SESSEE AND ACCORDINGLY THE COMMISSION PAID ON SALES MADE TO RELATED PARTIES OU T OF THE TOTAL SALES NEEDS TO BE PROPORTIONATELY DISALLOWED U/S 40A(2)(B) OF THE ACT . HE FOUND THAT SALES MADE TO RELATED PARTIES CONSTITUTE 42% OF TOTAL SALES OF TH E YEAR AND ACCORDINGLY DISALLOWED 42% OF COMMISSION PAYMENT THEREON AMOUNTING TO RS 6 1,85,300/- (1,47,26,906 * 42%) IN THE ASSESSMENT. THE LD AO ALSO MADE AN ALTERNATIVE OBSERVATION THAT SINCE THE SERVICE COMMISSION OF RS 61,85,300/- WAS PAID ONLY TO RELATED PARTIES HAV ING THE SAME ADDRESS, SUCH CLAIM OF THE ASSESSEE COMPANY IS NOT ADMISSIBLE U/S 37(1) OF THE ACT AS THE SAID PAYMENT DOES NOT CONSTITUTE BUSINESS PURPOSE. 3.2. THE ASSESSEE STATED THAT IT BELONGS TO THE AGA RWAL GROUP OF WHICH M/S R.S.ISPAT LIMITED IS THE FLAGSHIP COMPANY . R.S.ISPAT LIMITE D IS PRIMARILY IN THE BUSINESS OF MANUFACTURING AND TRADING OF STEEL AND ALLIED PRODU CTS AND HAS BEEN IN THE BUSINESS OF MORE THAN 2 DECADES. R.S.ISPAT LIMITED IS A REPUT ED NAME IN THE STEEL INDUSTRY AND HAS AN ESTABLISHED MARKETING AND DISTRIBUTION CHANN ELS. THE ASSESSEE THEREFORE DECIDED TO AVAIL THE BENEFIT OF MARKETING AND DISTR IBUTION NETWEORK, KNOWLEDGE AND EXPERTISE OF R.S.ISPAT LIMITED AND APPOINTED IT AS THEIR SOLE SALE PROMOTION AGENT FOR A 11 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 11 PERIOD OF ONE YEAR. FORMAL AGREEMENT WAS EXECUTED ON 30.3.2011 WHICH WAS DULY NOTARIZED. IN TERMS OF THE SALES PROMOTION AGREEME NT, R.S.ISPAT LTD WAS ENTRUSTED WITH THE TASK OF ASSISTING IN SALES AND OTHER SALES RELATED AUXILIARY SERVICES. IN CONSIDERATION, THE ASSESSEE WAS REQUIRED TO PAY 4% OF THE TOTAL SALES INVOICE BILLED DURING THE TENURE OF THE AGREEMENT. ACCORDINGLY, I N TERMS OF THE SALES PROMOTION AGREEMENT, THE ASSESSEE PAID COMMISSION OF RS 1,47, 26,906/- TO M/S R.S.ISPAT LIMITED. IT WAS PLEADED THAT THE LEGISLATIVE INTE NT OF ENACTING SECTION 40A(2) OF THE ACT WAS TO CURB AVOIDANCE OF TAX BY WAY OF SHIFTING OF PROFITS FROM ONE CONCERN TO ANOTHER, BY MAKING PAYMENTS TO SISTER CONCERNS/ REL ATED PARTIES. THE ASSESSEES FLAGSHIP COMPANY M/S R.S.ISPAT LIMITED IS AN INDEPE NDENT OPERATIONAL COMPANY WHICH IS ASSESSED TO TAX BY DCIT, CIRCLE 3(1), KOLKATA AN D HAD FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2012-13 DECLARING TOTAL INCOME OF RS 2,94,85,510/-, WHICH ADMITTEDLY INCLUDES THE COMMISSION PAYMENTS MADE BY THE ASSESS EE TO THEM. IT WAS PLEADED THAT R.S.ISPAT LIMITED IS HAVING A TURNOVER OF RS 431 CR ORES FOR THE YEAR ENDED 31.3.2012 AND IS A REGULAR OPERATIONAL COMPANY . HENCE THERE IS NO SCOPE OF AVOIDANCE OF TAX AS ALLEGED BY THE LD AO WHILE MAKING THE DISALLOWANCE U/S 40A(2) OF THE ACT. IT WAS ALSO PLEADED THAT THE LD AO HAD NOT BROUGHT ANY MATERIAL ON RECORD IN THE FORM OF COMPARABLE CASES TO PROVE THAT THE PAYMENT MADE TO R.S.ISPAT LIMITED WAS EXCESSIVE OR UNREASONABLE SO AS TO INVOKE SECTION 40A(2) OF T HE ACT. IT WAS FURTHER PLEADED THAT THE LD AO BY HIS OWN ACTION HAD ACCEPTED THE PAYMEN T OF COMMISSION AT 4% TO R.S.ISPAT LIMITED FOR SALES MADE TO UNRELATED PARTI ES WHICH CONSTITUTES 58% OF TOTAL SALES. THIS GOES TO PROVE THAT THE GENUINITY OF T HE COMMISSION AGREEMENT, FACTUM OF SERVICES RENDERED BY R.S.ISPAT LIMITED HAVE BEEN AC CEPTED AS SUCH BY THE LD AO. IT IS NOT THE CASE OF THE LD AO THAT THE ASSESSEE HAD PAI D MORE COMMISSION TO RELATED PARTIES AT A HIGHER PERCENTAGE WHEN COMPARED TO PAYMENT MAD E TO UNRELATED PARTIES. HIS ONLY ALLEGATION IS THAT THERE IS NO NEED TO PAY ANY COMM ISSION FOR SALES MADE TO RELATED PARTIES AND ACCORDINGLY HAD INVOKED SECTION 40A(2) OF THE ACT FOR DISALLOWANCE OF THE PROPORTIONATE COMMISSION. IT WAS FURTHER PLEADED TH AT THE COMMISSION PAYMENTS MADE 12 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 12 TO R.S.ISPAT LIMITED WERE DULY SUBJECTED TO LEVY OF SERVICE TAX AND DEDUCTION OF TAX AT SOURCE AND THAT THE PAYMENTS WERE MADE BY ACCOUNT P AYEE CHEQUES AND DULY CONFIRMED BY THE RECIPIENTS AND OFFERED TO TAX IN T HEIR RETURNS AT MAXIMUM MARGINAL RATE. IT WAS ALSO SUBMITTED THAT R.S.ISPAT LIMITED HAD REPORTED COMMISSION INCOME OF RS 16,12,01,851/- FOR THE YEAR ENDED 31.3.2012 IN T HEIR PROFIT AND LOSS ACCOUNT , WHICH GOES TO PROVE THAT THEY ARE IN THE REGULAR BUSINESS OF EARNING SERVICE COMMISSION FROM OTHER PARTIES ALSO AND HENCE THERE IS ABSOLUTELY NO SCOPE TO DOUBT THE ENTIRE TRANSACTION OR THE AGREEMENT ENTERED INTO WITH THEM, BY TREATIN G THE SAME AS A SHAM OR COLOURABLE DEVICE. UNDOUBTEDLY, THE PAYEE HAD EXPERIENCE IN STEEL BUSINESS WHICH HAD ENABLED ITSELF TO EARN COMMISSION INCOME FROM VARIOUS PARTI ES IN THE MARKET INCLUDING THE ASSESSEE HEREIN. THESE CONTENTIONS WERE DULY APPRE CIATED BY THE LD CITA AND ACCORDINGLY THE DISALLOWANCE MADE BY THE LD AO WAS DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. DISALLOWANCE OF PAYMENT OF SERVICE COMMISSION TO RELATED PARTIES UNDER SAME GROUP OF MANAGEMENT AND LOCATED AT THE SAME AD DRESS WITH THE ASSESSEE U/S 40A(2) OF THE IT ACT, 1961. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE LD CITA HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAD COMPLETEL Y OUTSOURCED ITS MARKETING ACTIVITY TO R S ISPAT LIMITED WHICH HAD SOURCED THE ENTIRE S ALES TO THE ASSESSEE . ADMITTEDLY THE SALES WERE MADE BY THE ASSESSEE TO ITS RELATED PARTIES (42%) AND ALSO TO UNRELATED PARTIES (58%) . THE COMMISSION WAS PAID BY THE AS SESSEE TO R.S.ISPAT LIMITED @ 4% ON TOTAL SALES MADE BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT R S ISPAT LIMTIED HAD ESTABLISHED AN EXTENSIVE MARKETING NETWORK; CAPABLE OF PROCURING ORDERS FOR THE ASSESSEES PRODUCTS. SINCE UNDER THE AGREEMENT, R. S.ISPAT LIMITED WAS ENTRUSTED WITH THE ENTIRE MARKETING AND SALES PROMOTION ACTIVITIES AND THE ASSESSE WAS NOT REQUIRED TO UNDERTAKE ANY MARKETING EFFORTS OF ITS OWN, THE PAR TIES HAD AGREED FOR A UNIFORM BASIS FOR COMPUTING THE AMOUNT OF COMPENSATION PAYABLE BY THE ASSESSEE IN THE FORM OF COMMISSION. THE COMMISSION PAYABLE TO R.S.ISPAT L IMITED THEREFORE WAS NOT LINKED 13 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 13 TO ORDERS PROCURED FROM ANY SPECIFIED PARTIES BUT T HE BASIS ADOPTED FOR PAYMENT OF COMMISSION WAS 4% OF THE GROSS TURNOVER OF THE ASSE SSEE FOR THE RELEVANT PERIOD. THE LD CITA HAD FURTHER GIVEN A FINDING THAT THE LD AO HAD NOT FOUND OR PROVED THE ASSESSEES AGREEMENT WITH R.S.ISPAT LIMTIED TO BE S HAM OR BOGUS. IT IS NOT IN DISPUTE THAT THE FACTUM OF SERVICES RENDERED BY R.S.ISPAT L IMITED ARE DOUBTED BY THE LD AO IN AS MUCH AS THE LD AO HAD ALLOWED THE COMMISSION PA YMENTS MADE TO R.S.ISPAT LIMITED TO THE EXTENT OF 58% OF TOTAL PAYMENTS. H ENCE THE COMMISSION AGREEMENT, NATURE OF SERVICES RENDERED BY PAYEE STANDS PROVED CONCLUSIVELY. THE PAYEE HAD ALSO SHOWN THE COMMISSION INCOME IN ITS RETURNS AND IT I S ALSO FOUND THAT IT HAD REPORTED A SUM OF RS 16.12 CRORES AS COMMISSION INCOME IN ITS PROFIT AND LOSS ACCOUNT AND HAD SUFFERED TAX AT MAXIMUM MARGINAL RATE. HENCE IT CA NNOT BE CONSTRUED AS A DEVICE TO SHIFT THE PROFITS FROM PROFIT MAKING ENTITY TO LOSS MAKING UNIT BY WAY OF HAVING TRANSACTIONS WITH THE RELATED PARTIES. WE FIND TH AT THE ASSESSEE HAD MADE PAYMENT OF COMMISSION AT 4% ON SALES MADE TO BOTH RELATED AS W ELL AS UNRELATED PARTIES. HENCE THE PERCENTAGE OF COMMISSION AT 4% IS DETERMINED TO BE AT ARMS LENGTH. HENCE THE SAME CANNOT BE CONSTRUED AS EXCESSIVE OR UNREASONAB LE WITHIN THE MEANING OF SECTION 40A(2) OF THE ACT. THERE IS NO EVIDENCE TO PROVE THAT THE IMPUGNED TRANSACTION OF PAYMENT OF COMMISSION WAS PROMPTED BY CONSIDERATION OF TAX AVOIDANCE. ON THE CONTRARY, THE EVIDENCES SUGGEST THAT THE PAYEE HAD SUFFERED TAXES ON THE SAID COMMISSION INCOME AT MAXIMUM MARGINAL RATE AND HAD ALSO DERIVED COMMISSION INCOME OF RS 16.12 CRORES WHICH ADMITTEDLY INCLUDES COMMISSION PAYMENTS MADE BY THE ASSESSEE HEREIN. WE HOLD THAT THE LD CITA HAD RIGHTLY APPRECIATED THESE FACTS AND CONTENTIONS OF THE ASSESSEE AND HAD RIGHTLY DELETED THE DISALLOWANCE AND WE FIND NO INFIRMITY IN THE SAID ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 14 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 14 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DIRECTING THE LD AO TO GRANT DEPRECIATION AT 15% ON ELECTRICAL INSTALLATIONS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE CLAIMED DEPRECIATION AT THE RATE OF 15% ON ELECTRICAL INSTALLATIONS REFLECTED IN THE BA LANCE SHEET. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED THE DETAILS OF OPENING AND CLOSING WRITTEN DOWN VALUE (WDV) OF PLANT AND MACHINERIES. THE LD AO THEREAFTER SHOW CAUSED THE ASSESSEE TO EXPLAIN AS TO WHY THE ELECTR ICAL INSTALLATIONS AT THE FACTORY SHOULD NOT BE TREATED AS OFFICE EQUIPMENT INSTEAD OF PLANT AND MACHINERY AND THEREFORE WHY THE NORMAL DEPRECIATION SHOULD NOT BE REDUCED FROM 15% TO 10%. IN RESPONSE THE ASSESSEE SUBMITTED THE NATURE AND PURP OSE OF ELECTRICAL INSTALLATIONS AND EXPLAINED THAT THESE INSTALLATIONS WERE MADE AT THE FACTORY AND NOT THE OFFICE PREMISES. IT WAS EXPLAINED THAT THESE ELECTRICAL INSTALLATION S WERE MADE TO OPERATE AND RUN THE FACTORY ALONG WITH MACHINERIES INSTALLED AT THE FAC TORY UNIT. ACCORDINGLY THE ELECTRICAL INSTALLATIONS FORMED AN INTEGRAL PART OF PLANT AND MACHINERY. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS OSWAL WOOLLEN MILLS LIMITED REPORTED IN 289 ITR 261 (P&H) WHEREIN THE ASSESSEE IN THAT CASE HAD CLAIMED DEPRECIATION AT 2 5% ON ELECTRICAL INSTALLATIONS IN THE UNIT TREATING IT TO BE PLANT AND MACHINERY. THE AO HOWEVER TREATED THE SAME AS OFFICE EQUIPMENT AND ALLOWED DEPRECIATION TO THE EXTENT OF 15%. ON APPEAL THE HIGH COURT HELD THAT THE ELECTRICAL INSTALLATION WAS IN THE UNIT AND THEREFORE FORMED AN INTEGRAL PART OF PLANT AND MACHINERY AND ALLOWED DEPRECIATION AT 25% AS CLAIMED BY THE ASSESSEE. THE ASSESSEE ALSO STATED THAT SIMILA R VIEWS WERE EXPRESSED IN THE FOLLOWING CASES :- A) CIT VS METALMAN AUTO PVT LTD REPORTED IN 11 TAXM ANN.COM 51 (P&H HC) 15 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 15 B) CIT VS SUBRATA DUTTA CHOUDHARY REPORTED IN 197 T AXMAN 71 (P&H ) C) CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN THE CAS E OF MALLOW INTERNATIONAL VS DCIT IN ITA NO. 564/MDS/2010 DATED 9.7.2010. THE LD AO DID NOT HEED TO THE CONTENTIONS OF THE AS SESSEE AND REDUCED THE CLAIM OF DEPRECIATION FROM 15% TO 10% IN THE ASSESSMENT. 4.2. THE LD CITA GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER:- 6.2. I HAVE CAREFULLY CONSIDERED THE ARS SUBMISSI ONS AND PERUSED THE IMPUGNED ORDER. FROM THE DETAILS PLACED BEFORE ME, I FIND TH AT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO SUBSTANTIATE HIS FINDING THAT E LECTRICAL INSTALLATIONS WERE LOCATED IN THE OFFICE PREMISES SO AS TO FORM PART OF THE WD V OF THE BLOCK OF BUILDING OR FURNITURE & FIXTURE. ON THE CONTRARY IT IS THE ASSE SSEES PLEA THAT THE ELECTRICAL INSTALLATIONS WERE INTEGRAL PART OF THE PLANT & MAC HINERIES INSTALLED AT THE FACTORY. THE ELECTRICAL INSTALLATIONS INTER ALIA INCLUDED ITEMS SUCH AS TRANSFORMERS, ELECTRICAL PANELS, HT WIRINGS ETC. WHICH WERE NECESSARY FOR OP ERATING PLANT & MACHINERIES INSTALLED AT THE FACTORY. WITHOUT THE AID AND USE O F THE SUPPORTING ELECTRICAL INSTALLATIONS, THE ASSESSEES FACTORY COULD NOT HAV E BEEN MADE OPERATIONAL. THE ELECTRICAL INSTALLATIONS THUS INTRINSICALLY RELATED WITH THE PLANT & MACHINERY AND COULD NOT BE CONSIDERED IN ISOLATION. FROM THE IMPUGNED O RDER I FIND THAT NO MATERIAL OR EVIDENCE WAS GATHERED BY THE AO TO DISPEL THE ASSES SEES AVERMENTS NOT THE AO BROUGHT ON RECORD ANY POSITIVE MATERIAL TO SUBSTANT IATE HIS FINDING THAT ELECTRICAL INSTALLATIONS WERE IN THE NATURE OF BUILDING OR FUR NITURE & FIXTURES. MOREOVER, I FIND THAT SUBSTANTIAL PART OF THE CLAIM FOR DEPRECIATION ON ELECTRICAL INSTALLATIONS PERTAINED TO WDV OF THE ELECTRICAL INSTALLATIONS BROUGHT FORW ARD FROM THE EARLIER YEAR. I DO NOT FIND IN THE EARLIER YEARS ASSESSMENTS THE CLAIM FO R DEPRECIATION WAS REDUCED ON THE GROUND THAT IT DID NOT QUALIFY FOR DEPRECIATION AT THE GENERAL RATE APPLICABLE TO PLANT & MACHINERY. ON THE CONTRARY THE AR FURNISHED EVIDE NCE TO SHOW THAT IN THE EARLIER YEAR THE DEPRECIATION WAS ALLOWED AT THE RATE OF 15 % BEING THE GENERAL RATE APPLICABLE TO PLANT & MACHINERIES. IN THE CIRCUMST ANCES, I FIND THAT IF IN THE EARLIER YEARS, THE CHARACTER OF THE DEPRECIABLE ASSET WAS A CCEPTED BY THE DEPARTMENT TO BE PLANT & MACHINERY ELIGIBLE FOR DEPRECIATION AT GENE RAL RATE OF 15% THEN IN LATER YEAR THE AO COULD NOT CHANGE THE CHARACTER AND OR CATEGO RY OF THE DEPRECIABLE ASSET AND REDUCE THE PERMISSIBLE RATE TO 10%. I FURTHER FIND THAT THE ASSESSEES CLAIM FOR DEPRECIATION IN RESPECT OF ELECTRICAL INSTALLATIONS IS SUPPORTED BY THE JUDGMENTS OF THE PUNJAB & HARIYANA HIGH COURT IN THE CASE OF CIT VS. OSWAL WOLLEN MILLS LIMITED (289 ITR 261), CIT VS. METALMAN AUTO PVT. LTD. (11 TAXMANN. COM 51) & CIT VS. SUBRATA DUTTA CHOUDHARY (197 TAXMAN 71). SINCE THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO THE CONTRARY, FOLLOWING THE RATIO L AID DOWN IN THESE DIRECTIONS, I DIRECT THE AO TO ALLOW THE DEPRECIATION AT A HIGHER RATE OF 15% IN RESPECT OF ELECTRICAL 16 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 16 INSTALLATIONS AND DELETE THE DISALLOWANCE OF RS. 4, 02,157/-. [GROUND NOS. 5 & 6 ARE ALLOWED.] 4.3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. EXCESS DEPRECIATION CLAIMED @ 15% ON OFFICE EQUI PMENT IS RESTRICTED TO 10% AND DISALLOWED @ 5%. 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE LD CITA HAD GIVEN A CATEGORICAL FINDING THAT THE ELECTRICAL INSTALLATIO NS WERE INTEGRAL PART OF PLANT AND MACHINERY INSTALLED AT THE FACTORY AND THAT THE ELE CTRICAL INSTALLATIONS INTER ALIA INCLUDED ITEMS SUCH AS TRANSFORMERS, ELECTRICAL PANELS, HT W IRINGS ETC WHICH WERE NECESSARY FOR OPERATING PLANT AND MACHINERIES INSTALLED AT THE FA CTORY. HE FURTHER HELD THAT WITHOUT THE AID AND USE OF SUPPORTING ELECTRICAL INSTALLATI ONS, THE ASSESEES FACTORY COULD NOT HAVE BECOME OPERATIONAL. THESE FINDINGS ARE NOT CO NTROVERTED BY THE REVENUE BEFORE US. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 23.03.2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.03.2018 SB, SR. PS 17 ITA NO.1309/KOL/2015 M/S MAA AMBA INFRASTRUCTURE PVT. LTD. A.YR.2012-13 17 COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-10(1), KOLKATA, P-7, CHOWRINGHEE SQ UARE, 3 RD FLOOR, KOLKATA-700069. 2. M/S MAA AMBA INFRASTRUCTURE PVT. LTD., B-401, 4 TH FLOOR, CITY CENTRE, SALT LAKE CITY, KOLKATA-700064. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S