Mayura Steels Private Ltd., Kolhapur V. Additional Commissioner of Income-tax,

ITA 1347/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0934 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 24-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Assessee Lawyers: AJINKYA A JAG OJE
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1347/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2011-12 MAYURA STEELS PRIVATE LIMITED, R.S.NO.526, SHIYE BAWADA ROAD, KOLHAPUR 416122 PAN : AABCM7847D ....... / APPELLANT ' / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE 2, KOLHAPUR / RESPONDENT ASSESSEE BY : SHRI AJINKYA A. JAGOJE REVENUE BY : SHRI HITENDRA NINAVE / DATE OF HEARING : 26-10-2015 / DATE OF PRONOUNCEMENT : 28-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATED 21-03 -2014 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED IN THE APPEAL IS, WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM HIGHER RATE OF DEPRECIATION (80%) ON THE CIVIL CONSTRUCTION AND ELECTRICAL INSTALLATIONS OF WINDMILL. 2 ITA NO.1347/PN/2014, A.Y. 2011-12 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAG ED IN THE BUSINESS OF MANUFACTURE AND SALE OF ALLOY STEEL CASTINGS, FOU NDRY EQUIPMENTS, HIRING OF GAS CYLINDERS AND GENERATION OF ELECTRIC ITY FROM WINDMILL. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUG NED ASSESSMENT YEAR ON 28.09.2011 DECLARING TOTAL INCOME OF RS.7,85,94,683/-. DURING THE COURSE OF SCRUTINY ASSESSMEN T, THE ASSESSING OFFICER MADE DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON WINDMILL. THE ASSESSEE HAD CLAIMED DEPRECIATION ON RS.6,65,08,380/- I.E. ENTIRE COST OF WINDMILL UNIT INCLUDING CONCRE TE BASE STRUCTURE AND ELECTRICAL INSTALLATIONS. THE ASSESSING OFFICER HELD THAT CIVIL CONSTRUCTION AND ELECTRICAL FITTINGS ARE NOT PART OF WINDMILL, THEREFORE, THESE COMPONENTS ARE NOT ELIGIBLE FOR HIGHER RAT E OF DEPRECIATION @ 80%. THE ASSESSING OFFICER RESTRICTED THE DEPRECIATION @ 10% ON THE AFORESAID COMPONENTS AND MADE DISALLOWANC E OF RS.16,20,000/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 23.10.2013, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE CIT(A) AFFIRMED THE FINDINGS OF ASSESSING OFFICER A ND REJECTED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSE E IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST THE FINDINGS OF COMMISSIONE R OF INCOME TAX (APPEALS). 4. SHRI AJINKYA A. JAGOJE APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED THAT THE ASSESSEE HAD INSTALLED WINDMILLS AT PETN IKOTA, KURNOOL, ANDHRA PRADESH AND AT JINTI, DISTRICT SATARA, MAH ARASHTRA. THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE TOTAL CAPIT ALIZED VALUE OF WINDMILLS @ 80%. THE ASSESSING OFFICER BIFURCATED THE DIFFERENT 3 ITA NO.1347/PN/2014, A.Y. 2011-12 COMPONENTS OF WINDMILL AND RESTRICTED DEPRECIATION ON THE FO UNDATION CIVIL WORK AND ELECTRICAL INSTALLATION AT 10% I.E. RS.1,80,000/-. THE LD. AR CONTENTED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEPREC IATION ON THE ENTIRE COMPOSITE UNIT OF WINDMILL, WHICH INCLUDES CONCRETE FOUN DATION AS WELL AS ELECTRICAL INSTALLATIONS. IN SUPPORT OF HIS SUBMIS SIONS, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- 1. CIT, AHMEDABAD-III VS. PARRY ENGINEERING & ELECTRONICS (P.) LTD. (2014) 49 TAXMANN.COM 252 (GUJARAT) 2. CIT-III, PUNE VS. COOPER FOUNDRY PVT. LTD. INCOME TAX APPEAL NO.1326 OF 2010 (BOMBAY HIGH COURT) 3. WESTERN PRECICAST PVT. LTD. SANGLI ITA NO.1495/PN/20 11 DATED 30.01.13 (PUNE BENCH B) 4. KUTTI SPINNERS (P.) LTD. (2014) 51 TAXMANN.COM 534 (CHENNAI TRIB.) 5. ON THE OTHER HAND, SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT, VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF BOTH SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR HAS PLACED RELIANCE IN SUPPORT OF HIS SUBMISSIONS. THE ONLY ISSUE RAI SED IN THE APPEAL IS WHETHER THE CIVIL WORK FORMING THE FOUNDATION OF WI NDMILL AND ELECTRICAL INSTALLATIONS ARE INTEGRAL PART OF WINDMILL AND ELIGIBLE FO R HIGHER RATE OF DEPRECIATION @ 80%. THE ISSUE RAISED IN THE PRESENT APPEAL IS NO MORE RES INTEGRA . THERE ARE CATINA OF DECISIONS BY VARIOUS HONBLE HIGH COURTS AND THE CO-ORDINATE BENCHES OF TRIBU NAL, WHEREIN THIS ISSUE HAS TIME AND AGAIN BEEN ADJUDICATED. THE HON BLE HIGH COURTS HAVE BEEN CONSISTENTLY HOLDING THAT WINDMILL CIVIL ST RUCTURE 4 ITA NO.1347/PN/2014, A.Y. 2011-12 FOUNDATION AND ELECTRICAL FITTINGS ARE CLOSELY INTER-CONNECTE D AND LINKED WITH EACH OTHER MAKING IT A SINGLE COMPOSITE UNIT. THEREFO RE, ON ALL THE COMPONENTS OF THE WINDMILL, WHETHER IT BE CONCRETE FOUNDATIO N OR ELECTRICAL FITTINGS / INSTALLATIONS, DEPRECIATION @ 80% HAS TO B E ALLOWED. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT, AHMED ABAD-III VS. PARRY ENGINEERING & ELECTRONICS (P.) LTD. (SUPRA) HAS HELD AS UNDER:- 5. WE ARE OF THE OPINION THAT THE APPROACH OF BOTH THE AUTHORITIES IS PERFECTLY JUSTIFIED. WINDMILL WOULD REQUIRE A SCIEN TIFICALLY DESIGNED MACHINERY IN ORDER TO HARNESS THE WIND ENERGY TO TH E MAXIMUM POTENTIAL. SUCH DEVICE HAS TO BE FITTED AND MOUNTED ON A CIVIL CONSTRUCTION, EQUIPPED WITH ELECTRIC FITTINGS IN OR DER TO TRANSMIT THE ELECTRICITY SO GENERATED. SUCH CIVIL STRUCTURE AND ELECTRIC FITTINGS, THEREFORE, IT CAN BE WELL IMAGINED, WOULD BE HIGHLY SPECIALIZED. THUS, SUCH CIVIL CONSTRUCTION AND ELECTRIC FITTING WOULD HAVE NO USE OTHER THAN FOR THE PURPOSE OF FUNCTIONING OF THE WINDMILL. ON THE OTHER HAND, IT CAN BE EASILY IMAGINED THAT WINDMILL CANNOT FUNCTION WI THOUT APPROPRIATE INSTALLATION AND ELECTRIFICATION. IN OTHER WORDS, T HE INSTALLATION OF WINDMILL AND THE CIVIL STRUCTURE AND THE ELECTRIC FITTINGS A RE SO CLOSELY INTERCONNECTED AND LINKED AS TO FORM THE COMMON PLA NT. AS ALREADY NOTED, THE LEGISLATURE HAS PROVIDED FOR HIGHER RATE OF DEPRECIATION OF 80 PER CENT ON RENEWABLE ENERGY DEVISES INCLUDING WIND MILL AND ANY SPECIALLY DESIGNED DEVISE, WHICH RUNS ON WINDMILL. THE CIVIL STRUCTURE AND THE ELECTRIC FITTING, EQUIPMENTS ARE PART AND P ARCEL OF THE WINDMILL AND CANNOT BE SEPARATED FROM THE SAME. THE ASSESSEE 'S CLAIM FOR HIGHER DEPRECIATION ON SUCH INVESTMENT WAS, THEREFORE, RIG HTLY ALLOWED. 7. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT-III , PUNE VS. COOPER FOUNDRY PVT. LTD. (SUPRA), HAS HELD THAT CEMENT FOUNDATION IS TO BE INCLUDED IN THE COST OF WINDMILL WHILE GRANTING DEPRECIATIO N @ 80%. SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE BENCH IN CASE OF ASSTT. CIT VS. WESTERN PRECICAST PVT. LTD. (SUPRA) AND THE CHENNAI BE NCH OF TRIBUNAL IN THE CASE OF KUTTI SPINNERS (P.) LTD. (SUPRA). TH US, IN VIEW OF THE FACTS OF THE CASE AND VARIOUS DECISIONS DISCUSSED ABO VE, WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION @ 80% ON ELECTRICAL INSTALLATIONS AS WELL AS CIVIL CONSTRUCTION CONCRETE FOUNDAT ION OF THE WINDMILL. 5 ITA NO.1347/PN/2014, A.Y. 2011-12 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE IMPUGNED ORDER IS SET-ASIDE. ORDER PRONOUNCED ON WEDNESDAY, THE 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 28 TH OCTOBER, 2015 GCVSR/RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A), KOLHAPUR. 4. ' / THE CIT-I / II, KOLHAPUR / CIT (CENTRAL), PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. / // ! % // TRUE COPY// #4 / BY ORDER, ! % // TRUE COPY // %5 ,0 / SR. PRIVATE SECRETARY ,- , / ITAT, PUNE