Dy.CIT, Cir.3, Pune, Pune V. Shri Rahul K. Shinde, Pune

ITA 153/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66863 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.153/PN/2012 ASSESSMENT YEAR : 200 8 - 0 9 DY. CIT, CIRCLE-3 PUNE VS. RAHUL K. SHINDE S. NO. PLOT NO. 12, JAEE BUNGLOW, KOTHRUD, PUNE (APPELLANT) (RESPONDENT) PAN NO. ASBPS3533P APPELLANT BY: MS. ANN KAPTHUAMA RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 10-04-2013 DATE OF PRONOUNCEMENT : 26-04-2013 ORDER PER R.S. PADVEKAR, JM:- IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD.CIT(A)-II, PUNE DATED 25-10-2011 FOR THE A.Y. 200 8-09. THE REVENUE HAS TAKEN FOLLOWING 2 EFFECTIVE GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN ALLOWING DEPRECIATION ON THE CIVIL WORK AND ELECTRIC ITEMS AND ON FEES PAID TO THE MAHARASHTRA ENERGY DEVELOPMENT AGENCY (MEDA) @ 80% HOLDING THAT THE SAME FORMED PART OF THE WINDMILL. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT AS PER CLAUSE I II(8)(XIII)(I) OF THE APPENDIX I TO THE INCOME-TAX RULES, 1962, ONLY WIN D MILLS AND ANY SPECIFICALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS ARE ELIGIBLE FOR DEPRECIATION @ 80% AND THE CIVIL WORK AND ELECTRIC ITEMS, NOT BEING IN THE NATURE OF POWER GENERATION APPARATUS, BY NO MEANS, COULD BE TREATED AS PART OF WINDMILL. 3. THE FACTS WHICH ARE REVEALED FROM RECORD ARE AS UNDE R. THE ASSESSEE HAS PURCHASED 2 WINDMILLS FROM TS WINDPOWER DEV ELOPERS TOWARDS WHICH THE HE HAS CAPITALIZED THE TOTAL EXPENDITU RE OF RS.2,32,56,735/-. ON THE SAID AMOUNT THE ASSESSEE HAS CLA IMED DEPRECIATION @ 80% WHICH WAS WORKED OUT TO RS.93,02,694/ -. THE ASSESSING OFFICER HAS RESERVATION FOR NOT ALLOWING THE DEPRECIATION @ 8 0% IN RESPECT OF VARIOUS ITEMS OF EXPENDITURE RELATING TO WIND MILLS. THE 2 ITA NO.153/PN/2012, RAHUL K. SHINDE, PUNE ASSESSING OFFICER HELD THAT THE EXPENDITURE ON CIVIL WORK, ELE CTRICAL ITEMS, TRANSFORMERS, ERECTION AND COMMISSIONING ETC. ARE NO T ELIGIBLE FOR DEPRECIATION AT A HIGHER RATE I.E. @ 80%, AS THOSE ITEMS A RE NOT PART OF ELECTRICITY GENERATION APPARATUS. THE ASSESSING OFFICER THE REFORE MADE THE TOTAL DISALLOWANCE OF RS.26,25,520/-, OUT OF TOTAL DEPREC IATION CLAIMED BY THE ASSESSEE OF RS.93,02,694/-. THE LD. CIT(A) ALLOWED THE DEPRECIATION @ 80% ON THE EXPENDITURE CAPITALIZED ON THE CIVIL WORK WHICH HAS BEEN INCURRED FOR ERECTION OF WINDMILLS. THE LD.CI T(A) FOLLOWED THE DECISION IN THE CASE OF DCIT VS. COOPER FOUNDR Y PVT. LTD. ITA NO. 1437/PN/2007 DATED 29-05-2009. 5. IN RESPECT OF THE HIGHER RATE OF DEPRECIATION ON ELECT RICAL ITEMS AND TRANSFORMERS THE LD. CIT(A) FOLLOWED THE DECISION IN THE CASE OF POONAWALLA FINVEST & AGRO PVT. LTD. 188 TTJ 68 (PUNE). IN RESPECT OF EXPENDITURE IN THE FORM OF FEES PAID TO MEDA WHICH WAS CAP ITALIZED, LD.CIT(A) OBSERVED THAT IT IS ONE TIME EXPENDITURE FOR ACQU IRING THE RIGHT TO RUN THE WINDMILLS AND HENCE, IT IS IN THE NATURE OF THE CAPITAL EXPENDITURE. LD.CIT(A) FURTHER HELD THAT THE ASSESSEE HAS RIGHTLY CAPITALIZED THE PAYMENT OF MEDA CHARGES AND WITHOUT PRE JUDICE HELD THAT PAYMENT TO MEDA IS A REVENUE EXPENDITURE AND SAM E TO BE ALLOWED IN TOTALITY. HE ACCORDINGLY DIRECTED TO ASSESSING OFFICER TO ALLOW THE DEPRECIATION @ 80%. 6. BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD THE PARTIES. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN CON SIDERED BY THE TRIBUNAL IN THE CASE OF M/S. WESTERN PRECICAST PVT. LTD. VS . JCIT, RANGE- I, SANGLI, ITA NO. 1495/PN/2011 ORDER DATED 30-01-2013. THE TRIBUNAL FOLLOWED THE DECISION IN THE ASSESSEE OWN CASE FOR THE A.Y. 2007-08. THE OPERATIVE PART OF THE TRIBUNALS ORDER IS AS UNDER: 4. WE HAVE HEARD THE RIVAL PARTIES. THE LD. COUNSEL SUB MITS THAT IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08, THE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL AND HAS ALLOWED THE CLAIM OF ASSESSEES ON DEPRECIATION AT 80% ON THE FOUNDATION, ERECTION AND INSTALLATION COST OF THE WIND MILL. THE LD. COUNSEL HAS FILED THE COPY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08. WE HAVE ALSO HEA RD THE 3 ITA NO.153/PN/2012, RAHUL K. SHINDE, PUNE LD. D.R. WE FIND THAT THE ISSUE OF THE RATE OF DEPREC IATION APPLICABLE TO THE COST OF FOUNDATION OF ERECTION AND COMMISSIONIN G HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESEES OWN CASE FOR THE A.Y. 2007- 08. THE TRIBUNAL HAS HELD THAT FOUNDATION IS THE INTE GRAL PART OF THE WIND MILL AND SAME IS ELIGIBLE FOR DEPRECIATION AT THE RATE WHICH IS APPLICABLE TO THE WIND MILL. IN THE SAME WAY THE TRIBUN AL ALSO ALLOWED THE DEPRECIATION RATE WHICH IS APPLICABLE TO THE WIND MILL FOR THE ERECTION AND INSTALLATION COST OF THE WIND MILL. THE OPERAT IVE PART OF THE TRIBUNAL ORDER IS AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. IN ORDER TO APPRECIATE THE DISPUTE, THE FOLLOWING BREAK-UP OF EXP ENSES ON ACCOUNT OF ERECTION AND COMMISSION OF WINDMILL I I.E. WI NDMILL INSTALLED IN THE PRECEDING ASSESSMENT YEAR 2006-07 WOULD BE NEC ESSARY AS CONTAINED IN PARA 2.5 OF ORDER OF THE CIT(A):- S.NO. DATE NATURE OF WORK EXPENDITURE RS. 1. 30-03-2006 TOWARDS SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD WITH VCB, OUTDOOR TYPE CT & PT AND HT TRANSMISSION LINE FROM WINDMILL TO GRID INTERCONNECTION POINT INCLUDING HT METERING FOR 1.25 MW WINDMILL AT LOCATION NO. K437 AT ABOVE SITE ADDRESS. 30,93,500/- 2. 30-03-2006 LABOUR CHARGES TOWARDS FINAL TESTING AND COMMISSIONING FOR 1.25 MW WINDMILL AT LOC NO. K437. 1,10,200/- 3. 30-03-2006 TOWARDS LABOUR CHARGES FOR WORK EXECUTED, FOR ERECTION AND INSTALLATION OF WINDMILL CONSISTING OF : UNLOADING AND SAFE KEEPING OF MATERIAL, ASSEMBLY, ERECTION AND INSTALLATION OF WINDMILL TOWER AND WIND TURBINE GENERATOR FOR 1.25 MW WINDMILL AT LOCATION NO K-437 AT ABOVE SITE ADDRESS. 14,32,600/- 4. 04-03-2006 PROCESSING FEES 2,58,970/- 5. 31-12-2005 MEDA PROCESSING AND APPLICATION FEES 6,28,750/- 6. 31-03-2006 CONTRIBUTION TOWARDS COMMON POWER EVACUATION INFRASTRUCTURE FACILITY 37,50,000/- 8. IN RESPECT OF ABOVE SIX COMPONENTS OF COST OF WIN DMILL CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER ALLOWED DEPREC IATION AT 15% AND NOT AT 80% AS CLAIMED BY THE ASSESSEE. THE CIT(A) HOWEVER, CONSIDERED THE ITEMS OF COSTS AT NO 1 TO 5 QUALIFYIN G FOR HIGHER RATE OF DEPRECIATION BEING INTEGRAL PART OF WINDMILL. IN SO FAR AS ITEM NO. 1 IS CONCERNED, THE COST OF RS. 30,93,500/- IS TOWARDS SUPPL Y OF ELECTRICAL ITEMS OF THE WINDMILL ITSELF. THE CIT(A) HAS OBSERVED T HAT SUCH COST IN THE INSTALLATION OF WINDMILL HAS BEEN FOUND BY THE TRI BUNAL IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA) AS AN INTEGRAL PART OF THE WINDMILL COST AND THEREFORE, FOUND TO BE ELIGIBLE FOR DEPRECIATION EQUIVALENT TO THAT OF THE WINDMILL. NO D ECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE AND THEREFO RE, FOLLOWING THE PRECEDENT IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) WHICH WE HEREBY AFFIRM. 4 ITA NO.153/PN/2012, RAHUL K. SHINDE, PUNE 9. TO THE SIMILAR EFFECT IS THE NATURE OF COST ENUMER ATED IN ITEMS NO. 2 AND 3 RELATING TO LABOUR CHARGES FOR ERECTION AND INSTALLATION OF WINDMILL. SUCH EXPENDITURE FORMS INTEGRAL PART OF COST OF THE WINDMILL AND THEREFORE, THERE IS NO MISTAKE ON THE PART OF TH E CIT(A) TO HAVE CONSIDERED SUCH EXPENDITURE AS ELIGIBLE FOR DEPRECIATION AT 80%. 5. WE THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL CITE D SUPRA HOLD THAT BOTH THE PARTIES BELOW WERE NOT JUSTIFIED I N CALCULATING AND DISALLOWING THE DEPRECIATION ON THE COST OF FOUNDATIO N, COMMISSIONING AND ERECTION OF THE WIND MILL. ACCORDINGLY, WE ALLOWED TH E ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE ADDITION MADE BY THE A.O. BY MAKING THE DISALLOWANCE TOWARDS ALLEGED EXCESS CLAIM OF DEPRECIATION. 7. IN OUR OPINION, THE LD.CIT(A) HAS RIGHTLY ALLOWED THE CLA IM OF THE ASSESSEE. MOREOVER, ISSUES ARISING FROM GROUNDS TAKEN B Y THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION CIT ED (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), AND ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26-04-2013 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 26 TH APRIL, 2013 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - II, PUNE 4 THE C C IT , PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE