Deputy Commissioner of Income-tax, V. M/s. Simran Wind Projects Pvt. Ltd., Pune

ITA 1538/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1745 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Depreciation; Rectification of order; Capital expenditure
• Section: 143(3); 154

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.1538/PN/2014 ASSESSMENT YEAR : 2008-09 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE. . APPELLANT VS. M/S SIMRAN WIND PROJECTS PVT. LTD., 3 RD FLOOR, SAI HIRA, MUNDHWA ROAD, PUNE 411 036. PAN : AAJCS4400J . RESPONDENT / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : NONE / DATE OF HEARING : 30.05.2016 / DATE OF PRONOUNCEMENT: 31.05.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE REVENUE IS AGAINS T THE ORDER OF CIT(A)-III, PUNE DATED 30.05.2014 RELATING TO ASSES SMENT YEAR 2008-09 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE/RESPONDENT INSPITE OF SERVICE OF NOTICE. THE LD. DEPARTMENTAL REPRESENTATIVE, SHRI ANIL CHAWARE APPEARED ON BEHAL F OF THE APPELLANT/REVENUE. THE PRESENT APPEAL WAS FIXED FO R HEARING ON 30.05.2016. HOWEVER, ON 30.05.2016 NEITHER APPEARED ON BEHALF O F THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. IT APPEARS THAT ASSESSEE IS NOT INTERESTED IN PURSUING THE APPEAL. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE IN PERSON OR THROUGH AUTHORIZED REPRESENTA TIVE INSPITE OF SERVICE OF 2 ITA NO.1538/PN/2014 NOTICE, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE ASSESSEE AFTER HEARING THE APPELLANT/REVENUE ON MERITS IN TERMS OF RULE 24 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE IN ITS APPEAL IS DISALLOWANCE OF DEPRECIATION ON WINDMILLS TO THE TUNE OF RS.34,14,2 74/- MADE BY THE ASSESSING OFFICER. 4. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE RAISED BY THE REVENUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUS INESS OF TRADING OF WTG (WIND TURBINE GENERATORS) AND ALSO IN GENERATION AN D SALE OF POWER THROUGH WIND MILLS. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILED RETURN OF INCOME ON 23.09.2008, DECLARING LOSS OF RS.49,24,90 ,490/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIMED DEPRECI ATION OF RS.51,78,80,574/- OUT OF WHICH RS.1,20,67,574/- WAS CLAIMED ON ACCOUN T OF CONSTRUCTION OF CONTROL ROOM AND TRANSFORMER PLINTH, ELECTRICAL YAR D FENCING AND TEMPORARY APPROACH ROAD. THE ASSESSEE CLAIMED DEPRECIATION A T ACCELERATED RATES ON THESE SPECIALIZED STRUCTURES ON THE GROUND THAT THEY WERE AN INDISPENSABLE PART OF THE WINDMILL. IT WAS EXPLAINED THAT AS PER PART OF APP ENDIX OF THE INCOME TAX RULES, 1962, THE CIVIL FOUNDATION AS WELL AS ELECTR ICAL YARD FENCING ETC. DO NOT FORM PART OF BUILDING. HOWEVER, THE ASSESSING OFFI CER DID NOT ACCEPT THIS CONTENTION AND HELD THAT THE CIVIL FOUNDATION, TRAN SFORMER PLINTH, CONTROL ROOM, ELECTRICAL YARD FENCING ETC. COULD NOT BE DESCRIBED AS SPECIALLY DESIGN DEVISES RUNNING ON WINDMILLS, WHICH IS THE CRITERIA THAT HA S TO BE SATISFIED FOR CLAIMING DEPRECIATION AT THE RATE OF 80%, CONSEQUENTLY THE D ISALLOWED DEPRECIATION OF RS.1,20,67,574/- CLAIMED ON THE ABOVE ITEMS. SUBSE QUENTLY, IT HAS SEEN FROM THE RECORD THAT THE ASSESSING OFFICER PASSED RECTIF ICATION ORDER UNDER SECTION 154 OF THE ACT ON 06.12.2010 ALLOWING DEPRECIATION ON THE CIVIL STRUCTURE, INCLUDING THE TAX ELEMENT ON THE SAME. CONSEQUENTL Y, FOLLOWING THE RECTIFICATION ORDER, THE NET DEPRECIATION DISALLOWE D WAS RS.34,14,274/-. 3 ITA NO.1538/PN/2014 AGGRIEVED BY THE SAID ACTION OF THE ASSESSING OFFIC ER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. THE CIT(A) FOLLOWING THE DECISION OF THE PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST & AGRO PVT. LTD. VS. ACIT, (2008) 118 TTJ 68 (PUNE) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. WE FIND THAT THE CONTROVERSY IN THE PRESENT CASE IS SQUARELY COVERED BY THE RECENT DECISION OF THE PUNE BENCH OF THE TRIBUN AL IN THE CASE OF SHREEM ELECTRIC LIMITED VS. JCIT IN ITA NO.2107/PN/2013, O RDER DATED 30.11.2015 WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL ON TH E ISSUE IS REPRODUCED HEREINBELOW :- 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 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 4 ITA NO.1538/PN/2014 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. IN THE LIGHT OF THE AFORESAID PRECEDENT ON THE I SSUE, WE FIND NO MERIT IN THE GROUNDS RAISED BY THE REVENUE. THUS, REVENUE F AILS ON ITS GROUNDS. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 31 ST MAY, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE