Bachhulal Hukumchand Rathod, Pune V. Addl. Comm. of Income-tax, Pune

ITA 1656/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67005 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Depreciation

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. 1546/PN/2011 (ASSTT. YEAR : 2008-09) M/S. AMENITY DEVELOPERS AND BUILDERS GAT NO. 170 MIDC KUPWAD, SANGLI PAN AAGFA 8415 M ... APPELLANT V. DY. CIT CIR. 1 SANGLI RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 09-05-2013 DATE OF PRONOUNCEMENT : 30-5-2013 ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED IMPUG NED ORDER OF THE LD. CIT(A) KOLHAPUR DATED 22-9-2011 FOR THE A.Y. 200-09 . THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS. 1. IN VIEW OF THE FACTS AND CIRCUMSTANCES HON'BLE. CIT(A) HAS ERRED BOTH ON FACTS AS WELL AS IN LAW IN TREATING RS. 21,63,00 0/- (RS. 21,60,000 + RS. 3,000/- [OUT OF PROCESSING CHARGES]) AS BUILDIN G INSTEAD OF THE COST OF WINDMILL AND THEREBY ALLOWING THE DEPRECIATION @ 10% INSTEAD OF 80% AND HENCE THIS MAY BE TREATED AS A PART AND PAR CEL COST OF WINDMILL. 2. DEPRECIATION MAY BE ALLOWED 80% ON RS. 2163,000 (RS. 21,60,000+RS. 3000 [OUT OF PROCESSING CHARGES]) BY TREATING IT COST OF WINDMILL. 2. THE ISSUE IN CONTROVERSY IS THE ALLOCATION OF EX PENDITURE BY THE A.O FOR THE PURPOSE OF APPLYING RATE OF DEPRECIATION IN RESPECT OF WINDMILL. THE FACTS REVEAL FROM THE RECORD ARE AS UNDER. THE ASSESSEE HAS PURCHASE D THE WINDMILL FOR RS. 7,41,56,986/- AND CLAIMED DEPRECIATION ON THE SAID COST AT 80% WHICH WORKED OUT TO RS. 5,93,25,589/-. THE SAID WINDMILL IS INSTALLED IN THE VILLAGE MOTI SHINDODI, TAL. APDASA, DIST. KUTCH, GUJARAT STATE. THE A.O WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION @ 80% DEPREC IATION ON THE ENTIRE COST OF WINDMILL BUT THE COST HAS TO BE SEGREGATED/BIFURCAT ED. THE ASSESSEE TOOK THE STAND ITA . NO.1546//PN/2011 AMENITY DEVELOPERS AND BUILDERS A.Y. 2008-09 PAGE OF 4 2 THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION @ 80% ON THE ENTIRE COST OF CIVIL WORK, INSTALLATION AND COMMISSIONING AS WELL AS TUR BINE AT FULL RATE WHICH IS APPLICABLE TO THE WINDMILL. THE ASSESSEE ALSO RELI ED ON THE DECISION IN THE CASE OF POONAWALA FINVEST & AGRO (P) LTD. VS. ACIT 118 TTJ 68 (PUNE). THE A.O WAS OF THE OPINION THAT COST INCURRED ON CIVIL WORK OF THE CONTROL ROOM, SITE DEVELOPMENT AND INTERNAL ROADS ADJACENT TO THE WINDMILL, DEPRECIATI ON CANNOT BE ALLOWED AT 80%. THE A.O RESTRICTED THE RATE OF DEPRECIATION TO 10% IN R ESPECT OF COST ON THE CIVIL WORK AND FOUNDATION IN PLACE OF 80%. IN RESPECT OF COST OF ERECTION AND COMMISSIONING, THE A.O TREATED THE SAME AS PART OF PLANT AND MACHINERY AND RESTRICTED DEPRECIATION AT 15%. THE A.O THEREFORE ALLOCATED THE COST OF WINDM ILL SHOWN BY THE ASSESSEE AND ALLOWED THE DEPRECIATION AT THE RESPECTIVE RATES SH OWN AS UNDER: SR. NO. DESCRIPTION OF THE ASSETS COST OF THE ASSETS DEPRECIATION RATE AMOUNT 01 CIVIL WORK (CONSISTING OF CIVIL WORK OF FOUNDATION AND ALLIED WORK) 53,23,108/- 10% 5,32,311/- 02 INSTALLATION AND COMMISSIONING 1,23,93,086/- 15% 18,58,963/- 03 WINDMILL MACHINERY PROJECT 5,64,40,792/- 80% 4,5 1,43,908/- 3. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O FO R RESTRICTING THE DEPRECIATION ON COST OF CIVIL WORK AS WELL AS INSTALLATION AND C OMMISSIONING @ 10% AND 15% RESPECTIVELY. THE LEARNED CIT(A) RE-ALLOCATED THE COST FOR THE WINDMILL CONSIDERING THE VARIOUS COMPONENTS AS UNDER: SR.NO. PARTICULARS AMOUNT 1. COST OF WIND TURBINE GENERATOR (INCLUSIVE OF NAC ELLE, HUB, BLADES, TOWER & HARDWARE) 5,64,40,792/- 2(A) (B) COST OF COMPONENT & ACCESSORY 18,76,000 ELECTRICAL ITEMS COMPONENTS OF WIND MILL 16,27,808 35,03,808/- 3. COST OF WORK INCLUDING FOUNDATION WORK 53,23,108 /- 4. A) B) C) LABOUR RELATED COST INSTALLATION OF WINDMILL 23 ,77,538 INSTALLATION OF ELECTRICAL LINE FOR POWER TRANSMISSION AND MATER 26,76,908 FINAL TESTING AND COMMISSIONING 1,34,832 51,89,278/- 5. REIMBURSEMENT OF POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE 36,00,000 6. MISCELLANEOUS 1,00,000 1,00,000/- TOTAL 7,41,56,986/- ITA . NO.1546//PN/2011 AMENITY DEVELOPERS AND BUILDERS A.Y. 2008-09 PAGE OF 4 3 4. IN THE ABOVE BIFURCATION, RS. 36,00,000/-IS SHOW N AS REIMBURSEMENT TOWARDS POWER EVACUATION FACILITY AND CREATION OF INFRASTRU CTURE. THE CIT(A) HAS OBSERVED THAT THE BREAKUP OF POWER EVACUATION COST AND INFRA STRUCTURE CREATION COST IS NOT GIVEN. HE HAS ALSO OBSERVED THAT SINCE INFRASTRUCT URE CREATION COST WOULD INCLUDE THE COST OF MAKING ROADS PROVIDING FREE ACCESS AND KEEPING THE SURROUNDING AREA VACANT, HENCE THE SAME IS TO BE TREATED AS BUILDING AND TO THAT EXTENT ON THE SAID COST DEPRECIATION AT 10% WOULD BE APPLICABLE. AS O BSERVED BY HIM, THE ASSESSEE DID NOT PROVIDE BREAK UP. HE, THEREFORE, ALLOCATED THE COST OF POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE WITH RATIO OF 60% AND 40% AND APPLIED THE RATE AT 10% FOR CIVIL CONSTRUCTION. IN RESPECT OF PROCE SSING CHARGES, HE MADE ALLOCATION ON PRO-RATA BASIS AND THEREFORE, RATIO OF THE COST TO WINDMILL AND COST ON OTHER CIVIL WORK AND FINALLY HELD THAT (I) THE COST OF WINDMILL WILL BE INCLUSIVE OF ALL ITEMS MENTIONED AT SR. NO. 1 TO 4, (II) THE COST OF POWER EVACUATION FACILITY AND INFRASTRUCTURE MENTIONED AT SR.NO. 5 WILL BE APPORT IONED AT 40% AND RATE OF DEPRECIATION APPLICABLE TO BUILDING WILL BE APPLIED AND ON BALANCE 60% DEPRECIATION @ 80% IS TO BE ALLOWED; AND (III) IN RESPECT OF PRO CESSING CHARGES THE SAME ARE TO BE APPORTIONED ON PRO-RATA BASIS BETWEEN WINDMILL A ND INFRASTRUCTURE FACILITIES I.E. 60% AND 40% AND ACCORDINGLY DIRECTED THE A.O TO RE- COMPUTE THE DEPRECIATION. 5. WE HAVE HEARD THE PARITIES AND PERUSED THE RECOR DS. THE LEARNED COUNSEL SUBMITS THAT THE LEARNED CIT(A) IS WRONG IN BIFURCA TING THE COST OF POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE, AS IT IS T HE PART OF WINDMILL ONLY. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS OF CO-ORDINATE BENCHES; I) PARRY ENGINEERING & ELECTRONICS (ITA NO. 3317/HA D/2012 DATED 2-3- 2012; II) THE ACIT VS. M/S. K.K. ENTERPRISE CIR. 2 UDAIPU R (ITA NO. 438/JU/2010 DATED 20-9-2012. 6. WE HAVE ALSO HEARD THE LEARNED DR. SO FAR AS TH E COST ON POWER EVACUATION FACILITY AND CREATION INFRASTRUCTURE IS CONCERNED, IT IS SHOWN BY THE ASSESSEE AT RS. 36,00,000/-. THE LEARNED CIT(A) HAS OBSERVED THAT THE SAID COST INCLUDES THE COST OF MAKING ROADS FOR PROVIDING FREE ACCESS AND KEEP SUR ROUNDING AREA VACANT. NOTHING HAS BEEN PLACED BEFORE US TO CONTROVERT THE SAID FA CTUAL FINDING. THE ARGUMENT OF ITA . NO.1546//PN/2011 AMENITY DEVELOPERS AND BUILDERS A.Y. 2008-09 PAGE OF 4 4 LEARNED COUNSEL IS THAT THE COST RELATING TO POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE IS A PART OF WINDMILL. IN OUR OPINI ON, THERE IS NO DISPUTE ABOUT THE PRINCIPLES LAID DOWN IN THE CASES RELIED UPON BY TH E ASSESSEE WHICH ARE IN RESPECT OF RATE OF DEPRECIATION APPLICABLE TO CIVIL WORK MORE PARTICULARLY ON THE FOUNDATION. IN OUR OPINION, BOTH THE DECISIONS DO NOT SUPPORT THE CASE OF THE ASSESSEE. WE, THEREFORE, HOLD THAT IF THE COST ON POWER EVACUATIO N AND CREATION OF INFRASTRUCTURE INCLUDES THE COST ON MAKING ROADS AND KEEPING THE S URROUNDING AREA VACANT THEN IT CANNOT BE TREATED AS A PART OF GENERATION OF ELECTR ICITY BY THE WINDMILL. WE THEREFORE CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THIS SPE CIFIC ISSUE. WE ALSO CONFIRM ALLOCATION OF COST MADE BY LEARNED CIT(A) WHICH IS REASONABLE. SO FAR AS THE ALLOCATION OF PROCESSING CHARGES IS CONCERNED, THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF PARRY ENGINEERING & ELECTRONICS (SUPRA). TO THAT EXTENT, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND ALLOW THE GROUND TAKEN BY THE ASSESSEE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY 2013 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 30 TH MAY 2013 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT KOLHAPUR 4. THE CIT(A)- KOLHAPUR 4. THE D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE