JCIT, Range-1, Solapur V. M/s. Kothari Industries, Solapur

ITA 1668/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2623 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASEEM SHARMA
• Assessee Lawyers: S N DOSHI
• Keywords: Capital asset; Depreciation; Business expenditure; Non-deduction of tax; Fair market value; Tax effect; Capital receipt; Commercial expediency; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 1667 & 1668/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2007-08 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, SOLAPUR ....... / APPELLANT ' / V/S. M/S. KOTHARI INDUSTRIES, 185 TO 189, CHANDRAMAULI AUDHYOGIK VASAHAT, TAL. MOHOL, DISTRICT SOLAPUR PIN 413213 PAN : AAIFK7671B / RESPONDENT / ITA NOS. 1990, 1991 & 1992/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2007-08, 2008-09 & 2009-10 M/S. KOTHARI INDUSTRIES, 185 TO 189, CHANDRAMAULI AUDHYOGIK VASAHAT, TAL. MOHOL, DISTRICT SOLAPUR PIN 413213 PAN : AAIFK7671B ....... / APPELLANT ' / V/S. INCOME TAX OFFICER, RANGE 1, SOLAPUR / RESPONDENT 2 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 / ITA NO. 11/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, SOLAPUR ....... / APPELLANT ' / V/S. M/S. KOTHARI INDUSTRIES, 185 TO 189, CHANDRAMAULI AUDHYOGIK VASAHAT, TAL. MOHOL, DISTRICT SOLAPUR PIN 413213 PAN : AAIFK7671B / RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI ASEEM SHARMA / DATE OF HEARING : 04-01-2016 / DATE OF PRONOUNCEMENT : 03-03-2016 * / ORDER PER VIKAS AWASTHY, JM : THESE APPEALS HAVE BEEN FILED BY THE REVENUE AND THE AS SESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- III, PUNE FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 20 10-11. ITA NO. 1667/PN/2013 HAS BEEN FILED BY THE REVENUE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 31-10-2011 FO R THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS FILED CROSS APPEAL AGAINST THE SAID ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN IT A NO. 3 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 1990/PN/2013. IN ITA NO. 1668/PN/2013 THE REVENUE HA S ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 06 -05-2013 FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS FILED CROSS APPEAL ASSAILING THE AFORESAID ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO. 1991/PN/2013. THE ASSESSEE IN ITA NO. 1992/P N/2013 HAS IMPUGNED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 30-01-2013 FOR THE ASSESSMENT YEAR 2009-10. THERE IS NO APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2009-10. IN ITA NO. 11/PN/2014 BY THE REVENUE HAS COME IN APPEAL AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) DATED 07-10-2013 FOR THE ASSESSM ENT YEAR 2010-11. THERE IS NO APPEAL FILED BY THE ASSESSEE IN ASSE SSMENT YEAR 2010-11. SINCE, THE ISSUES RAISED IN THE APPEALS ARE SIMILAR AND ARE ARISING FROM COMMON SET OF FACTS, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF PVC AND HDPE PIPES, ASSEMBLY OF SPRINKLERS, DRIPS, SWR PIPES AND FITTINGS. THE ASSESSEE HAS FILED REGULAR RETURN OF INCOME IN THE IMP UGNED ASSESSMENT YEARS. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY AND CERTAIN ADDITIONS/DISALLOWANCES WERE MADE BY THE ASSE SSING OFFICER IN THE INCOME RETURNED BY THE ASSESSEE. IN ASSES SMENT YEARS 2007-08, 2008-09 AND 2009-10 THE ASSESSING OFFICER MADE ADDITIONS / DISALLOWANCES INTER ALIA ON THE FOLLOWING GROUNDS: SR. NO. PARTICULARS A.Y. 2007 - 08 A.Y. 2008 - 09 1 DIFFERENCE ON ACCOUNT OF CASH ` 67,54,589/ - ` 16,92,538/ - 2 PAYMENT OF COMMISSION ` 30,20,972/ - ` 41,40,554/ - 3 TRANSACTIONS WITH SISTER CONCERN ` 28,25,102/ - ` 22,20,108 4 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 4 SUBSIDY ON WIND MILLS ` 20,00,000/ - - 5 DISALLOWANCE U/S. 40(A)(IA) (INCENTIVE ON SALES) ` 2,92,200/ - ` 12,78,000/ - 6 DISALLOWANCE U/S. 40 A (IA) (PIPE SUPERVISION CHARGES) ` 8,25,916/ - ` 1,66,827/ - 7 DISALLOWANCE U/S. 40 A (IA) (SERVICE COMMISSION AND TRANSPORT CHARGES) ` 4,10,491/ - ` 2,06,795/ - 2.1 IN RESPECT OF ASSESSMENT YEAR 2009-10 THE ASSESSIN G OFFICER MADE ADDITIONS/DISALLOWANCES ON THE FOLLOWING GROUNDS: SR. NO. PARTICULARS A.Y. 2009 - 10 1 DISALLOWANCE OF COMMUNICATION EXPENSES ` 50,000/ - 2 DISALLOWANCE OF COMMISSION PAID ` 11,92,085/ - 3 DISALLOWANCE OF HIGHER RATE OF DEPRECIATION ON CIVIL STRUCTURE, ERECTION AND COMMISSIONING AND ELECTRICAL ACCESSORIES OF WINDMILL ` 17,76,280/ - 4 DISALLOWANCE OF SUBSIDY DOCUMENTATION EXPENSES ` 7,51,050/ - AGGRIEVED BY THE ASSESSMENT ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS, THE ASSESSEE FILED SEPARATE APPEALS BEFORE THE COM MISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPE ALS) VIDE IMPUGNED ORDERS PARTLY ACCEPTED THE APPEALS OF THE ASS ESSEE BY DELETING THE ADDITIONS IN RESPECT OF TRANSACTIONS MADE WITH SISTER CONCERN FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 . THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITIONS / DISALLOWANCES MADE BY THE ASSESSING OFFICER ON OTHER COUN TS. AGAINST THESE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) BO TH, THE REVENUE AND THE ASSESSEE ARE IN APPEAL FOR THE ASSESS MENT YEAR 2007- 08 AND 2008-09. SINCE, THERE WAS NO ISSUE OF DISALLOWANCE OF 5 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 TRANSACTIONS WITH SISTER CONCERN IN THE ASSESSMENT YEAR 2009-10 NO APPEAL HAS BEEN FILED BY THE REVENUE FOR THE SAID ASSESSMENT YEAR. 2.2 IN ASSESSMENT YEAR 2010-11 THE ASSESSING OFFICER MAD E ADDITIONS ON ACCOUNT OF DISALLOWANCES ON CERTAIN BUSINESS EXPENSES AND DEPRECIATION OF WINDMILL AND HIGHER RATE OF DEPRECIATION CLAIME D BY THE ASSESSEE ON CIVIL WORK AND ALLIED FOUNDATION WORK OF THE WIN DMILL. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APP EALS) PARTLY ACCEPTED THE APPEAL OF THE ASSESSEE BY GRANTING HIGHER RATE OF DEPRECIATION I.E. 80% ON FOUNDATION, CONTROL ROOM, DP STRUCT URE WITH METERING SET ALONG WITH ACCESSORIES AND ERECTION AND COM MISSIONING EXPENSES. AGAINST THE RELIEF GRANTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE WILL FIRST TAKE UP THE APPEALS OF THE DEPARTMENT FO R SEQUENTIAL AND CONVENIENT DISPOSAL OF THE APPEALS. ITA NOS. 1667 & 1668/PN/2013 4. SHRI ASEEM SHARMA REPRESENTING THE DEPARTMENT SUBMIT TED THAT THE ASSESSEE HAS MADE LARGE NUMBER OF TRANSACTIONS WH ICH INCLUDE SALE OF MACHINERY, PAYMENT OF TRANSPORT CHARGES, SALE AND PURC HASE OF RAW MATERIAL AND SCRAP ETC. WITH ITS SISTER CONCERNS. THE ASS ESSEE HAS ALSO ADVANCED LOANS TO ITS SISTER CONCERNS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTIONS AND LEGITIMATE NEEDS OF THE ASSESSEE BUSINESS FOR ENTERING INTO TRANSACTIONS WITH SISTER CONCERNS. FURTHER , THE ASSESSEE WAS NOT ABLE TO SHOW THAT THE TRANSACTIONS WITH THE SIS TER CONCERNS WERE AT ARMS LENGTH. FROM THE PERUSAL OF THE DETAILS FILED BEFORE THE ASSESSING OFFICER IT TRANSPIRES THAT THE ASSESSEE HAS NOT CHARGED 6 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 SEVERAL HEADS OF DIRECT COSTS SUCH AS WAGES, BONUS TO S TAFF POWER AND FUEL COST, REPAIRS AND MAINTENANCE OF MACHINERY, DEPRECIATION , EMPLOYEES COST AND OTHER DIRECT EXPENSES TO ITS SISTER CONCERNS WHILE RAISING THE BILLS. THE ASSESSING OFFICER DISALLOWED EXPENDITURE WITH RESPECT TO DIRECT COSTS AMOUNTING TO ` 28,25,102/- IN ASSESSMENT YEAR 2007-08 AND ` 22,20,108/- IN ASSESSMENT YEAR 2008-09 OUT OF TOTAL EXPENSES CLAIMED BY THE ASSESSEE. THE COMMISSIONER OF IN COME TAX (APPEALS) HAS ERRED IN DELETING THE SAME IN BOTH THE IMPUGN ED ASSESSMENT YEARS. 5. ON THE OTHER HAND SHRI S.N. DOSHI APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE FINDINGS OF THE COMMIS SIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. THE LD. AR SUBMITTED TH AT THE ASSESSEE WAS ABLE TO EXPLAIN THE NEED AND COMMERCIAL EXP EDIENCY FOR INCURRING THE EXPENDITURE. THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF EXPENDITURE IN AN ARBITRARY, UNJUSTIFIED AND IN ILLEGAL MANNER CONTRARY TO THE PROVISIONS OF THE ACT. THE ASSE SSEE IS HAVING FIVE SISTER CONCERNS I.E. (I) KOTHARI PIPES, (II) KOTHARI PIPES & F ITTINGS P. LTD., (III) KOTHARI POLYEXTRUSION, (IV) PIONEER POLYMERS AND (V) KOTHARI MOULDING P. LTD. THE ASSESSEE HAD MADE PAYMENTS TO KOT HARI PIPES TOWARDS TRANSPORTATION CHARGES AND SALE OF FABRICATED CO UPLER. THE ASSESSEE HAD SOLD RAW MATERIAL TO KOTHARI POLYEXTRUSION, KOTHARI MOULDING P. LTD. AND PIONEER POLYMERS. THE ASSESSEE HAD SUPPLIED RAW MATERIAL TO ITS SISTER CONCERNS AT THE MARKET PRICE AND HAS PAID TRANSPORTATION CHARGES TO KOTHARI PIPES AT RATE WHICH W OULD HAVE BEEN THE THIRD PARTY FOR TRANSPORTATION OF GOODS. 7 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE REVENUE ASSA ILING THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. THE SOLITARY ISSUE RAISED BY THE DEPARTMENT IN ITS APPEALS IS DELETING OF PROPORTIONATE DISALLOWANCE OF BUSIN ESS EXPENDITURE BY COMMISSIONER OF INCOME TAX (APPEALS) IN RESP ECT OF TRANSACTIONS BETWEEN THE ASSESSEE AND ITS SISTER CONCERNS. THE ASSESSING OFFICER HAS DISALLOWED ` 28,25,102/- IN ASSESSMENT YEAR 2007-08 AND ` 22,20,108/- IN ASSESSMENT YEAR 2008-09, FOR THE TRANSACTIONS WITH ITS SISTER CONCERNS ON THE FOLLOWING GROUNDS : A) LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE NOT BEEN FILED. B) THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT TRANS ACTIONS HAVE TAKEN PLACE AT FAIR MARKET VALUE. C) RAW MATERIAL SOLD TO SISTER CONCERNS IS AT LESS THAN FAIR PRICE. D) THE ASSESSEE HAS NOT CHARGED CERTAIN DIRECT COSTS TO ITS SISTER CONCERNS. THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS SISTER CONCERNS IN ASSESSMENT YEARS 2007-08 AND 2008-09 ARE AS UNDE R : ASSESSMENT YEAR 2007-08 S. NO. NAME OF SISTER CONCERN NAME OF TRANSACTION AMOUNT (RS.) 1 KOTHARI PIPES I) OUTWARD TRANSPORTATION CHARGES TRANSFERRED II) SALE OF FABRICATED COUPLER 73,76,555/ - 8,99,149/- 2 KOTHARI POLYEXTRUSION SALE OF RAW MATERIAL 1,36,56,369/ - 3 KOTHARI MOULDING SALE OF RAW MATERIAL 13,56,835/ - 8 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 P. LTD. 4 PIONEER POLYMER SALE OF RAW MATERIAL 10,77,507/ - TOTAL 2,43,66,415/ - ASSESSMENT YEAR 2008-09 S. NO. NAME OF SISTER CONCERN NAME OF TRANSACTION AMOUNT (RS.) 1 KOTHARI PIPES I) SALES II) FREIGHT CHARGES 25,251/ - 80,60,574/- 2 KOTHARI POLYEXTRUSION RAW MATERIAL SALES 65,33,266/ - 3 KOTHARI PIPES & FITTINGS PVT. LTD. SALES 10,25,141/ - 4 PIONEER POLYMER RAW MATERIAL SALE 32,09,777/ - TOTAL 1,88,54,009/ - 7. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED TH E ADDITIONS IN ASSESSMENT YEAR 2007-08 BY OBSERVING AS UNDER: 8.3.1 IT IS SETTLED LEGAL POSITION THAT IN ORDER T O ASCERTAIN WHETHER THE TRANSACTIONS WITH ASSOCIATE CONCERNS ARE AT ARMS L ENGTH, THE ASSESSING OFFICER HAS TO FIRST DETERMINE WHAT CONSTITUTES THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY GROUP CONCERNS OR GOODS SUPPLIED TO GRO UP CONCERNS AND THEN EXAMINE THE DIFFERENCE, IF ANY, B ETWEEN THE AMOUNT PAID TO SISTER CONCERNS OR CHARGED FROM SIST ER CONCERNS AND THE FAIR MARKET VALUE OF SUCH SERVICES OR GOODS. B UT, THE ASSESSMENT ORDER DOES NOT INDICATE IN ANY MANNER TH AT SUCH EXERCISE WAS UNDERTAKEN BY THE ASSESSING OFFICER BE FORE RESORTING TO DISALLOWANCE OF EXPENDITURE ON PRO RATA BASIS WI TH REFERENCE TO THE TOTAL TURNOVER OF THE APPELLANT. THE ASSESSING OFFICER PROCEEDED ON THE ASSUMPTION THAT CERTAIN DIRECT AND INDIRECT COSTS CHARGED TO THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT HAVE N OT HAVE BEEN RECOVERED FROM THE SISTER CONCERNS WHILE RAISING SA LE BILLS ON THEM, LEADING TO UNDERSTATEMENT OF PROFIT OF THE APPELLAN T FOR THE YEAR. BUT, WHILE DOING SO, THE ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION THE COMMERCIAL EXPEDIENCY IN ENTERING INTO SUCH TRANSACTIONS WITH SISTER CONCERNS, WHICH INCLUDE BO TH PURCHASES AND SALES AT COST PRICE AS EXPLAINED BY THE APPELLA NT. THESE TRANSACTIONS BASICALLY AROSE FROM USE OF COMMON RAW MATERIAL, PVS R ESIN, BY THE APPELLANT AND SISTER CONCERNS, WHICH W ERE 9 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 TAKEN/GIVEN ON LOAN BASIS TO MEET THE DEMAND FOR TH E FINISHED PRODUCTS AND SINCE IT IS AN EXCISABLE COMMODITY, BI LLING WAS DONE AT A RATE AT WHICH IT WAS PURCHASED BY EITHER PARTY I.E. APPELLANT AND SISTER CONCERNS SO AS TO COMPLY WITH EXCISE RUL ES AND REGULATIONS. IT IS IMPORTANT TO NOTE THAT IN ALL T HESE TRANSACTIONS, IT WAS NOT SALE OF FINISHED PRODUCTS OF THE APPELLANT TO THE SISTER CONCERNS AT LOWER PRICE THAN FAIR MARKET PRICE OF G OODS OR PURCHASE OF RAW MATERIAL FROM SISTER CONCERNS AT MORE THAN M ARKET PRICE. IT WAS EXCHANGE OF RAW MATERIAL FROM ONE GROUP CONCERN TO OTHER GROUP CONCERN ON LOAN BASIS TO MEET THE EXTRA DEMAN D IN THE MARKET FOR PVS PIPES BEING MANUFACTURED BY THE APPE LLANT AND THE SISTER CONCERNS AND SUCH TRANSACTIONS DUE TO BUSINE SS EXIGENCIES CANNOT BE SAID TO HAVE BEEN ENTERED INTO WITH A VIE W TO PASS ON THE PROFIT OF THE APPELLANT TO GROUP CONCERNS. SIMILAR LY, IN CASE OF TRANSPORTATION CHARGES, NO MATERIAL IS BROUGHT ON R ECORD TO SHOW THAT CHARGES PAID TO MS KOTHARI PIPES WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE NATURE OF SERVICE S RENDERED BY THE SISTER CONCERN AND THE LEGITIMATE NEEDS OF THE BUSINESS OF THE APPELLANT. IN THESE CIRCUMSTANCES, I AM OF THE CON SIDERED OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED ON FACT S AND IN LAW IN DISALLOWING THE PROPORTIONATE EXPENDITURE ON THE GR OUND THAT IT WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. ACCORDINGLY, THE ADDITION OF RS.28, 25,102/- MADE BY THE ASSESSING OFFICER ON THIS GROUND IS DELETED. FOR THE SIMILAR REASONS THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITIONS IN ASSESSMENT YEAR 2008-09 . THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF COMM ISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. THE REVENUE HAS NOT BEEN ABLE TO SHOW FROM THE RECORDS ANY INSTANCES WHERE THE ASSESSE E HAS CHARGED MORE FOR RAW MATERIAL SUPPLIED TO THE THIRD PARTIES AS COM PARED TO PRICE CHARGED FROM THE SISTER CONCERNS. SIMILARLY, IN RESPECT OF PAYMENT OF TRANSPORTATION CHARGES THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT THE ASSESSEE HAS PAID MORE CHARGES TO THE SISTER CONCERN S FOR TRANSPORTATION AS COMPARED PAYMENTS MADE TO THE THIRD PARTIES. IN OUR CONSIDERED OPINION THE ASSESSING OFFICER HAS ERRED IN COMI NG TO THE 10 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 CONCLUSION THAT THE ASSESSEE HAS NOT RECOVERED DIRECT COSTS FROM ITS SISTER CONCERNS. THE FINDINGS OF THE ASSESSING OFFICER ARE M ERELY BASED ON SURMISES AND CONJECTURES. THE FINDINGS OF THE COMMISSIO NER OF INCOME TAX (APPEALS) ARE WELL REASONED AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 8. WE CONCUR WITH THE FINDINGS OF COMMISSIONER OF INCOME TA X (APPEALS) IN DELETING THE DISALLOWANCES MADE BY THE ASSESSIN G OFFICER IN RESPECT OF TRANSACTIONS WITH THE SISTER CONCERNS. ACCO RDINGLY, THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 ARE DISMISSED BEING DEVOID OF ANY MERIT. ITA NO. 11/PN/2014, A.Y. 2010-11 (REVENUES APPEAL) 9. IN ITA NO. 11/PN/2014 FOR THE ASSESSMENT YEAR 2010- 11, THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING HIGHER RATE OF DEPRECIATION ON THE FOUNDA TION, CIVIL WORK AND CONTROL ROOM ALONG WITH ACCESSORIES AND ERECTIO N AND COMMISSIONING EXPENSES OF THE WINDMILLS. THE LD. AR OF THE A SSESSEE SUBMITTED AT THE OUTSET THAT THE APPEAL OF THE DEPARTM ENT IS LIABLE TO BE DISMISSED ON THE ACCOUNT OF LOW TAX EFFECT AS WELL AS ON MERITS AS TH E ISSUE RAISED IN THE APPEAL BY THE DEPARTMENT IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. COOPER FOUNDARY P. LTD. IN INCOME TAX APPEAL NO. 1326 OF 2010 DECIDED ON 14 TH JUNE, 2011 AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL. THE LD. DR FAIRLY ADMITTED T HAT THE TAX EFFECT IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YE AR 2010-11 IS LESS THAN ` 10 LAKHS. 11 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 10. BOTH SIDES HEARD. THE ISSUE RAISED BY THE REVENUE IN APPEAL IS WITH RESPECT TO CLAIM OF HIGHER RATE OF DEPRECIATION I.E. 80%, ON CERTAIN COMPONENTS OF THE WINDMILL VIZ. CIVIL STRUCTURE AND ALLIED FOUNDA TION WORK INCLUDING REIMBURSEMENT OF DEVELOPMENT EXPENSES. THE ASSESSING OFFICER DISALLOWED DEPRECIATION ` 12,91,924/- ON THE ABOVE COMPONENTS OF WINDMILL VIDE ASSESSMENT ORDER DATED 27-12- 2012. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APP EALS) PARTLY ACCEPTED THE CONTENTIONS OF THE ASSESSEE IN GRA NTING HIGHER RATE OF DEPRECIATION ON CERTAIN COMPONENTS ON WINDMILL, IN ACCORDA NCE WITH VARIOUS DECISIONS OF THE TRIBUNAL. NOW, THE REVENUE IS IN AP PEAL AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) B EFORE THE TRIBUNAL. 11. UNDISPUTEDLY, TAX EFFECT IN THE PRESENT APPEAL IS LESS THAN ` 10 LAKHS. THE CBDT CIRCULAR NO. 21/2015, DATED 10-12-2015 HAS RAISED THE MONETARY LIMIT FOR FILING OF APPEALS BY THE DEPARTMENT BE FORE THE TRIBUNAL TO ` 10 LAKHS. THE CIRCULAR APPLIES TO THE APPEALS FILED BY THE DEPARTMENT IN FUTURE, AS WELL AS THE APPEALS PENDING BEFOR E THE TRIBUNAL. THUS, IN VIEW OF THE CBDT CIRCULAR THE PRESENT AP PEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. ITA NOS. 1990 & 1991/PN/2013 (ASSESSEES APPEALS) 12. THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER O F INCOME TAX (APPEALS) IN ASSESSMENT YEAR 2007-08 BY RAIS ING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DISALLOWING THE COMMISSION OF RS.27,78,372/- PAID I N THE COURSE OF AND FOR THE BENEFIT OF BUSINESS. 12 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN TREATING THE SUBSIDY OF RS.20 LACS AS OF REVENUE NA TURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN DISALLOWING RS.4,10,491/- U/S. 40(A)(IA) OVERLOOKIN G THE FACT THAT RELEVANT AMOUNT OF TDS HAS BEEN PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. SUBSEQUENTLY, THE ASSESSEE HAS AMENDED GROUND NO. 2 R AISED IN THE APPEAL AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED A. IN TREATING THE SUBSIDY OF RS.20 LAKHS AS OF REV ENUE NATURE B. ALTERNATIVELY, THE AMOUNT OF SUBSIDY OF RS.20 LA KHS IS SHARED BY THE APPELLANT AND MAHARASHTRA STATE ELECTRICITY DIS TRIBUTION CO. LTD. EQUALLY AND THUS APPELLANT RECEIVED ONLY RS.10 LAKHS THE ADDITION IF AT ALL WARRANTED THE SAME SHOULD BE RES TRICTED TO RS.10 LAKHS. SUBMISSION:- CLAUSE B OF THE AMENDED GROUND IS FACTUAL AND ERRON EOUSLY THE SAME WAS NOT EXPLAINED AND SUBMITTED TO THE LOWER AUTHOR ITIES. THEREFORE APPELLANT PRAYS THAT IT MAY PLEASE BE ADMITTED AND DECIDED ON MERIT AND OBLIGED. 13. IN ASSESSMENT YEAR 2008-09 THE ASSESSEE HAS RAISED THE FOLLOWING TWO GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DISALLOWING THE COMMISSION OF RS.40,09,174/- PAID I N THE COURSE OF AND FOR THE BENEFIT OF BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN DISALLOWING RS.2,06,795/- BY INVOKING THE PROVISION S OF SECTION 40(A)(IA) IN RESPECT OF THE PAYMENT MADE TOWARDS SERVICE COMM ISSION AND TRANSPORTATION CHARGES. 14. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE FIRST GR OUND RELATING TO DISALLOWANCE OF COMMISSION IN ASSESSMENT YEARS 2 007-08 AND 2008-09 IS SIMILAR TO THE ISSUE RAISED IN THE APPEAL B EFORE THE 13 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 986/PN/2011 FOR THE ASSESSMENT YEAR 2006-07 DECIDED ON 09-11-2012. THE T RIBUNAL AFTER CONSIDERING THE FACTS OF THE CASE RESTORED THE ISSUE BAC K TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORT UNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGARDING SERVICES RENDERED FOR WHICH COMMISSION WAS PAID. IN THE PRESENT ASSESSMENT YEAR UNDER APPEAL THE SITUATION IS SOMEWHAT SIMILAR. THE MATTER MAY BE RESTORED BACK TO THE ASSESSING OFFICER WIT H THE SIMILAR DIRECTIONS. THE LD. AR PLACED ON RECORD A COPY OF THE ORD ER OF TRIBUNAL IN ITA NO. 986/PN/2011 (SUPRA). 15. IN RESPECT OF SECOND ISSUE THE LD. AR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF A SSESSING OFFICER IN TREATING SUBSIDY OF RS.20 LACS AS REVENUE IN NATU RE. THE LD. AR MADE TWO FOLD SUBMISSIONS. THE FIRST CONTENTION OF THE LD. AR IS THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IS A CAPITAL SUBSIDY FOR SE TTING OFF OF WINDMILL POWER PROJECTS. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE GOVT. OF MAHARASHTRA, INDUSTRIE S, ENERGY AND LABOUR DEPARTMENT, RESOLUTION DATED 12-03-1998. THE LD. AR MADE AN ALTERNATE SUBMISSION THAT THE 50% OF THE SUBSIDY RECEIVE D BY THE ASSESSEE WAS SHARED WITH THE MAHARASHTRA STATE ELECTR ICITY DISTRIBUTION COMPANY LTD. THUS, THE ASSESSEE GETS THE B ENEFIT OF SUBSIDY ONLY TO THE EXTENT OF ` 10 LACS. THE LD. AR REFERRED TO THE LETTER DATED 19 TH SEPTEMBER, 2008 FROM MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. AT PAGE 55 OF THE PAPER BOOK A ND THE LETTER OF THE ASSESSEE TO SUPERINTENDING ENGINEER, MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. AT PAGE 57 OF THE PAP ER BOOK. THE LD. AR ALSO REFERRED TO PAGES 60 TO 65 OF THE PAPER BOOK TO SHOW 14 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 THAT THE SUBSIDY RECEIVED BY THE ASSESSEE FOR SETTING U P OF WINDMILL WAS SHARED WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM PANY LTD. THE LD. AR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCO ME TAX (APPEALS) WHILE DECIDING THE ISSUE OF SUBSIDY HAS GONE ON A DIFFERENT TANGENT BY TREATING THE SUBSIDY AS SALES TAX SUBSIDY. T HE DOCUMENTS ON RECORD CLEARLY SHOW THAT THE SUBSIDY RECEIVED IS CAP ITAL IN NATURE. THE LD. AR FURTHER SUBMITTED THAT BY THE TIME SUBSIDY WA S RECEIVED THE ENTIRE ASSETS OF THE ASSESSEE WERE WRITTEN OFF. TO SUPPOR T HIS CONTENTION THAT THE SUBSIDY RECEIVED WAS A CAPITAL RECEIPT, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. COMMISSIONER OF INCOME TAX VS. P.J. CHEMICALS LTD., 210 ITR 830 (SC); II. COMMISSIONER OF INCOME TAX VS. RELIANCE INDUSTRIES LTD., 33 9 ITR 632 (BOM); III. RASIKLAL M. DHARIWAL (HUF) VS. DY. COMMISSIONER OF INCOME TAX IN ITA NOS. 575/PN/2007 AND 150/PN/2008 FOR THE ASSESS MENT YEARS 2003-04 AND 2004-05 DECIDED ON 31-03-2011. 16. IN RESPECT OF GROUND NO. 3 (GROUND NO. 2 IN ASSESSMEN T YEAR 2008-09) WHEREIN THE ASSESSEE HAS ASSAILED THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE OF ` 4,10,491/- U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF SERVICE COMMISSION AND TRANSPORT CHARGES. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD DE DUCTED TAX AT SOURCE ON THE PAYMENTS MADE AND HAVE PAID THE AMOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. THE LD. AR SUBMITTED THAT THE DATE OF FILING OF RETURN WAS EXTENDED BY CBDT FROM 31-10-2 007 TO 15- 11-2007 IN THE ASSESSMENT YEAR 2007-08. THE LD. AR REFE RRED TO CBDT CIRCULAR DATED 31-10-2007 AT PAGES 66 AND 67 OF THE PA PER BOOK. THE 15 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 LD. AR ALSO REFERRED TO THE DECISION OF PUNE BENCH OF THE T RIBUNAL IN THE CASE OF ACIT VS. KUKADI SAHAKARI SAKHAR KARKHANA LTD. IN ITA NO. 1529/PN/2013 FOR THE ASSESSMENT YEAR 2007-08 DECIDED ON 25-08- 2014 IN SUPPORT OF HIS SUBMISSIONS. IN ASSESSMENT YEAR 2008-09 THE ASSESSING OFFICER MERELY ON THE BASIS OF ORDER FOR ASSESSM ENT YEAR 2007-08 DISALLOWED THE SUM OF ` 2,06,795/- IN A MECHANICAL MANNER. 17. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN RESPECT OF ISSUES RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. THE LD. DR SUBMITT ED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE PAYME NT OF COMMISSION. ACCORDINGLY, THE SAME WAS DISALLOWED BY THE ASSESSING OFFICE R AND EVEN BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSE SSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM. AS REGARDS THE SUBSIDY RE CEIVED BY THE ASSESSEE THE LD. DR CONTENDED THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IS REVENUE IN NATURE. IN SUPPORT OF HIS SUBMISS IONS, THE LD. DR PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED AND OT HERS VS. COMMISSIONER OF INCOME TAX REPORTED AS 228 ITR 253 (SC). 18. BOTH SIDES HEARD. THE FIRST ISSUE IN APPEALS OF THE A SSESSEE FOR ASSESSMENT YEARS 2007-08 AND 2008-09 IS WITH RESPECT TO DISALLOWANCE OF COMMISSION. THE COMMISSION PAID BY THE ASSESSEE TO VAR IOUS PARTIES WAS DISALLOWED BY THE ASSESSING OFFICER AS THE ASSESSEE FAILE D TO FURNISH RELIABLE DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM. THE ASSESSING OFFICER HELD THAT THE COMMISSION EXPENSES CLAIME D BY THE ASSESSEE ARE WITHOUT ANY BASIS. THE ASSESSEE COMPLIED W ITH TDS PROVISIONS TO GIVE COLOUR OF GENUINENESS TO THE EXPENDITUR E CLAIMED. IN 16 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 THE ABSENCE OF COMPLETE DETAILS THE ASSESSING OFFICER DISALLOW ED THE ENTIRE AMOUNT OF COMMISSION PAID IN ASSESSMENT YEARS 2007 -08 AND 2008-09. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (A PPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER BY OBSERVING THAT TH E ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE HIS ONUS TO PROVE AND E STABLISH WITH COGENT EVIDENCE THAT PAYEES HAVE RENDERED ANY SERVICE TO THE ASSESSEE, WHICH NECESSITATED THE PAYMENT OF COMMISSION. THE LD. AR H AS SUBMITTED THAT AN OPPORTUNITY BE GIVEN TO THE ASSESSEE TO SUBSTANTIATE THAT THE WORK WAS RENDERED BY THE PAYEES BY PRODUCIN G NECESSARY DOCUMENTS IN SUPPORT OF ITS CLAIM. THE ASSESSEE HAS PLACED ON RECO RD A COPY OF ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSES SMENT YEAR 2006-07 IN ITA NO. 986/PN/2011 (SUPRA). THE TRIBUNAL VIDE ORDER DATED 09-11-2012 REMITTED THE MATTER BACK TO THE FILE O F ASSESSING OFFICER FOR FRESH ADJUDICATION UNDER SIMILAR CIRCUMSTANCES. WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE NEEDS A REVISIT TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE ASSESSEE IS DIRECTED TO FURNISH THE NECESSARY DOCUMENTS TO THE SATISFACTION OF ASSESSING OFFICE R IN SUPPORT OF ITS CLAIM. THE ASSESSING OFFICER AFTER CONSIDERING THE SAME SHALL DECIDE THIS ISSUE DE NOVO, IN ACCORDANCE WITH LAW. ACCORDIN GLY, THE GROUND NO. 1 RAISED IN THE APPEAL FOR ASSESSMENT YEARS 2 007-08 AND 2008-09 IS ALLOWED FOR STATISTICAL PURPOSES. 19. THE GROUND NO. 2 OF APPEAL FOR THE ASSESSMENT YEAR 2007-08 RELATES TO THE SUBSIDY RECEIVED BY THE ASSESSEE. THE A SSESSEE HAD RECEIVED SUBSIDY OF ` 20 LACS FROM MEDA IN RESPECT OF WIND POWER PROJECT. THE ASSESSEE HAS TREATED THE SUBSIDY AS CAP ITAL RECEIPT NOT CHARGEABLE TO TAX, WHEREAS, THE STAND OF THE REVENUE IS THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IS REVENUE IN NATURE. THE ASSESSEE IN 17 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 SUPPORT OF HIS SUBMISSIONS HAS PLACED ON RECORD A COPY O F POLICY OF GOVT. OF MAHARASHTRA ON WIND POWER GENERATION. THE RELEV ANT EXTRACT OF THE PREAMBLE AND RESOLUTION OF INDUSTRIES, ENERGY AND L ABOUR DEPARTEMNT, GOVT. OF MAHARASHTRA DATED 12-03-1998 IS RE PRODUCED HERE-IN-UNDER: PREAMBLE : THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERA TION OF ENERGY THROUGH NON-CONVENTIONAL SOURCES TO SUPPLEME NT THE EVER INCREASING DEMAND OF ELECTRICITY IN THE STATE. IT WAS FOUND AFTER A SURVEY THAT THERE IS AN IMMENSE POTENTIAL FOR GENERATION O F WIND POWER IN THE STATE. SURVEYS CONDUCTED BY MEDA IN ASSOCIATION WI TH MNES, NEW DELHI AND IITM. BANGALORE INDICATE THAT THE POTENT IAL IS ABOUT 300 TO 400 MW, EIGHT DIFFERENT SITES HAVE BEEN SELECTED FOR TH IS PURPOSE AND FURTHER SURVEY IS BEING CARRIED OUT. THE STATE GOVERNMENT HAD ENUNCIATE ITS POLICY ON GE NERATION THROUGH NON-CONVENTIONAL SOURCES IN JANUARY 1996. THIS POLICY HOWEVER COULD NOT ATTRACT THE PROMOTERS. DURING THE INTERV ENING PERIOD, THE GOVERNMENT OF INDIA HAD ISSUED CERTAIN GUIDELINES R EGARDING WIND ENERGY GENERATION. THESE GUIDELINES FROM GOVERNMENT OF IN DIA, WIND POWER GENERATION POLICIES OF OTHER STATE GOVERNMENT AND T HE PROBLEMS BEING FACED BY PROMOTERS OF WIND ENERGY GENERATION WERE U NDER ACTIVE CONSIDERATION OF THE STATE GOVERNMENT. RESOLUTION : IN PARTIAL MODIFICATION OF ITS EXISTING POLICY TO P ROMOTE WIND ENERGY GENERATION, THE STATE GOVERNMENT HAS TAKEN FOLLOWIN G DECISIONS TO PROMOTE WIND ENERGY GENERATION IN THE STATE:- (1). XXXXXXXXXX (2). XXXXXXXXXX XXXXXXXXXX (7). CAPITAL SUBSIDY : WIND POWER PROJECT WILL BE G RANTED STATUS OF SMALL SCALE INDUSTRIES. MEDA SHALL GIVE A SUBSIDY UPTO 30% OF THE FIXED CAPITAL INVESTMENT (LIMITED TO RS.20 LAKHS) TO THE P ROMOTERS SUBJECT TO A CONDITION THAT WIND POWER PLANT HAS SUCCESSFULLY OP ERATED WITH A MINIMUM 12% PLANT LOAD FACTOR FOR AT LEAST ONE YEAR . (8). XXXXXXXXXXXXX XXXXXXXXXXXX 18 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 20. THE LD. AR HAS FURTHER CONTENDED THAT 50% OF THE C APITAL SUBSIDY RECEIVED BY THE ASSESSEE ` 20 LACS WAS SHARED WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. THUS, THE ASSESSEE C OULD TAKE THE BENEFIT OF ONLY 50% OF THE SUBSIDY I.E. ` 10 LACS. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED ON RECORD A COPY OF THE LETT ER DATED 19 TH SEPTEMBER, 2008 FROM MAHARASHTRA STATE ELECTRICITY DISTR IBUTION COMPANY LTD. AT PAGE 55 OF THE PAPER BOOK AND THE SUB SEQUENT COMMUNICATION OF THE ASSESSEE WITH MAHARASHTRA STATE ELE CTRICITY DISTRIBUTION COMPANY LTD. AT PAGES 57 TO 64 OF THE PAPER BOOK. THE LD. AR ALSO REFERRED TO THE LEDGER ACCOUNT OF MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. IN THE BOOKS OF ACCOUNT OF THE A SSESSEE TO SHOW THAT ` 10 LACS WAS PAID THROUGH CHEQUE TO MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. ON ACCOUNT OF 50% SHA RE OF SUBSIDY. 21. THE QUESTION WHETHER THE SUBSIDY RECEIVED IS OF CAP ITAL IN NATURE OR REVENUE IN NATURE DEPENDS ON THE PURPOSE AND OBJE CT FOR WHICH THE SUBSIDY IS RECEIVED. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED AND OTHERS VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS LAID DOWN THE PRINCIPLES TO ASCERTA IN THE NATURE OF SUBSIDY RECEIVED. THE HON'BLE APEX COURT AFTER CONSIDE RING CATENA OF JUDGMENTS IN THE PECULIAR FACTS OF THE CASE HELD THAT THE SUBSIDY RECEIVED BY THE ASSESSEE YEAR AFTER YEAR, AFTER SETTING UP OF NEW INDUSTRY AND COMMENCEMENT OF PRODUCTION WAS GIVEN FOR THE PURP OSE OF CARRYING ON OF THE BUSINESS OF THE ASSESSEE. THE HON'BLE COURT HELD THAT SUCH SUBSIDY IS OF REVENUE CHARACTER AND LIABLE TO TAX ACCORDIN GLY. 19 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 22. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF RASIKLAL M. DHARIWAL (HUF) VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) HA D OCCASION TO DEAL WITH THE ISSUE RELATING TO DETERMINE THE NATURE OF SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE SAME SCHEM E OF THE GOVERNMENT. THE CO-ORDINATE BENCH AFTER CONSIDERING JUD GMENTS OF THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF SAHNE Y STEEL AND PRESS WORKS LIMITED AND OTHERS VS. COMMISSIONER OF INCOME TAX (SUPRA) AND THE IN THE CASE OF COMMISSIONER OF INCOME TAX VS. PONNI SUGAR AND CHEMICALS LTD. REPORTED AS 306 ITR 392 (SC) AN D THE DECISION IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIA NCE INDUSTRIES LTD. REPORTED AS 88 ITD 273 (MUM) HELD AS UNDER: 15. ON THE BASIS OF THE AFORESAID DECISIONS AN UND ISPUTED PREMISE WHICH CAN BE DEDUCED IS THAT IN ORDER TO DETERMINE THE CHARACTER OF THE IMPUGNED RECEIPT WHETHER CAPITAL OR REVENUE, THE SAME HAS TO BE DECIDED IN THE LIGHTS OF THE OBJECTS AND PURPOSE FO R WHICH THE SCHEME HAS BEEN FORMULATED BY THE STATE GOVERNMENT. IT IS QUIT E CLEAR THAT THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID OR THE FORM OF INCENTIVE GRANTED UNDER A SCHEME ARE IMMATERIAL CONSIDERATIONS. IN A C ASE WHERE THE SUBSIDY/INCENTIVE UNDER A SCHEME IS GRANTED TO ENCO URAGE SETTING UP OF NEW INDUSTRIES THE SAME IS LIABLE TO BE CHARACTERIZ ED AS A CAPITAL RECEIPT, WHILE AN INCENTIVE/SUBSIDY GRANTED IN THE COURSE OF TRADE FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE, THE SA ME IS LIABLE TO BE REGARDED AS A REVENUE RECEIPT. 16. IN THIS BACKGROUND, WE MAY NOW REVERT BACK AND EXAMINE THE SCHEME UNDER WHICH THE ASSESSEE HAS AVAILED OF THE SALES-TAX BENEFIT. IN THE PRESENT CASE, AS NOTED EARLIER, THE STATE GOVER NMENT VIDE ITS RESOLUTION DATED 12.3.1998 MODIFIED ITS EXISTING PO LICY FOR THE PURPOSES OF PROMOTING WIND ENERGY GENERATION IN THE STATE OF MAHARASHTRA. THIS POLICY HAS BEEN FORMULATED IN THE BACKGROUND OF THE FACT THAT THE EARLIER POLICY OF THE STATE GOVERNMENT ON GENERATION THROUG H NON CONVENTIONAL SOURCES IN JANUARY, 1996 DID NOT ACHIEVE THE DESIRE D RESULTS. IN THE SAID POLICY, NINE DIFFERENT INCENTIVES HAVE BEEN LAID OU T, WHICH HAVE BEEN EXTRACTED BY US IN EARLIER PART OF THIS ORDER. THE DISPUTE BEFORE US IS IN RELATION TO THE SALES-TAX BENEFITS. THE PREAMBLE OF THE POLICY ITSELF REFLECTS THE AREA WHICH IS SOUGHT TO BE ADDRESSED BY THE POL ICY WHICH IS THE PROBLEMS BEING FACED BY PROMOTERS OF WIND ENERGY GE NERATION. IT IS QUITE 20 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 CLEAR THAT THE SALES-TAX BENEFIT IS NOT INTENDED TO BE GRANTED FOR CREATION OF OR BRINGING INTO EXISTENCE ANY NEW ASSET. IT IS ALSO CLEAR THAT THERE IS NO PRESCRIBED CRITERIA AS TO THE MANNER IN WHICH SU CH INCENTIVES ARE TO BE UTILIZED. THE CLAIM OF THE ASSESSEE IS THAT THE SAL ES-TAX BENEFIT IS GRANTED HAVING REGARD TO THE QUALIFYING INVESTMENT, WHICH I S STATED TO BE TOWARDS INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, L AND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN OF WIND PRODUCTS. ACCORDING TO THE APPELLANT, THE INCENTIVE BEING LINKED TO THE QUALIF YING INVESTMENT SHOWS THAT IT IS INTENDED AS A RECOUPMENT OF THE FIXED CO ST ALREADY INCURRED BY THE ASSESSEE AND, THEREFORE, SUCH INCENTIVES ARE TO BE REGARDED AS CAPITAL IN NATURE. IN OUR CONSIDERED OPINION, SUCH PURPOSE, AS ARTICULATED ON BEHALF OF THE APPELLANT IS NOT EMERGING FROM THE SCHEME OF THE STATE GOVERNMENT. RATHER, THE EMPHASIS ON OF THE GRANT OF SALES-TAX BENEFIT IS ON ACTUAL RUNNING OF THE PLANT AND THAT TOO UNDER P RESCRIBED EFFICIENCY LEVELS. IN FACT, IN THE RESOLUTION DT 1.10.1999 STA GGERED PLANT LOAD FACTORS ACHIEVED BY THE UNIT ENTITLED THE UNIT TO V ARYING LEVELS OF SALES-TAX BENEFIT. THEREFORE, IT COULD NOT BE SAID THAT THE S ALES-TAX BENEFIT IS AVAILABLE MERELY ON COMMENCEMENT OF GENERATION. WE ARE CONSCIOUS THAT MERE TIMING OF THE GRANT OF SUBSIDY IS NOT RELEVANT . HOWEVER, IN THE PRESENT CASE, IT IS NOT THE TIMING OF THE SUBSIDY AL ONE BUT THE GRANT IS LINKED TO ACHIEVING OPERATIONAL EFFICIENCIES AND TH AT TOO FOR ONLY SIX CONTINUOUS YEARS. IF A UNIT WHICH IS OTHERWISE ELIG IBLE FOR INCENTIVE, DOES NOT ACHIEVE THE PLANT LOAD FACTOR OF 12% OR ABOVE, IT WOULD NOT BE ENTITLED TO RECEIVE THE SALES TAX BENEFIT. THEREFORE, IN OUR CONSIDERED OPINION, THOUGH THE OBJECT OF THE SCHEME IS TO PROMOTE GENER ATION OF ENERGY THROUGH NON CONVENTIONAL SOURCES BUT THE SAME IS SO UGHT TO BE ACHIEVED BY THE GOVERNMENT IN THE FORM OF SUPPORTING THE UNI TS TO PERFORM MORE EFFICIENTLY AND PROFITABLY. 17. IN FACT THE HONBLE SUPREME COURT IN THE CASE O F PONNI SUGARS & CHEMICALS LTD. (SUPRA) CLEARLY NOTED THAT THE SUBSI DY RECEIVED THEREIN WAS TO BE UTILIZED ONLY FOR REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXIS TING BUSINESS. IN THE PRESENT CASE, THERE IS NO SUCH RESTRICTION OR OBLIG ATION ON THE PART OF THE ASSESSEE TO UTILIZE THE INCENTIVES AVAILED. IN FACT , ON THIS ASPECT THE INSTANT SCHEME IS AKIN TO THE SCHEME NOTED BY THE H ONBLE SUPREME COURT IN THE CASE OF SAHNEY STEELS (SUPRA) WHEREIN THE ASSESSEE WAS FOUND FREE TO USE THE MONEY IN ITS BUSINESS ENTIREL Y AS IT LIKED. IN THE PRESENT CASE ALSO, THE ASSESSEE IS NOT OBLIGED TO S PEND THE MONEY FOR ANY PARTICULAR PURPOSE. THUS, APPLYING THE PURPOSE TEST TO THE FACTS OF THE PRESENT CASE AND KEEPING IN MIND THE OBJECTS BE HIND THE PAYMENT OF INCENTIVE SUBSIDY, WE ARE SATISFIED THAT THE SALES- TAX BENEFITS RECEIVED BY 21 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 THE ASSESSEE UNDER THE INSTANT SCHEME ARE IN THE CO URSE OF CARRYING ON ITS TRADE MORE PROFITABLY AND THEREFORE SUCH RECEIP T CANNOT BE CHARACTERIZED AS CAPITAL IN NATURE. THUS, THE ASSES SEE FAILS ON THIS GROUND. IN THE PRESENT CASE IF THE PURPOSE TEST IS APPLIED TO TH E SUBSIDY RECEIVED, IT WOULD BE EVIDENT THAT THE SUBSIDY RECEIVED BY ASSESSEE IS NOT FOR PURCHASE OF CAPITAL ASSET OR TO REPAY THE LOANS TAKEN FOR SETTING UP OF WINDMILL. NO STRINGS ARE ATTACHED TO THE SUBSIDY REC EIVED. NO MATERIAL HAS BEEN PLACED ON RECORD BY THE LD. AR TO SHOW THAT THE SUBSIDY HAS TO BE UTILIZED IN A PARTICULAR MANNER. THUS, T HE ASSESSEE IS AT LIBERTY TO UTILIZES THE AMOUNT OF SUBSIDY FOR DAY TO D AY RUNNING OF THE WINDMILL. IN VIEW OF THE FACTS OF THE CASE AND THE DECISION OF THE CO- ORDINATE BENCH, WE HOLD THAT THE SUBSIDY RECEIVED BY TH E ASSESSEE IS REVENUE IN NATURE. 23. THE LD. AR OF THE ASSESSEE HAS MADE AN ALTERNATE SU BMISSION THAT THE ASSESSEE HAS SHARED 50% OF THE SUBSIDY WITH M AHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. IN SUPPORT OF ITS CLAIM THE ASSESSEE HAS PLACED ON RECORD LETTER DATED 19-09-2008 FROM MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. AT PAGE 55 OF THE PAPER BOOK AND THE SUBSEQUENT COMMUNICATION BETWE EN ASSESSEE AND MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LT D. AT PAGES 57 TO 64 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO PLAC ED ON RECORD LEDGER ACCOUNT OF MAHARASHTRA STATE ELECTRICITY DISTRIBU TION COMPANY LTD. IN THE BOOKS OF ASSESSEE TO SHOW THAT ` 10,00,000/- HAVE BEEN PAID TO MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LT D. TOWARDS 50% SHARE IN SUBSIDY. A PERUSAL OF COMMUNICATION FROM MAHA RASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. SHOWS THAT THE ASSESSEE WAS UNDER OBLIGATION TO SHARE 50% OF THE SUBSIDY AMOUNT RECEIVED FROM 22 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 MEDA WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMP ANY LTD. THE ASSESSEE HAS PAID ` 10,00,000/- BEING 50% OF THE TOTAL SUBSIDY ` 20 LAKHS RECEIVED. THE AUTHORITIES BELOW HAVE NOT APPRECIATE D THIS FACT ALTHOUGH THE ASSESSEE HAD FURNISHED THESE DOCUMENTS BE FORE THEM. WE ARE OF THE CONSIDERED OPINION THAT SINCE THE ASSESSEE HA S ONLY RECEIVED BENEFIT OF 50% OF THE SUBSIDY, THE ASSESSEE IS LIABLE FOR THE AMOUNT OF SUBSIDY RETAINED BY IT. NO MATERIAL HAS BEEN BROUGHT BEFO RE US TO SHOW THAT THE BENEFIT OF 50% SUBSIDY SHARED WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. HAS FLOWN BACK TO ASSESSEE IN AN Y OTHER MANNER WHATSOEVER. THUS, WE ACCEPT ALTERNATE SU BMISSION OF THE LD. AR AND HOLD THAT ONLY 50% OF THE SUBSIDY I.E. ` 10,00,000/- IS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE AS REVENUE R ECEIPT. ACCORDINGLY, GROUND NO. 2 OF THE APPEAL IS PARTLY ACCEPTED. 24. THE THIRD GROUND RAISED IN THE APPEAL FOR THE ASSESS MENT YEAR 2007-08 (GROUND NO. 2 IN ASSESSMENT YEAR 2008-09) RELATE S TO DISALLOWANCE MADE U/S. 40(A)(IA) IN RESPECT OF PAYMENTS MADE T OWARDS SERVICE COMMISSION AND TRANSPORTATION CHARGES. THE DISALL OWANCE HAS BEEN MADE FOR NON-DEDUCTION OF TAX AT SOURCE ON THE PA YMENTS MADE TOWARDS SERVICE COMMISSION AND TRANSPORTATION CHARGES. THE CONTENTION OF THE ASSESSEE IS THAT THE TAX HAS BEEN DE DUCTED ON SUCH PAYMENTS AND HAS BEEN DEPOSITED IN THE GOVT. EX-CHEQUE R BEFORE THE DUE DATE OF FILING OF RETURN. THE LD. AR SUBMITTED THAT DUE DATE FOR FILING OF RETURN IN ASSESSMENT YEAR 2007-08 WAS EXTENDED BY CBDT FROM 31-10-2007 TO 15-11-2007 VIDE NOTIFICATION DATED 31- 10-2007. THE TDS AMOUNT WAS DEPOSITED BEFORE THE EXTENDED DATE OF FILING OF RETURN. THE AUTHORITIES BELOW HAVE REJECTED THE CLAIM O F THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT 23 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 TAX HAS BEEN DEDUCTED AT SOURCE ON THE ABOVE SAID PA YMENTS. WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFICER. THE ASSESSEE SHALL FURNISH NECESSARY DOC UMENTS TO SHOW THAT THE TAX WAS DEDUCTED AT SOURCE ON THE PAY MENTS MADE TOWARDS SERVICE COMMISSION AND TRANSPORTATION CHARGES A ND THE SAME WAS DEPOSITED BEFORE THE DUE DATE OF FILING RETURN OF INCOME . THE ASSESSING OFFICER AFTER EXAMINING THE NECESSARY DOCUMENTS SHALL DECIDE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW. ACCORDINGLY, GROU ND NO. 3 IN ASSESSMENT YEAR 2007-08 AND GROUND NO. 2 IN ASSESSMEN T YEAR 2008-09 ARE ALLOWED FOR STATISTICAL PURPOSE. 25. THUS, IN VIEW OF THE ABOVE FINDINGS THE APPEAL FOR THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED AND THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 1992/PN/2013 (ASSESSEES APPEALS) 26. THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2009- 10 HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DISALLOWING THE COMMUNICATION EXPENSES OF RS.50,000 /-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN DISALLOWING THE COMMISSION OF RS.3,86,140/- PAID IN THE COURSE OF AND FOR THE BENEFIT OF BUSINESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN DISALLOWING THE SUBSIDIARY DOCUMENTATION EXPENSES O F RS.7,51,050/-. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND WHICH REA DS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE HIGHER CLAIM O F DEPRECIATION I.E. 80% 24 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 ON THE COST INCURRED ON FOUNDATION AND CONTROL ROOM AND OTHER CIVIL WORKS/INFRASTRUCTURE FACILITIES ATTACHED TO COST OF THE WINDMILL. 27. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DOCUMENTS PLACED ON RECORD BY THE LD. AR OF THE ASSESSEE. THE FIRST ISSUE IN APPEAL RELATES TO DISALLOW ANCE OF COMMUNICATION EXPENSES OF ` 50,000/-. THE ASSESSEE HAS CLAIMED COMMUNICATION EXPENSES TO THE TUNE OF ` 10,12,834/-. THESE EXPENSES INCLUDE MOBILE PHONE BILLS OF THE PARTNERS OF THE ASSESSEE. THE ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF ` 50,000/- FROM THE SAID EXPENSES ON ACCOUNT OF PRIVATE/PERSONAL USE OF MOBILE PH ONES BY THE PARTNERS AND STAFF MEMBERS. IN FIRST APPEAL THE ASSESSING OFFICER SUSTAINED THE DISALLOWANCE. 28. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE BY THE A UTHORITIES BELOW ON ACCOUNT OF PERSONAL USE OF MOBILE PHONES IN AN A D HOC MANNER. THE DISALLOWANCE MADE IN OUR OPINION IS ON THE HIG HER SIDE KEEPING IN VIEW THE FACT THAT MOBILE PHONE BILLS HAVE NOT BE EN SEGREGATED FROM THE TOTAL EXPENSES CLAIMED BY THE ASSE SSEE. THE POSSIBILITY OF USE OF MOBILE PHONES FOR PERSONAL USE BY THE P ARTNERS AND STAFF CANNOT BE RULED OUT. TO MEETS THE ENDS OF JUSTICE IT WOULD BE SUFFICE IF THE DISALLOWANCE TO THE EXTENT OF ` 10,000/- IS MADE. ACCORDINGLY, WE RESTRICT THE DISALLOWANCE TO ` 10,000/-. THE GROUND NO. 1 RAISED IN THE APPEAL OF THE ASSESSEE IS THUS, PARTLY ALLO WED FOR STATISTICAL PURPOSE. 29. THE SECOND ISSUE RAISED IN THE APPEAL BY THE ASSESSE E RELATES TO DISALLOWANCE OF COMMISSION OF ` 3,86,140/- PAID IN THE COURSE OF 25 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 BUSINESS. THIS ISSUE WAS RAISED BY THE ASSESSEE IN THE A SSESSMENT YEARS 2007-08 AND 2008-09 AS WELL. WE HAVE REMITTED TH IS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR REAPPRECIATION OF THE DOC UMENTS AND NECESSARY DETAILS FILED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. ACCORDINGLY, WE RESTORE THIS ISSUE BACK TO THE FILE OF ASSE SSING OFFICER TO DECIDED THIS ISSUE IN THE SAME TERMS. ACCORDINGLY, GROUND NO. 2 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 30. THE THIRD GROUND RAISED IN THE APPEAL BY THE ASSESS EE RELATES TO DISALLOWANCE OF DOCUMENTATION EXPENSES FOR THE REIMBURSEME NT OF SUBSIDY. THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S. MANJARA S.S.K. LTD. FOR SUPPLY OF SPRINKLER SETS WITH ACCES SORIES TO ITS CANE GROWER MEMBERS. THE CANE GROWER MEMBERS ARE EN TITLED TO CLAIM SUBSIDY ON THE SPRINKLER SETS AS PER THE GOVT. POLICY. T HE WORK OF COLLECTING THE REQUISITE DOCUMENTARY EVIDENCE IN ORDER TO CLAIM SUBSIDY WAS ENTRUSTED BY THE SUGAR FACTORY TO THE ASSESSEE. THE ASSESSEE APPOINTED SHRI SUDHAKAR YADAV TO COLLECT THE DOCUMENTS FOR CLAIMING THE SUBSIDY AND CLAIMED EXPENDITURE TO THE TUNE OF ` 7,51,050/- TOWARDS THE COLLECTION OF DOCUMENTS. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE CLAIMED ON THE GROUND THAT FOR LIMIT ED WORK OF COLLECTING DOCUMENTS THE EXPENDITURE CLAIMED IS ON THE HIG HER SIDE AND ALSO THAT THE ASSESSEE HAD NOT PRODUCED ANY SUPPORTIN G EVIDENCE TO SUBSTANTIATE THE EXPENDITURE CLAIMED. THE ASSESSING OFFICER FURTHER NOTED THAT SHRI SUDHAKAR YADAV WAS AN EMPLOYEE OF THE ASSESSEE AND WAS WORKING AS DIVISIONAL MANAGER. THE PAYMENT OF ` 2300/- PER SPRINKLER SET FOR MERELY COLLECTING DOCUMENTS TO CLAIM SUBS IDY IS ON THE HIGHER SIDE. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER AND REJECTED THE CLA IM OF THE 26 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 ASSESSEE. THE LD. AR OF THE ASSESSEE HAS PLACED ON REC ORD AN AGREEMENT BETWEEN THE ASSESSEE AND CHAMATKAR AGENCIE S GODIA FOR SUPPLY OF SPRINKLER PIPES AND AGREEMENT BETWEEN THE ASS ESSEE AND MANJARA S.S.K. LTD. FOR SUPPLY OF SPRINKLER SETS. THE ASSE SSEE HAS ALSO PLACED ON RECORD AT PAGES 23 AND 24 OF THE PAPER BOOK , THE APPOINTMENT LETTER ADDRESS TO SHRI S.S. YADAV AND B.K. PEDGAONKAR. 31. A PERUSAL OF THE APPOINTMENT LETTER WOULD SHOW THAT THE RATE FIXED FOR COLLECTION AS WELL AS DOCUMENTATION ETC. FOR SPRINKLE RS IRRIGATION SYSTEM HAS BEEN FIXED UP TO ` 2300/- PER SPRINKLER SET. THE ASSESSEE HAS NOT PLACED ON RECORD ANY DOCUMENT TO S HOW THE NUMBER OF PERSONS FROM WHOM DOCUMENTS HAVE BEEN COLLECTED FOR S UPPLY OF SPRINKLER SETS AND THE DETAILS OF THE AMOUNT CHARGED BY SHRI S.S. YADAV FOR COLLECTING AND PROCESSING OF DOCUMENTS. A PERUSAL OF TH E APPOINTMENT LETTER REVEAL THAT ` 2300/- IS THE MAXIMUM RATE THAT CAN BE CHARGED BY SHRI S.S. YADAV. IT IS NOT THE CASE WHERE FLAT RATE OF ` 2300/- HAS BEEN FIXED FOR COLLECTING AND PROCESSING OF THE DOCUMENTS. THE REVENUE HAS NOT DISPUTED THAT THIS EXERCISE OF COLLEC TING DOCUMENTS AND FURTHER PROCESSING HAS NOT BEEN UNDERT AKEN. THEREFORE, SOME EXPENDITURE MUST HAVE BEEN INCURRED ON THIS COUNT . THE CONTENTION OF THE REVENUE IS THAT SHRI S.S. YADAV IS THE EMPLOYEE OF THE ASSESSEE THEREFORE, NO FURTHER REMUNERAT ION WAS REQUIRED TO BE PAID FOR COLLECTION OF DOCUMENTS IS NOT SUS TAINABLE. THE WORK ASSIGNED TO SHRI S.S. YADAV FOR COLLECTION OF THE DOCUM ENTS AND PROCESSING THEREOF FOR CLAIMING SUBSIDY WAS OVER AND ABOVE HIS ROUTINE WORK. THE WORK INVOLVED EXTENSIVE TRAVELLING AND EFFORT T O COLLECT DOCUMENTS, THEREFORE, SOME ADDITIONAL REMUNERATION / INCENT IVE MUST HAVE BEEN PAID TO HIM BY THE ASSESSEE. SINCE, THE ASSE SSEE HAS FAILED 27 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 TO PLACE ON RECORD DETAILS OF THE EXPENDITURE AND THE EX ERCISE OF ASCERTAINING THE AMOUNT EXPENDED HAS NOT BEEN CARRIED OUT, KEEPING IN VIEW THE ENTIRETY OF FACTS, WE DISALLOW 30% OF THE EXPENDITUR E CLAIMED BY THE ASSESSEE. THUS, WE RESTRICT THE DISALLOWANCE OF EX PENDITURE TO THE EXTENT OF ` 2,25,000/-. ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL BY THE ASSESSEE IS PARTLY ACCEPTED. 32. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND WITH R ESPECT TO HIGHER CLAIM OF DEPRECIATION I.E. 80% ON THE COST OF FOUNDATION AND CONTROL ROOM AND OTHER CIVIL WORKS/INFRASTRUCTURE FACILITIES A TTACHED TO THE WINDMILL. WE FIND THAT THE ISSUE RELATING TO HIGHER RATE OF DEPRECIATION I.E. 80% ON THE COST OF FOUNDATION, CONTROL ROOM AND OTHER CIVIL WORKS/INFRASTRUCTURE FACILITIES ATTACHED TO THE WINDMILL H AS BEEN ADJUDICATED BY THE TRIBUNAL IN NUMBER OF CASES IN FAVOUR O F THE ASSESSEE. 33. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. COOPER FOUNDARY P. LTD. (SUPRA) HAS UPHE LD THE ORDER OF TRIBUNAL IN GRANTING HIGHER RATE OF DEPRECIATION I.E. 80% O N THE CEMENT FOUNDATION BY HOLDING IT TO BE AN INTEGRAL PART OF T HE WINDMILL. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMINITY DEVELOPERS & BUILDERS IN ITA NO. 1505/PN/2011 FOR THE ASS ESSMENT YEAR 2008-09 DECIDED ON 12-12-2012 HAS HELD THAT THE COST OF FOUNDATION OF WINDMILL IS ELIGIBLE FOR DEPRECIATION @ 80% I.E. THE RA TE APPLICABLE TO THE WINDMILL AS IT IS AN INTEGRAL PART OF THE COS T OF WINDMILL. THE COST OF COMMISSION AND ERECTION OF WINDMILL CANN OT BE SEPARATED FROM THE WINDMILL AS IT IS DIRECTLY RELATED TO FUNC TIONING OF THE WINDMILL. THEREFORE, IN VIEW OF THE WELL SETTLED LAW WE DIRECT T HE 28 ITA NOS. 1667, 1668, 1990, 1991 & 1992/PN/2013 AND 11/PN/2014 ASSESSING OFFICER TO GRANT THE DEPRECIATION @ 80% ON THE CIVIL WORK INCLUDE FOUNDATION AND CONTROL ROOM AND OTHER INFRASTRUCTU RE FACILITIES ATTACHED TO THE WINDMILL BEING AN INTEGRAL PART OF THE WINDM ILL. THUS, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. 34. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 03 RD DAY OF MARCH, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 03 RD MARCH, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-IV, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE