CLOVER ENERGY PRIVATE LIMITED, COIMBATORE V. DCIT CORPORATE CIRCLE 1, COIMBATORE

ITA 1746/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9334 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAMJCIT
• Assessee Lawyers: T RAGHUNATHAN
• Keywords: Depreciation; Opportunity of being heard; Set aside
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . , # , # ( BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBE R ./ ITA NO.1746/CHNY/2018 ) ) /ASSESSMENT YEAR: 2013-14 M/S. CLOVER ENERGY PVT. LTD., 484, KAMARAJ ROAD, UPPILIPALAYAM, COIMBATORE 641 015. VS. PRINCIPAL COMMISSIONER OF INCOME TAX-1, COIMBATORE. [PAN:AAECC 3271C] ( , /APPELLANT) ( -., /RESPONDENT) ./ ITA NO.2098/CHNY/2018 ) ) /ASSESSMENT YEAR: 2013-14 DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, COIMBATORE. VS. M/S. CLOVER ENERGY PVT. LTD., 484, KAMARAJ ROAD, UPPILIPALAYAM, COIMBATORE 641 015. [PAN:AAECC 3271C] ( , /APPELLANT) ( -., /RESPONDENT) , / / ASSESSEE BY : SHRI T. RAGHUNATHAN, FCA -., / /RESPONDENT BY : SHRI GURU BASHYAM, JCIT FOR CIT / /DATE OF HEARING : 24.06.2019 / / DATE OF PRONOUNCEMENT : 27.06.2019 ITA NOS.1746 & 2098/CHNY/2018 :- 2 -: / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THE APPEAL AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (APPEALS)-4, COIMBATORE (HEREINAFTER CALLED AS PCIT) IN ITA NO.120(34)/263/PCIT-1/CBE/ 2017-18 DATED 19.03.2018 IN ITA NO.1746/CHNY/2018 FOR ASSESSMENT YEAR (AY) 2013- 14, WHILE THE REVENUE FILED APPEAL IN ITA NO.2098/C HNY/2018 FOR AY 2013-14 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE (CIT(A)) IN APPEAL NO.12/16-17 DATED 1 2.04.2018. 2. M/S. CLOVER ENERGY PVT. LTD., THE ASSESSEE, IS C ARRYING ON THE BUSINESS OF ACQUIRING USED WIND ENERGY GENERATORS A ND GENERATING AND SELLING POWER FROM THEM. FOR THE AY 2013-14, THE A SSESSING OFFICER (AO) FOUND, INTER ALIA , THAT THE ASSESSEE-COMPANY ENTERED INTO A SLUMP SALE AGREEMENT DATED 16.04.2012 AND 28.03.2013 WITH M/S. DEVI SEAFOODS LTD. AND M/S. VTX INDUSTRIES LTD., RESPECT IVELY, FOR THE PURCHASE OF WIND ELECTRIC GENERATORS. FOR THE WIND MILLS PURCHASED FROM VTX INDUSTRIES LTD., THOUGH THE DATE OF ACQUISITION WAS SHOWN AS ON 25.03.2013 BUT THE NAME TRANSFER WAS NOT DONE TILL 31.03.2013. THEREFORE, THE AO DID NOT ALLOW THE DEPRECIATION CL AIMED BY THE ASSESSEE FOR THESE THREE WINDMILLS STATING THAT TH E TWO CONDITIONS VIZ. OWNERSHIP OF THE ASSET AND THE USER OF THE ASSET FO R THE PURPOSE OF THE ITA NOS.1746 & 2098/CHNY/2018 :- 3 -: BUSINESS WAS NOT FULFILLED. HOWEVER, IN THE SAME O RDER, THE AO HELD THAT DURING THE PREVIOUS AY 2012-13, THE DEPRECIATION WA S DISALLOWED TO THE TUNE OF RS. 21,59,61,289/- (ASSESSEE CLAIMED - 1,73 ,17,95,603/- - ALLOWED 1,51,58,31,314/-) FOR PENDING NAME TRANSFER OF WINDMILLS. THE NAME TRANSFER IS EFFECTED DURING THE AY 2013-14 AND ACCORDINGLY DEPRECIATION IS ALLOWED IN THE CURRENT ASSESSMENT Y EAR ETC. ON GOING THROUGH THE RECORDS, THE LD. PCIT FOUND , INTER ALI A, THAT IN THE RETURN OF INCOME FOR AY 2013-14, THE ASSESSEE HAD CLAIMED DEP RECATION @ 80% ON WINDMILLS THAT WERE PURCHASED DURING THE PREVIOU S YEAR RELEVANT TO THE AY 2013-14. HOWEVER, IN THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 4.3.2016, THE AO HAD ALLOWED INCREASED DEP RECIATION, DUE TO THE REASON THAT THE DEPRECIATION WAS NOT ALLOWED FOR A Y 2012-13 AS THE WINDMILLS WERE NOT TRANSFERRED IN THE ASSESSEES NA ME AS ON 31.03.2012. THE PCIT HELD THAT THE ALLOWANCE OF DEPRECIATION IN THE AY 2013-14 ITSELF ESTABLISHES THAT THE ASSESSEE BECAME THE OWNER OF ASSETS ONLY DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2013-14. AS PE R THE CBDT NOTIFICATION NO. 15/12 THAT THE WINDMILLS PURCHASED AFTER 31.03.2012 ARE TO BE ALLOWED A DEPRECIATION @ 15% ONLY. THEREFORE , THE PCIT HELD THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S. 143(3) DATED 4.3.2016 WAS MADE WITHOUT VERIFICATION OF FACTS, ALLOWING RE LIEFS WITHOUT PROPER INQUIRY OF THE CLAIM. HENCE, HE HELD THAT ASSESSME NT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND HEN CE SET ASIDE THE ITA NOS.1746 & 2098/CHNY/2018 :- 4 -: ORDER OF THE ASSESSMENT AND DIRECTED THE AO TO RE-D O ASSESSMENT AFRESH AFTER VERIFICATION OF FACTS AS PER LAW AND AFTER AF FORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AGGRIEVED AGAINST THA T ORDER, THE ASSESSEE FILED AN APPEAL IN ITA NO.1746/CHNY/2018 BEFORE T HIS TRIBUNAL. 3. AGAINST ASSESSMENT ORDER PASSED U/S. 143(3) DAT ED 4.3.2016 FOR AY 2013-14, WHEREIN THE AO REFUSED TO ALLOW DEPRECI ATION CLAIMED ON THE THREE WINDMILLS FOR THE REASON THAT THE NAME T RANSFER WAS NOT MADE TILL 31.3.2013 ETC, THE ASSESSEE FILED AN APPEAL BE FORE THE CIT(A) AND THE LD CIT(A) ALLOWED THE APPEAL. AGGRIEVED AGAINST THA T ORDER, THE REVENUE FILED AN APPEAL IN ITA NO.2098/CHNY/2018 BEFORE THI S TRIBUNAL. 4. ON ITA NO.1746/CHNY/2018, THE LD. AUTHORIZED REP RESENTATIVE OF ASSESSEE SUBMITTED THAT THE PCIT ERRED IN DIRECTING THE AO U/S. 263 TO RE-DO THE ASSESSMENT ON THE GROUND THAT THE DEPRECI ATION ON WINDMILL HAS BEEN ALLOWED @ 80% WITHOUT VERIFICATION OF FACT S AND ALSO FOR THE REASON THAT THE ALLOWED RELIEFS WITHOUT PROPER INQU IRY. THE AO AFTER DUE VERIFICATION HAS CORRECTLY ALLOWED THE DEPRECIATION AND THEREFORE, THE LD. PCIT ERRED IN REVISING THE ORDER U/S. 263 OF THE AC T AND HENCE, HE PLEADED TO ALLOW THE APPEAL. ITA NOS.1746 & 2098/CHNY/2018 :- 5 -: 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE INVITED OUR ATTENTION TO THE ASSESSMENT ORDER DATED 4.3.2016, W HEREIN, INTER ALIA, THE A O CLEARLY RECORDED A FINDING THAT THOUGH THE DATE OF ACQUISITION IS 28.03.2013, THE NAME TRANSFER WAS NOT DONE TILL 31. 03.2013, THE NAME TRANSFER ORDER DATED IS 03.5.2013, THEREFORE, THE A SSETS WAS NOT OWNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND HENCE THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION CLAIM FOR THESE THREE WIND MILLS . THEREAFTER, THE AO RECORDED THE FINDING AS UNDER AN D ALLOWED DEPRECIATION: 4.1 DURING THE PREVIOUS ASSESSMENT YEAR 2012-13 T HE DEPRECIATION WAS DISALLOWED TO TUNE OF RS.21,59,61,289/- (ASSESS EE CLAIMED - 1,73,17,95,603 ALLOWED 1,51,58,31,314) FOR PENDIN G NAME TRANSFER OF WIND MILLS. THE NAME TRANSFER IS EFFECTED DURING THE ASSESSMENT YEAR I.E. 2013-14 AND ACCORDINGLY DEPRECIATION IS A LLOWED IN THE CURRENT ASSESSMENT YEAR. 42. AS PER THE COMPUTATION STATEMENT ASSESSEE HAS C LAIMED IT DEPRECIATION OF RS.59,36,00,695/-. AFTER CONSIDERIN G THE ABOVE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION TO THE TUNE O F RS.76,66,91,961/-. 5.1 THEREFORE, THE LD. DR SUBMITTED THAT THE FINDIN GS RECORDED BY THE LD. PCIT THAT THE ORDER PASSED BY THE AO U/S. 143(3) D ATED 4.3.2016 IS MADE WITHOUT VERIFICATION OF FACTS AND HE ALLOWE D RELIEFS WITHOUT PROPER INQUIRY OF THE CLAIM OF THE SAID RELIEF IS CORRECT AND HENCE, THE ORDER OF THE LD. PCIT MAY BE CONFIRMED. 6. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. AS POINTED OUT BY THE LD. DR, IT IS CLE AR FROM THE ORDER PASSED ITA NOS.1746 & 2098/CHNY/2018 :- 6 -: BY THE AO U/S. 143(3) DATED 4.3.2016 THAT THOUGH TH E AO HELD THAT THE ASSETS WERE NOT OWNED BY THE ASSESSEE DURING THE YE AR UNDER CONSIDERATION AND HENCE THE ASSESSEE IS NOT ENTITL ED FOR DEPRECIATION CLAIM FOR THESE THREE WIND MILLS DURING THE YEAR UN DER CONSIDERATION, HOWEVER, IN THE LATER PART SHE HAS COMPUTED AND ALL OWED DEPRECIATION AT FULL RATE. FURTHER FROM THE ORDER, IT IS CLEAR THAT VARIOUS ASPECTS ASSOCIATED WITH THE CLAIM HAS NOT BEEN PROPERLY EXAMINED AN D DISCUSSED. IN THE FACTS AND CIRCUMSTANCES, THE FINDINGS RECORDED B Y THE LD PCIT IN THE IMPUGNED ORDER IS CORRECT . THEREFORE, WE DO NOT F IND ANY MERIT IN THE ASSESSEES APPEAL AND HENCE, THE APPEAL IN ITA N O.1746/CHNY/2018 IS DISMISSED. 7. WITH REGARD TO ITA NO.2098/CHNY/2018, THE LD. DR SUBMITTED THAT IN THIS CASE THE ISSUE INVOLVED IS REGARDING ALLOWA NCE OF DEPRECIATION ON WIND MILLS WHICH ARE CLAIMED TO BE ACQUIRED AS SLUM P SALE ON 28.03.2013. THE DEPRECIATION CLAIMED ON THESE WIND MILLS WAS DISALLOWED WHILE FINALIZING THE ASSESSMENT MAINLY FOR THE REASON THAT AS PER DOCUMENT AVAILABLE ON RECORD THE TRANSFER OF OW NERSHIP OF ALL THE WIND MILLS TOOK PLACE ON 13/5/13, I.E. DATE ON WHIC H TNEB APPROVED THE TRANSFER. THE CIT(A) HAS ALLOWED APPEAL OF ASSESSEE STATING THAT ASSESSEE HAD TAKEN POSSESSION OF THE WIND MILLS AND PART OF THE PAYMENTS WERE ALSO MADE BY 31 / 3/13. THE CIT(A) HA S RELIED ON VARIOUS ITA NOS.1746 & 2098/CHNY/2018 :- 7 -: CASE LAWS WHEREIN IT IS HELD THAT ASSESSEE IS ELIGI BLE FOR DEPRECIATION ON AN ASSET IF HE HAS TAKEN POSSESSION OF THE ASSET AS PART PERFORMANCE OF THE TRANSACTION. ORDER OF THE CIT(A) IS ERRONEOUS I NASMUCH AS THE CIT(A) HAS ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT PO SSESSION OF THE ASSET HAS BEEN TAKEN-OVER ON THE DATE OF THE SALE A GREEMENT ITSELF WITHOUT APPRECIATING THE FACT THAT AS PER THE SLUMP SALE AGREEMENT, POSSESSION OF THE ASSET WOULD BE GIVEN SUBJECT TO F ULL PAYMENT OF THE CONSIDERATION (AS PER PARA NO. 3 OF THE AGREEMENT D ATED 28.03.2013). POINTING OUT VARIOUS MATERIAL ON RECORD INCLUDING T HE PAPER BOOKS , THE LD DR SUBMITTED THAT THE CIT(A) HAS IN THE APPELLATE O RDER ITSELF MENTIONED THAT PART PAYMENT HAS ONLY BEEN MADE BY 31/3/13. TH US, AS PER DOCUMENTS ON RECORD, THE ASSESSEE HAS NOT BEEN GIV EN POSSESSION OF THE ASSET AS ON 31/3/13 AS PAYMENTS WERE OUTSTANDIN G. FURTHER, AS PER DOCUMENTS AVAILABLE ON RECORD, THE NAME TRANSFER BY TNEB HAS TAKEN PLACE ONLY ON 13/5/2013 ON THE BASIS OF ASSESSEES LETTER DATED 27/4/213. THUS, THIS DOCUMENT ALSO GOES TO SUPPORT THE FACT T HAT POSSESSION OF THE WINDMILLS MUST HAVE BEEN HANDED OVER ONLY IN THE SU BSEQUENT FINANCIAL YEAR AS THE APPLICATION ITSELF IS FILED ON 27.04.20 13. WITHOUT PREJUDICE TO ABOVE, ASSESSEE CANNOT GENERATE AND USE OR SELL POW ER) WITHOUT THE APPROVAL OF TNEB. FOR SELLING POWER TO THIRD PARTIE S, AS PER THE GROUP CAPTIVE SCHEME, THE PURCHASER OF POWER HAS TO BE SH AREHOLDER OF ASSESSEE-/ WITH NOT LESS THAN 26% OF SHARES. THIS C ONDITION IS MENTIONED ITA NOS.1746 & 2098/CHNY/2018 :- 8 -: IN THE APPROVAL LETTER DATED 13/05/2013 WHICH IS A NNEXED TO THIS STATEMENT OF FACTS (PAGE NO. 5 TO 9). ASSESSEE DO N OT FULFILL THIS CONDITION, THEREFORE, ASSESSE IF DO NOT HAVE RIGHT TO SELL POW ER TO THOSE ENTITIES FROM WHOM ASSESSEE CLAIMS TO HAVE RECEIVED SUMS FOR SALE OF POWER DURING THE YEAR UNDER CONSIDERATION, AFTER TAKING POSSESSI ON OF THE WIND MILL. AS ASSESSEE DO NOT HAVE RIGHT TO RECEIVE INCOME FROM T HE ASSETS, WHICH IS CLAIMED TO HAVE BEEN TAKEN POSSESSION OF, ASSESSEE CANNOT BE HELD TO BE OWNER OF THE ASSET IN THE YEAR UNDER CONSIDERATI ON KEEPING IN VIEW THE DECISION QUOTED BY THE LEARNED CIT(A) WHILE GIVING RELIEF TO ASSESSEE. THERE IS NO VALID DOCUMENT ON RECORD TO PROVE THAT POSSESSION OF THE WIND MILLS WERE TAKEN ON THE DATE OF THE SLUMP-SALE AGREEMENT. THE CASE LAWS QUOTED BY THE CIT(A) WILL BE APPLICABLE O NLY IF THERE IS ANY EVIDENCE OF TAKING POSSESSION OF THE ASSETS BY ASSE SSEE. ALL THE DOCUMENTS ON RECORD AND THE FACTS OF THE CASE ONLY INDICATE THAT POSSESSION OF THE WINDMILL IS GIVEN IN THE SUBSEQUE NT FINANCIAL YEAR. IN THE ABSENCE OF ANY SUCH EVIDENCE THE CASE LAWS QUOT ED BY THE CIT(A) WILL NOT BE APPLICABLE IN THE ASSESSEES CASE. IN V IEW OF THE FACTS MENTIONED ABOVE THE CIT(A) HAS ERRED BY GIVING RELI EF TO ASSESSEE. THEREFORE, THE LD.DR REQUESTED TO QUASH THE ORDER O F THE LEARNED CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. ITA NOS.1746 & 2098/CHNY/2018 :- 9 -: 8. PER CONTRA, THE LD. AR SUBMITTED THE ASSESSEE C ONTENDED BEFORE THE LD CIT(A) THAT THEY HAVE TAKEN POSSESSION OF THE WI NDMILLS BASED ON THE SLUMP SALE AGREEMENT DATED 28.03.2013, FILED BANK A CCOUNT COPIES, WHEREIN THE ASSESSEES ACCOUNT HAS BEEN DEBITED S UBSTANTIAL PART OF THE CONSIDERATION BEFORE 31.03.2013 , FILED STATEME NT FROM THE AUDITOR OF THE SELLERS STATING THAT THE SALES RECORDED IN THE BOOKS OF ACCOUNT AND THE SELLERS HAVE NOT CLAIMED DEPRECIATION ON THE ASSETS SOLD ETC. AFTER CONSIDERING ALL OF THEM, THE LD. CIT(A) ALLOWED THE ASSESSEES DEPRECATION CLAIM. THEREFORE, THE LD AR SUPPORTED THE ORDER OF THE LD. CIT(A) AND PLEADED TO SUSTAIN IT. 9. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. IT IS CLEAR FROM THE ASSESSMENT ORDER THA T THE AO HAS NOT EXAMINED THE SLUMP SALE AGREEMENT AND ITS ASSOCIA TED ISSUES PROPERLY. WE CONFIRMED THE ACTION OF THE LD. PCIT U/S . 263, IN DIRECTING THE AO TO RE-DO THE ASSESSMENT AFRESH AFTER VERIFICATION O F FACTS AS PER LAW AND AFTER DUE AFFORDING OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE, SUPRA. WE FIND THAT THE ASSESSEE HAS PRODUCED THE COPIES OF S LUMP SALE AGREEMENT, LETTER OF HANDING OF POSSESSION AND THE PAYMENT PAR TICULARS ETC., SOME OF THEM, FOR THE FIRST TIME BEFORE THE LD. CIT(A), ON WHICH, THE LD. CIT(A) HAS NOT SOUGHT THE COMMENTS FROM THE A O. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THE IMPUGNED ISSUES BACK TO THE ITA NOS.1746 & 2098/CHNY/2018 :- 10 -: AO FOR A FRESH EXAMINATION. THE ASSESSEE SHALL LAY ALL MATERIAL IN SUPPORT OF ITS CONTENTION BEFORE THE AO AND SHALL COMPLY WI TH THE REQUIREMENTS OF AO IN ACCORDANCE WITH LAW. THE AO IS FREE TO CONDUC T APPROPRIATE ENQUIRY, AS DEEMED FIT, HOWEVER, HE SHALL FURNISH A DEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AGAINST THE MATERIAL, I F ANY, THAT IS TO BE USED AGAINST IT AND THEN SHALL PASS A SPEAKING ORDE R IN ACCORDANCE WITH LAW. THUS, THE APPEAL FILED BY THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1746/CHNY/2018 IS DISMISSED AND THE APPEAL FILED BY THE REVENUE IN ITA NO.2098/CHNY/2018 IS TREATED AS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2019 IN CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN ) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 27 TH JUNE, 2019 . EDN, SR. P.S / - 67 87 /COPY TO: 1. , /APPELLANT 2. -., /RESPONDENT 3. 9 ( )/CIT(A) 4. 9 /CIT 5. 7 - /DR 6. ) /GF