RAR Enterprises P Ltd. , CHENNAI V. ITO Corporate Ward 5(4) , CHENNAI

ITA 1800/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5612 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , ! [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMB ER ] ./I.T.A. NO.1800/MDS/2017 / ASSESSMENT YEAR : 2014-2015. M/S. RAR ENTERPRISES P. LTD, NO.138, USMAN ROAD, T. NAGAR, CHENNAI 600 017. [ PAN AAECR 7733E ] VS. THE INCOME TAX OFFICER, CORPORATE WARD 5(4) CHENNAI. ( '# / APPELLANT) ( $%'# /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. B.SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 13-12-2017 !' /DATE OF PRONOUNCEMENT : 19-12-2017 & / O R D E R ASSESSEE IN THIS APPEAL IS AGGRIEVED ON RESTRICTI ON OF ITS CLAIM OF DEPRECIATION ON TWO WINDMILL ENERGY GENE RATORS TO 15% AGAINST 80%. 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSI NESS OF POWER GENERATION HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING NIL INCOME. ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 80% ON WINDMILLS. LD. ASSESSING OFFICER ITA NO. 1800/MDS/2017. :- 2 -: NOTED THAT TWO WINDMILLS WERE PURCHASED BY THE AS SESSEE ONLY DURING THE RELEVANT PREVIOUS YEAR. ACCORDING TO HI M, BY 4 TH AMENDMENT RULES, 2012, WINDMILLS COMMISSIONED ON OR AFTER 01.04.2012 WERE ELIGIBLE FOR DEPRECATION @15% ONLY. WHEN ASSESSEE WAS PUT ON NOTICE, ITS REPLY WAS THAT WINDMILLS TH OUGH PURCHASED BY IT DURING THE RELEVANT PREVIOUS YEAR WERE INSTALLED PR IOR TO THAT YEAR. HOWEVER, LD. ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION. ACCORDING TO HIM, ACQUISITION OF THE WINDMILLS BY T HE ASSESSEE COULD BE CONSIDERED ONLY AS NEW INSTALLATION. AS PER THE L D. ASSESSING OFFICER, INSTALLATION COULD BE DEEMED TO HAVE HAPPENED ONLY ON OR AFTER THE DATE OF ACQUISITION OF THE WINDMILLS BY THE ASSESS EE. THUS, AS PER THE LD. ASSESSING OFFICER, ASSESSEE WAS ELIGIBLE FOR DE PRECIATION @15% ONLY. A DISALLOWANCE OF RS.32,76,000/- WAS MADE. 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION OF THE ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT THE TWO WINDMILLS WHICH WERE USED BY THE PREVIOUS OWNER COU LD NOT BE CONSIDERED AS NEW INSTALLATION OR AS SOMETHING COM MISSIONED BY THE NEW OWNER. AS PER THE ASSESSEE, DATE OF PURCHASE O F WINDMILLS AND DATE OF INSTALLATION WERE DIFFERENT. CONTENTION OF THE ASSESSEE WAS THAT WINDMILLS ACQUIRED BY IT DURING THE RELEVANT P REVIOUS YEAR STOOD ALREADY INSTALLED AND WAS ALREADY BEING OPERATED BY ITS PREVIOUS ITA NO. 1800/MDS/2017. :- 3 -: OWNER. THUS, ACCORDING TO THE ASSESSEE, IT WAS ENT ITLED FOR DEPRECIATION AT A HIGHER RATE. HOWEVER, LD. COMMISS IONER OF INCOME TAX (APPEALS) DID NOT ACCEPT THE CONTENTION. HE HE LD AT PARA 3 OF ITS ORDER AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS BUT AM UNABLE TO AGREE. IT IS AN ADMITTED FACT THAT THE GENERATORS WERE PURCHASED FROM ANOTHER ENTITY. THAT ENTITY WOULD HA VE AVAILED DEPRECIATION AT 80% ON THE BASIS OF HIS DATE OF INSTALLATION. THE ASSESSEE HAD ONLY ACQUIRED THE GENERATOR/WINDMILL ALREADY INSTALLED. THE APPELLANT HAS NOT INSTALLED THE GENERATOR AND HE ONLY ACQUIRED TH E ASSET IN FINANCIAL YEAR 2012-13. WHEN THE DATE OF ACQUISITION ITSELF IN FINANCIAL YEAR 2012-13 BY THE APPELLANT, IT CANNOT BE SAID THAT THE APPELLANT HAD INSTALLED THE MACHINERY BEFORE THE SAID DATE THE INSTALLATION BY THE PREVIOUS OWNER CANNOT BE CONSID ERED AS INSTALLATION DONE BY THE APPELLANT. THE ASSET HA VING BEEN ENJOYED HIGHER DEPRECIATION AT THE HANDS OF THE PREVIOUS OWNER AND THE APPELLANT HAD ACQUIRED THE ASSET AFTER 1/4/2012 IT IS NOT ENTITLED TO HIGHER DEPRECIATION AT 80% AND THE ASSESSING OFFICER WAS RIGHT IN RESTRICTING THE SAME TO 15% AS PER THE AMENDED RULES REFERRED ABOVE. I THEREFORE CONFIRM THE ORDER OF THE ASSESSING OFFICER AND THE GROUNDS RAISED ARE DISMISSED. 4. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE SUBMIT TED THAT WINDMILLS PURCHASED BY THE ASSESSEE WERE ALREADY IN STALLED AND COMMISSIONED BY ITS ERSTWHILE OWNERS ON 27.03.2004 AND 30.09.2004. ACCORDING TO HIM, THE CORRESPONDENCE BETWEEN EARLIE R OWNERS AND TANGEDCO WAS PLACED BEFORE THE LD. ASSESSING OFFIC ER AND SUCH CORRESPONDENCE CLEARLY CONFIRMED THE DATE OF COMMIS SIONING. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD CL AIMED DEPRECIATION @80% ON THE WDV OF WINDMILLS WHICH CAME TO RS.50, 40,000/-. AS ITA NO. 1800/MDS/2017. :- 4 -: PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE H AD ACQUIRED WINDMILLS AT THE COST OF RS.2,52,00,000/- AND COUL D HAVE CLAIMED DEPRECIATION ON THE WHOLE OF SUCH AMOUNT, BUT AS A CONSERVATIVE MEASURE RESTRICTED ITSELF TO THE WDV OF RS.50,40,00 0/- FOR WORKING OUT THE DEPRECIATION. RELYING ON THE NOTIFICATION NO. 15/2012, ISSUED BY THE GOVERNMENT OF INDIA, LD. AUTHORISED REPRESENTAT IVE SUBMITTED THAT AMENDMENT TO INCOME TAX RULES SPECIFICALLY MENTIONE D WINDMILLS COMMISSIONED OR INSTALLED ON OR AFTER 31 ST MARCH, 2012. ACCORDING TO HIM, WHEN THE INSTALLED WINDMILLS WERE ACQUIRED WA S IRRELEVANT. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES SU BMITTED THAT IN SO FAR AS ASSESSEE WAS CONCERNED, THE INSTALLATION COULD HAVE BEEN DONE ONLY AFTER IT PURCHASED THE TWO WINDMILLS FROM ITS EARLIER OWNERS. ACCORDING TO HIM, INSTALLATION BY ACTUAL OWNER WHO CLAIMED DEPRECIATION WAS THE RELEVANT FACTOR AND NOT THE INSTALLATION BY THE EARLIER OWNERS. ASSESSEE HAVING ACQUIRED AND INSTA LLED TWO WINDMILLS AFTER 31.03.2012, AS PER THE LD. DEPARTMENTAL REPRE SENTATIVE, BY VIRTUE OF THE AMENDED RULES IT WAS ELIGIBLE ONLY FOR 15 % DEPRECIATION. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED THAT TWO WINDMILLS PURCHASED BY THE ASSESSEE ON WHICH IT CLAIMED DEPRE CIATION @80% WERE ALREADY UNDER OPERATION OF ITS ERSTWHILE OWNER S. CONTENTION OF ITA NO. 1800/MDS/2017. :- 5 -: THE ASSESSEE IS THAT NOTIFICATION NO.15/2012, DATE D 30.03.2012 BRINGING INTO FORCE AMENDMENT INCOME TAX RULES, 19 62 ONLY SPOKE ABOUT INSTALLATION DONE ON OR BEFORE 31 ST MARCH, 2012 AND HAD NOTHING TO DO WITH THE DATE OF ACQUISITION. I AM OF THE OPI NION THAT THIS ARGUMENT IS ON A STRONG WICKET. ACCORDING TO ME, A LREADY INSTALLED MACHINERY CANNOT BE RE-INSTALLED. A REINSTALLATIO N COULD HAVE BEEN DONE ONLY IF IT WAS REMOVED FROM THE PREMISES WHERE IT WAS ORIGINALLY INSTALLED. IN MY OPINION, IF THE ASSESSEE HAD ACQU IRED THE WINDMILLS ALONGWITH THE LAND ON A RUNNING CONDITION, WHAT THE ASSESSEE ACQUIRED CAN BE CONSIDERED ONLY AS OPERATING WINDMILLS OF W HICH THE INSTALLATION HAPPENED PRIOR TO THE RELEVANT ASSESSMENT YEAR. TH E INCOME TAX (FOURTH AMENDMENT RULES, 2012) THROUGH WHICH NEW A PPENDIX I IN THE TABLE TO INCOME TAX RULES, 1962 HAS BEEN AMENDE D IS REPRODUCED HEREUNDER:- 1. (1) THESE RULES MAY BE CALLED THE INCOME-TAX ( 4TH AMENDMENT) RULES, 2012. (2) THEY SHALL COME INTO FORCE ON THE 1 ST DAY OF APRIL, 2012. 2. IN THE INCOME-TAX RULES, 1962, IN THE TABLE, IN THE NEW APPENDIX I, IN PART-A RELATING TO TANGIBLE ASSETS, UNDER THE HEADING 'ILL. MACHINERY AND PLANT', IN ITEM (8), IN SUB-ITEM (XIII), - A. IN CLAUSE (1), AFTER THE WORDS, 'WHICH RUN ON WIND MILLS', THE WORDS, FIGURES AND LETTERS, 'INSTALLED ON OR BEFORE 31 ST DAY OF MARCH, 2012 SHALL BE INSERTED ; AND B. IN CLAUSE (M), AFTER THE WORDS, 'RUNNING ON WIND ENERGY', THE WORDS FIGURES AND LETTERS, 'INSTALLED ON OR BEF ORE 31 ST DAY OF MARCH, 2012', SHALL BE INSERTED. ITA NO. 1800/MDS/2017. :- 6 -: THE WORDS MENTIONED ARE INSTALLED. I CANNOT READ IN TO THESE WORDS INSTALLED BY THE OWNER. IN MY OPINION WHO INSTALLE D THE WINDMILLS DOES NOT MATTER. WHAT MATTERS IS WHETHER IT WAS INSTALLE D PRIOR TO OR AFTER 31.03.2012. HOWEVER, WHETHER THE ASSESSEE HAD ACQU IRED WINDMILLS WHICH WERE ALREADY RUNNING ALONGWITH WITH THE LAND WHERE IT WAS SITUATED OR WHETHER HE HAD MOVED THE MACHINERY AND RE-INSTALLED IT SOMEWHERE ELSE ARE NOT CLEAR FROM THE RECORDS. I AM THEREFORE OF THE OPINION THAT THE ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. I SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE QUESTION REGARDING DEPRECIATION ON WINDMILLS BACK TO THE FI LE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCOR DANCE WITH LAW AFTER ASCERTAINING ALL THE RELEVANT FACTS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 19 TH DAY OF DECEMBER, 2017, AT CHENNAI SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 19TH DECEMBER, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF