Deputy Commissioner of Income-tax, V. Shri Sushant M. Jadhav, Pune

ITA 1843/PUN/2013

• Counselvise Citation: 184324514 RSA 2013
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.1843 & 1841/PN/2013 (A.YS: 2009-10 & 2010-11) DY.CIT, CIRCLE-3, PUNE APPELLANT VS. SHRI SUSHANT M. JADHAV PLOT NO.67, MAHATMA SOCIETY, KOTHRUD, PUNE 411029 PAN: AAPPJ9013M RESPONDENT APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI NIKH IL PATHAK DATE OF HEARING: 23.09.2014 DATE OF ORDER : 23.09.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE FILE D BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF COMMISSION ER OF INCOME TAX (APPEAL)-II, PUNE FOR A.YS. 2009-10 AND 2010-11 . 2. IN ITA NO.1843/PN/2013 FOR A.Y. 2009-10, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING DEPRECIATION @ 80% ON CIVIL WORK, ERECT ION & COMMISSIONING, ELECTRIC ITEMS, LINE WORK, POWER EVA CUATION FACILITY AND MEDA CHARGES. (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN ALLOWING DEPRECIATION @ 80 % ON CIVIL WORK WITHOUT APPRECIATING THE FACT THAT THE EARTH WORK & FOUNDAT ION WAS NOTHING BUT CIVIL WORK ON WHICH DEPRECIATION WAS AL LOWABLE @ 10% AND SINCE CIVIL WORKS ARE NOT 'SPECIALLY DESI GNED DEVICES', THE SAME ARE NOT ENTITLED TO HIGHER RATE OF DEPRECIATION. 2 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON ERECTION & COMMISSIONING AS NO SUCH INTENTION HAS EVER BEEN EXPRESSED BY THE LEGISLATURE. (4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON TRANSFOR MERS & ELECTRICAL ITEMS WITHOUT APPRECIATING THE FACT THAT TRANSFORMERS & ELECTRICAL ITEMS ARE NOT PART OF ELE CTRICITY GENERATING APPARATUS BUT ARE PART OF ELECTRICITY SE LLING APPARATUS AND THESE CONSTITUTE THE BLOCK 'PLANT AND MACHINERY ' ON WHICH DEPRECIATION IS ALLOWABLE @ 15 %. (5) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON PAYMENT MADE TO MEDA WITHOUT APPRECIATING THE FACT THAT PAYMENT MAD E TO MEDA ARE NOT 'SPECIALLY DESIGNED DEVICES' ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. (6) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 2.1 THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BU SINESS OF TRADING IN LAND, PROMOTER, BUILDER AND IS PARTNER I N VARIOUS FIRMS, WHO FILED THE RETURN OF INCOME DECLARING TOTAL LOSS OF RS.27,03,510/- AND THE SAME HAS BEEN ASSESSED U/S 1 43(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.5,23,000 /-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT MAKING F OLLOWING ADDITIONS / DISALLOWANCES. 1) DISALLOWANCE U/S 14A R.W.R.8D RS.7,071/- 2) DISALLOWANCE OF DEPRECIATION CLAIMED ON WINDMILL RS.32,19,443/- 2.2 THE ISSUE BEFORE US IS WITH REGARD TO DEPRECIAT ION CLAIMED ON WINDMILL OF RS.32,19,443/- MADE BY THE ASSESSING OFFICER AS DISCUSSED ABOVE. 2.3 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN FOLLOWING DECISION OF ITAT, PUNE FOR A.Y. 2 008-09 ON SIMILAR ISSUE, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THE 3 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE RE VENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) ERRED IN ALLOWING D EPRECIATION @ 80 % ON CIVIL WORK WITHOUT APPRECIATING THE FACT THAT TH E EARTH WORK & FOUNDATION WAS NOTHING BUT CIVIL WORK ON WHI CH DEPRECIATION WAS ALLOWABLE @ 10% AND SINCE CIVIL WO RKS ARE NOT 'SPECIALLY DESIGNED DEVICES', THE SAME ARE NOT ENTI TLED TO HIGHER RATE OF DEPRECIATION. ACCORDINGLY, THE ORDER OF CI T(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 2.4 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT IN ASSESSEES OWN CASE, THE TR IBUNAL HAS DECIDED THE ISSUE AT HAND IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 5. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ID ENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE CA SE OF M/S. WESTERN PRECICAST PVT. LTD. VS. JCIT, RANGE-I, SANGLI, ITA NO. 1495/PN/2011 ORDER DATED 30-01-2013. THE TRIBUNAL FOLLOWED THE DECISION IN THE ASSESSEE OWN CASE FOR THE A.Y. 2007-08. THE OPERATIVE PART OF THE TRIBUN ALS DECISION IS AS UNDER: 4. WE HAVE HEARD THE RIVAL PARTIES. THE LD. COUNSE L SUBMITS THAT IN ASSESSEES OWN CASE FOR THE A.Y. 20 07- 08, THE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL A ND HAS ALLOWED THE CLAIM OF ASSESSEES ON DEPRECIATION AT 80% ON THE FOUNDATION, ERECTION AND INSTALLATION CO ST OF THE WIND MILL. THE LD. COUNSEL HAS FILED THE CO PY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE A .Y. 2007-08. WE HAVE ALSO HEARD THE LD. D.R. WE FIND THAT THE ISSUE OF THE RATE OF DEPRECIATION APPLICAB LE TO THE COST OF FOUNDATION OF ERECTION AND COMMISSIONIN G HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESEES OWN CASE FOR THE A.Y. 2007-08. THE TRIBU NAL HAS HELD THAT FOUNDATION IS THE INTEGRAL PART OF TH E WIND MILL AND SAME IS ELIGIBLE FOR DEPRECIATION AT THE RATE WHICH IS APPLICABLE TO THE WIND MILL. IN THE SAME WAY THE TRIBUNAL ALSO ALLOWED THE DEPRECIATION RATE WHICH IS APPLICABLE TO THE WIND MILL FOR THE ERECTI ON 4 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV AND INSTALLATION COST OF THE WIND MILL. THE OPERAT IVE PART OF THE TRIBUNAL ORDER IS AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN ORDER TO APPRECIATE THE DISPUTE, THE FOLLOWING BREAK-UP OF EXPENSES ON ACCOUNT OF ERECTION AND COMMISSION OF WINDMILL I I.E. WINDMILL INSTALLED IN THE PRECEDING ASSESSMENT YEAR 2006-07 WOULD BE NECESSARY AS CONTAINED IN PARA 2.5 OF ORDER OF THE CIT(A):- S.NO. DATE NATURE OF WORK EXPENDITURE RS. 1. 30-03- 2006 TOWARDS SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD WITH VCB, OUTDOOR TYPE CT & PT AND HT TRANSMISSION LINE FROM WINDMILL TO GRID INTERCONNECTION POINT INCLUDING HT METERING FOR 1.25 MW WINDMILL AT LOCATION NO. K437 AT ABOVE SITE ADDRESS. 30,93,500/ - 2. 30-03- 2006 LABOUR CHARGES TOWARDS FINAL TESTING AND COMMISSIONING FOR 1.25 MW WINDMILL AT LOC NO. K437. 1,10,200/ - 3. 30-03- 2006 TOWARDS LABOUR CHARGES FOR WORK EXECUTED, FOR ERECTION AND INSTALLATION OF WINDMILL CONSISTING OF : UNLOADING AND SAFE KEEPING OF MATERIAL, ASSEMBLY, ERECTION AND INSTALLATION OF WINDMILL TOWER AND WIND TURBINE GENERATOR FOR 1.25 MW WINDMILL AT LOCATION NO K- 437 AT ABOVE SITE ADDRESS. 14,32,600/ - 4. 04-03- 2006 PROCESSING FEES 2,58,970/ - 5. 31-12- 2005 MEDA PROCESSING AND APPLICATION FEES 6,28,750/ - 6. 31-03- 2006 CONTRIBUTION TOWARDS COMMON POWER EVACUATION INFRASTRUCTURE FACILITY 37,50,000/ - 8. IN RESPECT OF ABOVE SIX COMPONENTS OF COST OF WINDMILL CLAIMED BY THE ASSESSEE, THE ASSESSING OFF ICER 5 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV ALLOWED DEPRECIATION AT 15% AND NOT AT 80% AS CLAIMED BY THE ASSESSEE. THE CIT(A) HOWEVER, CONSIDERED THE ITEMS OF COSTS AT NO 1 TO 5 QUALIFYI NG FOR HIGHER RATE OF DEPRECIATION BEING INTEGRAL PART OF WINDMILL. IN SO FAR AS ITEM NO. 1 IS CONCERNED, TH E COST OF RS. 30,93,500/- IS TOWARDS SUPPLY OF ELECTRICAL ITEMS OF THE WINDMILL ITSELF. THE CIT(A) HAS OBSER VED THAT SUCH COST IN THE INSTALLATION OF WINDMILL HAS BEEN FOUND BY THE TRIBUNAL IN THE CASE OF POONAWALA FINV EST AND AGRO PVT. LTD. (SUPRA) AS AN INTEGRAL PART OF T HE WINDMILL COST AND THEREFORE, FOUND TO BE ELIGIBLE F OR DEPRECIATION EQUIVALENT TO THAT OF THE WINDMILL. N O DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NO TICE AND THEREFORE, FOLLOWING THE PRECEDENT IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) WHICH WE HEREBY AFFIRM. 9. TO THE SIMILAR EFFECT IS THE NATURE OF COST ENUMERATED IN ITEMS NO. 2 AND 3 RELATING TO LABOUR CHARGES FOR ERECTION AND INSTALLATION OF WINDMILL. SUCH EXPENDITURE FORMS INTEGRAL PART OF COST OF THE WIND MILL AND THEREFORE, THERE IS NO MISTAKE ON THE PART OF T HE CIT(A) TO HAVE CONSIDERED SUCH EXPENDITURE AS ELIGI BLE FOR DEPRECIATION AT 80%. 5. WE THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL CITED SUPRA HOLD THAT BOTH THE PARTIES BELOW WERE NOT JUS TIFIED IN CALCULATING AND DISALLOWING THE DEPRECIATION ON THE COST OF FOUNDATION, COMMISSIONING AND ERECTION OF THE WIND MILL. ACCORDINGLY, WE ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE ADDITION MADE BY THE A.O. BY MAKING THE DISALLOWANCE TOWARDS ALLEGED EXCESS CLAIM OF DEPREC IATION. 6. IN OUR OPINION, THE LD.CIT(A) HAS RIGHTLY ALLOWE D THE CLAIM OF THE ASSESSEE, AS ISSUE ARISING FROM THE GR OUNDS TAKEN BY THE REVENUE COVERS IN FAVOUR OF THE ASSESS EE BY THE DECISION CITED (SUPRA). WE FIND NO REASON TO INTER FERE WITH THE ORDER OF THE LD.CIT(A), AND ACCORDINGLY THE SAM E IS CONFIRMED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 2.5 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF 6 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV CIT(A), WHO HAS RIGHTLY ALLOWED THE CLAIM OF THE AS SESSEE. WE UPHOLD THE SAME. 3. IN THE RESULT, THIS APPEAL OF REVENUE IS DISMISS ED. 4. IN ITA NO.1841/PN/2013 FOR A.Y. 2010-11, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING DEPRECIATION @ 80% ON CIVIL WORK, ERECT ION & COMMISSIONING, ELECTRIC ITEMS, LINE WORK, POWER EVA CUATION FACILITY AND MEDA CHARGES. (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN ALLOWING DEPRECIATION @ 80 % ON CIVIL WORK WITHOUT APPRECIATING THE FACT THAT THE EARTH WORK & FOUNDAT ION WAS NOTHING BUT CIVIL WORK ON WHICH DEPRECIATION WAS AL LOWABLE @ 10% AND SINCE CIVIL WORKS ARE NOT 'SPECIALLY DESI GNED DEVICES', THE SAME ARE NOT ENTITLED TO HIGHER RATE OF DEPRECIATION. (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON ERECTION & COMMISSIONING AS NO SUCH INTENTION HAS EVER BEEN EXPRESSED BY THE LEGISLATURE. (4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON TRANSFOR MERS & ELECTRICAL ITEMS WITHOUT APPRECIATING THE FACT THAT TRANSFORMERS & ELECTRICAL ITEMS ARE NOT PART OF ELE CTRICITY GENERATING APPARATUS BUT ARE PART OF ELECTRICITY SE LLING APPARATUS AND THESE CONSTITUTE THE BLOCK 'PLANT AND MACHINERY ' ON WHICH DEPRECIATION IS ALLOWABLE @ 15 %. (5) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ALLOWING HIGHER RATE OF DEPRECIATION ON PAYMENT MADE TO MEDA WITHOUT APPRECIATING THE FACT THAT PAYMENT MAD E TO MEDA ARE NOT 'SPECIALLY DESIGNED DEVICES' ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. (6) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN HOLDING THAT THE DISALLOWANCE OF AGRICULTURAL IN COME WAS MADE WITHOUT ANY ENQUIRY & VERIFICATION WITHOUT APPRECIATING THE FACT THAT NO EVIDENCE OF EXPENSES INCURRED 7 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV AND INCOME GAINED WERE SUBMITTED BY THE ASSESSEE EI THER IN THE ASSESSMENT OR APPELLATE PROCEEDINGS. (7) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 5. A SIMILAR ISSUE OF DEPRECIATION ON CIVIL WORK HA S AROSE IN ASSESSEES OWN CASE FOR A.Y. 2009-10, WHICH HAS BEE N DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA 2.5 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE ARE NO T INCLINED TO INTERFERE WITH THE FINDING OF CIT(A), WHO HAS RIGHT LY ALLOWED THE CLAIM OF THE ASSESSEE. WE UPHOLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARD TO THE ADHOC ADDIT ION OF RS. 39,320/- ON AGRICULTURAL INCOME. DURING THE ASSESS MENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE AS SESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.1,96,600/- AND SOUG HT THE DETAILS OF THE AGRICULTURAL INCOME EARNED. THE ASS ESSEE EXCEPT FOR FURNISHING THE 7/12 EXTRACT COULD NOT FU RNISH ANY EVIDENCE OF EXPENSES OR RECEIPTS FROM SALE OF AGRIC ULTURAL PRODUCE. THE ASSESSING OFFICER NOTED THAT THE NATU RE OF AGRICULTURE INCOME WAS NOT VERIFIABLE AND HELD THAT TAKING INTO CONSIDERATION THE SIZEABLE LAND OWNED, 20% OF THE I NCOME SHOWN AS AGRICULTURAL INCOME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. 6.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE, INTER ALIA, SUBMITTED THAT T HE CIT(A) ERRED IN HOLDING THAT THE DISALLOWANCE OF AGRICULTURAL IN COME WAS MADE WITHOUT ANY ENQUIRY & VERIFICATION WITHOUT APPRECIA TING THE FACT THAT NO EVIDENCE OF EXPENSES INCURRED AND INCOME GA INED WERE 8 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV SUBMITTED BY THE ASSESSEE EITHER IN THE ASSESSMENT OR APPELLATE PROCEEDINGS. ON THE OTHER HAND, THE LEARNED AUTHOR IZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 6.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE DISALLOWANCE OF RS.39,320/ - BEING 20% OF THE TOTAL AGRICULTURE INCOME DECLARED OF RS.1,96,60 0/- FOR NON- FURNISHING OF BILLS & VOUCHERS IN RESPECT OF THE SA ID INCOME. FURTHER, THE CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD PRODUCED THE 7/12 EXTRACT WHICH INDICATED THE CULTIVATION OF LAND DECLARED AT KUSGAON, MAWAL TALUKA, HELD BY THE ASSESSEE. TH E ASSESSEE HAS BEEN DECLARING AGRICULTURAL INCOME IN THE PAST YEARS WHICH WERE MORE OR LESS IN THE SAME RANGE OF INCOME DECLA RED DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) RIGHTLY F OUND THAT THE ASSESSING OFFICER DID NOT SUBJECTED THE 7/12 EXTRAC T TO ENQUIRY RATHER RESORTED TO THE DISALLOWANCE ON AN ESTIMATED BASIS IN AN AD HOC AND ROUTINE MANNER. A DISALLOWANCE MADE WIT HOUT ANY ENQUIRY AND VERIFICATION ON AN ESTIMATED BASIS AND IN A ROUTINE MANNER IS DIFFICULT TO BE SUSTAINED. IN VIEW OF AB OVE, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. THIS REASON ED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF SEPTEMBER, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 23 RD SEPTEMBER, 2014 GCVSR 9 ITA NOS.1843 & 1841/PN/13 SUSHANT M. JADHAV COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE