DCIT, JODHPUR V. Delhi Rajasthan Transport Co. Ltd., JODHPUR

ITA 195/JODH/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9451 (ITAT-JODHPUR)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVDESH KUMAR
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI V.D. RAO, JUDICIAL MEMBER ITA NO: 195 / JU / 2010 ASSTT. YEAR: 2007 2008 DY. COMMISSIONER OF INCOME-TAX VS DELHI RAJASTHAN T RANSPORT TAX,CIRCLE-3, CO. LTD., JODHPUR. JODHPUR. C.O.NO:09 / JU / 2010 A/O ITA NO:195 / JU / 2010 ASSTT. YEAR: 2007 -2008 M/S DELHI RAJASTHAN TRANSPORT VS DCIT., CIRCLE-3, J ODHPUR. COMPANY LTD., JODHPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVDESH KUMAR, D.R., RESPONDENT BY : SHRI AMIT KOT HARI, A.R., ORDER PER V.D. RAO: JM THIS APPEAL AND CROSS OBJECTIONS HAS BEEN FILED BY THE REVENUE AS WELL AS THE ASSESSEE ARISING OUT OF COMMON ORDER PASSED BY THE LD. CIT (A), JODHPUR, DATED 22 ND JANUARY, 2010 RELATING TO ASSESSMENT YEAR 2007 2 008. 2 WE, THEREFORE, PROCEEDED TO DECIDE BOTH THE APPEALS BY PASSING COMMON ORDER. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPE AL THAT THE CIT ERRED IN ALLOWING THE DEPRECIATION OF RS. 9,43, 383/- AT THE RAT OF 80% INSTEAD OF 15% . 2. THE FACTS RELATING TO FIRST GROUND OF APPEAL RAISED BY THE ARE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION IN RESPECT OF EXP ENSES PERTAINING TO COMPONENT AND ACCESSORIES AND ELECTRICAL ITEMS OF R ENEWABLE DEVICE INCLUDING TRANSFORMER, INSTALLATION OF TRANSMISSION LINE AND LABOUR EXPENSES FOR INSTALLATION AS WELL AS TESTING AND COMMISSIONI NG, THE TOTAL EXPENSES INCURRED BY THE ASSESSEE OF RS. 29,02,726/-. 3. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HA S OBSERVED THAT THE ITEMS OF WHICH THE DEPRECIATION WAS CLAIMED NOT INT EGRAL PART OF THE WINDMILL, AS ALLOWED THE DEPRECIATION AT 15%. THE LD. CIT (A) BY FOLLOWING THE DECISION OF THE TRUMAC ENGINEERING CO . PVT. LTD. V/S INCOME- TAX OFFICER (ITA NO.555/MUM/2003) AND POONAWALA FIN VEST & AGRO (P) LTD. V/S ACIT (118 TTJ 68), IT WAS HELD THAT GADGET FOR TRANSMISSION OF POWER GENERATED BY WINDMILL UP TO SUB-STATION OF MS EB IS INTEGRAL PART OF WINDMILL ELIGIBLE FOR DEPRECIATION AT THE RATE OF 1 00% AND THE LD. CIT (A) ALLOWED DEPRECIATION ON RS.29,02,726/- OF RS.9,43,3 86/- ON THE GROUND THAT 3 WHICH IS IDENTICAL TO THE POONWALA FINVEST & AGRO ( P) LTD., THE ADDITION WAS DISALLOWED . ON BEING AGGRIEVED REVENUE CARRIED TH E MATTER IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY T HE ASSESSING OFFICER, ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE COMPONENTS ON WHICH THE DEPRECIATION WAS CLAIMED IS ELIGIBLE AT THE RATE OF 80% AND THIS CASE IS COVERED BY POONAWALA FINVEST & AGRO (P) LTD. (SUPRA) AND HE SUPPORTED THE ORDER PASSED BY THE LD CIT (A ). 5. WE HAVE HEARD BOTH THE SIDES, PERUSE THE RECORDS AND GONE TO THE ORDERS OF THE AUTHORITIES BELOW. 6. THE ASSESSING OFFICER HAS DENIED THE DEPRECIATIO N CLAIMED BY THE ASSESSEE AT THE RATE OF 80%, ON THE GROUND THAT THE COMPONENTS ON WHICH THE CLAIM WAS MADE BY THE ASSESSEE, IS NOT INTEGRAL PAR T OF THE WINDMILL AND THE COMPONENTS ALTOGETHER A DIFFERENT AND HIGHER DEPREC IATION COULD NOT ALLOWED. THE LD. CIT (A) BY FOLLOWING THE 2 DECISIONS I.E., TRUMAC ENGINERING CO. PVT. LTD VS ITO AND POONAWALA FINVEST & AGRO (P) LT D. VS ACIT, HE WAS ALLOWED THE CLAIM OF THE ASSESSEE AND THE HIGHER DE PRECIATION OF THE ASSESSEE. NOTHING WAS BROUGHT TO OUR NOTICE BY THE LD. D.R. T HAT WHETHER THE DECISIONS RELIED BY THE LD. CIT (A) REVERSED OR MODIFIED BY T HE HONBLE JURISDICTIONAL HIGH COURT AND NO CONTRARY DECISION WAS ALSO BROUGH T TO OUR NOTICE. WE, 4 THEREFORE, FIND NO INTERFERENCE IS REQUIRED FROM TH E ORDER PASSED BY THE LD. CIT (A) AND UPHELD THE ORDER OF THE LD. CIT (A) AND THIS APPEAL FILED BY THE REVENUE IS DISMISSED. C.O.NO.09 /JU / 2010 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN HI S CROSS OBJECTIONS. 1. THE ORDER PASSED BY THE LD. ADDL. CIT RANGE-3, JODH PUR IS BAD IN LAW AND BAD ON FACTS AND WITHOUT PROPER JURISDICTIONS AND THE ORDER PASSED MAY KINDLY BE QU ASHED. THE RESPONDENT PRAYS FOR ADMISSION OF SUCH GROUND W HICH IS PURELY LEGAL AND GOES TO THE ROOT OF THE MATTER. 2. THE LD. CIT (A) HAD ERRED IN CONFIRMING THAT HIGHER DEPRECIATION ON CIVIL WORKS AT RS.6,09,202/- CANNOT BE ALLOWED, AND HAVE ERRED IN NOT ACCEPTING THE SAME T O BE PART OF WIND MILL ELIGIBLE FOR HIGHER DEPRECIATION AT 80 % AS AGAINST ALLOWED AT 10%. 3. THE LD. CIT (A) HAS ERRED IN SUSTAINING ADDITION OF RS. 10,77,000/- ON CERTAIN EXPENSES TREATED AS PART OF WIND MILL COST. IF SUCH CLAIM IS NOT ALLOWED AS CAPITAL EXPE NDITURE, ENTIRE AMOUNT MAY BE ALLOWED AS REVENUE EXPENDITURE . 5 7. GROUND NO.1 NOT PRESSED BY THE ASSESSEE AND, THE REFORE, THIS GROUND OF CROSS OBJECTIONS DISMISSED AS NOT PRESSED. 8. GROUND NO.2 RELATING TO DEPRECIATION ON CIVIL WO RKS AMOUNT TO RS. 6,09,202/-. THE ASSESSEE HAS CLAIMED THE DEPRECIAT ION OF RS. 6,09,202/- AND CIVIL WORKS INCLUDING FOUNDATION AND ALLIED IN RESP ECT OF WIND MILL PROJECT. THE CLAIM OF THE ASSESSEE WAS BEFORE THE ASSESSING OFFICER THAT THE FOUNDATION AS WELL AS OTHER CIVIL WORK CARRIED OUT BY THE ASSESSEE IS AN INTEGRAL PART OF THE WIND MILL AND THE ASSESSEE IS ELIGIBLE FOR AT THE RATE OF 80% DEPRECIATION. HOWEVER, THE ASSESSING OFFICER H AS DISALLOWED ON THE GROUND THAT THE FOUNDATION AND CIVIL WORK IS NOT IN TEGRAL PART OF THE WIND MILL AND ONLY ALLOWED DEPRECIATION AT THE RATE OF 1 0%. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A) AND THE CIT (A) HAS OBSERVED THAT THE CIVIL WORK INCLUDING FOUNDATION AND ALLIED WORKS IN RESPECT OF WIND MILL PROJECT DOES NOT FARM INTEGRAL PART OF THE MIL L AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 9. ON BEING AGGRIEVED THE ASSESSEE RAISED A CROSS A PPEAL AND IT WAS SUBMITTED THAT THE WIND MILL IS HEAVY MACHINE AND A SPECIAL DESIGN IS REQUIRED AND FURTHER A SEPARATE FOUNDATION IS REQUI RED TO BE MADE TO HOLD THE WIND MILL FOUNDATION AND WIND MILL BOTH ARE PLANT A ND MACHINERY; 6 WHATEVER THE DEPRECIATION IS AVAILABLE TO THE WIND MILL IT CAN BE AVAILABLE TO THE FOUNDATION ALSO. 10. IN SO FAR AS OTHER ALLIED WORKS ARE CONCERNED I T WAS SUBMITTED THAT ALL OTHER CIVIL WORKS ARE PART AND PARCEL OF THE WIND M ILL, THEREFORE, ASSESSEE IS ELIGIBLE FOR THE HIGHER DEPRECIATION AS CLAIMED BY THE ASSESSEE. 11. ON THE OTHER HAND THE LD. D.R. HAS SUBMITTED TH AT WIND MILL IS DIFFERENT FROM FOUNDATION AND OTHER ALLIED CIVIL WO RKS AND THE ASSESSEE IS ONLY ELIGIBLE FOR WIND MILL ALONG NOT ANY OTHER CIV IL WORKS. WE HAVE HEARD BOTH THE SIDES, PERUSE THE RECORD AND GONE TO THE O RDERS OF THE AUTHORITIES BELOW. 12. THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% ON FOUNDATION AS WELL AS OTHER CIVIL WORKS. BOTH THE ASSESSING OFFICER A ND LD. CIT (A) DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THEY ARE N OT INTEGRAL PART OF THE WIND MILL. THE DEPRECIATION IN RESPECT OF FOUNDAT ION IS CONCERNED THE FOUNDATION FOR THE PURPOSE OF THE WIND MILL IS DIFF ERENT FROM THE OTHER CIVIL WORKS. WIND MILL IS A HEAVY MACHINE AND A SPECIALL Y DESIGNED FOUNDATION IS REQUIRED, THEREFORE, THE ASSESSING OFFICER HAS NOT JUSTIFIED IN COMPARING THE FOUNDATION OF THE WIND MILL FROM OTHER CIVIL WORKS. IN THE CASE OF CIT V/S HERDILLIA CHEMICALS LTD. (216 ITR 742) (BOM) WHEREIN THE HONBLE HIGH COURT OF MUMBAI HAS HELD THAT THE EXPENDITURE INCUR RED ON FOUNDATION FOR 7 FIXING THE PLANT & MACHINERY WOULD FARM PART OF THE COST OF PLANT & MACHINERY AND THE ASSESSEE WOULD BE ENTITLED TO DEP RECIATION AT THE SAME RATE AS APPLICABLE TO THAT PLANT AND MACHINERY. IN THE CASE OF ACIT VS MADRAS CEMENTS LTD. (110 ITR 281) (MAD.) HAS HELD THAT THE FOUNDATION WORK DONE FOR FIXING MACHINERY IS TO BE TREATED AS PART OF THE PLANT & MACHINERY. IN THE CASE OF CIT VS R.G. ISPAT LTD. 123 CTR (RAJ) WHERE THE JURISDICTIONAL HIGH COURT CATEGORICALLY HELD TH AT THE MASSIVE REINFORCED CONCRETE STRUCTURE, ESPECIALLY DESIGNED TO TAKE UP LOADS, CONSTITUTED PLANT WITHIN THE MEANING OF SECTION 43 (3) OF THE INCOME TAX ACT, 1961. 13. WE, THEREFORE, TAKING INTO CONSIDERATION THE FA CTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE ABOVE CASE LAWS WE CAME TO CONCLUSION THAT THE FOUNDATION OF THE WIND MILL IS AMOUNTING TO PAR T AND PARCEL OF THE WIND MILL AND IT IS A PLANT AND MACHINERY AND ACCORDINGL Y THE ASSESSEE IS ELIGIBLE FOR HIGHER RATE OF DEPRECIATION WHICH WAS CLAIMED. AS FAR AS CIVIL WORK IS CONCERNED, WE FIND THAT IT IS NOT AN INTEGRAL PART OF THE WIND MILL AND HE IS NOT ELIGIBLE FOR HIGHER DEPRECIATION. 14. IN VIEW OF THE ABOVE OBSERVATIONS, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) AND REMIT THE ISSUE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT THE AO TO ALLOW THE HIGHER DEPRE CIATION CLAIM OF THE ASSESSEE IN RESPECT OF FOUNDATION OF THE WIND MILL. IN SO FAR AS OTHER ALLIED 8 WORKS ARE CONCERNED NORMAL RATE HAS TO BE APPLIED A ND THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 15. THE NEXT GROUND OF APPEAL RELATING TO DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 17,95,000/-. FACTS ARE IN BRIEF THAT THE ASSESSEE HAS CLAIMED THE ABOVE AMOUNT ON ACCOUNT OF VARIOUS EXPE NSES INCURRED BY HIM. THE DETAILS OF THE EXPENSES CLAIMED BY THE ASSESSEE ARE (I) POWER EVACUATION FACILITIES RS.15,95,000/- (II) SUB-LEASE OF LAND RS .1,00,000/- (III) POWER PURCHASE AGREEMENT CHARGES RS.1,00,000/-. FOR THES E EXPENSES, THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.7,18,000/-. THE ASS ESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THESE EXPENSES ARE NOT ELIGIBLE FOR DEPRECIATION. ON APPEAL THE LD. C IT (A) HAS HELD THAT THE EXPENSES INCURRED FOR OBTAINING THE LAND ON LEASE I S NOT ELIGIBLE FOR DEPRECIATION AND THE OTHER EXPENSES CANNOT BE CONSI DERED AS A COST OF WIND MILL AND CONFIRMED THE ORDER OF THE ASSESSING OFFIC ER. IT WAS ALTERNATIVELY SUBMITTED BEFORE THE LD. CIT (A) THAT IF THE EXPENS ES INCURRED BY THE ASSESSEE ARE NOT ELIGIBLE FOR DEPRECIATION, IT HAS TO BE ALLOWED AS A REVENUE EXPENSES. WITH REGARD TO ABOVE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT (A) HAS OBSERVED THAT THE ASSESSEE HAS NOT RAISED T HIS CONTENTION BEFORE THE ASSESSING OFFICER, THEREFORE, REJECTED THE ALTERNAT IVE CONTENTION RAISED BY THE 9 ASSESSEE. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 16. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS INCURRED RS. 17,95,000/- IN RELATING TO BRING T HE WIND MILL IN EXISTENCE, AND THEREFORE THE EXPENSES EITHER ALLOWABLE AS A CA PITAL OR REVENUE EXPENDITURE. IF IT ALLOWED AS A CAPITAL EXPENDITUR E DEPRECIATION COULD BE ALLOWED. THE ASSESSING OFFICER COULD CONSIDER THE EXPENSES INCURRED BY THE ASSESSEE EITHER RELATING TO CAPITAL OR REVENUE, CAN NOT DENY THE CLAIM OF THE ASSESSEE. 17. ON THE OTHER HAND THE LD. D.R. SUPPORTED THE OR DER PASSED BY THE ASSESSING OFFICER. 18. WE HAVE HEARD BOTH THE SIDES, PERUSE RECORDS AN D GONE TO THE ORDERS OF THE AUTHORITIES BELOW. 19. IT IS NOT DISPUTED THAT THE ASSESSEE HAS NOT IN CURRED VARIOUS EXPENSES I.E., POWER EVACUATION CHARGES RS.10,00,000/- AND R S.5,00,000/-, SUB-LEASE OF LAND RS.1,00,000/-, POWER PURCHASE AGREEMENT CHA RGES OF RS. 1,00,000/-. THE ASSESSEE HAS TREATED THE ABOVE EXPENSES AS CAPI TAL EXPENDITURE AND DEPRECIATION WAS CLAIMED THEREON. HOWEVER, THE ASS ESSING OFFICER AND LD. CIT (A) DENIED THE SAME ON THE GROUND THAT NOT ELIG IBLE FOR DEPRECIATION WHEN THE ASSESSEE RAISED THE ALTERNATIVE CONTENTION BEFORE THE LD. CIT (A) 10 SIMPLY REJECTED THAT ON THE GROUND THAT THIS CONTEN TION WAS NOT RAISED BEFORE THE ASSESSING OFFICER. IN ANY CASE WHEN THE ASSESS EE HAS INCURRED CERTAIN EXPENDITURE IN RELATION TO BUSINESS OF THE ASSESSEE I.E., TO BRING THE WIND MILL IN EXISTENCE, THE ASSESSING OFFICER EITHER HAS TO TREAT THE EXPENSES CAPITAL OR REVENUE IN NATURE. HE CANNOT DENY ON T HE GROUND THAT THE ASSESSEE HAS NOT RAISED THE CONTENTION INITIALLY. 20. WE, THEREFORE, SET ASIDE THE ORDER PASSED BY TH E LD. CIT (A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICE R TO CONSIDER THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING A REASON ABLE OPPORTUNITY TO THE ASSESSEE. THIS GROUND OF APPEAL RAISED BY THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSE. 21. THE NEXT GROUND OF APPEAL IS RELATING TO DISALL OWANCE OF WAY EXPENSES OF RS. 2,00,000/- AND RS.1,00,000/- RELATING TO REP AIRS AND MAINTENANCE. THE ASSESSING OFFICER HAS MADE A LUMP SUM DISALLOWANCE FOR THE REASON THAT THESE EXPENSES WERE CLAIMED ON THE BASIS OF A RECEI PT SUBMITTED BY THE DRIVER AFTER RETURN FROM THE JOURNEY AND THERE IS NO SUPPO RT EVIDENCE TO THE CLAIM. THE ASSESSING OFFICER HAS DISALLOWED THESE EXPENSES ON THE GROUND THAT THIS EXPENSES WHICH ARE NOT DUE TO THE NATURE OF THESE E XPENSES. WE HAVE HEARD BOTH THE SIDES PERUSE THE RECORDS. 11 22. THE ASSESSING OFFICER HAS DISALLOWED RS. 2,00,0 00/- WITH THE REGARD TO WAY EXPENSES. IN OUR CONSIDERED OPINION THE DIS ALLOWANCE IS RESTRICTED TO RS. 1,00,000/- AND THE ASSESSEE WILL GET BENEFIT IN THIS GROUND REMAINING RS.1,00,000/-. DISALLOWANCE MADE THE ASSESSING OFF ICER IN RESPECT OF RS.1,00,000/- RELATING TO REPAIRS AND MAINTENANCE, IN OUR OPINION RS.50,000/- IS SUFFICIENT. WE, THEREFORE, RESTRICT THE DISALLO WANCE MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 50,000/- AND THE ASSES SEE WILL GET BENEFIT OF RS. 50,000/-. IN THE RESULT THIS GROUND OF APPEAL FILE D BY THE ASSESSEE IS PARTLY ALLOWED. 23. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSE. . O RDER WAS PASSED IN THE OPEN COURT DATED ON 11 TH FEBRUARY, 2011. SD/- SD/- (S.V. MEHROTRA) (V.D. RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH FEBRUARY, 2011 KAMAL KUMAR COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. INCOME-TAX OFFICER 4. CIT 5. D/R 6) GUARD FILE.