ACIT, Salem V. M/s. Velathal Spinning Mills (P) Ltd., Pallipalayam

ITA 2083/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6513 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MDS; ANIRUDH RAI PAGE OF I T A NOS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NOS. 2082 & 2083/MDS/2010 ASSESSMENT YEAR 2005-06 & 2006-07 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE SALEM VS. M/S VELATHAL SPINNING MILLS [P] LTD NO. 115, TIRUCHENGODE ROAD PALLIPALAYEM 638 006. (PAN NO. AAACV 6931 C) CO NOS. 11 & 12/MDS/2010 [A/O I.T.A. NOS. 2082 & 2083/MDS/2010 ASSESSMENT YEAR 2005-06 & 2006-07] M/S VELATHAL SPINNING MILLS [P] LTD VS. THE ASST T. COMMISSIONER NO. 115, TIRUCHENGODE ROAD OF INCOME-TAX PALLIPALAYEM - 638 006. CO MPANY CIRCLE SALEM (PAN NO. AAACV 6931 C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR DEPARTMENT BY : SHRI ANIRUDH RAI PAGE 2 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 O R D E R PER N.S. SAINI, AM:- THESE TWO APPEALS BY THE REVENUE AND CROSS OBJECTI ONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), SALEM DATED 20.9.2010 PERTAINING TO ASSESSMENT YEARS 2005 -06 AND 2006- 07 RESPECTIVELY. 2. IN BOTH THE YEARS UNDER APPEAL, THE REVENUE HAS TAKEN SIX GROUNDS OF APPEAL IN ALL. 3. GROUND NOS. 2 AND 3 OF THE APPEAL FOR BOTH THE Y EARS UNDER CONSIDERATION ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) CONCLUDING THAT THE WINDMILL FOUNDATION IS ELIGIBLE FOR DEPRECIATION ON PAR WITH WINDMILL IN THE ABSENCE OF ANY CATEGORI CAL EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE CLAIM TH AT IT IS INTEGRAL PART OF WINDMILL. THE RATIO OF POONAWALA FINVEST & AGRO [P] LTD. REPORTED IN [2008] 118 TTJ [PUNE] 68 CLEARLY BRINGS OUT THIS AND SUPPORTS THE CASE OF THE REVENUE. PAGE 3 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CL AIMED DEPRECIATION @ 40% ON TOTAL COST OF WIND MILL INSTA LLED OF RS. 6,73,30,366/-. THIS AMOUNT INCLUDED RS. 36,17,810 /- FOR THE COST OF CIVIL WORKS INCURRED FOR ROAD PLATFORM, CONTROL ROOM, ETC. THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 5% ON THIS AMOUNT INSTEAD OF 40% CLAIMED BY THE ASSESSEE. 5. ON APPEAL THE LD. CIT(A) FOLLOWING THE ORDER OF CHENNAI D BENCH OF THE TRIBUNAL IN THE CASE OF M/S BRITISH WE AVING COMPANY VS. DCIT, CIRCLE 2, TRICHY DATED 12.3.2010 PASSED I N ITA NO. 511/MDS/2009 IN ASSESSMENT YEAR 2005-06 DIRECTED TH E ASSESSING OFFICER TO TREAT THE CONSTRUCTION OF WIND MILL FOUN DATION AS PART OF WIND MILL FOR THE PURPOSE OF DEPRECIATION. 6. BEING AGGRIEVED BY THE SAID ORDER OF THE LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. D.R. VERY FAIRLY CONCEDED THAT THIS ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN M/S BRITISH WEAVING COMPANY [SUPRA]. PAGE 4 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 8. THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT( A). 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT IN THE I NSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATION @ 40% ON TOTAL COST O F WIND MILL FOUNDATION. THE ASSESSING OFFICER ALLOWED DEPRECIA TION @ 5% ON WINDMILL FOUNDATION INSTEAD OF 40% CLAIMED BY THE A SSESSEE. IN APPEAL, THE LD. CIT(A) FOLLOWING THE ORDER OF THE T RIBUNAL IN THE CASE OF M/S BRITISH WEAVING COMPANY [SUPRA] DIRECTE D THE ASSESSING OFFICER TO TREAT THE CONSTRUCTION OF WIND MILL FOUN DATION AS A PART OF WINDMILL AND ALLOW DEPRECIATION @ 40% ON THE SAME. NO CONTRARY DECISION WAS CITED BEFORE US BY THE LD. D.R. HENCE WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A), WHICH IS CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED IN BOT H THE YEARS UNDER CONSIDERATION. 10. GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS DI RECTED AGAINST THE ORDER OF THE LD. CIT(A) HOLDING THAT INFRASTRUC TURAL FEE PAID TO TNEB ARE ENTITLED TO DEPRECIATION AS ELIGIBLE FOR W IND MILL RELYING ON THE DECISION OF THE ITAT, D BENCH, CHENNAI IN ITA NOS. 362 & PAGE 5 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 470/MDS/2009 DATED 4.9.2009 IN THE CASE OF M/S DEVE NDRA SPINNERS P. LTD AS THE DECISION OF THE TRIBUNAL ON THIS ISSU E WAS NOT ACCEPTED BY THE DEPARTMENT AND THE APPEAL HAS BEEN ADMITTED BEFORE THE HON'BLE HIGH COURT. 11. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C LAIMED DEPRECIATION @ 40% ON INFRASTRUCTURE FEE PAID TO TN EB RS. 96,90,000/-. THE ASSESSING OFFICER ALLOWED DEPRECI ATION @ 7.5% ON THE SAID AMOUNT AND DISALLOWED THE BALANCE AMOUNT O F DEPRECIATION CLAIMED BY THE ASSESSEE. 12. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S DEVENDRA SPINNERS [SUPRA]. 13. THE LD. D.R. VERY FAIRLY CONCEDED THAT THIS ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION RELIED UPON BY THE LD. CIT(A) [SUPRA]. 14. THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT (A). PAGE 6 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT IN THE I NSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATION @ 40% ON INFRASTRUCTU RE FEE PAID TO TNEB OF RS. 96,90,000/-, WHICH WAS ALLOWED AT 7.5% BY THE ASSESSING OFFICER. IN APPEAL, THE LD. CIT(A) ALLOW ED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S DEVENDRA SPINNERS [SUPRA] WHEREIN IT HAS BEEN THAT WHEN THE COST OF INSTALLATION IS CAPITALIZED AND ADDED IN THE VAL UE OF WIND MILL, THEN THE DEPRECIATION IS ALLOWABLE ON THE TOTAL VAL UE OF THE WINDMILL AT THE SAME RATE. THERE IS NO PROVISION F OR SEGREGATING THE VALUE OF THE ASSET FOR THE PURPOSE OF DEPRECIATION WHEN THE ASSET IS A SINGLE IDENTIFIABLE UNIT. NO CONTRARY DECISION W AS CITED BY THE LD. D.R. WE, THEREFORE, DO NOT FIND ANY ERROR IN THE O RDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 16. GROUND NO. 5 OF THE APPEAL OF THE REVENUE FOR B OTH THE YEARS IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) HOL DING THAT TRANSFORMER IS AN INTEGRAL PART OF WIND MILL. PAGE 7 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 17. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C LAIMED DEPRECIATION @ 40% ON COST OF TRANSFORMERS AMOUNTIN G TO RS. 15 LAKHS. THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 7.5% ON THE SAID AMOUNT AND DISALLOWED THE BALANCE AMOUNT OF DE PRECIATION CLAIMED BY THE ASSESSEE. 18. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE TRANSFORMER IS SEPARATE MACHINERY WHICH IS USED FOR THE PURPOSE OF TRANSMISSION OF ELECTRICAL POWER GEN ERATED UPTO SUB- STATION. THE FUNCTION OF SUCH UNIT IS THAT THE ELE CTRICITY SO GENERATED IS REQUIRED TO BE TRANSFERRED AND TRANSMI TTED TO CABLE LINE UPTO SUBSTATION, WHERE THE ACTUAL UNITS SO GEN ERATED ARE STORED AND METERED. THIS IS THE FUNCTION OF THE TRANSFORM ER UPTO DP STRUCTURE, HENCE OUGHT TO BE HELD AS AN INTEGRAL PA RT OF THE WIND MILL. IN SUPPORT OF THIS VIEW, THE LD. CIT(A) PLACE D RELIANCE ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF POONAWALA FINVEST AND AGRO [P] LTD [2008] 118 TTJ [PUNE] 68. PAGE 8 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 19. THE LD. D.R. VERY FAIRLY CONCEDED THAT THIS ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION RE LIED UPON BY THE LD. CIT(A) [SUPRA]. 20. THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT (A). 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT IN THE I NSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATION @ 40% ON COST OF TRAN SFORMERS OF RS. 15 LAKHS, WHICH WAS ALLOWED AT 7.5% BY THE ASSESSIN G OFFICER. IN APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S POONAWALA FINVEST & AGRO [P] LTD [SUPRA] WHEREIN IT HAS BEEN HELD THAT TRANSFORMER UPTO TO DP STRUCTURE IS A GADGET FOR TR ANSMISSION OF POWER GENERATED BY WIND MILL AND IS AN INTEGRAL PAR T OF THE WINDMILL ELIGIBLE FOR 100 PER CENT DEPRECIATION. NO CONTRAR Y DECISION WAS CITED BY THE LD. D.R. WE, THEREFORE, DO NOT FIND A NY JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ) WHICH IS CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS D ISMISSED IN BOTH THE YEARS UNDER CONSIDERATION. PAGE 9 OF 9 I.T.A. NOS. 2082 & 2083/MDS/2010 CO NOS. 11 & 12/MDS/2010 22. THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR BOTH THE YEAR UNDER CONSIDERATION ARE IN SUPPORT OF THE ORDER OF THE LD. CIT(A), WHO ALLOWED RELIEF TO THE ASSESSEE. THUS THERE BEI NG NO GRIEVANCE OF THE ASSESSEE FROM THE ORDER OF THE LD. CIT(A), T HE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE INFRUCTUOUS AN D HENCE ARE DISMISSED AS HAVING BECOME INFRUCTUOUS. 23. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE AND BOTH THE CROSS OBJECTIONS FILED BY THE ASSESSEE STAND DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 30 TH JUNE, 2011 SD/- SD/- (U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE