Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 0860 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-11-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
09-11-2015
Assessment Year
2010-2011
Appeal Filed On
02-12-2013
Judgement Text
] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.2107/PN/2013 ASSESSMENT YEAR : 2010-11 SHREEM ELECTRIC LIMITED, PLOT NO.22, MADHUBAN SOCIETY, VISHRAM BAG, SANGLI 416 416. PAN : AACCS4893C . APPELLANT VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE- 1, SANGLI. . RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 09.11.2015 / DATE OF PRONOUNCEMENT: 30.11.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A), KOLHAPUR DATED 20.11.2013 RELATING TO ASSES SMENT YEAR 2010-11 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- 1.1 THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLO WANCE OF DEPRECIATION ON WIND MILLS OF RS.54,44,869/-. 1.2 THE LEARNED AO MAY BE DIRECTED TO ALLOW THE DEP RECIATION IN FULL AS CLAIMED BY THE ASSESSEE. 1.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ISSUE IS COVERED BY JURISDICTIONAL ITAT DECISION IN THE CASE OF JSONS P VT. LTD., AND HENCE NEEDS TO BE ALLOWED. 1.4 THE DISALLOWANCE OF DEPRECIATION MAY PLEASE BE DELETED. 2.0 THE APPELLANT CRAVES RIGHT TO ADD, LATER, DELET E, MODIFY ALL OR ANY OF THE GROUNDS OF APPEAL. 2 ITA NO.2107/PN/2013 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APP EAL IS DISALLOWANCE OF DEPRECIATION ON WINDMILLS TO THE TUNE OF RS.54,44,8 69/- BY THE ASSESSING OFFICER. 4. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE RAISED BY THE ASSESSEE ARE THAT THE ASSESSEE COMPANY IS ENGAGED I N THE BUSINESS OF MANUFACTURING OF CAPACITORS AND GENERATION OF ELECT RICITY THROUGH WINDMILLS. THE ASSESSEE COMPANY HAS SHOWN INSTALLATION OF WIND MILLS AND GENERATION OF WIND ENERGY IN DIFFERENCE PLACES OF THE COUNTRY. T HE ASSESSEE COMPANY HAS, INTER-ALIA , DECLARED INCOME FROM SALE OF WIND ENERGY OF RS.3, 69,52,669/-. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES SEE COMPANY HAD BEEN CLAIMING DEPRECIATION ON WINDMILLS @ 80% SINCE ITS INSTALLATION FROM ASSESSMENT YEAR 2004-05 ONWARDS TILL THIS ASSESSMEN T YEAR. IT WAS, INTER-ALIA , NOTICED BY THE ASSESSING OFFICER THAT THE DEPRECIAT ION @ 80% WAS CLAIMED UNIFORMLY IN RESPECT OF ALL THE WORKS SUCH AS CIVIL AND CONSTRUCTION WORK, ERECTION AND COMMISSIONING WORK OF WINDMILL ITSELF. THE ASSESSING OFFICER TOOK A VIEW THAT THE ASSESSEE COMPANY IS NOT ENTITL ED TO DEPRECIATION @ 80% ON FOUNDATION & CIVIL WORK AND ERECTION & COMMIS SIONING WORK AS ALLEGEDLY CLAIMED BY THE ASSESSEE COMPANY. ACCORDI NG TO THE ASSESSING OFFICER, DEPRECIATION ON FOUNDATION & CIVIL WORK FOR WINDMILL IS ENTITLED @ 10% AS APPLICABLE IN THE CASE OF BLOCK OF ASSETS OF BUILDINGS AND @ 15% FOR ERECTION & COMMISSIONING WORK AS APPLICABLE IN TH E CASE OF PLANT & MACHINERY UNDER THE INCOME TAX RULES, 1962. HE ACC ORDINGLY RECOMPUTED THE DEPRECIATION APPLYING THE REVISED RATE FROM ASSESSM ENT YEAR 2004-05 ONWARDS. AS PER THE REVISED WORKING DEPRECIATION FOR THE ASS ESSMENT YEAR 2010-11 WAS COMPUTED AT RS.6,95,46,231/- AS AGAINST DEPRECIATIO N CLAIMED BY THE ASSESSEE RS.7,49,91,100/-. ACCORDINGLY, THE ASSESSING OFFIC ER DISALLOWED THE ALLEGED EXCESS CLAIM OF DEPRECIATION OF RS.54,44,869/- RELA TABLE TO FOUNDATION & CIVIL WORK AND ERECTION & COMMISSIONING WORK NOTED ABO VE. 5. THE CIT(A) JUSTIFIED THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER. THE RELEVANT OPERATIVE PARA IS REPRODUCED HEREIN BE LOW FOR READY REFERENCE :- 3 ITA NO.2107/PN/2013 9. BEFORE THE UNDERSIGNED, SIMILAR ARGUMENTS HAVE BEEN TAKEN ON BEHALF OF THE APPELLANT. ON GOING THROUGH THE APPELLANTS SUBMIS SIONS AND ASSESSMENT ORDER, I FIND THAT THE DISALLOWANCE MADE BY THE ASSESSING OF FICER IS JUSTIFIED. PURPOSE OF ALLOWING DEPRECIATION IN A BUSINESS IS TO ALLOW THE BUSINESSMAN TO RECOVER THE COST OF PROPERTY BEFORE THE EXPIRY OF ITS LIFE SO THAT I T MAY BE REPLACED WITH A NEW ONE AT THE END OF THE LIFE OF THE EXISTING PROPERTY. SINC E CIVIL STRUCTURES LAST LONGER THEREFORE, A LOWER RATE OF DEPRECIATION OF 10% AND 20% IS ALLOWED UNDER INCOME-TAX RULES FOR VARIOUS TYPES OF STRUCTURES. WHEREAS MAC HINERY/PLANT BECOME OBSOLETE SOON DUE TO CHANGE IN TECHNOLOGY AND DUE TO WEAR AN D TEAR. THEREFORE, HIGHER RATE OF DEPRECIATION IS ALLOWED UNDER THE INCOME-TAX RUL ES. ANOTHER PURPOSE OF ALLOWING HIGHER DEPRECIATION OF THE ORDER OF 80% TO 100% IS WITH A VIEW TO ENCOURAGE DEVELOPMENT IN CERTAIN SECTORS WHICH THE GOVERNMENT WANTS TO PROMOTE. THAT IS WHY IN RESPECT OF WIND PLANTS, HIGHER RATE OF DEPRE CIATION HAS BEEN ALLOWED. NOW, CIVIL WORK, IF USED WITH WIND TURBINE MAST AS ITS F OUNDATION WILL NOT DEPRECIATE EARLIER JUST BECAUSE IT HAS BEEN PROVIDED WITH WIND TURBINE MAST. IT IS A CIVIL WORK AND ITS NORMAL LIFE WILL BE THE SAME AS ANY OTHER C IVIL WORK. FURTHER, ALLOWING DEPRECIATION @ 80% ON ROADS WHICH ARE INCLUDED IN C IVIL WORK IS TO STRETCH TOO FAR THE MEANING OF WINDMILL. THEREFORE, ALLOWING A HIG HER RATE OF DEPRECIATION TO THE COMPONENTS OF WIND PROJECT OTHER THAN WIND TURBINE MAST IS NOT WARRANTED. THEREFORE, THE GROUND TAKEN BY THE APPELLANT IS REJ ECTED. 6. BEFORE US, NONE APPEARED FOR THE ASSESSEE. NO AD JOURNMENT APPLICATION WAS MOVED EITHER. IT IS SEEN FROM THE RECORDS THAT THE NOTICES FOR HEARING HAVE BEEN SERVED ON THE ASSESSEE. THUS, IT CAN BE INFER RED THAT THE ASSESSEE IS INDOLENT IN COMPLIANCE WITH THE APPOINTED DATE OF H EARING. HENCE, THE MATTER IS PROCEEDED EXPARTE AND IS BEING DISPOSED ON THE BASIS OF SUBMISSION M ADE ON BEHALF OF THE REVENUE AND MATERIAL PLACED ON RECORD . 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED THAT DE PRECIATION AT HIGHER RATE APPLICABLE TO WINDMILLS IS NOT PERMISSIBLE IN THE C ASE OF CIVIL & ERECTION AND STRUCTURAL WORK, ETC. AND THEREFORE ACTION OF THE R EVENUE IS FULLY JUSTIFIED. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND SUBMISSIONS MADE ON BEHALF OF THE REVENUE. THE ONL Y ISSUE FOR ADJUDICATION BEFORE US IS ALLOWABILITY OF SIMILAR DEPRECIATION R ATE AS APPLICABLE TO WINDMILLS, ALSO TO THE FOUNDATION & CIVIL WORK AND ERECTION & COMMISSIONING WORK EXECUTED FOR THESE WINDMILLS. IT IS THE CASE OF TH E ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) THAT ENTIRE EXPENDITURE TOGETHER WITH COST OF WINDMILL IS ENTITLED TO SAME RATE OF D EPRECIATION AT 80% AS THE OTHER EXPENDITURE INCURRED TOWARDS FOUNDATION & CI VIL WORK AND ERECTION & 4 ITA NO.2107/PN/2013 COMMISSIONING WORK, ETC. ARE INTEGRAL PART OF WIND MILLS AND ARE DIRECTLY ATTRIBUTABLE TO INSTALLATION AND OPERATIONAL FUNCTI ONING OF WIND TURBINE. SINCE THE CIVIL WORK AND ERECTION & COMMISSIONING EXPENSE S INCURRED ARE IN RELATION TO INSTALLATION OF WINDMILL, DEPRECIATION ON THE SA ME SHOULD BE PROVIDED AT THE RATE APPLICABLE TO WINDMILL. WE FIND THAT THE AFOR ESAID ASSERTIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE REVENUE REMAINS U NCONTROVERTED. ACCORDINGLY, WE ARE OF THE FIRM VIEW THAT THE EXPEN SES INCURRED ON ERECTION & COMMISSIONING, CIVIL WORK, ETC. BEING NECESSARY ADJ UNCT TO THE WINDMILL AND IS NOT MEANT FOR ANY OTHER PURPOSES OTHER THAN FOR OPE RATIONAL FUNCTIONING OF WIND TURBINE AND THEREFORE CANNOT BE TREATED DIFFER ENTLY. THEREFORE, IMPUGNED CAPITAL EXPENDITURE TOWARDS CIVIL WORK & COMMISSION ING ETC. ALSO WILL QUALIFY FOR THE SAME RATE OF DEPRECIATION AS APPLICABLE TO WIND TURBINE ITSELF. THE ISSUE IS NO LONGER RES-INTEGRA AND IS COVERED BY THE DECISION OF CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST & AGR O (P.) LTD. VS. ACIT, (2008) 118 TTJ 68 (PUNE) WHEREIN IT HAS BEEN CLEARL Y HELD THAT THE CAPITAL EXPENDITURE INCIDENTAL TO THE WINDMILL HAS TO BE TE STED ON THE TOUCHSTONE OF THE FUNCTIONAL TEST AND THE ASSESSEE WILL BE ENTITLED T O HIGHER RATE OF DEPRECIATION ON SUCH INCIDENTAL EXPENDITURE, IF IT HAS NO OTHER USE EXCEPT FOR POWER GENERATION DONE BY THE WINDMILL. OUR VIEW IS ALSO SUPPORTED BY ANOTHER DECISION OF THE CO-ORDINATE BENCH OF PUNE TRIBUNAL IN THE CASE OF M/S D.J. MALPANI VS. ACIT IN ITA NOS.1148 TO 1154/PN/2013, O RDER DATED 30.10.2015. ACCORDINGLY, WE HOLD THAT THE REVENUE IS MISDIRECTE D ITSELF IN LAW IN MAKING THE IMPUGNED DISALLOWANCE OF DEPRECIATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 30 TH NOVEMBER, 2015. 5 ITA NO.2107/PN/2013 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE
