ACIT, Madurai V. M/s. Kasim Textile Mills (P) Ltd., Madurai

ITA 2125/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7363 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 04-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 14-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Depreciation
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 201; 13

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 2 125 /MDS/201 6 / ASSESSMENT YEAR :20 12 - 1 3 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I , MADURAI. VS. M/S. KASIM TEXTILE MILLS (P) LTD., 214, EAST VELI STREET, MADURAI 625 001. [PAN: AA A C K8107D ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S UPRIYO PAL , J CIT / RESPONDENT BY : SHRI G. BASKAR , A DVOCATE / DATE OF HEARING : 04 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 30 . 0 3 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , MADURAI DATED 2 1 . 0 4 .201 6 REL EVANT TO THE ASSESSMENT YEAR 20 12 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING 80% DEPRECIATION ON LAND COST, RENT CHARGES, CIVIL WORKS, ELECTRICAL FITTINGS AND TRANSFORMERS AS APPLICABLE T O WINDMILL. 2. BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF I.T.A. NO . 2 125 /M/ 16 2 MANUFACTURING OF GREY AND FABRICS AND FILED ITS RETURN OF INCOME ON 2 9 .09.20 12 ADMITTING INCOME OF .( - ) 3,21,77,958/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT DATED 23 . 03 .201 5 DETERMINING THE LOSS AT .2,40,49,750/ - AFTER MAKING VARIOUS ADDITIONS . 3. THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE, THE APPEAL FILED BY THE ASSESSEE WAS PARTLY ALLOWED BY THE LD. CIT(A). 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE TH E TRIBUNAL AND CHALLENGED THE DELETION OF DISALLOWANCE OF .70,13,847/ - . THE LD. DR MAINLY ARGUED THAT THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF ASIAN HANDLOOM V. DCIT IN ITA NO. 2291/MDS/2008 DATED 20.11.2015, WHICH WAS FOLLOWED BY THE LD. CIT(A), HAS NOT ATTAINED FINALITY SINCE THE A PPEAL FILED BY THE DEPARTMENT BEFORE THE HON BLE MADRAS HIGH COURT IS PENDING. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF T HE TRIBUNAL AND THEREFORE, PRAYED THAT THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD I.T.A. NO . 2 125 /M/ 16 3 AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASSESSING O FFICER HAS OBSERVED THAT THE ASSESSEE HAS INSTALLED AND COMMISSIONED 1 NO. OF WIND TURBINE GENERATOR OF 1.25 MW AND CLAIMED DEPRECIATION ON THE ENTIRE COST OF WIND ENERGY GENERATOR AT THE RATE OF 80%. AS THE COST OF WINDMILL INCLUDES LAND, RENTING OF IMMOV ABLE PROPERTY, CIVIL CONSTRUCTION WORK, ELECTRICAL FITTINGS AND TRANSFORMER, THE ASSESSING OFFICER RESTRICTED THE DEPRECIATION AND THE EXCESS CLAIM OF DEPRECIATION TO THE EXTENT OF .70,13,847/ - HAS BEEN DISALLOWED/WITHDRAWN. 6.1 BY FOLLOWING THE DECISION IN THE CASE OF ASIAN HANDLOOM V. DCIT (SUPRA), THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IN THE CASE OF ASIAN HANDLOOM V. DCIT (SUPRA), THE COORDINAT E BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPARATUS THAT HARNESSES WIND POWER, FOR A VARIETY OF USES LIKE PUMPING WATER, DRIVING OF S AW MILL, GRINDING CONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL, AS INSTALLED BY THE ASSESSEE, WHICH IS OF SUZLON CORPORATION, WOULD CONSIST OF A SPECIALIZED FOUNDATION, ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONNEC TED IN THE TOP IS A REVOLVING APPARATUS TO WHICH DIFFERENT NUMBERS OF ARMS ARE ATTACHED. WHEN IT IS USED FOR PRODUCING ELECTRICITY, THESE ARE CALLED WIND TURBINES AND SERVES AS A SIGNIFICANT SOURCE OF ELECTRICAL ENERGY. BEING A N ONCONVENTIONAL SOURCE OF EN ERGY WITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAVE BEEN GIVEN SPECIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THAT FOR A WINDMILL TO BE SUSTAINABLE IT HAS TO BE ERECTED IN A PLACE WHERE SUSTAINABLE WIND FLOW IS AVAILABLE WITH A LAND SUITABLE TO A FOUNDATION ON WHICH, A STRUCTURE STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AND SPECIALIZED AREA SPECIFICALLY EAR - MARKED TO FACILITATE A FLOW OF WIND WITHOUT HIND RANCE, AND I.T.A. NO . 2 125 /M/ 16 4 SPECIALIZED ELECTRICAL FITTINGS AND HIGH TENSION LINES ARE ALL BASIC REQUIREMENTS FOR A WIND MILL PLANT. NONE OF THESE REQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN DETACHED FROM WHAT IS CALLED A 'WIND MILL' SINCE A WIND MILL TO WORK THESE ARE ESSENTIAL. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH WIND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALLY DEMARCATED APPURTENANT THERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUILDING WHICH IS ADJUNCT TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS. ON THE OTHER HAND THESE CAN BE DEEMED ONLY A PART OF A WINDMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCLUSION WE ARE FORTIFIED BY DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. KARNATAKA P OWER CORPORATION (247 ITR 268) WHERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WAS A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEE'S SPECIAL TECHNICAL REQUIREMENT, IT WOULD QUALIFY TO BE TREATED AS A PLANT. IN OUR OPINION, THE EXPENSES RELATING TO THE LAND AND FOUNDATION SPECIALLY INCURRED WITH A VIEW TO SERVE THE TECHNICAL REQUIREMENTS WOULD ALSO BECOME A PART OF THE PLANT IN A CASE THAT OF A WIND MILL. SIMILARLY, IN THE CASE OF CIT V. HERDILIA CHEMICALS (216 ITR 742),HON'BLE JURISDICTIONAL HIGH COURT HELD THAT HUGE LAND MEASURING 360 ACRES TAKEN ON EASE FOR THE PURPOSE OF ERECTION OF PLANT AND MACHINERY WHERE THE ENTIRE FACTORY WAS TO BE CONSTRUCTED IN THIS LAND AND EXPENSES INCURRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND FOR THE PURPOSE OF LEVELING THE LAND, FORMED A PART OF THE COST OF THE PLANT. IF WE LOOK AT APPENDIX I TO THE INCOME - TAX RULES, PRESCRIBING THE RATES OF DEPRECIATION, IT CAN BE SEEN THAT LEGISLATURE HAS GIVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI - POLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARENTLY, THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFF - SETTING THE IMPAIRMENT IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE SUCH ENTREPRENEUAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF RENEWABLE ENERGY SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMITED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES, IT WOULD DEFEAT THE VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE, IN OUR OPINION, ASSESSEE'S CLAIM FOR DEPRECIATION SHOULD NOT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFICER. THEREFORE, DISALLO WANCE OF RS.1,17,00,000/ - , 13 LAKHS, RS.23,51,576/ - AND RS.5,73,824/ - ON ACCOUNT OF DEPRECIATION CLAIM STANDS CANCELLED. GROUND NOS. 5 TO 19 OF THE ASSESSEE STAND ALLOWED. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL OR FILED I.T.A. NO . 2 125 /M/ 16 5 ANY D ECISION OF HIGHER COURT HAVING MODIFIED OR REVERSED. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 30 TH MARCH, 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 30 . 0 3 . 201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.