DCIT, Central Circle, Kolhapur V. M/s. Shrenik Industries, Kolhapur

ITA 2153/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79825 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Unexplained investment; Depreciation; Search and seizure; Charitable institution; Valuation report; Revenue expenditure
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2151 TO 2155/PN/2012 (ASSESSMENT YEAR 2005-06 TO 2009-10) ACIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. M/S. SHRENIK INDUSTRIES, 593, A/P. CHIPRI, TAL : SHIROL, DIST : KOLHAPUR PAN NO. AARFS8972Q .. RESPONDENT ASSESSEE BY : SHRI MAHENDRA MEHTA SHRI BHARAT SHAH REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 23-04-2014 DATE OF PRONOUNCEMENT : 25-04-2014 ORDER PER R.K. PANDA, AM : THE ABOVE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 10-08-2012 OF THE CIT(A), KOLHAP UR RELATING TO ASSESSMENT YEARS 2005-06 TO 2009-10 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.2151/PN/2012 (A.Y. 2005-06) : 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT O F UNEXPLAINED INVESTMENT IN LAND AMOUNTING TO RS.11,60,000/-. 2 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAD PURCHASED LAND COSTING RS.11,60,000/-. HE OBSERVED THAT IN POST SURVEY ENQUIRIES MADE, THE PE RSONS WHO HAD SOLD LAND TO THE OTHER CONCERNS/INDIVIDUALS OF THE GHODA WAT GROUP ADMITTED TO HAVE RECEIVED SALE CONSIDERATION OVER AND ABOVE THE DOCUMENTATION PRICE. THE ASSESSING OFFICER OBSERVED THAT IN THE CASE OF SUSHIL D. GHODAWAT CHARITABLE TRUST, THE LAND SELLERS WERE VERIFIED BY THE INVESTIGATION WING. THE NUMBER OF PERSONS WHO HAVE SOLD LAND TO THE TRU ST ARE 16 AND EVERY ONE OF THEM HAVE STATED TO HAVE RECEIVED ON MONEY OVER AND ABOVE THE DOCUMENTATION PRICE. SIMILARLY, IN THE CASE OF GHO DAWAT FOOD INTERNATIONAL PVT. LTD. 3 SUCH LAND SELLERS WERE VE RIFIED WHO HAVE STATED RECEIPT OF CASH OVER AND ABOVE THE DOCUMENTATION PR ICE. IN THE CASE OF GHODAWAT INDUSTRIES (INDIA) PVT. LTD. ONE LAND SELL ER, WHO WAS VERIFIED HAD STATED TO HAVE RECEIVED THE CASH OVER AND ABOVE THE DOCUMENTATION PRICE. IN THE CASE OF SANJAY GHODAWAT, AN INDIVIDU AL, ONE LAND SELLER WHO SOLD THE LAND WAS VERIFIED AND HE ALSO STATED TO HA VE RECEIVED THE CASH OVER AND ABOVE THE DOCUMENTATION PRICE. THE ASSESS ING OFFICER, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY SIMILAR RATIO SHOULD NOT BE APPLIED ON ALL CASES OF THE ASSESSEE GROUP WHERE VER LAND PURCHASES ARE SHOWN. THERE WAS NO RESPONSE FROM THE ASSESSEE. F URTHER, THE AR OF THE ASSESSEE ALSO EXPRESSED HIS INABILITY TO PRODUCE WI TNESS BEING LAND SELLERS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICE R, THEREFORE, WAS OF THE OPINION THAT THE ASSESSEE HAD PAID AN EQUAL AMOUNT OVER AND ABOVE THE PURCHASE CONSIDERATION SHOWN IN THE BOOKS. HE ACCO RDINGLY MADE ADDITION OF RS.11.60,000/-. 3 3. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT TH E ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO ENABLE HI M TO MAKE THE ADDITION. FURTHER, IT WAS CONTENDED THAT THERE WERE NO INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH IN THIS REGARD. THE ASSESSING OFFICER HAD REFERRED TO TRANSACTIONS MADE IN CASES OF OTHER FIRM/ INDIVIDUALS OF THE GROUP, WHICH HAD NO BEARING ON T HE ASSESSEE'S CASE. IT WAS STATED THAT THE CONCERNED LAND OWNER WAS NOT SU MMONED DURING ASSESSMENT PROCEEDINGS. IT WAS ARGUED THAT THE ASSE SSEE HAD NOT PAID ANYTHING MORE THAN THE SALE DEED PRICE FOR PURCHASE OF THE LAND AND HENCE, THE ADDITION MADE WAS ON THE BASIS OF CONJECTURES A ND SURMISES. IN SUPPORT OF ITS CONTENTION THE ASSESSEE PLACED RELIA NCE ON THE DECISION IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. V/S CIT ( 1954) 26 ITR 775 (SC). 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 8. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS ON RECORD. IT IS OBSERVED THAT IN THE CASE OF THE APPELLANT, THE LANDLORDS FROM WHOM THE LAND WAS PURCHASED IN THE PREV IOUS YEARS RELEVANT TO ASSESSMENT YEARS 2004-05 AND 2005-06 WERE N OT PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DESPITE HIS REQUEST FOR PRODUCING THE WITNESS. SIMULTANEOUSLY IT IS ALSO TRUE THAT THE ASSE SSING OFFICER, WHO COULD HAVE USED THE POWERS UNDER SECTION 131 TO ENFORC E THE ATTENDANCE OF WITNESS, CHOSE NOT TO DO SO. IT IS A FACT THAT SIXTE EN LAND OWNERS IN THE TRUST CASES, ONE LAND OWNER IN THE CASE OF SHRI SANJAY GHODAWAT, INDIVIDUAL AND GHODAWAT INDUSTRIES INDIA PVT. LTD. AN D THREE LAND OWNERS IN THE CASE OF GHODAWAT FOODS INDUSTRY PVT. LTD. HAD ST ATED THAT THEY HAD RECEIVED MONIES OVER AND ABOVE THE PRICE DOCUMENTED. THE ASSESSING OFFICER CONCLUDED THAT THE APPELLANT HAD PAID AN EQ UAL AMOUNT OF UNACCOUNTED CASH, OVER AND ABOVE THE PRICE SHOWN AS LA ND PURCHASED IN THE BOOKS OF ACCOUNT AND THEREFORE MADE THE IMPUGNED ADDITION. 9. IN MY OPINION, THOUGH IT IS WELL-KNOWN THAT REAL ESTATE TRANSACTIONS MORE OFTEN THAN NOT INVOLVE PAYMENTS IN CASH WHEREBY THE UNTAXED MONEY EARNED BY THE BUYER IS SIEVED OFF IN THE FORM O F 'ON MONEY' AND PAID TO THE SELLERS. THIS IS A BANE OF INDIAN ECONOMY AND I S A TRUTH WHICH EVERYONE ACCEPTS AS CORRECT. YET THIS IS NOT THE GOSPEL TRUTH I.E. IT IS NOT POSSIBLE TO STATE WITH UTMOST CERTAINTY THAT EACH AND E VERY REAL ESTATE DEAL INVOLVES A CASH COMPONENT WHICH IS NOT A PART OF THE D OCUMENTATION PRICE. THEREFORE, FOR THE PURPOSE OF INCOME-TAX, ONE CANNOT MAKE AN ADDITION 4 MERELY ON AN ASSUMPTION THAT BECAUSE OTHER INDIVIDUALS OR PERSON HAVE MADE PAYMENT OF ON MONEY IN REAL ESTATE PURCHASES, ANO THER PERSON BELONGING TO THE SAME GROUP WOULD HAVE ALSO MADE A SIM ILAR PAYMENT OF ON MONEY TO ACQUIRE REAL ESTATE IN HIS OR HER OWN NAM E. THERE IS NO PRESUMPTION IN LAW THAT THERE HAS TO BE AN UNACCOUNTE D TRANSACTION WHEN THERE IS A DEALING IN REAL ESTATE. IT HAS TO BE NOTED THAT SEARCH AND SEIZURE WAS CONDUCTED ON THE PREMISES OF THE APPELLANT AND NO DOCUMENT OR EVIDENCE WHATSOEVER WAS FOUND WHICH WOULD INDICATED U NACCOUNTED TRANSACTIONS IN LAND DEALING BETWEEN THE MEMBERS OF TH E GHODAWAT GROUP AND THE SELLERS. IT IS ONLY THE STATEMENT MADE BY SOME O F THE LANDLORDS WHO HAD SOLD LANDS TO THE GHODAWAT GROUP WHICH IMPLICATED SOME MEMBERS OF THE GHODAWAT GROUP OF INDULGING IN TRANSACTIONS OF ON MONEY PAYMENTS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE ORAL EV IDENCE OF LANDLORDS IN OTHER CASES CANNOT BE USED TO JUSTIFY AN ADDITION OF ON MONEY PAYMENT IN THE HANDS OF THE APPELLANT. THEREFORE, THE APPELL ANT GETS RELIEF FOR BOTH THE YEARS AND THIS GROUND OF APPEAL IS ALLOWED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND AN I DENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF DCIT VS. GHOD AWAT FOOD INTERNATIONAL PVT. LTD. WE FIND THE TRIBUNAL VIDE ITA NO.2147 TO 2150/PN/2012 ORDER DATED 31-12-2013 FOR A.YRS. 2005 -06 & 2007-08 TO 2009-10 HAS DISCUSSED THE ISSUE AT PARA 3 OF THE OR DER AND UPHELD THE DELETION MADE BY THE CIT(A) ON THIS ISSUE HOLDING T HAT ADDITION BASED ON PRESUMPTION CANNOT BE SUSTAINED. THE LD. DEPARTMEN TAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE IN THE ORDER OF THE CIT(A) NOR COULD BRING OUT ANY MATERIAL SO AS TO TAKE A DIFFERENT VIEW THA N THE VIEW TAKEN BY THE TRIBUNAL IN CASE OF ONE OF THE GROUP CASES. UNDER THESE CIRCUMSTANCES AND FOLLOWING THE DECISION OF THE TRIBUNAL IN THE C ASE OF THE SISTER CONCERN OF THE ASSESSEE, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5 ITA NO.2152/PN/2012 (A.Y. 2006-07) : 6. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND AMOUNTING TO RS.2,42,145/-. 6.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL IN ITA NO.2151/PN/2012 BY THE R EVENUE. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE ABOVE GRO UND RAISED BY THE REVENUE IS DISMISSED. 7. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN FACTORY, PLANT AND MACHINE RY AMOUNTING TO RS.5,43,95,669/-. 7.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM THE AUDIT REPORT THAT THE ASSESSEE FIRM HAS MADE AN INVESTMENT OF RS.35,52,74 ,331/- ON ACCOUNT OF CONSTRUCTION OF OFFICE BUILDING, FACTORY FOR PLANT AND MACHINERY, FURNITURE AND FIXTURES AND COMPUTER SOFTWARE. HE OBSERVED TH AT AT THE TIME OF SURVEY THE SEARCH PARTY HAD FOUND A VALUATION REPOR T BY M/S. ADEPT CONSULTANTS, KOLHAPUR ACCORDING TO WHICH THE VALUAT ION OF LAND AND BUILDING WAS AT RS.17,30,26,000/- AND VALUATION OF PLANT AND MACHINERY WAS AT RS.23,66,44,000/- BOTH TOTALLING TO RS.40,96 ,70,000/-. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE EXCESS VALUATION AT RS.5,43,95,669/- SHOULD NOT BE ADDED TO THE TOTAL I NCOME. IN ABSENCE OF 6 ANY SATISFACTORY REPLY FROM THE ASSESSEE THE ASSESS ING OFFICER MADE ADDITION OF RS.5,43,95,669/-. 8. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSING OFFICER HAD NOT INFORMED ABOUT THE BASIS ON WHICH THE ADDITION WAS MADE AND NO ADEQUATE OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO E XPLAIN ITS CASE. IT WAS FURTHER SUBMITTED THAT THE VALUATION REPORT IS DATE D 28-03-2008 AND THE VALUE INCLUDED OF ASSETS AS ON THAT DATE TOTALLING TO RS.40,96,70,000/- WHEREAS THE VALUE OF ASSETS REFLECTED IN THE BOOKS WERE AS ON 31-03-2006 AT RS.35,68,59,457/-. IT WAS EXPLAINED THAT IF ASS ETS ADDED AND DEDUCTED DURING THE YEAR 2006-07 AND 2007-08 WERE CONSIDERED THEN THE GROSS BLOCK VALUE OF ASSETS AS ON 28-03-2008 WOULD BE RS. 49,34,49,431/-. 8.1 IT WAS FURTHER POINTED OUT THAT THE ADDITION IS MADE IN THE ASSESSMENT YEAR 2006-07 ON THE BASIS OF THE DIFFERE NCE IN GROSS VALUE OF BLOCK OF ASSETS ON 31/03/2006 WHICH WAS RS.35,52,74 ,331/- AND THE VALUE AS PER THE VALUATION REPORT WHICH IS DATED 28/03/20 08 WHEREIN THE VALUATION IS SHOWN AT RS.40,96,70,000/-. IT WAS THU S POINTED OUT THAT THE VALUATION AS ON 28/03/2008 I.E. OF FINANCIAL YEAR 2 007-08 CANNOT BE ANTEDATED AS THE VALUATION OF THE ASSETS IN THE FIN ANCIAL YEAR 2006-07. IT WAS ALSO POINTED OUT THAT IN ACCORDANCE WITH THE BO OKS OF ACCOUNT THE GROSS VALUE OF BLOCK OF ASSETS OF LAND AND BUILDING , PLANT AND MACHINERY AND FURNITURE AND OTHER EQUIPMENTS IS RS.35,68,59,4 57/-AS ON 31/03/2006. FURTHER ADDITIONS TO THE TUNE OF RS.14,19,96,739/- WERE MADE DURING THE FINANCIAL YEARS 2006-07 AND 2007-08. THERE WAS ALSO A DEDUCTION OF RS.54,06,765/- FROM THE BLOCK OF ASSETS. IT WAS ACC ORDINGLY POINTED OUT THAT THE TOTAL GROSS VALUE OF BLOCK OF ASSETS AS ON 28/03/2008 IS 7 RS.49,34,49,431/- WHICH IS HIGHER THAN THE VALUATIO N REPORT FOUND DURING THE COURSE OF SURVEY UNDER SECTION 133A. 8.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E CIT(A) BROUGHT TO THE NOTICE OF THE ASSESSEE THAT IN GROUNDS OF APPEA L THE FIGURE OF ADDITION IS TAKEN AT RS.4,88,90,325/- AS AGAINST THE SUBMISS ION WHEREIN THE FIGURE IS ADOPTED AT RS.14,19,96,739/-. THE ASSESSEE STATE D THAT THE LATTER FIGURE IS CORRECT AND SUBMITTED THE SCHEDULE OF FIXED ASSE TS FORMING A PART OF THE BALANCE SHEET FOR FINANCIAL YEARS 2005-06 AND 2006- 07 AND 2007-08 WHICH PROVE THE VERACITY OF THE STATEMENT GIVEN BY THE AS SESSEE. SINCE THE ASSESSEE HAS ALREADY SHOWN HIGHER FIGURE OF THE VAL UE OF VARIOUS ASSETS AND ALSO BECAUSE OF THE FACT THAT THE ASSESSING OFF ICER HAS SUBSTITUTED THE VALUE AS ON 28/03/2008 FOR THE VALUE RELEVANT TO TH E FINANCIAL YEAR 2005- 06 WHICH IS INCORRECT, THE LD.CIT(A) DELETED THE AD DITION. 8.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSEE HAD SUBMITTED BEFORE THE LD.CIT(A) THAT IF ASSETS ADDED AND DEDUC TED DURING THE YEAR 2006-07 AND 2007-08 WERE CONSIDERED THEN THE GROSS VALUE OF BLOCK OF ASSETS AS ON 28-03-2008 WOULD BE AT RS.49,34,49,431 /- WHICH IS MORE THAN RS.40,96,70,000/- AS PER THE VALUATION REPORT. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FACTUAL FIN DING GIVEN BY THE LD.CIT(A) THAT THE ASSESSEE HAS ALREADY SHOWN HIGHE R FIGURE OF THE VALUE OF VARIOUS ASSETS AND THE ASSESSING OFFICER HAS SUB STITUTED THE VALUE AS ON 8 28-03-2008 FOR THE VALUE RELEVANT TO F.Y. 2005-06 W HICH IS INCORRECT. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE CIT(A). WE ACCORDINGLY UPHOLD THE SAME AND THE GRO UND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 10. GROUND OF APPEAL NO.3 BEING GENERAL IN NATURE I S DISMISSED. ITA NO.2153/PN/2012 (A.Y. 2007-08) : 11. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT O F EXPENDITURE ON ROAD DEVELOPMENT FOR THE A.Y. 2007-08 AMOUNTING TO RS.12, 36,812/-. 11.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER, DURING THE COURSE OF ASSESSMENTS, OBSERVED FROM THE AUDIT REPO RT AND PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS SHOWN ROAD DEVELOPMEN T EXPENSES TO THE TUNE OF RS.12,36,812/-. ON BEING QUESTIONED BY THE AO IT WAS EXPLAINED THAT THE ROAD TOWARDS ITS FACTORY SITUATED AT MAJAL E TAL. HATKANANGALE ON THE KOLHAPUR-SANGLI HIGHWAY WAS DEVELOPED BY IT AS THE SAID ROAD WAS NOT CONVENIENT FOR PLYING OF HEAVY VEHICLES. NOT BEING SATISFIED WITH THE ABOVE CONTENTIONS, THE ASSESSING OFFICER DISALLOWED THE SUM OF RS.12,36,812/- ON THE GROUND THAT THE ABOVE ROAD WA S USED BY ALL TYPES OF VEHICLES. HE FURTHER HELD THAT IT WAS NOT NECESSARY FOR THE ASSESSEE TO INCUR EXPENSES TOWARDS DEVELOPMENT OF THE ROAD AS T HE SAME WAS MAINTAINED/ REPAIRED REGULARLY BY STATE AS WELL AS CENTRAL GOVERNMENT AUTHORITIES. 12. BEFORE THE CIT(A) IT WAS CLARIFIED THAT THAT TH EY HAD DEVELOPED THE AREA LYING BETWEEN THEIR FACTORY AND THE KOLHAPUR-S ANGLI STATE HIGHWAY 9 FOR ITS OWN CONVENIENCE. IT WAS EXPLAINED THAT SINC E THE AREA DEVELOPED DID NOT BELONG TO THE ASSESSEE, THEY HAD CLAIMED TH E DEVELOPMENT EXPENSES INCURRED AS REVENUE EXPENDITURE. 13. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 19. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS EXPLAINED BY THE A PPELLANT THAT THE FACTORY IS SITUATED AT MAJALE, TAL. HATKANANGALE ON THE KOLHAPUR-SANGLI HIGHWAY. IT WAS POINTED OUT THAT THE ROAD WAS IN A BA D STATE AND IT WAS NOT POSSIBLE FOR HEAVY VEHICLES TO COMMUTE UPTO THE FACTOR Y. HENCE, FOR THE SAKE OF CONVENIENCE AND SAFER TRANSPORTATION WHICH WAS NECESSARY FOR TRANSPORTATION OF THE TOWERS OF WINDMILL MANUFACTURED BY THE APPELLANT, THE SAID ROAD WHICH WAS OUTSIDE THE FACTORY PREMISES WAS DEVELOPED. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THIS EXPLANATION AND IN VIEW OF THE FACT THAT PUBLIC ROADS ARE MAINTAINED AND REPAIRED B Y THE STATE GOVERNMENT OR OTHER AUTHORITIES, IT WAS NOT FOUND NEC ESSARY FOR THE APPELLANT TO INCUR ANY EXPENDITURE ON THE ROAD DEVE LOPMENT, WHICH WAS A PUBLIC PROPERTY. 19.1 IN MY OPINION, THE REASONING GIVEN BY THE ASSESSIN G OFFICER IS NOT APPROPRIATE. A BUSINESSMAN CAN INCUR EXPENSES WHICH ARE NOT AGAINST LAW AND WHICH FACILITATES HIS BUSINESS. IT IS NOT MATERIAL IF THE LAND OR THE ROAD BELONGS TO THE PUBLIC AND THE RESPONSIBILITY OF LAYING THE ROAD AND ITS MAINTENANCE LIES WITH ANOTHER ORGANIZATION OR DEPART MENT OF THE STATE GOVERNMENT. IF THE EXPENDITURE IS INCURRED TO FACILI TATE THE BUSINESS OF THE ASSESSEE, THE SAME HAS TO BE ALLOWED AS AN EXPENSE, EITHER CAPITAL OR REVENUE. SINCE, IN THE INSTANT CASE THERE IS NO DENIAL OF THE FACT THAT RELAYING OF ROAD WAS INCURRED FOR THE PURPOSE OF SAFER TRANSPORTATION OF MEN AND MATERIAL OF THE APPELLANT, THE GENUINENESS OF EXPENSES IS PROVED. SINCE THE LAND DID NOT BELONG TO THE APPELLANT, THE EXPENSES CANNOT BE CAPITALIZED. IT IS IMMATERIAL THAT THE SAME ROAD IS AL SO UTILIZED BY PUBLIC AT LARGE. AS LONG AS IT SERVES THE PURPOSE OF BUSINESS OF THE APPELLANT, THE SAME HAS TO BE ALLOWED AS AN EXPENDITURE WHICH IN THIS CASE IS A REVENUE EXPENSES. THIS GROUND OF APPEAL IS ALLOWED. 13.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE ON ROAD DEVELOPMENT AMOU NTING TO RS.12,36,812/- ON THE GROUND THAT PUBLIC ROADS ARE MAINTAINED AND 10 REPAIRED BY THE STATE GOVERNMENT OR OTHER AUTHORITI ES AND THE ASSESSEE IS NOT REQUIRED TO INCUR ANY EXPENDITURE ON THE ROAD D EVELOPMENT WHICH WAS A PUBLIC PROPERTY. WE FIND THE LD.CIT(A) DELETED T HE ADDITION ON THE GROUND THAT A BUSINESSMAN CAN INCUR EXPENSES WHICH ARE NOT AGAINST LAW AND WHICH FACILITATES HIS BUSINESS. ACCORDING TO L D.CIT(A) IT IS NOT MATERIAL IF THE LAND OR THE ROAD BELONGS TO THE PUB LIC AND THE RESPONSIBILITY OF ALLOWING THE ROAD AND ITS MAINTENANCE LIES WITH ANY ORGANISATION OR DEPARTMENT OF THE STATE GOVERNMENT. FURTHER, ACCOR DING TO THE LD.CIT(A) IF THE EXPENDITURE IS INCURRED TO FACILITATE THE BU SINESS OF THE ASSESSEE THE SAME HAS TO BE ALLOWED AS AN EXPENDITURE EITHER CAP ITAL OR REVENUE. SINCE THE LAND DOES NOT BELONG TO THE ASSESSEE HE HELD TH AT THE EXPENDITURE CANNOT BE CAPITALISED. SINCE THE EXPENDITURE INCUR RED FACILITATES THE BUSINESS OF THE ASSESSEE, THEREFORE, THE SAME HAS T O BE ALLOWED AS A REVENUE EXPENDITURE EVEN THOUGH THE ROAD IS ALSO UT ILISED BY PUBLIC AT LARGE. THE ABOVE REASONINGS GIVEN BY THE LD.CIT(A) IN OUR OPINION ARE REASONABLE AND JUSTIFIED UNDER THE FACTS AND CIRCUM STANCES OF THE CASE. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) ON TH IS ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO.2154/PN/2012 (A.Y. 2008-09) : 15. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT O F DEPRECIATION ON WINDMILL FOR THE A.Y. 2008-09 AMOUNTING TO RS.24,15 ,000/-. 15.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS INSTALLED NEW WIND MILLS DURING THE IMPUGNED ASSESSMENT YEAR. FROM THE DETAILS 11 FURNISHED BEFORE HIM HE OBSERVED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE ENTIRE EXPENDITURE INCLUDING PU RCHASE AND INSTALLATION OF THE WINDMILL. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM MADE ON THE ASSETS OTHER THA N WINDMILL. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THERE W AS NO CIVIL WORK INVOLVED FOR ERECTION OF THE WIND TURBINE AS PARTS LIKE CONTROL PANELS AND DISPLAY METERS WERE HOUSED WITHIN THE TOWER ITSELF. IT WAS SUBMITTED THAT THE CIVIL WORK DONE IN THE FORM OF FOUNDATION WORK COULD NOT BE SEPARATED FROM THE WIND TURBINE AND THEREFORE IT WAS ENTITLED FOR DEPRECIATION ON THE ENTIRE COST OF THE WIND TURBINE. HOWEVER, THE ASSE SSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E. AFTER PERUSING VARIOUS BILLS IN CONNECTION WITH EXPENSES INCURRED ON WIND TURBINE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT EN TITLED TO DEPRECIATION ON CIVIL WORK, ERECTION WORK, INSTALLATION WORK AND PAYMENT TOWARDS DEVELOPMENT CHARGES ETC. FOR THIS PROPOSITION HE R ELIED ON THE ORDER OF THE ITAT IN POONAWALA FINVEST & AGRO PVT. LTD. VS. ACIT REPORTED IN 118 TTJ 68 (PUNE). THE ASSESSING OFFICER ALSO REFE RRED TO RULE 32(1) OF THE I.T. RULES, 1962, APPENDIX-I, PART-A, ITEM III( 3) (XIII)(I). BASED ON THE ABOVE OBSERVATIONS, HE DISALLOWED THE CLAIM OF THE ASSESSEE MADE ON ACCOUNT OF EXCESS DEPRECIATION. 16. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S AME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. THE DECISION OF THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST & AGRO PVT. LTD. (SUPRA) WAS CITED BEFORE THE CIT(A) ACCORDING TO WHICH COST OF TRANSFORMER UPTO DP STRUCTURE AND INTERNAL LINE UPTO THE METER WAS HELD TO BE AN INTE GRAL PART OF THE MAIN PLANT, I.E. THE WIND TURBINE AND 100% DEPRECIATION WAS ALLOWED. IT WAS 12 SUBMITTED THAT THE NECESSARY CIVIL WORKS TOWARDS ER ECTION AND INSTALLATION OF THE WIND TURBINE ARE INTEGRAL PART OF THE WINDMI LL WITHOUT WHICH THE WINDMILL CANNOT COME INTO EXISTENCE AND GENERATE EL ECTRICITY AND THEREFORE, THE SAME HAS TO BE TREATED AS PART OF T HE WINDMILL. ASSESSEE ALSO FILED COPIES OF BILLS RECEIVED FROM ENERCON (I NDIA) LTD., 17. HOWEVER, THE LD.CIT(A) WAS NOT FULLY CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. FOLLOWING HIS O RDER IN THE CASE OF M/S. CHAPHALKAR BROTHERS FOR A.Y. 2008-09 WHEREIN HE HAS DETERMINED THE VARIOUS COMPONENTS WHICH GO ON TO MAKE UP THE CASE OF THE WINDMILL, HE DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE DE PRECIATION ALLOWANCE ACCORDING TO THE FOLLOWING I. COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL ITEM S MENTIONED AT 1 TO 5 BELOW : II. COST OF POWER EVACUATION FACILITY AND INFRASTRUCT URE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDING /ROADS AND WINDMILL IN 60:40 RATIO. III. COST OF OTHER MISCELLANEOUS EXPENSES WILL BE APPOR TIONED ON PRORATE BASIS BETWEEN WINDMILL AND INFRASTRUCTURE FACI LITIES. 17.1 SINCE THE ASSESSEE HAS GIVEN THE REVISED WORKI NG OF DEPRECIATION IN THE ABOVE LINE HE DIRECTED THE ASSESSING OFFICER GO THROUGH THE REVISED WORKING AND ALLOW DEPRECIATION ACCORDINGLY. SR.NO. PARTICULARS 1. COST OF WIND TURBINE GENERATOR 2 A. COST OF COMPONENT & ACCESSORY (COPPER WOUND WITH ACCESSORIES) B. COST OF COMPONENT FOR GENERATION OF ELECTRICI TY SUPPLY OF ROTOR BLADES C. ELECTRICAL ITEMS, COMPONENTS OF RE DEVICE. 3. COST OF TUBULAR TOWER 4. COST OF WORK INCLUDING FOUNDATION WORK 5. LABOUR RELATED COST A. INSTALLATION OF WINDMILL B. INSTALLATION OF ELECTRICAL LINE FOR POWER TRAN SMISSION AND METER C. FINAL TESTING AND COMMISSIONING 13 17.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 18. AFTER HEARING BOTH THE SIDES WE FIND THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN THE CASE OF ACIT VS. EVERREADY INVESTMENT PVT. LTD. AND VICE-VERSA V IDE CONSOLIDATED ORDER DATED 29-11-2012 FOR A.YRS. 2003-04 TO 2008-09. TH E RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER : 5. IN THIS BACKGROUND, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT WAS A CONVERGENCE OF OPINION BETWEEN THE ASSESSEE AND TH E LEARNED CIT(DR) THAT SO FAR AS THE COST OF FOUNDATION OF WIND MILL IS CONCERNED, THE SAME IS LIABLE TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL HAVING REGARD TO THE DECISION OF THE PUNE BENCH OF T HE TRIBUNAL IN THE CASE OF AMINITY DEVELOPERS & BUILDERS VIDE ITA NO. 1505/PN /2011 DATED 12.12.2012 AND ALSO IN TERMS OF THE JUDGMENT OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. COOPER FOUNDARY PVT . LTD. VIDE INCOME TAX APPEAL NO. 1326 OF 2010 DATED 14.06.2011. THE TRIBUNAL IN THE CASE OF AMINITY DEVELOPERS & BUILDERS (SUPRA) BY APPLYING T HE FUNCTIONAL TEST HELD THAT THE COST INCURRED ON THE FOUNDATION OF THE WINDMILL IS TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL ERECTION AND IS THUS ELIGIBLE FOR THE DEPRECIATION @ 80%, PRESCRIBED FOR WINDMILL. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COOPER FOUNDARY PVT . LTD. (SUPRA) HAS ALSO UPHELD THE PROPOSITION THAT CEMENT, CONCRETE FOU NDATION IS TO BE INCLUDED IN THE COST OF WINDMILL, WHILE GRANTING DEP RECIATION @ 80% ON THE WINDMILL. THEREFORE, ON THE BASIS OF THE AFORESAI D, IN-PRINCIPLE THE PLEA OF THE ASSESSEE IS LIABLE TO BE UPHELD. 6. SO, HOWEVER IT IS PERTINENT TO OBSERVE THAT THE C OST OF CIVIL WORKS, ETC. AMOUNTING TO RS.20,00,000/- INCURRED BY THE ASSESSE E CANNOT BE SAID TO BE ENTIRELY TOWARDS THE COST OF CIVIL WORK FOUNDAT ION FOR THE WINDMILL. THE LEARNED COUNSEL HAS REFERRED TO THE COPY OF INVOI CE RAISED BY SUZLON DEVELOPERS PRIVATE LIMITED FOR THE COST OF CIVIL WORK , ETC. AMOUNTING TO RS.20,00,000/- WHICH SHOWS THAT IT IS A COMPOSITE BILL FOR FOUNDATION OF WINDMILL, PLINTH FOR TRANSFORMER, WINDMILL CONTROL R OOM, SITE DEVELOPMENT AND INTERNAL ROAD DEVELOPMENT, ETC. . IT IS IN THIS CONTEXT, ON BEING UNABLE TO DECIPHER THE EXACT COST OF THE CIVIL FOUNDATION WORK FOR WINDMILL/TRANSFORMER, THE LEARNED CIT(A) HAS APPORTIO NED THE COST BETWEEN THE BUILDINGS/ROADS AND WINDMILL IN THE RATI O OF 60:40. THE LEARNED COUNSEL VEHEMENTLY POINTED OUT THAT THOUGH SE PARATE COSTS WERE NOT ENUMERATED BY SUZLON DEVELOPERS PRIVATE LIMITED WHO HAD UNDERTAKEN THE EXECUTION OF WORK, YET THE ITEMS OF C IVIL WORK ON ACCOUNT OF BUILDINGS/ROADS WAS MINIMAL AND THEREFORE APPORTIONMEN T MADE BY THE CIT(A) WAS UNJUSTIFIED. THE LEARNED COUNSEL FURTHER POINTED OUT THAT THE MAJOR COSTS ARE IN RELATION TO THE CONSTRUCTION OF CIV IL FOUNDATION FOR THE WINDMILL/OTHER EQUIPMENT REQUIRED FOR POWER GENERAT ION AND IS LIABLE TO BE CONSIDERED AS A PART OF WINDMILL FOR THE PURPOSES OF GRANT OF DEPRECIATION @ 80%. 7. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, AND ALSO THE PLEA RAISED BEFORE US, IN OUR CONSIDERED OPINION IT WOULD MEET TH E ENDS OF JUSTICE IF 60% OF COST OF CIVIL WORK IS APPORTIONED TO CIVIL WOR K INVOLVED IN THE 14 ERECTION OF FOUNDATION OF WINDMILL/OTHER POWER EQUI PMENT AND 40% BE APPORTIONED TOWARDS OTHER CIVIL WORKS WHICH SHALL BE E LIGIBLE FOR THE LOWER RATE OF DEPRECIATION. THE COST OF CIVIL WORK APPORTIONED TOWARDS THE ERECTION OF FOUNDATION FOR WINDMILL SHALL BE ELIGIBL E FOR DEPRECIATION @ 80% AND THE BALANCE OF THE COST SHALL BE ELIGIBLE FOR DEPRECIATION @ 10%, AS ALLOWED BY THE ASSESSING OFFICER. THE ORDER OF THE C IT(A) IS THEREFORE SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMP UTE THE ALLOWANCE OF DEPRECIATION ACCORDINGLY. 18.1 IN VIEW OF THE DECISION OF THE TRIBUNAL CITED (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY WE UPHOLD THE SAME AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO.2155/PN/2012 (A.Y. 2009-10) : 19. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT O F DEPRECIATION ON WINDMILL FOR THE A.Y. 2008-09 AMOUNTING TO RS.2,41,5 00/-. 19.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL IN ITA NO.2151/PN/2012. WE HAV E ALREADY DECIDED THE ISSUE AND THE APPEAL FILED BY THE REVENUE HAS B EEN DISMISSED. FOLLOWING THE SAME RATIO, THIS GROUND BY THE REVENU E IS DISMISSED. 20. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 25-04-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 25 TH APRIL, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), KOLHAPUR 4 CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE