CITY LIFE DEVELOPERS, MUMBAI V. ITO 25(1)(1), MUMBAI

ITA 2324/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4264 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Keywords: Depreciation; Additional depreciation
• Section: 32(1)(iia); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJEET SINGH, JUDICIAL MEMBER ITA NO.2324/M/2017 ASSESSMENT YEAR: 2011-12 M/S. CITY LIFE DEVELOPERS, 5 TH FLOOR, AGARWAL GOLDEN CHAMBER, PLOT NO.13/A, FUN REPUBLIC ROAD, OFF NEW LINK ROAD, ANDHERI WEST, MUMBAI 400 053 PAN: AADFC1252B VS. INCOME TAX OFFICER- 25(1)(1), 201, 2 ND FLOOR, C-11, PRATYAKSHAKAR BHAVAN, BKC BANDRA (E) MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVRAM, A.R. SHRI SASHANK DUNDU, A.R. REVENUE BY : SHRI ABI RAMA KARTIKEYAN, D.R. DATE OF HEARING : 06.03.2019 DATE OF PRONOUNCEMENT : 13.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 09.01.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF DISALLOWANCE ON ACCOUNT OF ADDITION AL DEPRECIATION OF RS.1,87,53,204/- AS MADE BY THE AO UNDER SECTION 32(1)(IIA) IN RESPECT OF WIND MILL. ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 2 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF CONSTRUCTION AND DURING THE YEAR FILED THE RETURN OF INCOME ON 26.09.2011 DECLARING LOSS OF RS.9,12,45,4 83/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THER EAFTER STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE A SSESSEE. DURING ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE HAS DEBITED DEPRECIATION OF RS.2,55,58,684/-WHEREAS THE DEPRECIATION IN THE CORRESPONDING PREVIOUS YEAR WAS RS.1,35,18,814/-ONLY. THE AO NOTED THAT THE SAID I NCREASE IN DEPRECIATION WAS ON ACCOUNT OF ADDITION TO THE FIX ED ASSETS ON ACCOUNT OF WIND MILLS. ACCORDINGLY, THE ASSESSEE W AS ASKED TO PRODUCE THE COMPLETE DETAILS OF WIND MILL PURCHASED AND PUT TO USE IN THE CURRENT FINANCIAL YEAR. THE ASSESSEE R ESPONDED VIDE LETTER DATED 28.01.2014 BY SUBMITTING THAT THE WIND MILL WAS PROCURED IN 2009-10 BUT SAME WAS NOT USED FOR THE P URPOSE OF BUSINESS IN THE FINANCIAL YEAR 2009-10 AS WAS INSTA LLED AND INVOICED IN THE NEXT YEAR. THE ASSESSEE FILED COPI ES OF DELIVERY CHALLAN, LORRY RECEIPTS ETC TO CORROBORATE HIS AVER MENTS. THE OPERATION OF WIND MILL WAS STARTED IN 2010-11 AND T HEREFORE THE ASSESSEE CLAIMED DEPRECIATION @ 80% ALONG WITH ADDI TIONAL DEPRECIATION @ 20% UNDER SECTION 32(1)(IIA) OF THE ACT. HENCE, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE VID E ORDER SHEET ENTRY DATED 14.03.2014 CALLING UPON THE ASSES SEE TO JUSTIFY THE CLAIM OF ADDITIONAL DEPRECIATION AND AL SO STATE AS TO WHY THE SAME SHOULD NOT BE DISALLOWED. ACCORDING T O THE AO, IN THE BUSINESS OF GENERATION AND DISTRIBUTION OF POWE R THE ADDITIONAL DEPRECIATION SHALL BE ALLOWED ONLY FROM 01.04.2013 WHEREAS THE ASSESSEE HAS WRONGLY CLAIMED THE ADDITI ONAL ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 3 DEPRECIATION IN A.Y. 2011-12. THUS AO DISALLOWED D EPRECIATION TO THE EXTENT OF RS.1,87,53,204/- IN THE ASSESSMENT FRAMED. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALS O DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 3.3. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION OF THE APPELLANT. I HAVE ALSO CAREFULLY PERUSED THE DETAILS FILED BY THE APPELLANT. THE ONLY ISSUE IN DISPUTE IS REGARDING A LLOWABILITY OF CLAIM OF ADDITIONAL DEPRECIATION. ADDITIONAL DEPRECIATION IS DISCUSSED IN SECTION 32(1)(IIA) OF THE INCOME TAX ACT. FOR THE RELEVANT ASSESSMENT YEAR THE LANGU AGE OF THE SECTION IS AS FOLLOWS: 'IN THE CASE OF ANY NEW MACHINERY OR PLAN! (OILIER THAN SHIPS AND AIRCRAFTS), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31S T DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II)' 3.4 FROM A PERUSAL OF THE SECTION IT CAN BE CLEARLY SEEN THAT THE WORDS 'IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER' WAS NOT THERE IN THE SECTION FOR THE IMPUGNED ASSESSMENT YEAR. THE S ECTION WAS AMENDED BY THE FINANCE ACT 2012 AND THE AMENDED PROVISION WAS APPL ICABLE FROM 01.04.2013. THEREFORE, THE AO WAS NOT WRONG IN INTERPRETING THE LAW TO THE EFFECT THAT THE ADVANTAGE OF ADDITIONAL DEPRECIATION WOULD BE AVAIL ABLE TO THE APPELLANT ONLY FROM THE AY 2013-14. HOWEVER, THE APPELLANT HAS RELIED O N THE DECISION OF THE JURISDICTIONAL ITAT MUMBAI IN THE CASE OF SHRI ATUL SHIVDAS GANATRA VS DCIT 22(1), MUMBAI ITA NO. 4899/MUM/2014 DTD 26.08.2016. IN THI S JUDGMENT THE HON'BLE ITAT MUMBAI HAS HELD THAT THE ELECTRICITY GENERATED BY AN ASSESSEE IS AN ARTICLE OR GOOD AND HAS ALLOWED ADDITIONAL DEPRECIATION ON WIN DMILL FOR AY 2010-11 I.E. FOR A PERIOD PRIOR TO THE AMENDMENT. SIMILARLY, THE APPEL LANT HAS RELIED ON THE DECISION OF THE ITAT, DELHI IN THE CASE OF NTPC LTD. VS DCTT WHEREIN IT WAS HELD THAT THE PRODUCTION OF ELECTRICITY AMOUNTS TO PRODUCTION OF AN ARTICLE OR THING. HOWEVER, THE DECISION OF THE HON'BLE ITAT IS DISTINGUISHABLE ON FACTS AND LAW. THE BASIC REQUIREMENT FOR CLAIM OF ADDITIONAL DEPRECIATION IS THAT THE ASSESSEE HAS TO ACQUIRE AND INSTALL A NEW MACHINERY OR PLANT IN THE CONCERN ED PREVIOUS YEAR. IN THE JUDGMENT GIVEN BY THE ITAT MUMBAI CITED ABOVE THE W INDMILLS WERE ACQUIRED AND INSTALLED DURING THE CONCERNED PREVIOUS YEAR. HOWEV ER, IN THE CASE OF THE APPELLANT, IT HAS BEEN STATED BY THE APPELLANT ITSELF BEFORE T HE AO VIDE ITS LETTER DATED 20.08.2014 THAT 'ALTHOUGH WE HAVE PROCURED THE WINDMILL AND THE SAM E WAS INSTALLED IN FY 2009-10, THE .SAID WINDMILL WAS NOT USED FOR THE PURPOSE OF BUSINESS DURING FY 2009-10.' THUS, THE WINDMILL WAS NEITHER ACQUIRED NOR INSTALL ED IN THE RELEVANT PREVIOUS YEAR 2010-11. FURTHER, IN THE CAS E OF NTPC LTD VS DCIT THE ISSUE OF ACQUISITION AND INSTALLATION OF THE NEW MACHINER Y WAS NOT DISCUSSED AT ALL. IT HAS BEEN HELD BY THE HON'BLE ITAT DELHI IN THE CASE OF INTERNATIONAL CARS & MOTORS LTD. VS ITO 30 TAXRNANN.COM 5 THAT FOR CLAIMING ADDITION AL DEPRECIATION BOTH CONDITIONS THAT NEW MACHINERY OR PLANT HAS BEEN ACQUIRED AND I NSTALLED ARE REQUIRED TO BE FULFILLED. CONSEQUENTLY, ADDITIONAL DEPRECIATION ON THE WINDMILL WHICH WAS NEITHER ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 4 ACQUIRED NOR INSTALLED DURING THE FY 2010-11 WILL N OT BE AVAILABLE TO THE APPELLANT FOR AY 2011-12. AFTER CONSIDERING THE FACTS OF THE CASE AND THE POSITION OF LAW AS GIVEN IN SECTION 32(1)(IIA), I HAVE COME TO A CONCL USION THAT THE ADDITIONAL DEPRECIATION ON WINDMILL IS NOT ALLOWABLE FOR AY 20 11-12. THE ADDITION OF RS 1,87,53,2047- IS CONFIRMED AND GROUNDS OF APPEAL NO S. 1 & 2 ARE DISMISSED. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION ON THE WIND MILL COMMISSIONED DURING THE YEAR. THE LD. A.R. TOOK U S TO THE PAGE NO.29 OF THE PAPER BOOK WHEREIN COMPLETE DETAILS OF ADDITIONS ALONG WITH DATE OF PURCHASE, NAME OF THE SUPPLIER, INVOICE NUMBER ETC WERE GIVEN. THE LD. A.R. ALSO TOOK US TO THE PAGES NOS.30 TO 38 WHICH ARE IN RESPECT OF INVOICES ISSUE D BY THE SUPPLIERS AND DEBIT NOTE ETC. FURTHER, THE LD. A.R . REFERRED TO THE CERTIFICATE ISSUED BY MAHARASHTRA ELECTRICITY D ISTRIBUTION CO. LTD., O & M CIRCLE, SATARA DATED 29.04.2010 WHEREI N IT IS CERTIFIED THAT WIND TURBINE GENERATOR IN RESPECT OF THE ASSESSEE WAS INSTALLED ON 28.04.2010 IN THE PRESENCE OF THE EXECUTIVE ENGINEER. THE LD. A.R. SUBMITTED THAT THE AO HAS N OT DOUBTED THE INSTALLATION AND COMMISSIONING OF THE WIND MILL WHEREAS LD. CIT(A) DOUBTED THE ACQUISITION AND INSTALLATION OF WIND MILL IN PREVIOUS YEAR 2010-11. THE LD. A.R. SUBMITTED BEFO RE THE BENCH THAT THE FINDING OF THE LD. CIT(A) THAT WIND MILL IS NOT ACQUIRED NOR INSTALLED DURING THE FINANCIAL YEAR 20 10-11 IS TOTALLY WRONG AND CONTRARY TO THE FACTS OF THE CASE AS IS CLEAR FROM THE CERTIFICATE ISSUED BY THE MAHARASHTRA ELEC TRICITY DISTRIBUTION CO. LTD. AT PAGE NO.39 AND VARIOUS COP IES OF THE INVOICES AS REFERRED TO ABOVE. THE LD. A.R. ALSO S UBMITTED THAT THE ASSESSEE STARTED THE CHARGING THE CONSUMPTION O F ELECTRICITY BY REFERRING TO THE BILL DATED 27.04.2011 FILED IN THE PAPER BOOK COVERING THE PERIOD FROM 03.05.2010 TO 04.06.2010. THE LD. A.R. ADMITTED THAT THE PLANT WAS RECEIVED IN THE LA ST YEAR ON ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 5 30.03.2010 BUT INVOICED AND INSTALLED IN THE NEXT F INANCIAL YEAR 2010-11. THE LD. A.R. ALSO REFERRED TO THE BALANCE SHEET OF THE ASSESSEE FILED ON PAGE NO.11 SPECIFICALLY THE SCHE DULE OF FIXED ASSETS WHEREIN THE ADDITION OF WIND MILL PLANT WAS SHOWN DURING THE FINANCIAL YEAR 2010-11. THUS LD. A.R. SUBMITTE D THAT THE FINDINGS OF THE LD. CIT(A) ARE FACTUALLY INCORRECT. THE LD. A.R. FINALLY SUBMITTED THAT SINCE THE ACTUAL PURCHASE, I NSTALLATION AND COMMENCEMENT OF GENERATION OF ELECTRICITY UNITS HAVE HAPPENED DURING THE CURRENT YEAR ASSESSMENT YEAR, T HEREFORE THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION WHICH OUGHT TO BE ALLOWED TO THE ASSESSEE BY THE LOWER AUTHORITIES . IN DEFENCE OF HIS ARGUMENT, THE LD. A.R. RELIED ON THE DECISIO N OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.6116/ M/2014 A.Y. 2010-11 ORDER DATED 03.04.2017, NTPC VS. ACIT (2012) 54 SOT 177 URO (DEL-TRIB). 6. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CA SE LAWS CITED BY THE LD. A.R. DURING THE COURSE OF HEARING. WE O BSERVE THAT IN THIS CASE THE PLANT OF WIND MILL WAS INSTALLED IN THE FINANCIAL YEAR 2010-11 AS IS APPARENT FROM THE INVOICES ATTAC HED FROM PAGE NO.30 TO 38, CERTIFICATION OF COMMISSIONING OF THE WIND MILL PLANT DATED 29.04.2010 ISSUED BY MAHARASHTRA ELECTR ICITY DISTRIBUTION CO. LTD. AND COPY OF BILL SHOWING THE METER READING DATED 27.04.2011. THEREFORE, WE ARE NOT IN AGREEME NT WITH THE FINDING OF THE LOWER AUTHORITIES THAT WIND MILL HAS BEEN PURCHASED IN FINANCIAL YEAR 2009-10 AND INSTALLED I N THE NEXT ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 6 FINANCIAL YEAR I.E. 2010-11. WE OBSERVE THAT AO HA S DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT AMENDM ENT IN SECTION 32(1)(IIA) HAS COME INTO EFFECT FROM 01.04. 2013 WHEREAS ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION IN THE ASSESSMENT YEAR 2011-12 WHILE LD. CIT(A) CONFIRMED THE DISALLO WANCE BY FOLLOWING THE DECISION IN THE CASE OF INTERNATIONAL CARS AND MOTORS LTD. VS. ITO 30 TAXMANN.COM (2013) 56 SOT 50 (DEL- TRIB.) WHEREIN IT HAS BEEN HELD THAT FOR THE PURPOS E OF CLAIMING ADDITIONAL DEPRECIATION BOTH THE CONDITIONS OF ACQU ISITION AND INSTALLATION ARE REQUIRED TO BE FULFILLED AND THUS OBSERVED THAT WIND MILL WAS NEITHER ACQUIRED NOR INSTALLED DURING THE FINANCIAL YEAR 2010-11 AND THEREFORE ASSESSEE IS NOT ENTITLED TO ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. AFTER PERUSING THE ORDER IN ASSESSEES OWN CASE IN ITA NO.6116/M/2 014 (SUPRA) WE OBSERVE THAT THE SIMILAR ISSUE HAS ARISE N IN AY 2010- 11 WHICH HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AS UNDER: 8. THE GROUND NO.(I) OF THE APPEAL IS RELATING TO THE ISSUE REGARDING THE ALLOWABILITY OF ADDITIONAL DEPRECIATION ON WIND MILL. AT THE OUT SET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY C OVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NTPC LTD. VS. DCIT 2012 54 SOT 177 WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OR PRODUCTION OF ARTICLE OR THING AND THAT AN ASSESSEE ENGAGED IN THE ACTIVITY OF GENERATION OF E LECTRICITY WOULD BE ENTITLED TO ADDITIONAL DEPRECIATION UNDER SECTION 32(1). 9. THE LD. D.R. COULD NOT POINT OUT ANY DIFFERENTIA TING CASE LAW AGAINST THE ABOVE STATED PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT. IN VIEW OF THIS, WE DO NOT FIND ANY FORCE IN GROUND NO.I OF THE APPE AL AND THE SAME IS ACCORDINGLY DISMISSED. 8. SIMILARLY, IN THE CASE OF NTPC VS. DCIT (SUPRA) IT HAS BEEN HELD THAT THE ADDITIONAL DEPRECIATION IS ALLOWABLE TO THE ASSESSEE AS THE GENERATION OF ELECTRICITY IS AKIN TO MANUFAC TURE OF PRODUCTION OF ARTICLE OR THING AND THE ASSESSEE HAS , IN FACT, BEEN ITA NO.2324/M/2017 M/S. CITY LIFE DEVELOPERS 7 ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICIT Y. TO SUM UP, WE ARE OF THE VIEW THAT THE ASSESSEE HAS INSTALLED AND COMMISSIONED THE WIND WILL IN A.Y. 2011-12 AND IS E NTITLED TO ADDITIONAL DEPRECIATION AFTER RESPECTFULLY FOLLOWIN G THE RATIO LAID DOWN IN THE ASSESSEES OWN CASE IN A.Y. 2010-11 WHI CH HAS BEEN PASSED AFTER FOLLOWING THE DELHI TRIBUNAL IN THE CA SE OF NTPC VS. DCIT (SUPRA). 9. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2019. SD/- SD/- ( AMARJEET SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.