Dy. CIT, Sangli V. J-Sons Foundry P. Ltd, Sangli

ITA 2349/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5896 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 2349 /PN/20 12 ASSESSMENT YEAR : 2009 - 10 THE DY. COMMISSIONER OF INCOME TAX , CIRCLE - 1, SANGLI VS. J - SONS FOUNDRY PVT. LTD., G - 13, MIDC, KUPWAD, DISTT. - SANGLI (APPELLANT) (RESPONDENT) PAN NO. AAACJ6740K APPELLANT BY: SHRI P.L. PATHADE RESPONDENT BY: SHRI M.P. MACHAVE DATE OF HEARING : 02 - 01 - 2014 DATE OF PRONOUNCEME NT : 28 - 01 - 2014 ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A), KOLHAPUR DATED 03 - 09 - 2012 FOR THE A.Y. 2009 - 10. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN ALLOWING DEPRECIATION ON THE WIND MILL ON PRO - RATA BASIS AND IN NOT APPRECIATING THE FACT THAT THE EARTH WORK AND FOUNDATION IS NOTHING BUT CIVIL WORK ON WHICH DE PRECIATION IS ALLOWABLE @ 10%, WHEREAS, INSTALLATION AND COMMISSIONING WORK CONSTITUTES BLOCK PLANT AND MACHINERY ON WHICH DEPRECIATION IS ALLOWABLE @ 15%. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRE D IN NOT APPRECIATING THE RATIO LAID DOWN BY THE HON'BLE ITAT, PUNE, 'A' BENCH, PUNE IN THE CASE OF PUNAWALA FINEST AND AGRO PVT. LTD. V/S ACIT (2008) 118 TTJ (PUNE) 68, 12 DTR 211. 2 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLOWING THE APPEAL O THE ASSESSEE CLAIMING DEDUCTION U/S 80IA(5) OF THE I.T. ACT, ON THE PROFITS EARNED FROM GENERATION AND SALE OF ELECTRICITY FROM SATARA UNIT, IN THE PROCESS IGNORING THE FACT THAT THE ASSESSEE COMPANY HAD INCURRED LOSS ES FROM GENERATION AND SALE OF ELECTRICITY FROM TAMILNADU AND GUDHE PANCHAGANI UNIT WHICH WERE REQUIRED TO BE FIRST SET OF AGAINST THE PROFITS EARNED AT SATARA UNIT IN TERMS OF PROVISIONS OF SEC. 70 OF THE I.T. ACT AND RESULTANT PROFITS WAS TO BE ALLOWED A S DEDUCTION IN TERMS OF THE PROVISIONS OF SEC. 80IA(1) OF THE I.T. ACT, 1961. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING AT PARA. NO.29 OF HIS ORDER THAT , EVERY UNIT CONSTITUTES A SEPARATE UNDERTA KING ENGAGED IN THE ELIGIBLE BUSINESS AND LOSSES FROM ONE UNIT CANNOT BE SET OFF AGAINST PROFITS OF ANOTHER UNIT ENGAGED IN THE SAME BUSINESS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA', AS THE PROVISIONS OF SEC. 80IA OF THE I.T. ACT REFERES TO PROFITS AND GAINS DERIVED BY AND UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SEC. (4) OF SEC. 80IA WHICH IN THE CONTEXT OF THE ASSESSEE COMPANY WOULD IMPLY THAT PROFIT AND GAINS EARNED BY THE ASSESSEE COMPANY FROM THE ELIGIBLE BUSINESS OF GE NERATION OF ELECTRICITY WOULD BE CONSIDERED FOR ALLOWING THE DEDUCTION AN NOT THE PROFITS EARNED BY INDIVIDUAL UNITS ENGAGED IN THE BUSINESS OF GENERATING ELECTRICITY. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ER RED IN INTERPRTING THE PROVISIONS OF SEC. 80IA(2) OF THE I.T. ACT, 1961 IN RESPECT OF THE ASSESSEE COMPANY'S PREOGATIVE TO CHOOSE ANY CONSECUTIVE PERIOD OF 10 YEARS FROM THE FIRST 15 YEARS OF ITS OPERATION IN CONTEXT OF SUBSTANTIATING HIS INFERENCE THAT TH E PROVISION IS INTENDED TO CONSIDER EACH UNIT OF THE ELIGIBLE BUSINESS AS A SEAPRATE PROFIT CENTRE FOR COMPUTING THE ALLOWABLE DEDUCTION AS AGAINST THE CLEAR MANDATE OF SUB - SEC. (1) OF SEC. 80IA OF THE I.T. ACT TO COMPUTE ALLOWABLE DEDUCTION ON THE BASIS O F PROFIT OF THE ELIGIBLE BUSINESS AND NOT INDIVIDUAL UNITS OF ELIGIBLE BUSINESS. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING OF IRON, STEEL, STAINLESS STEEL AND ALLOY STEEL CASTINGS AND A LSO GENERATION OF ELECTRICITY 3 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI FROM W IND M ILLS. SO FAR AS A.Y. 2009 - 10 IS CONCERNED THE ISSUE IS IN RESPECT OF THE DEPRECIATION ON THE WIND MILLS. IN THE A.Y. 2009 - 10 THE ASSESSING OFFICER FOLLOWED THE DECISION OF HIS PREDECESSOR IN THE ASSESSEES OWN CAS E FOR THE PRECEDING YEARS I.E. 2007 - 08 AND 2008 - 09 AND ALLOWED THE DEPRECIATION ON (I) FOUNDATION WORK, ROAD DEVELOPMENT ETC. @ 10%, (II) ERECTION AND COMMISSIONING WORK TREATED AS PLANT AND MACHINERY @ 15% AND (III) @ 80% ON THE WIND MILL. THE ASSESSIN G OFFICER HAS WORKED OUT THE DEPRECIATION ON WIND MILL AS UNDER: DESCRIPTION AMOUNT (RS.) @ 80% @ 15% @ 10% TOTAL COST BEFORE DEPRECIATION - (A) (B) 73,75,755 5,16,38,402 14,41,711 1,00,93,570 3,30,197 23,11,738 91,47,663 6,40,43,710 LESS: DEPR ECIATION AS ALLOWED IN ASST. ORDER FOR A.Y. 2007 - 08 (A) (B) 59,00,604 2,06,55,361 1,44,171 5,04,667 49,530 1,73,380 60,94,305 2,13,33,418 WDV AS ON 01/04/2007 AS PER ASST. ORDER OF A.Y. 2007 - 08 3,24,58,192 1,08,86,433 24,19,025 4,57,63,650 DEPRECIATION FOR A.Y. 2008 - 09 ON THE SAME BASIS 2,59,66,554 10,88,643 3,62,854 2,74,18,051 WDV AS ON 01/04/2007 AS PER ASST. ORDER OF A.Y. 2008 - 09 64,91,638 97,97,790 20,56,171 1,83,45,599 DEPRECIATION FOR A.Y. 2009 - 10 ON THE SAME BASIS 51,93,310 9,79,779 3,08,426 64,81,515 ADDITION FOR A.Y. 2009 - 10 5,53,88,000 44,95,194 84,28,618 6,83,11,812 DEPRECIATION ON ADDITION FOR A.Y. 2009 - 10 ON THE SANE BASIS 4,43,10,400 4,49,519 12,64,293 4,60,24,212 TOTAL DEPRECIATION ALLOWABLE 5,25,05,727 DEPRECIATION CLAIMED IN THE RETURN FILED FOR A.Y. 2009 - 10 6,10,90,371 DEPRECIATION TO BE DISALLOWED 85,84,644 THE ASSESSING OFFICER , ACCORDINGLY, DISALLOWED THE DEPRECIATION TO THE EXTENT OF RS.85,84,644/ - AND ADDED TO THE INCOME OF THE ASSESSEE. 3. IN SUM A ND SUBSTANCE THE ASSESSING OFFICER MADE THE BIFURCATION OF TOTAL COST OF THE WIND MILL AND ACCORDINGLY ALLOWED THE DEPRECIATION TO THE ASSESSEE. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A). THE LD. CIT(A) FOLLOWED HIS ORDER IN THE CASE OF M/S. C HAPHALKAR BROTHERS IN 4 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI APPEAL NO. SLI/330/10 - 11 DATED 12 - 09 - 2011 FOR THE A.Y. 2008 - 09 AND PARTLY ALLOWED THE CLAIM OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO RE - WORK THE DEPRECIATION AS PER HIS DIRECTIONS. THE REASONS AND DIRECTIONS OF THE CIT(A ), KOLHAPUR ARE AS UNDER: 8. THUS, SINCE THE ISSUE INVOLVED BEING IDENTICAL, THE DECISION GIVEN IN M/S. CHAPHALKAR BROTHERS, WILL APPLY TO THE INSTANT CASE IN RESPECT OF THE NEW WIND MILLS INSTALLED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009 - 10 AS WELL. IT IS PERTINENT TO MENTION HERE THAT THE ISSUE OF DEPRECIATION ON WINDMILL WAS AGITATED IN APPEAL BEFORE THE ITAT IN THE CASE OF M/S. CHAPHALKAR BROTHERS. HOWEVER, A PERUSAL OF THE ITATS ORDER SHOWS THAT MY DECISION IN ALLOWING THE CLAIM OF DE PRECIATION ON COST OF FOUNDATION OF WIND TURBINE WHICH WAS COMMISSIONED IN FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 WAS NOT AGITATED IN APPEAL BY THE DEPARTMENT. IN THE SAID CASE, I HAVE DETERMINED THE VARIOUS COMPONENTS WHICH TO ON TO MAKE UP THE CASE OF THE WINDMILL. THESE COMPONENTS ARE LISTED OUT IN THE TABLE BELOW: 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 ELECTRIC ITY 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 TRANSMISSION AN D METER C) FINAL TESTING AND COMMISSIONING 6. REIMBURSEMENT OF POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE 7. MISCELLANEOUS A) PROCESSING CHARGES B) INTEREST ON LOAN CAPITALIZED UPTO 17/01/2008 C) PROFESSIONAL FEES D) REGISTRATION FEES E) SUBSTATION CHARGES F) FRANKING CHARGES G) MEDA OR EQUIVALENT CHARGES 5 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI 9. THEREAFTER I HAD DIRECTED THE ASSESSING OFFICER IN THE ABOVE REFERRED ORDER TO RECOMPUTE THE DEPRECIATION ALLOWANCE ACCORDING TO THE FOLLOWING: I) COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL ITEMS MENTIONED AT 1 TO 5 ABOVE. II) COST OF POWER EVACUATION FACILITY AND INFRASTRUCTURE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDING/ROADS AND WINDMILL IN 60 : 40 RATIO. III) COST OF OTHER MISCELLANEOUS EXPENSES WILL BE A PPORTIONED ON PRORATE BASIS BETWEEN WINDMILL AND INFRASTRUCTURE FACILITIES. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEPRECIATION AS PER MY DIRECTIONS ABOVE IN RESPECT OF THE NEW WIND MILLS INSTALLED. 10. HOWEVER, IN RESPECT OF WIND MILLS INSTALL ED EARLIER I HAVE HELD IN THE CASE OF M/S. CHAPHALKAR BROTHER THAT 59. AS FAR AS THE ISSUE RAISED IN GROUND NO. 4 IN RESPECT OF WINDMILL LOCATED AT DHULIA IS CONCERNED, MY PREDECESSOR IN OFFICE HAD GIVEN A FINDING THAT NO DETAILS WERE MADE AVAILABLE WH ICH WOULD ESTABLISH THE FUNCTIONALITY AND UTILITY OF THE FOUNDATION IN GENERATING ELECTRICITY FROM WIND TURBINES. IN FACT, THOUGH THE APPELLANT HAD RELIED ON THE DECISION IN THE CASE OF KARNATAKA POWER CORPORATION (SUPRA) IN APPELLATE PROCEEDINGS FOR ASSES SMENT YEAR 2007 - 08 ALSO THE ASPECT OF FUNCTIONAL UTILITY WAS NEVER ESTABLISHED. HENCE, DEPRECIATION CLAIM DISALLOWED IN RESPECT OF FOUNDATION OF WTGS AT DHULIA WAS UPHELD BY MY PREDECESSOR. AN ISSUE WHICH IS THE SUBJECT MATTER IN APPELLATE PROCEEDINGS IN A N EARLIER ASSESSMENT YEAR IS NOT LIABLE TO BE DISTURBED FOR THE REASON THAT THE SAME OFFICE IS NOT COMPETENT TO SIT IN JUDGEMENT ON ISSUES DECIDED EARLIER UNLESS THE DECISION IS OVERRULED BY HIGHER COURT. IT IS A WELL - KNOWN AND ESTABLISHED TENET IN JUDICIA L PROCEEDINGS THAT A DECISION CAN BE OVERRULED ONLY BY A BENCH COMPRISING OF A LARGER NUMBER OF JUDGES OR IF THERE ARE DECISIONS OF SUPERIOR COURTS OVERRULING THE POINT OF VIEW TAKEN BY THE APPELLATE AUTHORITY. THE DISALLOWANCE OF ? 12,08,321/ - IS MERELY A N EFFECT OF A DECISION TAKEN EARLIER IN APPELLATE PROCEEDINGS FOR ASSESSMENT YEAR 2007 - 08. THE APPELLANT IS IN APPEAL BEFORE 6 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI THE ITAT AGAINST THE ORDER PASSED FOR ASSESSMENT YEAR 2007 - 08. HENCE, THE ISSUE REGARDING ALLOWING DEPRECIATION ON FOUNDATION OF WT GS INSTALLED AT DHULIA CAN BE OVERRULED ONLY BY THE TRIBUNAL. NO NEW FACTS CAN BE ENTERTAINED BY THE SAME APPELLATE AUTHORITY IN RESPECT OF AN ISSUE CONCLUDED IN AN EARLIER APPELLATE PROCEEDING. SINCE I AM NOT THE AUTHORITY TO SIT IN JUDGMENT OVER THE DEC ISION TAKEN BY MY PREDECESSOR IN OFFICE, I CANNOT DISTURB THE FINDING GIVEN BY HIM BY CONSIDERING FACTS FOR THE FIRST TIME. 11. THESE REASONINGS ARE APPLICABLE IN THE INSTANT CASE AS WELL HENCE, THE DEPRECIATION CLAIM IN RESPECT OF THE WINDMILL AS DISCUSS ED IN THE ASSESSMENT ORDER (EXCEPT FOR THE NEW WINDMILL INSTALLED IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009 - 10) IS NOT DISTURBED AND THE DISALLOWANCE MADE IS CONFIRMED. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES. WE FIN D THAT SO FAR AS A.YS. 2007 - 08 AND 2008 - 09 ARE CONCERNED, BOTH ASSESSEE AS WELL AS THE REVENUE HA VE CARRIED THE ISSUE BEFORE THE TRIBUNAL WHERE IN THE CORE CONTROVERSY WAS RAISED IN RESPECT OF EXPENDITURE PERTAINING TO THE FOUNDATION CIVIL WORK, ERECTION AN D COMMISSIONING ETC. THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF JCIT, RANGE - 1, SANGLI VS. M/S. WESTERN PRECICAST PVT. LTD., HAS HELD AS UNDER: 5. IN THIS CASE, THE A.O. AS WELL AS THE LD. CIT(A) HAVE RESERVATIONS IN TREATING THE COST INCURRED BY T HE ASSESSEE ON THE FOUNDATION & CIVIL WORK FOR INSTALLATION AND ERECTION OF THE WIND MILL. IN THEIR OPINION, THE EXPENDITURE IS TO BE APPORTIONED CONSIDERING THE NATURE OF THE SAID EXPENDITURE I.E. THE FOUNDATION & CIVIL WORK AND ERECTION AND COMMISSIONIN G. WE FIND THAT ISSUE IS SQUARELY COVERED IN THE FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. WESTERN PRECICAST PVT. LTD., SANGLI (SUPRA), THE OPERATIVE PART OF THE FINDING OF THE TRIBUNAL IN THE SAID CASE ARE AS UNDER: 7. W E HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN ORDER TO APPRECIATE THE DISPUTE, THE FOLLOWING BREAK - UP OF EXPENSES ON ACCOUNT OF ERECTION AND COMMISSION OF WINDMILL I I.E. WINDMILL 7 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI INSTALLED IN THE PRECEDING ASSESSMENT YEAR 2006 - 07 WOULD BE NECESSA RY AS CONTAINED IN PARA 2.5 OF ORDER OF THE CIT(A): - S.NO. DATE NATURE OF WORK EXPENDITURE RS. 1. 30 - 03 - 2006 TOWARDS SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD WITH VCB, OUTDOOR TYPE CT & PT AND HT TRANSMISSION LINE FROM WINDMILL TO GRID INTERCONNEC TION POINT INCLUDING HT METERING FOR 1.25 MW WINDMILL AT LOCATION NO. K437 AT ABOVE SITE ADDRESS. 30,93,500/ - 2. 30 - 03 - 2006 LABOUR CHARGES TOWARDS FINAL TESTING AND COMMISSIONING FOR 1.25 MW WINDMILL AT LOC NO. K437. 1,10,200/ - 3. 30 - 03 - 2006 TOWARDS LAB OUR CHARGES FOR WORK EXECUTED, FOR ERECTION AND INSTALLATION OF WINDMILL CONSISTING OF : UNLOADING AND SAFE KEEPING OF MATERIAL, ASSEMBLY, ERECTION AND INSTALLATION OF WINDMILL TOWER AND WIND TURBINE GENERATOR FOR 1.25 MW WINDMILL AT LOCATION NO K - 437 AT A BOVE SITE ADDRESS. 14,32,600/ - 4. 04 - 03 - 2006 PROCESSING FEES 2,58,970/ - 5. 31 - 12 - 2005 MEDA PROCESSING AND APPLICATION FEES 6,28,750/ - 6. 31 - 03 - 2006 CONTRIBUTION TOWARDS COMMON POWER EVACUATION INFRASTRUCTURE FACILITY 37,50,000/ - 8. IN RESPECT OF ABO VE SIX COMPONENTS OF COST OF WINDMILL CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER ALLOWED DEPRECIATION AT 15% AND NOT AT 80% AS CLAIMED BY THE ASSESSEE. THE CIT(A) HOWEVER, CONSIDERED THE ITEMS OF COSTS AT NO 1 TO 5 QUALIFYING FOR HIGHER RATE OF DEPRE CIATION BEING INTEGRAL PART OF WINDMILL. IN SO FAR AS ITEM NO. 1 IS 8 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI CONCERNED, THE COST OF RS. 30,93,500/ - IS TOWARDS SUPPLY OF ELECTRICAL ITEMS OF THE WINDMILL ITSELF. THE CIT(A) HAS OBSERVED THAT SUCH COST IN THE INSTALLATION OF WINDMILL HAS BEEN FOUN D BY THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA) AS AN INTEGRAL PART OF THE WINDMILL COST AND THEREFORE, FOUND TO BE ELIGIBLE FOR DEPRECIATION EQUIVALENT TO THAT OF THE WINDMILL. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE AND THEREFORE, FOLLOWING THE PRECEDENT IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) WHICH WE HEREBY AFFIRM. 9. TO THE SIMILAR EFFECT IS THE NATURE OF COST ENUMERATED IN ITEMS NO. 2 AND 3 RELATING TO LABOUR CHARGES FOR ERECTION AND INSTALLATION OF WINDMILL. SUCH EXPENDITURE FORMS INTEGRAL PART OF COST OF THE WINDMILL AND THEREFORE, THERE IS NO MISTAKE ON THE PART OF THE CIT(A) TO HAVE CONSIDERED SUCH EXPENDITURE AS ELIGIB LE FOR DEPRECIATION AT 80%. 6. LD. COUNSEL HAS FILED A CHART GIVING DETAILS OF CIVIL WORK WHICH HAS NO RELATION WITH FOUNDATION OR ERECTION & COMMISSIONING WHICH ARE AS UNDER: CIVIL WORK (COST) 1. WIND MILL I & II 5,76,303 (INSTALLED IN AY 200 2 - 03&2006 - 07) (PART OF WDV) 2. WIND MILL IV (INSTALLED IN A.Y. 2007 - 08) 18,70,890 24,47,193 HENCE, TO EXTENT OF CIVIL WORK COST, WE UPHOLD ACTION OF THE A.O. TO RESTRICT DEPRECIATION @ 10%. WE THEREFORE, ALLOW THE GROUNDS TAKEN BY THE ASSESSE E PROTANTO AND DIRECT THE A.O. TO ALLOW THE DEPRECIATION AT 80%ON THE COST OF FOUNDATION AS WELL AS COST INCURRED ON ERECTION AND COMMISSIONING OF THE WIND MILL. ACCORDINGLY, GROUNDS TAKEN BY THE ASSESSEE ARE PARTLY ALLOWED. 7. NOW WE TAKE UP THE REVENUE S APPEAL FOR THE A.Y. 2007 - 08 BEING INCOME - TAX ACT, 1961 NO.891/PN/2011. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS 1 TO 4: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CLASSIFYING COMPONENTS & ACCESSORIES OF RENEWABLE DEVICES (1/3 RD OF THE TOTAL COST), ELECTRICAL ITEMS, 9 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI COMPONENTS OF RENEWABLE ENERGY PROJECT DEVICE/WIND MILL, IN RESPECT OF WIND FARM PROJECT DEVICE/WIND MILL, IN RESPECT OF WIND FARM PROJECT CONSISTING OF ONE WTG 0.60 MW WIND MILL AT LOCATIO N NO.GP - 31, INSTALLATION (WITH MATERIAL) OF ELECTRICAL LINE FOR POWER TRANSMISSION AND METERING IN RESPECT OF WIND FARM PROJECT CONSISTING OF ONE WTG FOR YOUR 0.60 MW WIND MILL AT LOCATION WIND MILL WHEN THESE ITEMS ARE NOT WIND MILL OR SPECIFICALLY DESIGN ED DEVICES WHICH RUN ON WIND MILLS AND AS SUCH SAID ITEMS WOULD NOT CLASSIFY FOR DEPRECIATION @ 80% AS PER THE DEPRECIATION SCHEDULE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED OBSERVING THAT LABOUR WORK RELATED TO INST ALLATION OF ONE WIND TURBINE GENERATOR FOR RS.10,55,056/ - WAS REQUIRED TO BE INCLUDED IN THE COST OF WIND TURBINE GENERATOR FOR ALLOWANCE OF DEPRECIATION @ 80% WHEN THE SAID EXPENSES WAS REQUIRED TO BE SPREAD OVER IN THE PROPORTION OF COST OF CIVIL WORK, C OST OF WIND MILL AND COST OF PLANT & MACHINERY AND THE DEPRECIATION WAS TO BE ALLOWED AS APPLICABLE RATES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW THE CIT(A) ERRED IN APPLYING THE DECISION OF THE ITAT, PUNE BENCH IN THE CASE OF POONA WALA FINVEST AND AGRO PVT. LTD. (118 TTJ 68) AS THE DECISION IS DISTINGUISHABLE ON FACTS AND DOES NOT CONSIDERED THE RATE SCHEDULE OF DEPRECIATION U/S 32C WHICH PROVIDES FOR DEPRECIATION @ 80% ONLY ON WIND MILLS AND DEVICES SPECIALLY DESIGNED TO RUN ON WIN D MILLS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLOWING DEPRECIATION @ 80% ON PROPORTIONATE COST IN MEDA CHARGES OF RS.3,01,800/ - AS THE SAME DOES NOT FORM PART OF COST OF WIND MILL OR ANY SPECIFICALLY DEVICE TO RUN ON WIND MILL. 8. AS PER THE GROUNDS TAKEN BY THE REVENUE, THEY HAVE OBJECTED FOR TREATING THE COST OF THE LABOUR WORK FOR INSTALLATION OF THE WIND MILL TURBINE. IN OUR OPINION, THE SAID ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS THE COST INCURRED ON THE INSTALLATION OF THE WIND MILL IS AN INTEGRAL PART OF THE TOTAL COST OF THE WIND MILL AND INSTALLATION 10 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI NEEDS THE LABOUR WORK ALSO. WHILE DECIDING THE ASESSEES APPEAL, WE HAVE DIRECTED THE A.O. TO ALLOW DEPRECIATION AT 80% ON COST OF FOUNDATION AS WELL AS EXPENDITURE INCURRED ON ERECTION & COMMISSIONING. WE FIND THAT THOUGH THE LD. CIT(A) HAS REFERRED TO THE DECISION OF THE ITAT PUNE BENCH, PUNE IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD V/S. ACIT (2008) 118 TTJ (PUNE) 68. THE SAID DECISIO N HAS NOT BEEN APPLIED BUT IN FACT DISTINGUISHED FOR DENYING THE CLAIM OF THE ASSESSEE. HENCE, GROUND NO.3 TAKEN BY THE REVENUE IS INFRUCTUOUS. ACCORDINGLY, ALL THE GROUNDS OF THE REVENUE ARE DISMISSED. 5. IN SUM AND SUBSTANCE THE TRIBUNAL UPHELD THE AC TION OF THE ASSESSING OFFICER TO RESTRICT THE DEPRECIATION @ 10% ON SOME ITEMS BUT ALLOWED THE DEPRECIATION @ 80% ON THE COST OF FOUNDATION AS WELL AS COST INCURRED ON ERECTION AND COMMISSIONING OF THE WIND MILL. THE TRIBUNAL ALSO HELD THAT COST INCURRED ON INSTALLATION OF WIND MILL IS AN INTEGRAL PART OF THE WIND MILL AND THE ASSESSEE SHOULD BE ALLOWED DEPRECIATION @ 80% ON THE COST OF FOUNDATION AS WELL AS ON ERECTION AND COMMISSIONING. AS THE ISSUE IS CONSEQUENTIAL IN THIS YEAR VIS - - VIS THE ALLOCATION MADE BY THE LD. CIT(A), WE FIND NO REASON TO TAKE DIFFERENT VIEW. ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF ALLOCATION OF THE EXPENDITURE AND RATE OF DEPRECIATION ON FOUNDATION, ERECTION AND COMMISSIONING EXPENDITURE. GROUND NOS. 1 & 2 ARE DISMISSED. 6. SO FAR AS GROUND NOS. 3 , 4 AND 5 ARE CONCERNED THAT IS IN RESPECT OF INITIAL ASSESSMENT YEAR . WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2007 - 08 IN ITA NOS. 815, 1494, 891 & 1600/PN/2011 ORDER DATED 30 - 01 - 2013 AND HAS HELD AS UNDER: 15. AGAINST THE DECISION OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. ADMITTEDLY, THE ASSESSEE IS POWER GENERAL THROUGH THE WIND MILLS AT 3 DIFFERENT LOCATIONS I.E. IN 11 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI TAMILNADU, PANCHGANI AND SATARA. THE WIND MILLS ARE COMMISSIONED AND ERECTED IN DIFFERENT ASSESSMENT YEARS AS NOTED BY THE AUTHORITIES BELOW. ASSESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUN TS IN RESPECT OF 3 WIND MILLS AND WORKING OUT THE PROFIT OR LOSSES. THOUGH THE FIRST WIND MILL WAS ERECTED AND COMMISSIONED IN THE A.Y. 2002 - 03, THERE WERE CONSISTENT LOSSES UP TO THE A.Y. 2007 - 08 AND ASSESSEE DID NOT OPT FOR CLAIMING THE DEDUCTION U/S 80 IA(2) OF THE ACT. SO FAR AS A.Y. 2008 - 09 IS CONCERNED, ASSESSEE OPTED FOR CLAIMING THE DEDUCTION U/S 80IA(2) TREATING THE SAID ASSESSMENT YEAR (A.Y.) AS AN INITIAL ASSESSMENT YEAR AS THERE WAS THE PROFIT IN SATARA WIND MILL BUT LOSSES IN THE TAMIL NADU WI ND MILL AND PANCHGANI WIND MILL. IF WE LOOK AT THE SCHEME OF THE SECTION 80IA(2), IT SPEAKS ABOUT THE UNDERTAKING OR ENTERPRISE AND NOT THE BUSINESS OF THE ASSESSEE. ADMITTEDLY, THREE WIND MILLS AT THE 3 LOCATIONS ARE INDEPENDENTLY OPERATED AND THE F INANCIAL RESULTS ARE SEPARATELY WORKED OUT. AS PER SUB - SEC.(5) OF SECTION 80IA, FOR COMPUTING THE DEDUCTION U/S 80IA(2), THE ELIGIBLE BUSINESS IS TO BE TREATED AS THE ONLY SOURCE OF INCOME. SUB - SEC.(5) OF SECTION 80IA HAS BEEN EXPLAINED BY THE HON'BLE HI GH COURT AND KERALA IN THE CASE OF CIT VS. ACCEL TRANSMATIC SYSTEMS LTD. 230 CTR 206 (KER) WHICH HAS BEEN FOLLOWED BY THE LD. CIT(A). THE TERM BUSINESS USED IN SUB - SEC.(5) SECTION 80IA IN OUR HUMBLE OPINION IS CONFINED TO THE INDEPENDENT UNDERTAKING AND CANNOT GET MERGED WITH THE OTHER BUSINESSES. IN SEC. 80IA(2), FOR CLAIMING DEDUCTION UNDERTAKING OR ENTERPRISE AS SUCH IS TO BE CONSIDERED. SEC.80IA(2) IS CHARGING SECTIONS FOR DETERMINING BASIC ELIGIBILITY AND THERE IS NO MENTION OF WORD BUSINESS . SUB - SEC.(5) OF SEC.80IA SPEAKS OF BUSINESS BUT SAME IS TO BE CONSTRUED AS BUSINESS OF UNDERTAKING OR ENTERPRISE AS REFERRED TO IN SUB - SEC.(2) OF SEC.80IA. IT IS WELL SETTLED PRINCIPLE OF INTERPRETATION OF STATUTORY PROVISION THAT THEY ARE TO BE INT ERPRETED HARMONIOUSLY TO MAKE WORKABLE TO GIVE INTENDED RESULTS. HENCE, AS RIGHTLY HELD BY LD. CIT(A) TERM BUSINESS USED IN SEC.80IA(5) IS TO BE CONSTRUED AND UNDERSTOOD TO MEAN BUSINESS OR UNDERTAKING OR ENTERPRISE. IN OUR OPINION, THE LD. CIT(A) IN HIS WELL REASONED ORDER HAS RIGHTLY HELD THAT EVERY UNIT CONSTITUTE A SEPARATE UNDERTAKING ENGAGED IN THE ELIGIBLE BUSINESS AND LOSSES FROM ONE UNIT CANNOT BE SET OFF AGAINST THE PROFITS. ANOTHER UNIT ENGAGED IN THE SAME BUSINESS FOR THE PURPOSE OF COM PUTING THE DEDUCTION U/S 80IA. WE FIND NO REASON TO INTERFERE WITH THE FINDINGS 12 ITA NO. 2349/PN/2012, J - SONS FO UNDRY PVT. LTD., SANGLI OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE SAME ARE CONFIRMED AND GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 7. AS THE A.Y.2009 - 10 WHICH IS BEFORE US IS A CONSEQ UENTIAL , WE FIND NO REASON TO TAKE DIFFERENT VIEW. THE GROUND NOS. 3, 4 AND 5 ARE DISMISSED AND ORDER OF THE LD. CIT(A) ON THE ISSUE OF INITIAL ASSESSMENT ORDER IS CONFIRMED. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN CO URT ON 28 - 01 - 201 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 28 TH JANUARY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A), KOLHAPUR 4 THE CIT, KOLHAPUR 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE