Dy. CIT, Pune V. M/s T S Wind Power Developers, Pune

ITA 2388/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72150 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2388/PN/2012 (ASSESSMENT YEAR 2009-10) DY.CIT, CIRCLE-2, PUNE .. APPELLANT VS. M/S. T.S. WIND POWER DEVELOPERS, 143, NAVLAKHA COMPLEX, BUILDING NO.1 OF DHOLE PATIL ROAD, PUNE -411001. .. RESPONDENT PAN NO.AAEFT9552C APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI S.N. PURANIK DATE OF HEARING : 20-09-2013 DATE OF PRONOUNCEMENT : 24-09-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 31-07-2012 OF THE CIT(A)-II, PUNE RELATING TO A.Y. 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FIRM IS ENGAGED IN THE BUSINESS OF GENERATION OF WIND POWER. IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.98,72,070/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT THE ASSESSE E HAD PURCHASED TWO WINDMILLS WEG 225 KV-J-23 AND WEG 225 KV-J-24 FOR A N AGGREGATE AMOUNT OF RS.1,97,52,067/- I.E. RS.96,86,308/- & RS .1,00,65,759 ON WHICH DEPRECIATION AT THE RATE OF 80% AMOUNTING TO RS.38,74,523/- AND RS.80,52,607/- RESPECTIVELY HAD BEEN CLAIMED. .THE ASSESSING OFFICER ALSO NOTICED THAT ONE OF THE WINDMILL WAS INSTALLED AFTE R SEPT., 2008 AND THE 2 OTHER BEFORE SEPT., 2008 AND THUS THE DEPRECIATION OF ONE OF THE WINDMILL CLAIMED WAS FOR HALF THE PERIOD AND THE OTHER WINDM ILL FOR FULL PERIOD BY THE ASSESSEE. 2.1 THE ASSESSING OFFICER FOUND THAT THE ASSESSEE H AD CLAIMED DEPRECIATION AT THE RATE OF 80% ON THE CIVIL WORK A ND ELECTRICAL WORK AND FEES TO MEDA. THE CIVIL WORK EXPENSES FOR THE J-24 WINDMILL WAS RS.15,24,044/- AND RS.11,56,404/- IN THE CASE OF J- 23. THE ASSESSING OFFICER ACCORDINGLY SOUGHT THE EXPLANATION OF THE A SSESSEE WITH RESPECT TO THE ALLOWABILITY OF DEPRECIATION @ 80% CLAIMED BY THE ASSESSEE FOR THE AFORESAID CLAIM ON THE CIVIL WORK. THE ASSESSEE'S E XPLANATION THAT THE EXPENSES ON CIVIL WORK WERE TOWARDS THE FOUNDATION AND ERECTION OF THE WINDMILLS AND BEING AN INTEGRAL PART WITHOUT WHICH THE WINDMILLS COULD NOT STAND WAS NOT ACCEPTED BY THE ASSESSING OFFICER . THE ASSESSING OFFICER THUS HELD THAT THE EXPENDITURE ON CIVIL WOR K ETC COULD NOT BE CONSIDERED TO BE AN INTEGRAL PART OF THE WINDMILL. RELYING ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PO ONAVALA FINVEST & AGRO (P) LTD. HE HELD THAT DEPRECIATION @80% WAS NO T ALLOWABLE ON CIVIL CONSTRUCTION OF THE WINDMILL. 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT TO PUT T HE WINDMILL TO USE THE FOUNDATION, ERECTION OF WINDMILL IS NECESSARY A S MACHINERY IN TOTALITY IS A PLANT AND CANNOT BE SEPARATED FOR DEPRECIATION . IT WAS SUBMITTED THAT THE FOUNDATION AND CIVIL WORK FOR ERECTION OF PLANT IS PART AND PARCEL OF THE PLANT ITSELF AND THE FOUNDATION AND ERECTION OF PLA NT AND MACHINERY CANNOT BE SEGREGATED FROM THE PLANT. THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAVALA FINVEST & AGRO (P ) LTD. AND ANAND THEATRE VS. ACIT REPORTED IN 244 ITR 192 RELIED ON BY THE AO WERE 3 DISTINGUISHED. IT WAS SUBMITTED THAT SO FAR AS THE FOUNDATION AND ERECTION WORK FOR WINDMILL IS CONCERNED THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA POWER TRANSMISSION REPORTED IN 24 7 ITR 268 HAS HELD THAT CIVIL WORK SO PLANNED AND CONSTRUCTED IS TO SE RVE THE SPECIAL TECHNICAL REQUIREMENT AND WILL QUALIFY AS A PLANT. IT WAS EX PLAINED THAT IN ASSESSEES CASE IT PERTAINS TO THE EXPENDITURE INCURRED ON CIV IL WORK FOR ERECTION AND INSTALLATION OF THE WINDMILL WHEREAS IN THE CASE OF POONAVALA FINVEST & AGRO (P) LTD. (SUPRA) THE EXPENDITURE WAS INCURRED ON CONSTRUCTION FOR A CONTROL ROOM WHEREIN THE TRANSFORMER AND OTHER EQUI PMENTS WERE INSTALLED. IT WAS ACCORDINGLY HELD BY THE TRIBUNAL THAT IT DOES NOT RESULT IN BEING PART OF WINDMILL AND ACCORDINGLY THE DEPRECIA TION WAS RESTRICTED AT 10% ON SITE DEVELOPMENT COST OF CONSTRUCTION OF CON TROL ROOM AND COST OF INTERNAL ROAD DEVELOPMENT. 3.1 VARIOUS DECISIONS INCLUDING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF COOPER FOUNDRY PVT. LTD. WA S BROUGHT TO THE NOTICE OF THE LD.CIT(A) TO THE PROPOSITION THAT DEPRECIATI ON HAS TO BE ALLOWED IN RESPECT OF COST OF CIVIL WORK WHICH IS REQUIRED FOR FOUNDATION OF THE WINDMILL. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND RELYING ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF DCIT VS. COOPER METALS PVT. LTD., VIDE ITA NO.1743/PN/2007 O RDER DATED 30-04- 2009 FOR A.Y. 2004-05 AND THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. HERDILLIA CHEMICALS LTD. REP ORTED IN 216 ITR 742 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PURE ICECREAM CO. LTD. REPORTED IN 129 ITR 344 THE LD.CI T(A) ALLOWED THE 4 CLAIM OF THE ASSESSEE AND HELD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION @80% IN RESPECT OF THE CIVIL WORK FOR ERECTION OF T HE 2 WINDMILLS. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN ALLOWING DEPRECIATION ON EXPENDITURE ON CIVIL WORK FOR ERECTION OF TWO WINDMILLS. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE EXPENDITURE ON CIVIL WORK CAN NOT BE CONSIDERED TO BE AN INTEGRAL PART OF THE WINDMILL AS IT WAS NEVER THE INTENTION OF THE LEGISLATURE TO GIVE EXTRA BENEFIT OF DEPRECIATION T O A BUILDING WHICH IS USUALLY MORE DURABLE THAN MACHINERY OR PLANT. 3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 5. AFTER HEARING BOTH THE SIDES WE FIND THE ISSUE S TANDS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. COOPE R METALS (P) LTD. VIDE ITA NO.1743/PN/2007 ORDER DATED 30-04-2009 FOR A.Y. 2004-05. WE FIND THE TRIBUNAL, AFTER CONSIDERING THE DECISIO N OF THE TRIBUNAL IN THE CASE OF POONAVALA FINEST & AGRO (P) LTD. (SUPRA) HA S HELD THAT ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION ON EXPENDIT URE ON CIVIL WORK WHICH IS AN INTEGRAL PART OF THE WINDMILL. VARIOUS OTHER DECISIONS RELIED ON BY LD. CIT(A) ALSO SUPPORT THE CASE OF THE ASSESSEE. NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE CIT( A) WHO HAS FOLLOWED THE RATIO OF DECISION OF THE TRIBUNAL AND VARIOUS H IGH COURTS. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F LD.CIT(A) ON THIS ISSUE AND ACCORDINGLY UPHOLD THE SAME. THE GROUNDS RAISE D BY THE REVENUE ARE ACCORDINGLY DISMISSED. 5 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF SEPTEMBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 24 TH SEPTEMBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4 CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY I TAT, PUNE BENCHES, PUNE