Dy.CIT, Circle-16(1), Hyderabad V. M/s Lanco Infratech Limited, Hyderabad

ITA 252/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82606 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Depreciation; Search and seizure; Assessment record
• Section: 143(3); 153A; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 252 & 253/HYD/2013 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(1), HYDERABAD. M/S LANCO INFRATECH LTD., HYDERABAD. PAN AAACL3449H (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY SHRI T. CHAITANYA KUMAR DATE OF HEARING 26-11-2014 DATE OF PRONOUNCEMENT 05-12-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINS T A COMMON ORDER DATED 22/11/2012 PASSED BY LD. CIT(A), HYDERABAD PERTAINING TO THE AYS 2002-03 AND 2003-04. 2. THE SOLITARY ISSUE, WHICH IS COMMON IN BOTH THE APPEALS, IS IN RESPECT OF ALLOWANCE OF ASSESSEES CLAIM OF DEPREC IATION BY LD. CIT(A) AT 100% ON WIND ELECTRIC GENERATIONS AS AGAI NST @ 25% ALLOWED BY AO. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRU CTION. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIE D OUT IN CASE OF ASSESSEE ON 24/03/2007. PURSUANT TO THE SEARCH AND SEIZURE OPERATION, NOTICES WERE ISSUED U/S 153A OF THE ACT FOR THE IMPUGNED 2 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. ASSESSMENT YEARS AND ULTIMATELY, ASSESSMENTS WERE C OMPLETED U/S 143(3) READ WITH SECTION 153A OF THE ACT. AFTER CO MPLETION OF THE ASSESSMENT AS AFORESAID, LD. CIT (CENTRAL) IN EXERC ISE OF POWER U/S 263 OF THE ACT CALLED FOR THE ASSESSMENT RECORDS AN D AFTER EXAMINING THEM WAS OF THE VIEW THAT ASSESSMENT ORDERS PASSED BY AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE AS AO HAS ALLOWED DEPRECIATION AT 100% ON WIND MILL GENERATOR S WHICH ACCORDING TO LD. CIT ARE ELECTRIC EQUIPMENTS ON WHI CH DEPRECIATION IS ALLOWABLE AT 25%, ACCORDINGLY, HE SET ASIDE THE ASS ESSMENT ORDERS PASSED BY AO AND DIRECTED HIM TO EXAMINE THE ISSUE. IN PURSUANCE TO THE DIRECTION OF LD. CIT U/S 263, AO CALLED UPON ASSESSEE TO FURNISH DETAILS AND EXPLAIN WHY EXCESS DEPRECIATION CLAIMED SHALL NOT BE DISALLOWED. THOUGH ASSESSEE EXPLAINED THAT WIND MIL L GENERATORS WHICH ARE RENEWABLE ENERGY DEVICES ON WHICH DEPRECI ATION IS ALLOWABLE AT 100%, BUT AO REJECTING THE CLAIM OF AS SESSEE CONCLUDED THAT WIND ELECTRIC GENERATORS BEING ELECTRICAL EQUI PMENTS, DEPRECIATION, IS ALLOWABLE AT 25% AND ACCORDINGLY P ASSED THE ASSESSMENT ORDER BY DISALLOWING EXCESS DEPRECIATION CLAIMED BY ASSESSEE. BEING AGGRIEVED OF THE ASSESSMENT ORDER S O PASSED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE SUBMITTED THAT IT IS HAVING ONE WIND MILL POWER PRO JECT SITUATED AT CHITRADURGA IN THE STATE OF KARNATAKA, WHICH WAS CO NCEIVED BY M/S ENCON SERVICES LTD., CHENNAI AT A COST OF RS. 14,73 ,71,680. SUBSEQUENTLY, M/S ENCON SERVICES LTD., AMALGAMATED WITH ASSESSEE WITH EFFECT FROM 01/04/2001 BY VIRTUE OF AN ORDER P ASSED BY HONBLE HIGH COURT OF A.P. ON 08/10/2002. IT WAS SUBMITTED THAT AS DEPRECATION AT 100% ARE ON WIND MILL EQUIPMENTS, AO WAS NOT JUSTIFIED IN TREATING THEM AS ELECTRICAL EQUIPMENTS AND RESTRICTING THE DEPRECIATION TO 25%. IN SUPPORT OF SUCH CONTENTION, ASSESSEE RELIED UPON CERTAIN JUDICIAL PRECEDENTS. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND DOCUMENTARY EVIDENCES A VAILABLE ON 3 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. RECORD INCLUDING INVOICE COPIES, ETC. ALLOWED ASSES SEES CLAIM OF DEPRECIATION AT 100% WITH THE FOLLOWING FINDINGS: 4.6 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DERS AND WRITTEN SUBMISSIONS FILED BEFORE ME. IT IS NOT A DI SPUTED FACT THAT THE APPELLANT IS HAVING WINDMILL POWER PROJECT AND WAS COMMISSIONED ON 30/03/2002. THE ONLY POINT OF CONTE NTION IS RATE OF DEPRECIATION ON WIND ELECTRICAL GENERATORS. IN THIS REGARD, THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. AGARWAL TRANSFORMERS HAVE CONSTRUED THE WORD WIND E LECTRIC GENERATORS BASED ON THE PRINCIPAL OF EJUSDEM GENERI S AND HELD THAT WIND ELECTRIC GENERATORS ARE ELIGIBLE FOR THE HIGHER RATE OF DEPRECIATION. ALSO, IN THE CASE OF HINDUSTAN PLATIN UM (P) LTD. VS. ACIT, ITAT, MUMBAI, DEPRECIATION HAS BEEN ALLOW ED ON WIND ELECTRIC GENERATORS AT A HIGHER RATE. 4.7 I AM OF THE VIEW THAT THE WIND ELECTRIC GENERA TORS ARE THE PART OF THE WIND POWER PROJECTS. THE WIND POWER PRO JECTS CANNOT BE OPERATIONAL WITHOUT THE WIND ELECTRIC GENERATORS . THE HIGHER RATE OF DEPRECIATION IS GIVEN TO ENCOURAGE MORE WIN D POWER PROJECTS. THEREFORE, AFTER CONSIDERING THE AFORESAI D FACTS OF THE CASE AND CASE LAWS, I HOLD THAT THE ELECTRIC WIND G ENERATORS ARE ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. FURTHER, IT IS HELD THAT, THE DEPRECIATION FOR THE YEAR 2003-04 SHOULD ALSO B E ALLOWED AT 100%. ACCORDINGLY, I DIRECT THE AO TO ALLOW THE SAM E. THUS, THIS GROUND OF APPEAL IS ALLOWED. 5. THE LEARNED DR SUBMITTED BEFORE US, BEFORE AO, ASSESSEE DID NOT ESTABLISH THE FACT THAT THE EQUIPMENTS ON WHICH 100% DEPRECIATION WAS CLAIMED ARE PART OF WIND MILL, HENCE, AO TREATE D THE WIND MILL ELECTRIC GENERATORS AS ELECTRICAL EQUIPMENTS AND AL LOWED DEPRECIATION AT THE APPROPRIATE RATE. 6. THE LEARNED AR, ON THE OTHER HAND, STRONGLY SUP PORTING THE ORDER OF LD. CIT(A) SUBMITTED THAT DOCUMENTARY EVID ENCES SUBMITTED BEFORE AO AS WELL AS LD. CIT(A) CLEARLY ESTABLISH T HE FACT THAT THE EQUIPMENTS ON WHICH DEPRECIATION WAS CLAIMED @ 100% ARE PART OF WIND MILL, HENCE, AO WAS NOT JUSTIFIED IN RESTRICTI NG THE DEPRECIATION TO 25%. 4 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. AFTER GOING THROUGH THE DOCUMENTARY EVIDENCES PLACE D BEFORE US WHICH ALSO FORMS PART OF RECORD BEFORE THE DEPARTME NTAL AUTHORITIES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LD. CIT(A). IT IS CLEAR FROM THE ASSESSMENT ORDER, ASSESSEES CLAIM OF DEPR ECIATION AT 100% ON WIND MILL EQUIPMENT WAS REJECTED BY AO SIMPLY FO R THE REASON THAT AS WIND ELECTRIC GENERATOR IS IN THE NATURE OF ELEC TRICAL EQUIPMENT, DEPRECIATION IS TO BE ALLOWED @ 25% AND NOT AT 100% . HOWEVER, AS FOUND FROM THE FACTS ON RECORD, ASSESSEE CLAIMED 10 0% DEPRECIATION ON ASSETS WORTH RS. 14,73,71,680 BY TREATING IT AS WIND MILL EQUIPMENT. THE BREAK UP OF RS. 14,73,71,680 IS AS U NDER: S.NO. DESCRIPTION OF ASSETS DATE OF ACQUISITION AMOUNT (IN RS.) 1. INCIDENTAL EXPENSES 08.01.2002 1,680 2. ERECTION & COMMISSIONING CHARGES 20.03.2002 3,98,90,000 3. PURCHASE OF WIND ELECTRIC GENERATORS 20.03.2002 10,61,10,000 4. REGISTRATION & FRONT END FEE TO IREDA 31.03.2002 13,70,000 TOTAL 14,73,71,680 8. ON PERUSAL OF THE INVOICES RAISED TOWARDS SALE O F WIND MILL EQUIPMENT AND ERECTION AND COMMISSIONING OF THE SAM E, IT IS TO BE NOTED THAT THE PRICE HAS BEEN CHARGED FOR SUPPLY, E RECTION AND COMMISSIONING OF WIND ELECTRICAL GENERATORS. THE SE LLER OF THE WIND MILL EQUIPMENT HAS ALSO ISSUED A CERTIFICATE, A COP Y OF WHICH IS AT PAGE 38 OF THE PAPER BOOK, WHEREIN IT IS CLARIFIED THAT THE EQUIPMENT SUPPLIED BY THEM TO ASSESSEE IS NOT JUST WIND ELECT RIC GENERATOR BUT THE COMPLETE WIND MILL UNIT CONSISTING OF THE FOLLO WING COMPONENTS: 1. GEAR BOX & ITS RELATED ACCESSORIES, 2. BLADES, 3 . TOWER, 4. GENERATOR & ITS RELATED ACCESSORIES, 5. POWER CABLE S, 6. 5 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. COMMUNICATION CABLES, 7. MAIN BEARING AND SHAFT, 8. ELECTRONIC CONTROLLERS, AND 9. POWER (MAIN) PANEL. 9. IT WAS FURTHER CLARIFIED BY THE SELLERS THAT ALL THE AFORESAID COMPONENTS ARE INTEGRAL PART OF THE WIND MILL UNIT AND WITHOUT THEM THE UNIT CANNOT FUNCTION. FURTHER, ASSESSEE HAS ALS O OBTAINED AN OPINION FROM A TECHNICAL EXPERT I.E. M/S SERVEL KR ISHNA ENGINEERS PVT. LTD. , WHO IN THEIR OPINION HAVE STATED THAT T HE MAIN COMPONENTS OF WIND TURBINES ARE AS UNDER: 1. BLADES, 2. GEAR BOX, 3. GENERATOR, 4, TOWER, 5. FOUNDATION, 6. STEP UP TRANSFORMER, 7. METERING ARRANGEMENT, AN D 8. 11/33 KV OVERHEAD LINES. THEY HAVE FURTHER OPINED THAT WIND ELECTRIC GENERAT OR IS AN INTEGRAL PART OF THE WIND MILL AND IT IS SPECIFICALLY DESIGN ED, SO THAT THEY CAN CONVERT MECHANICAL ENERGY INTO ELECTRICAL ENERGY WH EN INSTALLED IN A WIND MILL. WITHOUT THE GENERATOR UNIT, THE WIND MIL L CANNOT ACHIEVE THE DESIRED PURPOSE. THEY FURTHER CLARIFIED, AS THE GENERATOR IS THE MAIN COMPONENT, THE EQUIPMENT SUPPLIED FOR WIND MIL L INSTALLATION IS SOME TIMES REFERRED TO AS WIND ELECTRIC GENERATOR I N INDUSTRY TERMS. IT WAS STATED THAT THE COMPLETE UNIT OF THE WIND MILL COMPRISING OF THE AFORESAID COMPONENTS IS A MONOLITHIC UNIT CALLED W IND MILL OR WIND MILL GENERATOR. APART FROM THE AFORESAID, TECHNI CAL OPINION, A SCHEMATIC DIAGRAM OF THE WIND MILL AS PROVIDED BY THE SELLER OF THE WIND MILL EQUIPMENT ALSO CLEARLY DEMONSTRATES THAT THE GENERATOR IS AN INTEGRAL PART OF THE WINDMILL UNIT. THEREFORE, CONS IDERING THE AFORESAID FACTUAL ASPECT IT HAS TO BE ACCEPTED THAT WIND MILL GENERATOR IS NOTHING BUT WIND MILL EQUIPMENT ON WHICH DEPRECIATI ON IS ALLOWABLE @ 100% AS PER THE STATUTORY PROVISION. ON A PERUSAL O F THE ASSESSMENT ORDER, IT IS CLEAR THAT AO WITHOUT CONTROVERTING TH E EVIDENCES AND MATERIALS BROUGHT ON RECORD BY ASSESSEE, HAS ARBITR ARILY COME TO A CONCLUSION THAT WIND ELECTRIC GENERATORS IS AN ELEC TRIC EQUIPMENT ELIGIBLE FOR DEPRECIATION @ 25%. EVEN AT THE TIME O F HEARING BEFORE US, LD. DR HAS NOT BROUGHT ANY CONTRARY EVIDENCE TO CONCLUSIVELY 6 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. PROVE THE FACT THAT THE EQUIPMENT ON WHICH ASSESSEE CLAIMED DEPRECIATION AT 100% IS NOT AN INTEGRAL PART OF THE WIND MILL. IN THE AFORESAID VIEW OF THE MATTER, CONSIDERING THE FACT THAT THE MATERIALS BROUGHT ON RECORD CLEARLY DEMONSTRATE THAT ASSESSEE HAS CLAIMED DEPRECIATION AT 100% ON WIND MILL AS A WHOLE COMPRI SING OF VARIOUS ANCILLARY AND INTEGRAL COMPONENTS INCLUDING GENERAT OR, WE UPHOLD THE ORDER OF LD. CIT(A). GROUNDS RAISED BY THE DEPARTME NT IN BOTH THE APPEALS ARE DISMISSED. 10. IN THE RESULT, APPEALS OF DEPARTMENT ARE DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 05/12/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 5 TH DECEMBER, 2014 KV COPY TO:- 1) DCIT, CIRCLE 16(1), HYDERABAD 2). M/S LANCO INFRATECH LTD., LANCO HOUSE, PLOT NO. 4, SOFTWARE UNITS LAYOUT, HITECH CITY, MADHAPUR, HYDERABAD 50 0 004. 3) CIT(A)-V, HYDERABAD 4)CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 7 ITA NOS. 252 & 253/HYD/2013 M/S LANCO INFRATECH LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER