ANAMIKA CONDUCTORS PVT. LTD., Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur

ITA 266/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1678 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA CIT DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A; 115JB; 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES A, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA -@ ITA NO. 266/JP/2019 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 ANAMIKA CONDUCTORS PVT. LTD., B-129, RAJENDRA MARG, BAPU NAGAR, JAIPUR-302015. C UKE VS. A.C.I.T., CIRCLE-6, JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA 5681 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI G.M. MEHTA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI P.P. MEENA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/05/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/06/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT(A), AJMER DATED 14/12/2018 FOR THE A.Y. 2014-15 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: (1) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING DISALLOWANCE OF DEPRECIATION BY IGNORING THE EXPLANATION 5 TO SECTION 32 OF IT ACT UNDER WHICH THE ASSESSEE COMPANY IS LEGALLY ENTITLED TO DEDUCTION OF DEPRECIATION 73,53,340/- ON THE WINDS MILLS AS AGAINST RS.36,72,397/- ALLOWED BY THE LD. AO. ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 2 (2) THAT LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCES RS.6,66,228/- UNDER SECTION 14A OF IT ACT IGNORING THE FINAL FINDING OF THIS HONBLE TRIBUNAL IN . ASSESSEE'S OWN CASE IN THE A.Y. 2012-13 AND THE FACT THAT AFTER A.Y. 2012-13, NO NEW INVESTMENT IN EXEMPT INCOME EARNING INVESTMENT WAS MADE. (3) LD. CIT(A) HAS FURTHER ERRED IN SUSTAINING THE ADDITION OF RS.6,66,228/- U/S 14A OF IT ACT FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT UNDER SECTION 115JB OF IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF ALUMINIUM AND ALUMINIUM ALLOY CONDUCTORS, ACSR AND ARIEL BUNCH CABLES AND WIRES AS WELL AS ALSO ENGAGED IN BUSINESS OF WIND POWER GENERATION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION TO THE TUNE OF RS. 36,72,397/- ON ALL THE FIVE UNITS OF WIND MILLS SET UP ONE EACH AT VILLAGE BARAMSAR IN JAISALMER DISTRICT, VILLAGE KUNDALAPUR IN SANGLI DISTRICT (MAHARASHTRA), VILLAGE PITHLA IN JAISALMER DISTRICT (RAJASTHAN), VILLAGE HABUR, JAISALMER & LAST ONE AT TEJUVA, JAISALMER. OUT OF THESE FIVE UNITS TWO WERE INSTALLED IN THE PREVIOUS YEAR RELEVANT TO AY 2004-05 AND ONE IN PREVIOUS YEAR RELEVANT TO A.Y. 2008-09 WHILE FOURTH UNIT WAS INSTALLED IN THE AY 2011-12 AND THE FIFTH ONE HAS BEEN SET-UP IN AY 2012-13. THE ASSESSEE CLAIMED DEPRECIATION @ 80% ON THE ENTIRE WIND MILL UNITS WHICH COMPRISED OF THE CIVIL ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 3 WORK CARRIED OUT FOR THEIR INSTALLATION AND THE ELECTRICITY WORK INCLUDING CABLING 85 ELECTRICITY LINES. THE A.O. HELD THAT THE ABOVE CIVIL WORK AND THE ELECTRICAL WORK ARE THE ANCILLARY ITEMS CONNECTED WITH THE INSTALLATION OF THE WINDMILL. THE ACT PROVIDES FOR DEPRECIATION @ 80% FOR THE ENERGY SAVING DEVICES ONLY AND NOT ON ANY OTHER ACCESSORIES CONNECTED WITH THE SYSTEM. THE ABOVE ITEMS SHOULD HAVE BEEN PROVIDED DEPRECIATION UNDER THE HEAD BUILDING @ 10%) AND PLANT AND MACHINERY (@ 15%). THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON THESE ANCILLARY WORKS AT HIGHER RATES I.E. 80% DURING EARLIER YEARS ALSO AND HAS CONTINUED TO CLAIM THE DEPRECIATION AT THE SAME RATES DURING THE YEAR UNDER CONSIDERATION ALSO. THE DEPARTMENT HAS BEEN DISALLOWING THE EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE ON THESE WORKS. THEREFORE, CONSIDERING THESE FACTS, THE ASSESSEE VIDE ORDER SHEET ENTRY DT. 19.12.2016 WAS ASKED TO SHOW CAUSE AS TO WHY THE DISALLOWANCE OF EXCESS DEPRECIATION SHOULD NOT BE MADE. AFTER CONSIDERING THE ASSESSEES REPLY, THE A.O. WORKED OUT DEPRECIATION @ 10% ON THE COST OF INSTALLATION OF WINDMILL AND @ 15% IN ITS ELECTRIC LINES. THE A.O. OBSERVED THAT TOTAL DEPRECIATION AS COMPUTED BY HIM WORKS OUT TO RS. 40,67,374/- BUT THE ASSESSEE ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 4 HAD CLAIMED DEPRECIATION OF RS. 36,72,397/- WHICH IS LOWER THAN RS. 40,67,374/- AS WORKED OUT BY HIM, ACCORDINGLY, HE ALLOWED RS. 36,72,397/-. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O. AFTER OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. IT IS SEEN THAT THE APPELLANT ITSELF HAD CLAIMED DEPRECIATION AT RS. 36,72,397/-. THE ARGUMENT OF THE APPELLANT THAT IN VIEW OF EXPLANATION 5 TO SECTION 32(1), THE AO SHOULD HAVE ALLOWED DEPRECIATION OF RS. 40,67,374/, IS NOT FOUND TO BE ACCEPTABLE BECAUSE EXPLANATION 5 DOES NOT PROVIDE THAT, IF THE ASSESSEE DOES NOT CLAIM DEPRECIATION, EVEN THEN, THE AO SHALL ALLOW DEPRECIATION AND REDUCE THE RETURNED INCOME OF THE ASSESSEE. THEREFORE, THE CONTENTION OF THE APPELLANT THAT THE AO SHOULD HAVE ALLOWED DEPRECIATION AT RS. 40,67,374/- AS AGAINST THE DEPRECIATION OF RS. 36,72,397/- CLAIMED BY THE APPELLANT, CANNOT BE ACCEPTED. THE AO CANNOT REDUCE THE RETURNED INCOME DECLARED BY THE APPELLANT. ACCORDINGLY, THE RESTRICTION OF THE AMOUNT OF DEPRECIATION TO RS. 36,72,397/- AS CLAIMED BY THE APPELLANT IS HELD TO BE IN ACCORDANCE WITH THE PROVISIONS OF LAW. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 4. NOW THE ASSESSE IS IN FURTHER APPEAL BEFORE THE ITAT. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT IN ASSESSEES OWN CASES FOR EARLIER YEARS, DEPRECATION @ 80% ON WIND MILL, ITS CIVIL CONSTRUCTION AND ELECTRICAL INSTALLATION WAS FOUND TO BE ALLOWABLE BY THE ITAT VIDE ORDER DATED 26/10/2017. ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 5 MOREOVER, THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MEHRU ELECTRICALS & MECHANICAL ENGINEERS (P) LTD. (2016) 388 ITR 169 (RAJ) HAS HELD THAT ROOM CONSTRUCTED ALONG WITH COST OF ERECTION AND INSTALLATION OF ELECTRICAL ITEMS ARE COVERED UNDER PLANT AND MACHINERY FOR A WIND MILL, ENTITLED FOR DEPRECIATION AT THE SAME RATE APPLICABLE TO WIND MILL. ACCORDINGLY, RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS, WE DIRECT THE A.O. TO ALLOW CLAIM OF DEPRECIATION AT 80% WITH RESPECT TO COST OF CONSTRUCTION AND INSTALLATION OF ELECTRICAL ITEMS AND THE FOUNDATION STRUCTURE WITH RESPECT TO WIND MILLS. WE DIRECT ACCORDINGLY. 6. THE ASSESSEE HAS ALSO PLEADED THAT WHILE ALLOWING THE ASSESSEES CLAIM OF DEPRECIATION, THE A.O. HAS NOT CONSIDERED THE EXPLANATION 5 TO SECTION 32 WHICH WAS INSERTED BY THE FINANCE ACT, 2001 W.E.F. 01/04/2002. ACCORDING TO WHICH THE ASSESSEE SHOULD BE ALLOWED CLAIM OF DEPRECIATION IRRESPECTIVE OF THE FACT THAT THE SAME HAS NOT BEEN CLAIMED IN THE RETURN OF INCOME. THE LD AR HAS PLACED BEFORE US THE WORKING OF ASSESSEES CLAIM OF DEPRECIATION FOR THE A.Y. 2013-14 AND 2014-15 AS UNDER: ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 6 DEPRECIATION FOR THE A.Y. 2013-14: S.NO. PARTICULARS AMOUNT 1. AMOUNT ON WHICH DEPRECIATION IS ALLOWABLE 2,75,53,660 2. DEPRECIATION ALLOWABLE @ 80% /40% 1,83,61,985 3. W.D.V. AS ON 1ST APRIL 2013 91,91,675 ALLOWABLE DEPRECIATION FOR THE A.Y. 2014-15 1. AMOUNT ON WHICH DEPRECIATION IS ALLOWABLE 91,91,675 2. DEPRECIATION ALLOWABLE @ 80% (EXPL. 5 TO SECTION 32) 73,53,340 3. W.D.V. AS ON 1 ST APRIL 2014 18,38,335 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT AFTER INSERTION OF EXPLANATION 5 TO SECTION 32 OF THE ACT, OPTION OF ASSESSEE FOR CLAIM OF DEPRECATION CEASES AND THE SAME TO BE ALLOWED AS PER PROVISIONS OF SECTION 32 OF THE ACT. HOWEVER, WE FOUND THAT THE ABOVE DETAILS OF DEPRECIATION FOR THE A.Y. 2013-14 AND 2014-15 WAS FIRST TIME FILED BY THE ASSESSEE BEFORE US AND THIS CLAIM WAS NEITHER BEFORE THE A.O. NOR ANY DETAILS WERE SUBMITTED EARLIER. THEREFORE, IN THE FITNESS OF THING, WE RESTORE THE MATTER TO THE FILE OF THE A.O. TO VERIFY THE CORRECTNESS OF DETAILS FURNISHED BY THE ASSESSEE AND FOR DECIDING AFRESH IN TERMS OF EXPLANATION-5 TO SECTION 32 OF THE ACT. WE DIRECT ACCORDINGLY. 8. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF RS. 6,66,228/- U/S 14A OF THE ACT WITH RESPECT TO INVESTMENT MADE IN EQUITY SHARES OF M/S ANAMIKA OIL PVT. LTD. AND STATE BANK OF BIKANER AND JAIPUR. IT WAS ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 7 CONTENDED BY THE LD AR OF THE ASSESSEE THAT ALL THE INVESTMENTS WERE MADE EARLIER TO THE YEAR UNDER CONSIDERATION AND ALSO PLACED BEFORE US, THE ORDER OF THE TRIBUNAL DATED 26/10/2017 IN ASSESSEES OWN CASE FOR THE A.Y. 2012-13 WHEREIN SIMILAR DISALLOWANCES SO MADE BY THE A.O. WAS DELETED. WE ALSO FOUND THAT NO DIVIDEND OR EXEMPT INCOME WAS RECEIVED FROM THE INVESTMENT MADE IN EQUITY SHARES OF M/S ANAMIKA OIL PVT. LTD., THEREFORE, NO DISALLOWANCE OF INTEREST CAN BE MADE IN VIEW OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAKHANI MARKETING INDUSTRIES (2014) 272 CTR 265 (P&H), HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. (2014) 272 CTR 282 (DEL) , HONBLE ALLAHABAD HIGH COURT DECISION IN THE CASE OF CIT VS. SHIVAM MOTORS PVT. LTD. (2014) 272 CTR 277 (ALL) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY PVT. LTD. (2015) 376 ITR 97 (GUJ). RESPECTFULLY FOLLOWING THE PROPOSITIONS OF LAW LAID DOWN IN THESE JUDICIAL PRONOUNCEMENTS, NO DISALLOWANCE OF EXPENDITURE IS REQUIRED WHEN THERE IS NO EXEMPT INCOME FROM SUCH INVESTMENT. 9. SIMILARLY, WITH RESPECT TO INVESTMENT OF RS. 5,400/- IN THE SHARES OF STATE BANK OF BIKANER AND JAIPUR, WE FOUND THAT SUCH INVESTMENT WAS BEING CARRY FORWARD FROM A.Y. 2012-13 AND THE TRIBUNAL IN ITS ORDER ITA 266/JP/2019_ ANAMIKA CONDUCTORS VS ACIT 8 DATED 26/10/2017 FOR THE A.Y. 2012-13 IN ASSESSEES OWN CASE HAS HELD THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS, ACCORDINGLY, NO DISALLOWANCE IS WARRANTED. RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS, WE DIRECT THE A.O. TO DELETE THE DISALLOWANCE OF RS. 6,66,228/- MADE U/S 14A OF THE ACT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2019. SD/- SD/- FOT; IKY JKO JES'K LH 'KEKZ (VIJAY PAL RAO) (RAMESH C SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10 TH JUNE, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ANAMIKA CONDUCTORS PVT. LTD., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 266/JP/2019) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR