Satya Narayan Dhoot, Jodhpur V. ACIT, Circle-3, Jodhpur

ITA 35/JODH/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7279 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 07-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANCHITA KUMAR
• Keywords: Capital asset; Revision of order; Depreciation; Assessment record; Capital receipt; Set aside; Capital Gains
• Section: 32; 263; 28; 143(3); 142(1); 201; 143(2); 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH , JODHPUR BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM ITA. NO. 35/JODH/2021 ASSESSMENT YEARS : 2015-16 SHRI SATYA NARAYAN DHOOT STREET, 1 ST A ROAD, SARDARPURA, JODHPUR VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-03, JODHPUR PAN/GIR NO.: AAAPD4945L APPELLANT RESPONDENT ASSESSEE BY : SH. MOHIT SONI (ADV.) SH. RAJENDRA JAIN (ADV. ) & SMT. RAKSHA BIRLA (CA) REVENUE BY : SMT. SANCHITA KUMAR (CIT-DR) DATE OF HEARING : - 12/08/2021 DATE OF PRONOUNCEMENT : 07/09/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE CHA LLENGING THE ORDER OF LD. PR. CIT-1, JODHPUR PASSED U/S 263 OF THE ACT DATED 27.03.2021 FOR A.Y 2015-16. 2. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM S ALE OF ELECTRICITY THROUGH POWER PROJECTS, INCOME FROM PARTNERSHIP FIR M AND CAPITAL GAINS. THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNTS WHICH ARE SUBJECT TO AUDIT AS PER PROVISION OF LAW. THE CASE OF ASSESSEE WAS SELECTED FOR ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 2 LIMITED SCRUTINY ON VARIOUS ISSUES AND ACCORDINGLY, THE LD AO HAD ISSUED A QUERY LETTER ASKING VARIOUS QUERIES/QUESTIONS INC LUDING THE QUESTION ABOUT CLAIM OF LIQUIDATED DAMAGES OF RS. 1,20,00,00 0/- AS CAPITAL RECEIPT IN THE BOOKS OF ACCOUNTS. IN RESPONSE TO SU CH QUERY, THE ASSESSEE HAD FURNISHED THE EXPLANATION & DOCUMENTAR Y EVIDENCE SUPPORTED BY JUDICIAL DECISIONS FROM TIME TO TIME W HICH ARE EVIDENT FROM ORDER SHEET. THE DETAILS OF DOCUMENTARY EVIDENCE FU RNISHED DURING THE ASSESSMENT PROCEEDING ARE A COPY OF PURCHASE ORDER, CERTIFICATE OF COMMISSIONING OF PLANT & MACHINERY, CONFIRMATION OF ACCOUNT OF SULZON PVT.LTD AND BILLS & INVOICES. FURTHER, RELIANCE WA S PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CI T V/S SAURASHTRA CEMENT LTD 325 ITR 422 AND HONBLE GUJARAT HIGH COU RT IN THE CASE OF SHRI DIGVIJAY CEMENT COMPANY LTD. 138 ITR 45. THE L D. AO AFTER DUE EXAMINATION AND VERIFICATION OF FACTS FROM DOCUMENT ARY EVIDENCE AND IN THE LIGHT OF THE DECISIONS OF HONBLE SUPREME COURT AND HONBLE GUJARAT HIGH COURT HAD ACCEPTED THAT THE AMOUNT RECEIVED AS LIQUIDATED DAMAGES DUE TO DELAY IN SUPPLY OF MACHINERY WAS A C APITAL RECEIPTS AND ACCORDINGLY HAD ALLOWED THE CLAIM OF DEPRECIATION. 3. IT WAS SUBMITTED THAT THE LD PCIT THEREAFTER ISS UED A SHOW CAUSE NOTICE U/S 263 OF THE ACT AND IN RESPONSE, A REPLY WAS FURNISHED TO LD PCIT ALONG WITH DOCUMENTARY EVIDENCE AND JUDICIAL D ECISIONS WHICH WERE ALSO PART OF ASSESSMENT RECORDS. THE PCIT PASS ED THE ORDER U/S 263 OF THE ACT AND HIS FINDINGS READ AS UNDER:- IN THIS REGARD, I AM OF THE OPINION THAT THE ORDER PASSED IS BASED ON INCORRECT/ MISTAKEN ASSUMPTION OF THE FACTS OF T HE CASE BY WAY OF ACCEPTING THE STATEMENT OF THE ASSESSEE WITHOUT DUE ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 3 VERIFICATION/ ERRONEOUS APPLICATION OF PROVISIONS O F THE ACT. I, THEREFORE, CANCEL THE ASSESSMENT ORDER PASSED BY TH E AO U/S 143(3) ON 14.12.2017 WITH THE DIRECTION TO THE ASSE SSING OFFICER TO PASS THE ASSESSMENT ORDER AFRESH AFTER CONSIDERI NG THE ABOVE MENTIONED ISSUES, APART FROM OTHER ISSUES DISCUSSED IN THE ASSESSMENT ORDER DATED 14.12.2017 AND ALSO THE ISSU ES WHICH MAY SUBSEQUENTLY COME INTO THE NOTICE OF ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961. 4. IT WAS SUBMITTED THAT ON PERUSAL OF FINDING OF T HE LD. PCIT, IT IS CRYSTAL CLEAR THAT THE LD PCIT HAD PASSED THE ORDER WITHOUT DUE APPLICATION OF MIND ON THE DOCUMENTARY EVIDENCE PLA CED ON RECORD DURING THE ASSESSMENT PROCEEDING AS WELL AS REVISIO N PROCEEDINGS. HOWEVER THE OBSERVATION OF LD. PCIT THAT THE LD. AO HAD ARBITRARILY RELIED ON THE STATEMENT OF THE ASSESSEE WITHOUT PRO PER APPLICATION OF PROVISIONS OF LAW IS TOTALLY INCORRECT, FALSE AND C ONTRARY TO THE LAW LAID DOWN BY THE HONBLE SUPREME COURT & HONBLE GUJARAT HIGH COURT. 5. IT WAS SUBMITTED THAT WHEN THE LAW LAID DOWN BY THE HONBLE SUPREME COURT AND FOLLOWED BY THE HONBLE GUJARAT H IGH COURT THAT WHEN THE DAMAGES TO THE ASSESSEE WAS DIRECTLY AND I NTIMATELY LINKED WITH THE PROCUREMENT OF A CAPITAL ASSET THEN THE AM OUNT RECEIVED BY THE ASSESSEE FROM THE SUPPLIERS OF THE PLANT WAS IN THE NATURE OF A CAPITAL RECEIPT AND ACCORDINGLY THE LD AO HAD ACCEP TED THE LIQUIDITY DAMAGES AS CAPITAL RECEIPT THEN HOW LD PCIT WITHOUT GIVING ANY REASON AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 4 FOLLOWING THAT DECISION. HOWEVER THE PCIT HAS EXERC ISED POWER U/S 263 OF THE ACT ON THE BASIS THAT ORDER OF ASSESSING OFF ICER IN TERMS OF DECISION OF HONBLE SUPREME COURT AND HIGH COURT OR DER IS ERRONEOUS AS SUCH ACTION IS CONTRARY TO THE PROVISION OF LAW AND ALSO HIGHLY DISREGARDING THE LAW LAID DOWN BY HONBLE COURTS. 6. IT WAS SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S G.M MITTAL STAINLESS STEEL (P) LTD 263 ITR 255 HAS HELD THAT IF AT THE TIME OF WHEN THE POWER UNDER SECTION 263 WAS EXERCISED THE DECISION OF THE JURISDICTIONAL HIGH COURT HAD NOT B EEN SET ASIDE BY THIS COURT OR AT LEAST HAD NOT BEEN APPEALED FROM, IT WO ULD NOT BE OPEN TO THE COMMISSIONER TO HAVE PROCEEDED ON THE BASIS THA T THE HIGH COURT ORDER WAS ERRONEOUS AND THE ASSESSING OFFICER WHO H AD ACTED IN TERMS OF THE HIGH COURTS DECISION HAD ACTED ERRONEOUSLY. 7. IT WAS SUBMITTED THAT THE LD AO HAD EXERCISED T HE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRI VED AT CONCLUSION ON THE BASIS OF LEGAL & VALID DOCUMENTARY EVIDENCES AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS AND PRE JUDICE TO INTEREST OF REVENUE ON THE BASIS OF REPRESENTATION OF FACTUA LLY INCORRECT FACTS. 8. IT WAS SUBMITTED THAT IT IS SETTLED POSITION OF LAW THAT REVISIONARY POWERS OF CIT U/S 263 CAN BE INVOKED ONLY WHEN THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE, IN THE CASE OF ASSESSEE, THE ASSESSMENT ORDER COULD NOT BE ESTABLISHED TO BE ERRONEOUS, BY PR CIT. THE SOLE GROUND OF 263 JURISDICTION BY THE PR. CIT WAS THAT THE LD AO DID NOT MAKE PROPER ENQU IRY. THIS ITSELF ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 5 CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE SINCE THE AO WAS ALIVE ON ALL THESE QUESTIO NS AND HE HAS CALLED UPON THE ASSESSEE TO PRODUCE RELEVANT MATERIAL IN R EGARD TO AREAS WHICH WERE STATED BY THE PCIT IN HIS SHOW CAUSE NOTICE. I T IS VERY IMPORTANT TO NOTE THAT THE LD PCIT IS NOT SPECIFIC AS TO THE REA SONS WHY THE ASSESSMENT MADE BY THE AO WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THE PCIT HAS NOT ARRIVED A T ANY INDEPENDENT FINDING FOR ISSUANCE OF NOTICE UNDER SECTION 263. F URTHER, A THOROUGH ENQUIRY HAS BEEN CONDUCTED BY THE AO WHICH COMPRISE D OF QUESTIONNAIRE TO WHICH THE ASSESSEE HAS SUBMITTED H IS REPLY, THEREAFTER THERE IS A NOTICE UNDER S. 142(1) WITH A QUERY LETT ER TO WHICH AGAIN THE ASSESSEE HAS REPLIED TO THE QUERIES, SO IT IS EVIDE NT THERE HAS BEEN A DETAILED INVESTIGATION AND ENQUIRY CONDUCTED BY THE AO. WHEN SUCH JUDICIALLY EXERCISE HAS BEEN APPARENTLY MADE BY LD AO, THEREFORE THE ORDER OF THE AO CANNOT BE BRANDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE EXERCISE OF JURISDICT ION UNDER SECTION 263 BY THE PCIT IS NOT VALID IN EYE OF LAW AS HELD IN F OLLOWING DECISIONS: CIT VS. GIRDHARI LAL (2002) 258 ITR 331 (RAJ), CIT VS. SHIV HARI MADHU SUDAN (1998) 233 ITR 649 (R AJ), CIT VS. KANDA RICE MILLS (1989) 178 ITR 446 (P&H) CIT VS. ARVIND JEWELLERS 259 ITR 502 (GUJ) RAKESH KHANDELWAL VS CIT (ITA NO.204/IND/2019 DATED 29.01.2020) PCIT VS. M/S CARTIER LEAFLIN PVT. LTD. (2020) 268 T AXMAN 0222 (BOMBAY) ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 6 PERFECT STONEWARE PIPES LTD. VS. COMMISSIONER OF IN COME TAX (2018) 61 ITR (TRIB) 0526 (JABALPUR) IN LIGHT OF ABOVE, IT WAS SUBMITTED THAT THE ORDER PASSED BY THE PCIT MAY KINDLY BE QUASHED. 9. PER CONTRA, THE LD CIT/DR RELIED ON THE FINDINGS OF THE LD PCIT AND OUR REFERENCE WAS DRAWN TO HIS FINDINGS WHICH READ AS UNDER: ON EXAMINATION OF ASSESSMENT RECORD FOR THE AY 201 5-16, IT IS NOTICED THAT THE ASSESSEE HAS RECEIVED SUM OF RS. 1 ,20,00,000/- TOWARDS LIQUIDITY DAMAGES FROM M/S SUZLON ENERGY LT D., WHICH WAS NOT DEDUCTED FROM THE COST OF PLANT AND MACHINE RY OF WIND MILL OF RS. 7,80,99,198/-. THE ASSESSEE CLAIMED DEP RECIATION @ 100% ON THE COST OF PLANT AND MACHINERY IN THE AUDI TED FINANCIALS AND THE SAME WAS ACCEPTED BY THE AO WHILE COMPLETIN G THE ASSESSMENT WITHOUT PROPER EXAMINATION AND VERIFICAT ION OF THE FACTS OF THE CASE. AS PER THE PROVISION OF SECTION 43(1) OF THE INCOME -TAX ACT, 1961, THE AMOUNT OF LIQUIDITY DAMAGES RECEIVED DURING THE YEAR WAS REQUIRED TO BE REDUCED FROM THE ACTUAL COST OF THE ASSET AND ON THE BALANCE AMOUNT DEPRECIATION WAS TO BE CALCULATE D. AS PER THE PROVISIONS OF SECTION 32(1)(I) OF THE INCOME-TAX AC T, 1961, IN RESPECT OF DEPRECIATION OF BUILDING MACHINERY, PLAN T OR FURNITURE, BEING TANGIBLE ASSET, OWNED, WHOLLY OR PARTLY BY TH E ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED. ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 7 (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESS EE AS MAY BE PRESCRIBED. FURTHER, SECTION 43(1) PROVIDES THAT IN SECTIONS 28 TO 41 AND IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES ACTUAL COST MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE , REDUCED BY THAT PORTION OF THE COST THEREOF, IF ANY, HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED A REPLY RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN TH E CASE OF CIT VS. M/S SAURASTRA CEMENT REPORTED IN (325 ITR 422 ( SC). IN THE RELEVANT PARAGRAPH OF THE SAID JUDGMENT, THE HONBL E SUPREME COURT HAS HELD AS UNDER: THE QUESTION WHETHER A PARTICULAR RECEIPT IS CAPIT AL OR REVENUE HAS FREQUENTLY THE ATTENTION OF THE COURTS BUT IT HAS NOT BEEN POSSIBLE TO LAY DOWN ANY SINGLE CRITERION AS DECISIVE IN THE DETERMINATION OF THE QUESTION. TIME AND AGAI N, IT HAS BEEN REITERATED THAT ANSWER TO THE QUESTION MUST UL TIMATELY DEPEND ON THE FACTS OF A PARTICULAR CASE, AND THE A UTHORITIES BEARING ON THE QUESTION ARE VALUABLE ONLY AS INDICA TING THE MATTERS THAT HAVE TO BE TAKEN INTO ACCOUNT IN REACH ING CONCLUSION. ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 8 FROM THE ABOVE FINDING OF THE HONBLE SUPREME COURT IT IS CRYSTAL CLEAR THAT PARTICULAR RECEIPT IS CAPITAL OR REVENUE DEPENDS ON THE FACTS OF THE CASE. IN THE INSTANT CASE LIQUIDITY DA MAGE RECEIPTS CANNOT BE ACCEPTED AS CAPITAL RECEIPTS, HENCE AMOUN T OF LIQUIDITY DAMAGES WERE REQUIRED TO BE REDUCED AS PER SECTION 43(1) OF THE I.T. ACT. IN THIS REGARD, IT IS STATED THAT SECTION 43(1) OF THE INCOME TAX ACT DOES NOT DIFFERENTIATE BETWEEN A CAPITAL OR A R EVENUE RECEIPT TO DETERMINE ACTUAL COST OF THE ASSET. SECTION 43(1 ) PROVIDES THAT UNLESS THE CONTEXT OTHERWISE REQUIRES ACTUAL COST MEANS, THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THEREOF, IF ANY, AS HAS BEEN MET DIRECT LY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. THE HONBLE SUPRE ME COURT IN ITS LANDMARK JUDGMENT IN COMMISSIONER OF INCOME TAX VS. SAURASHTRA CEMENT REPORTED IN (325 ITR 422 (SC), WH ICH WAS REFERRED BY THE ASSESSEE, HAS ALSO ENUNCIATED THAT THE DAMAGES TO THE ASSESSEE WERE DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF A CAPITAL ASSET THEREFORE, IN THE P RESENT CASE, AMOUNT OF LIQUIDITY DAMAGES RECEIVED BY THE ASSES SEE WAS DIRECTLY RELATABLE TO THE PROCUREMENT OF THE CAPITA L ASSET, HENCE, THE AMOUNT OF LIQUIDITY DAMAGES WAS REQUIRED TO BE REDUCED FOR DETERMINING ACTUAL COST OF PLANT AND MACHINERY AS P ROVIDED UNDER SECTION 43(1) OF THE ACT AND DEPRECIATION WAS TO BE CHARGED ACCORDINGLY. THEREFORE, RELIANCE ON THE ABOVE SAID JUDGMENT OF THE HONBLE SUPREME COURT IS FOUND TO BE NOT ATTRAC TED ON THE FACTS OF THE CASE. ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 9 FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE MATERIAL AVAILABLE ON RECORD, THE ASS ESSING OFFICER FAILED TO CONSIDER THE INFORMATION AVAILABLE ON REC ORD WITH REGARD TO ALLOWING THE CLAIM OF DEPRECIATION @ 100% ON THE COST OF PLANT AND MACHINERY OF WIND MILL OF RS. 7,80,99,198/- IN TERMS OF SECTION 43(1) OF THE I.T. ACT, 1961. THE ASSESSING OFFICER IN A ROUTINE AND PERFUNCTORY MANNER ALLOWED EXCESS CLAIM OF DEPRECIATION WITHOUT DEDUCTING THE LIQUIDITY DAMAGE S FROM THE COST OF WIND MILL AS PER THE PROVISION SECTION 43(1 ) OF THE ACT. THE ORDER HAS THUS RESULTED IN EXCESS ALLOWANCE OF DEPRECIATION TO THE ASSESSEE. IN THIS REGARD, THE AO IS DIRECTED TO EXAMINE AND V ERIFY THE ISSUE DISCUSSED ABOVE IN THE LIGHT OF THE PROVISIONS OF S ECTION 43(1) OF THE INCOME-TAX ACT, 1961. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE HAS CAPITALIZED A SUM OF RS 7,80,99,198/- TOWARDS COST OF WINDMILL AND HAS CLAIMED DEPRECIATION @ 80% AND ADD ITIONAL DEPRECIATION @ 20% ON SUCH COST. THE ASSESSEE HAS ALSO RECEIVED A SUM OF RS 12 CRORES TOWARDS LIQUIDATED DAMAGES FROM M/S SUZLON ENERGY WHICH HAS SUPPLIED THE WINDMILL TO THE ASSES SEE AND THE SAME WAS TREATED AS CAPITAL RECEIPT BY THE ASSESSEE. TH E SAID RECEIPT OF LIQUIDATED DAMAGES WAS NEITHER OFFERED TO TAX NOR R EDUCED FROM THE COST OF THE WINDMILL FOR THE PURPOSES OF CLAIMING D EPRECIATION. ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 10 11. AS PER THE LD PCIT, THE AMOUNT OF LIQUIDATED DA MAGES WAS DIRECTLY RELATABLE TO THE PROCUREMENT OF WINDMILL A S PER THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SAURASHTRA CEMENTS (SUPRA) AND WAS REQUIRED TO BE REDUCED FROM THE ACTUAL COST OF WINDMILL AS PER PROVISIONS OF SECTION 43(1) OF THE ACT AND ON T HE BALANCE AMOUNT, THE DEPRECIATION SHOULD HAVE BEEN CLAIMED AND ALLOW ED, HOWEVER, THE ASSESSING OFFICER IN A ROUTINE AND PERFUNCTORY MANN ER WITHOUT PROPER EXAMINATION AND VERIFICATION OF THE FACTS OF THE CA SE HAS ALLOWED EXCESS CLAIM OF DEPRECIATION AND THE ORDER SO PASSE D IS THUS FOUND TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERE ST OF REVENUE. 12. PER CONTRA, THE CONTENTION OF THE ASSESSEE IS T HAT WHEN THE DAMAGES WAS DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF WINDMILL, THEN AS PER THE TERMS OF THE AGREEMENT, T HE SAME IS IN NATURE OF COMPENSATION FOR DELAYED DELIVERY AND HAS NOTHING TO DO WITH THE COST OF THE WINDMILL AND THE AMOUNT RECEIV ED FROM THE SUPPLIER OF WINDMILL WAS IN NATURE OF CAPITAL RECEI PT AND NOT REQUIRED TO BE REDUCED FROM THE ACTUAL COST OF WINDMILL AS P ER PROVISIONS OF SECTION 43(1) OF THE ACT AND ON THE WHOLE OF THE CO ST OF WINDMILL, THE DEPRECIATION CLAIM IS ELIGIBLE WHICH HAS BEEN RIGHT LY CLAIMED AND ALLOWED BY THE ASSESSING OFFICER AFTER DUE EXAMINAT ION AND VERIFICATION IN LIGHT OF DECISION OF HONBLE SUPREM E COURT IN CASE OF SAURASHTRA CEMENTS (SUPRA) AND HONBLE GUJARAT HIGH COURT IN CASE OF SHREE DIGVIJAY CEMENT CO LTD (SUPRA) AND THE ORD ER SO PASSED CANNOT BE SAID TO BE ERRONEOUS IN SO FAR AS PREJUDI CIAL TO THE INTEREST OF REVENUE. ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 11 13. WE FIND THAT CONTENTIONS ADVANCED BY BOTH THE P ARTIES AS TO THE TRUE NATURE AND CHARACTER OF LIQUIDATED DAMAGES ARE GUIDED BY THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SA URASHTRA CEMENTS (SUPRA) AND DECISION OF THE HONBLE GUJARAT HIGH CO URT IN CASE OF SHREE DIGVIJAY CEMENT CO LTD (SUPRA). IT WOULD THER EFORE BE APPROPRIATE TO REFER TO THESE TWO DECISIONS TO UNDE RSTAND THE TRUE PURPORT AND THE LEGAL PROPOSITION SO LAID DOWN BY T HE HONBLE SUPREME COURT AND HONBLE HIGH COURT IN THESE DECIS IONS AND ITS APPLICABILITY IN THE FACTS OF THE PRESENT CASE. 14. IN CASE OF SAURASHTRA CEMENTS (SUPRA), THE QUES TION FOR CONSIDERATION BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE LIQUIDATED DAMAGES RECEIVED BY THE ASSESSEE FROM TH E SUPPLIER OF PLANT AND MACHINERY ON ACCOUNT OF DELAY IN SUPPLY O F PLANT WAS CAPITAL OR REVENUE RECEIPT. IN THAT CASE, THE FACT S OF THE CASE WERE THAT THE ASSESSEE ENGAGED IN THE MANUFACTURE OF CEM ENT ENTERED INTO AN AGREEMENT WITH M/S. WALCHANDNAGAR INDUSTRIES LIM ITED, BOMBAY FOR PURCHASE OF ADDITIONAL CEMENT PLANT. THE AGREE MENT CONTAINED A CONDITION WITH REGARD TO THE MANNER IN WHICH THE MA CHINERY WAS TO BE DELIVERED AND THE CONSEQUENCES OF DELAY IN DELIV ERY. AS PER THE SAID CONDITION IN THE AGREEMENT, IN THE EVENT OF DE LAY CAUSED IN DELIVERY OF THE MACHINERY, THE ASSESSEE WAS TO BE C OMPENSATED AT THE RATE OF 0.5 PER CENT OF THE PRICE OF THE RESPEC TIVE PORTION OF THE MACHINERY FOR DELAY OF EACH MONTH BY WAY OF LIQUIDA TED DAMAGES BY THE SUPPLIER, WITHOUT PROOF OF ACTUAL LOSS AND THE TOTAL AMOUNT OF DAMAGES WAS NOT TO EXCEED 5 PER CENT OF THE TOTAL P RICE OF THE PLANT AND MACHINERY. THE SUPPLIER DEFAULTED AND FAILED T O SUPPLY THE PLANT ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 12 AND MACHINERY ON THE SCHEDULED TIME AND, THEREFORE, AS PER THE TERMS OF CONTRACT, THE ASSESSEE RECEIVED AN AMOUNT OF RS. 8,50,000 FROM THE SUPPLIER BY WAY OF LIQUIDATED DAMAGES. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, A QUESTION AROSE WHETHER TH E SAID AMOUNT RECEIVED BY THE ASSESSEE AS DAMAGES WAS A CAPITAL O R A REVENUE RECEIPT. THE ASSESSING OFFICER TREATED THE SAME AS A CAPITAL RECEIPT WHICH WAS CONFIRMED BY THE LD CIT(A). ON FURTHER AP PEAL, THE TRIBUNAL HELD THAT THE SAID AMOUNT COULD NOT BE TRE ATED AS A REVENUE RECEIPT. ACCORDING TO THE TRIBUNAL, THE PAYMENT OF LIQUIDATED DAMAGES TO THE ASSESSEE BY THE SUPPLIER WAS INTIMATELY LINK ED WITH THE SUPPLY OF MACHINERY I.E., A FIXED ASSET ON CAPITAL ACCOUNT , WHICH COULD BE SAID TO BE CONNECTED WITH THE SOURCE OF INCOME OR P ROFIT-MAKING APPARATUS RATHER THAN A RECEIPT IN COURSE OF PROFIT -EARNING PROCESS AND, THEREFORE, IT COULD NOT BE TREATED AS PART OF RECEIPT RELATING TO A NORMAL BUSINESS ACTIVITY OF THE ASSESSEE. THE TRIBU NAL ALSO OBSERVED THAT THE SAID RECEIPT HAD NO CONNECTION WITH LOSS O R PROFIT BECAUSE THE VERY SOURCE OF INCOME VIZ., THE MACHINERY WAS YET T O BE INSTALLED. ACCORDINGLY, THE TRIBUNAL ALLOWED THE APPEAL AND DE LETED THE ADDITION MADE ON THIS ACCOUNT. 15. ON BEHALF OF THE REVENUE, THE REFERENCE TO HIGH COURT WAS AGAIN DECIDED IN FAVOUR OF THE ASSESSEE AND ON APPE AL BY THE REVENUE, THE HONBLE SUPREME COURT REFERRING TO THE TERMS OF THE AGREEMENT PROVIDING FOR LIQUIDATED DAMAGES HELD THA T DETERMINATION OF DAMAGES WAS NOT BASED UPON THE CALCULATION MADE IN RESPECT OF LOSS OF PROFIT ON ACCOUNT OF DELAYED SUPPLY OF THE PLANT AND THE DAMAGES TO THE ASSESSEE WAS DIRECTLY AND INTIMATELY LINKED WITH THE ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 13 PROCUREMENT OF A CAPITAL ASSET, I.E., THE CEMENT PL ANT, WHICH WOULD OBVIOUSLY LEAD TO DELAY IN COMING INTO EXISTENCE OF THE PROFIT-MAKING APPARATUS, RATHER THAN A RECEIPT IN THE COURSE OF P ROFIT-EARNING PROCESS. IT WAS HELD THAT THE COMPENSATION PAID FOR THE DELA Y IN PROCUREMENT OF CAPITAL ASSET AMOUNTED TO STERILIZATION OF THE CAPI TAL ASSET OF THE ASSESSEE AS SUPPLIER HAD FAILED TO SUPPLY THE PLANT WITHIN TIME AS STIPULATED IN THE AGREEMENT AND THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS COMPENSATION FOR STERILIZATION OF THE PROFI T-EARNING SOURCE, NOT IN THE ORDINARY COURSE OF THEIR BUSINESS WAS HELD A S A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 16. IN CASE OF SHREE DIGVIJAY CEMENT CO LTD (SUPRA) , THE QUESTION FOR CONSIDERATION BEFORE THE HONBLE GUJARAT HIGH COURT WAS WHETHER THE ACTUAL COST OF MACHINERY, HAS TO BE REDUCED BY THE AMOUNT OF COMPENSATION FOR DELAY IN SHIPMENT OF THE MACHINERY RECEIVED FROM THE SUPPLIERS, FOR THE PURPOSES OF ALLOWING DEPRECIATIO N AND DEVELOPMENT REBATE. IN THAT CASE, THE FACTS OF THE CASE WERE THAT THE ASSESSEE WAS MAINLY ENGAGED IN THE BUSINESS OF MANUFACTURE AND S ALE OF CEMENT AND ASBESTOS CEMENT PRODUCTS. IT ENTERTED INTO AN AGREE MENT WITH REVISIONE CONSTRUZIONE MACHINE OF TORINO, ITALY FOR SUPPLY OF MACHINERY FOR MANUFACTURE OF ASBESTOS CEMENT PRODUCTS. UNDER THE SUB-TITLE 'DELIVERY', OF THIS AGREEMENT, THE SUPPLIERS AGREED TO DELIVER THE MACHINERY AS SET OUT UNDER THE SHIPMENT PLAN AND UN DERTOOK TO REIMBURSE THE ASSESSEE-COMPANY WITH COMPENSATION FO R DELAY IN DELIVERY. THERE WAS DELAY IN SUPPLY OF THE MACHINER Y BY THE SUPPLIERS. THE ASSESSEE-COMPANY, THEREFORE, CLAIMED COMPENSATI ON FOR THE DELAY UNDER THE AFORESAID TERM OF THE AGREEMENT. THIS CLA IM FOR COMPENSATION ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 14 MADE BY THE ASSESSEE-COMPANY WAS SETTLED AND UNDER AN AGREEMENT DATED 12-7-1965, THE SUPPLIERS AGREED TO PAY LIRA 7 4,559,725 EQUIVALENT TO RS. 5,72,216 BY WAY OF COMPENSATION F OR THE DELAY TO THE ASSESSEE-COMPANY. UNDER THE AGREEMENT DATED 12-7-19 63, IT WAS AGREED BETWEEN THE PARTIES THAT THE ASSESSEE-COMPAN Y WOULD NOT PAY LIRA 74,559,725 OUT OF THE PRICE OF THE MACHINES WH ICH IT WAS LIABLE TO PAY UNDER THE FIRST AGREEMENT. IN OTHER WORDS, THE AMOUNT OF COMPENSATION WHICH WAS SETTLED BETWEEN THE PARTIES WAS TO BE ADJUSTED AGAINST THE COST OF MACHINERY AGREED TO BE SUPPLIED BY THE SUPPLIERS. THE CONTENTION OF THE ASSESSEE-COMPANY B EFORE THE ITO WAS THAT THE AMOUNT OF COMPENSATION OF RS. 5,72,216 DID NOT IN ANY WAY REDUCE THE PRICE OF THE MACHINERY WHICH IT HAD AGRE ED TO PURCHASE FROM THE SUPPLIERS. IN OTHER WORDS, ACCORDING TO THE ASS ESSEE-COMPANY, COMPENSATION PAID TO IT FOR THE DELAY IN SUPPLY OF MACHINERY HAD NO RELATION OR CONNECTION WITH THE COST OF MACHINERY A ND, THEREFORE, PAYMENT OF SUCH COMPENSATION WOULD NOT REDUCE THE C OST OR PRICE OF THE MACHINERY. THE ITO, HOWEVER, REJECTED THIS CONT ENTION HOLDING THAT THE COMBINED EFFECT OF THE AGREEMENTS DATED 17-8-19 60 AND 12-7-1963 WAS THAT THE PRICE OF THE MACHINERY STOOD REDUCED T O THE EXTENT OF RS. 5,72,216. ACCORDING TO THE ITO, PAYMENT OF COMPENSA TION WAS INCIDENTAL TO THE ACQUISITION OF MACHINERY AND SUCH PAYMENT WOULD IN EFFECT AND SUBSTANCE REDUCE OR DECREASE THE PRICE O F MACHINERY. CONSEQUENTLY, THE ITO DEDUCTED RS. 5,72,216 OUT OF THE TOTAL PRICE OF THE MACHINERY AND ALLOWED DEVELOPMENT REBATE AND DE PRECIATION ON SUCH REDUCED PRICE TREATING IT TO BE THE ACTUAL COS T OF MACHINERY. THE AAC AND THE TRIBUNAL HAVE CONFIRMED THE VIEW TAKEN BY THE ITO. ON FURTHER APPEAL, THE HIGH COURT HELD THAT IN ORDER T O ANSWER THE ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 15 QUESTION, IT IS RELEVANT TO UNDERSTAND THE NATURE O F RIGHT OF THE ASSESSEE COMPANY TO RECEIVE THE COMPENSATION UNDER THE TERMS OF THE AGREEMENT AND THEIR EFFECT ON THE ACTUAL COST OF TH E MACHINERY. IT WAS HELD THAT PROVISION FOR COMPENSATION FOR THE DELAY IN DELIVERY WAS MADE IN THE AGREEMENT TO COMPENSATE THE ASSESSEE COMPANY FOR A LOSS INCLUDING THE LOSS OF PROFIT WHICH IT WOULD SUFFER ON ACCOUNT OF DELAY IN THE DELIVERY OF THE MACHINERY AND HAS NO RELATION W HATSOEVER WITH THE COST OF THE MACHINERY. IT WAS HELD THAT THE METHOD ADOPTED BY THE ASSESSEE COMPANY IN RECEIVING THE COMPENSATION BY W AY OF ADJUSTMENT AGAINST THE PRICE OF THE MACHINERY DOESNT CHANGE I TS NATURE OR CHARACTER AND IT WILL RETAIN THE CHARACTER OF COMPE NSATION ONLY. IT WAS ACCORDINGLY HELD THAT ACTUAL COST OR PRICE OF THE M ACHINERY AND COMPENSATION PAYABLE TO THE ASSESSEE COMPANY FOR TH E DELAY IN DELIVERY ARE TWO DIFFERENT AND DISTINCT THINGS AND THE SAME SHOULDNT BE MIXED UP. IT WAS HELD THAT REFERRING TO THE PROVISIONS O F SECTION 43(1), THE ACTUAL COST OF THE MACHINERY TO THE ASSESSEE COMPAN Y IS THE PRICE AT WHICH IT AGREED TO PURCHASE THE MACHINERY, AND COMP ENSATION PAID FOR THE DELAY IN DELIVERY IS TO SET OFF OR REDUCE THE L OSS WHICH THE ASSESSEE COMPANY SUFFERED AS A RESULT OF DELAY IN SUPPLY OF MACHINERY AND THE SAME WOULD NOT REDUCE THE COST OF MACHINERY FOR THE PURPOSES OF CALCULATING DEPRECIATION AND DEVELOPMENT REBATE. 17. APPLYING THE LEGAL PROPOSITION SO LAID DOWN IN THE INSTANT CASE, WE REFER TO THE RELEVANT CLAUSES OF THE PURCHASE ORDER DATED 10.09.2013 AS UNDER: ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 16 2. PRICE SR. NO. DESCRIPTION PRICE PER UNIT (IN RS.) NO. OF UNITS TOTAL PRICE (IN RS.) 1 A SUPPLY OF S-82 SUZLON 1500 KW WIND TURBINE GENERATOR COMPRISING MAINLY OF: NACELLE HUB CONTROLLER (MICRO PROCESSOR ETC.) 4,03,58,000/- 1 4,03,58,000/- TOTAL (RUPEES FOUR CRORE THREE LACS FIFTY EIGHT THOUSAND ONLY) 4,03,58,000/- 1 4,03,58,000/- 3. PRICE BASIS THE ABOVE PRICES ARE ON BASIS OF DELIVERY AT OUR SI TE. (EX-FACTORY BASIS PLUS TRANSPORTATION AND TRANSIT INSURANCE WHI CH IS INCLUDED IN PRICE). THE ABOVE PRICES INCLUDE TAXES, DUTIES, CESS, OTHER LEVIES ETC. AT THE PREVAILING RATES. IN THE EVENT OF INTRODUCTION OF GST AND/OR ANY INCREASE IN OR INTRODUCTION OF NEW TAXES, DUTIE S AND LEVIES, THESE WILL BE PAYABLE EXTRA. THE PERIOD FOR LODHA S TREET, 1 ST A ROAD, SARDARPURA, JODHPUR-342001 (RAJASTHAN) ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 17 CONSIDERING THESE ADDITIONAL INCIDENCES OF TAXES (I NCLUDING GST), DUTIES, LEVIES, ETC. WILL BE FROM THE DATE OF THIS PURCHASE ORDER TILL THE SUPPLIES/SERVICES ARE OVER. WE AGREE TO REGISTER UNDER THE LOCAL SALES TAX/VAT REGIME FOR THIS SUPPLY AND WILL INFORM THE SALES TAX/VAT AUTHO RITIES ABOUT (I) COMMENCEMENT OF BUSINESS OF GENERATION OF ELECTRICI TY WITH THE USE OF WIND TURBINE GENERATOR AT THE PROPOSED WIND FARM SITE AND SHALL INFORM YOU ABOUT THE LOCAL SALES TAX/VAT/ CST NO. AS APPLICABLE. YOU WILL COMMENCE DELIVERY ONLY AFTER C OMMUNICATION OF SALES TAX/VAT REGISTRATION BY US. FOR EACH INTER-STATE DISPATCH, WE WILL ISSUE SEPARA TE VALID C FORM LATEST BY 45 DAYS FROM THE DATE OF YOUR INVOICE FOR EACH OF YOUR DISPATCHING MANUFACTURING UNITS. IN CASE OF OUR INA BILITY TO ISSUE C FORM WITHIN STIPULATED TIME, WE AGREE TO PAY AD DITIONALLY SALES TAX/VAT @ THE RATE APPLICABLE TO RENEWABLE ENERGY D EVICE IN THE STATE/UNION TERRITORY FROM WHERE THE SUPPLIES ARE M ADE. 4. DELIVERY THE DELIVERY OF WTG SHALL BE MADE FOR DAMAN/PONDY W ORKS TO OUR PROJECT SITE. THE DELIVERY OF WTG SHALL BE COMPLETED ON OR BEFORE 30 TH SEPTEMBER 2013 OR ANY EXTENDED DATE AS MAY BE MUTUA LLY AGREED UPON. PART SHIPMENTS WILL BE ACCEPTED. WE ACCEPT AND CONFIRM THAT ADHERENCE TO THE DELIVER Y SCHEDULE SHALL BE SUBJECT TO RELEASE OF ALL PAYMENTS AS AGRE ED UNDER THIS PURCHASE ORDER. 6. PAYMENT ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 18 WE WILL EFFECT TOTAL PAYMENT OF RS. 4,03,58,000/- O N COMPLETION OF MILESTONES AS UNDER:- A. RS. 80,00,000/- ALREADY PAID. B. RS. 3,23,58,000/- ON INTIMATION OF SUPPLY OF NAC ELLE, HUB, CONTROLLER FROM YOUR FACTORY. WE CONFIRM THAT THE PAYMENTS WILL BE MADE AS INDICA TED ABOVE. IN CASE THE PAYMENTS ARE NOT EFFECTED AS PER ABOVE SCHEDULE, WE UNDERSTAND THAT FURTHER SUPPLIES MAY B E DELAYED ACCORDINGLY. LODHA STREET, 1 ST A ROAD, SARDARPURA, JODHPUR 342001 (RAJASTHAN) UNTIL 100% OF THE TOTAL PAYMENTS INCLUDING INTEREST FOR DELAYED PAYMENTS ARE REALIZED BY YOU, YOU WILL HAVE ALL RIG HTS OF UNPAID SUPPLIERS LIEN ON COMPLETE SUPPLIES MADE BY YOU. Y OU WILL ALSO HAVE ALL REMEDIES AVAILABLE UNDER APPLICABLE LAW TO RECOVER POSSESSION OF THE GOODS SUPPLIED AND SEEK DAMAGES TO THE EXTENT OF AN Y LOSS OR COSTS INCURRED AS A RESULT OF SUCH NON PAYMENT. 12. LIQUIDITY DAMAGES AS YOU ARE AWARE THAT TIMELY DELIVERY OF WTG IS CRU CIAL FOR THE TIMELY COMMISSIONING OF THE WTG, ANY DELAY IN DELIV ERY OF WTG SHALL RESULT IN DELAYED COMMISSIONING OF OUR WIND FARM PR OJECT. IN ORDER TO MAKE YOU STICK TO THE TARGET, YOU SHALL AS SOLE REM EDY PAY TO US LIQUIDATED DAMAGES (LD) OF 15% OF TOTAL PROJECT COS T I.E. RS. 120 LACS PER WTG, ON PRO RATE BASIS FOR THE WTG DELIVERED AF TER 30 TH SEPTEMBER 2013, IF RESULTING IN DELAYED COMMISSIONING. HOWEVER, AS OUR SOLE OBJECTIVE IS TO ACHIEVE END RE SULT, I.E. TIMELY COMMISSIONING OF OUR WIND FARM PROJECT, WE SHALL NO T LODGE CLAIM FOR LD, IF WE ARE ABLE TO ACHIEVE THE END RESULT I.E., COMMISSIONING OF THE ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 19 WTG THROUGH OUR ERECTION & COMMISSIONING AGENCY, ON OR BEFORE THEIR COMMITTED DATE OF COMMISSIONING. 18. ON COMBINED READING OF THE AFORESAID CLAUSES O F THE PURCHASE ORDER PLACED BY THE ASSESSEE WITH M/S SUZLON ENERGY LIMITED AND THE ACCEPTANCE THEREOF BY THE LATTER VIDE LETTER DATED 12.09.2013 AND THUS MUTUALLY AGREED BETWEEN THE TWO PARTIES, WE FIND TH AT LIQUIDATED DAMAGES HAVE BEEN PROVIDED TO ENSURE THAT THERE IS TIMELY DELIVERY AND COMMISSIONING OF THE WINDMILL PROJECT AND WHERE THE DELIVERY IS DELAYED BEYOND 30.09.2013 RESULTING IN DELAYED COMMISSIONI NG, THE LIQUIDATED DAMAGES OF 15% OF TOTAL PROJECT COST OF RS 120 LACS HAS BEEN PROVIDED. THE SAME IS THUS IN NATURE OF COMPENSATION FOR THE DELAYED DELIVERY AND CONSEQUENT DELAYED COMMISSIONING OF WINDMILL PR OJECT. THEREAFTER, VIDE LETTER DATED 3.10.2013, THE ASSESSEE HAS RAISE D A CLAIM TOWARDS LIQUIDATED DAMAGES ON M/S SUZLON ENERGY LIMITED AS PER CLAUSE 12 OF THE AFORESAID AGREEMENT STATING THAT TIMELINES FOR TIMELY DELIVERY AND COMMENCING OF WINDMILL PROJECT HAS ELAPSED AND M/S SUZLON ENERGY LIMITED IS LIABLE TO PAY LIQUIDATED DAMAGES AND IN EVENT OF FAILURE, THE ASSESSEE MAY INVOKE ITS CONTRACTUAL RIGHT TO CANCEL THE PURCHASE ORDER. IN RESPONSE, M/S SUZLON ENERGY LIMITED VIDE ITS LET TER DATED 5.10.2013 HAS ACKNOWLEDGED THE FACT THAT DUE TO SOME UNAVOIDA BLE CIRCUMSTANCES, THEY WERE UNABLE TO DELIVER WITHIN T HE TIMEFRAME AS STIPULATED IN THE PURCHASE ORDER AND ACCEPTED THEIR LIABILITY TO PAY LIQUIDATED DAMAGES OF RS 1.20 CRORES. FURTHER, THE ASSESSEE HAS DEBITED THE ACCOUNT OF M/S SUZLON ENERGY LIMITED DU RING THE YEAR UNDER CONSIDERATION AND A CREDIT NOTE HAS BEEN ISSUED BY M/S SUZLON ENERGY LIMITED ON 2.05.2015. WE THEREFORE FIND THAT THE C ONTRACTUAL TERMS FOR ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 20 COMPENSATING THE ASSESSEE FOR THE DELAYED DELIVERY OF THE WINDMILL PROJECT HAVE NOT JUST BEEN AGREED UPON BUT DUE TO A CTUAL DELAY IN THE DELIVERY, THE SAME HAVE BEEN ACKNOWLEDGED AND THERE HAS BEEN ACCEPTANCE ON PART OF M/S SUZLON ENERGY LIMITED TO PAY THE LIQUIDATED DAMAGES TO COMPENSATE THE ASSESSEE FOR THE DELAYED DELIVERY. 19. IT IS THEREFORE NOT IN DISPUTE THAT THE LIQUIDA TED DAMAGES WERE DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF THE WINDMILL, HOWEVER, AS HELD BY THE HONBLE SUPREME COURT IN CA SE OF SAURASHTRA CEMENT (SUPRA), IT WOULD LEAD TO DELAY IN COMING IN TO EXISTENCE OF THE PROFIT-MAKING APPARATUS, RATHER THAN A RECEIPT IN T HE COURSE OF PROFIT- EARNING PROCESS AND THE AMOUNT RECEIVED BY THE ASSE SSEE TOWARDS COMPENSATION FOR STERILIZATION OF THE PROFIT-EARNIN G SOURCE IS A CAPITAL RECEIPT AND THE SAME BY DEFAULT CANNOT BE HELD AS M EETING THE COST OF THE WINDMILL IN THE HANDS OF THE ASSESSEE AND BE RE DUCED FOR DETERMINING THE ACTUAL COST OF WINDMILL UNDER SECTI ON 43(1) OF THE ACT WHICH NEEDS TO BE EXAMINED INDEPENDENTLY BASED ON R EVIEW OF TERMS AND CONDITIONS OF THE CONTRACT. AS DISCUSSED ABOVE, ON REVIEW OF TERMS OF THE CONTRACT, THE LIQUIDATED DAMAGES RETAINS ITS INDEPENDENT CHARACTER OF COMPENSATING THE ASSESSEE AND CANNOT B E MIXED UP WITH THE COST OF THE WINDMILL AT WHICH THE ASSESSEE AGRE ED TO PURCHASE THE WINDMILL AND THE SAME WOULD THEREFORE NOT REDUCE TH E COST OF WINDMILL FOR THE PURPOSES OF CALCULATING DEPRECIATION U/S 32 (1) OF THE ACT. 20. WE THEREFORE FIND THAT THE DECISION OF THE HON BLE SUPREME COURT IN CASE OF SAURASHTRA CEMENT (SUPRA) AS WELL AS TH E DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF SHREE DIGVIJA Y CEMENT CO LTD ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 21 (SUPRA) SUPPORTS THE CASE OF THE ASSESSEE IN TREATI NG THE LIQUIDATED DAMAGES AS CAPITAL RECEIPTS AND NOT REDUCING THE SA ME FROM THE COST OF THE WINDMILL IN TERMS OF SECTION 43(1) FOR THE PURP OSES OF CLAIM OF DEPRECIATION AND WHERE SUCH A CLAIM IS ALLOWED BY T HE ASSESSING OFFICER, IT CANNOT BE HELD THAT THERE IS ERRONEOUS APPLICATI ON OF PROVISIONS OF LAW AND LEGAL POSITION SO EMERGING FROM READING OF THE AFORESAID TWO DECISIONS. 21. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WE FIND THAT THE MATTER WAS DULY EXAMINED BY THE ASSESSING OFFICER A S EVIDENT FROM THE NOTICE ISSUED U/S 143(2) WHEREIN ONE OF THE REASONS FOR SELECTION OF CASE HAS BEEN STATED TO BE CLAIM OF DEPRECIATION WH ICH WAS FOLLOWED BY SPECIFIC QUERIES RAISED ON 11.10.2017, 7.11.2017, 1 0.11.2017 AND 30.11.2017 AND REPLIES DATED 10.11.2017 AND 7.11.20 17 SUBMITTED BY THE ASSESSEE PROVIDING THE NECESSARY INFORMATION AN D DOCUMENTATION AS WELL AS THE LEGAL DECISIONS REFERRED SUPRA IN SUPPO RT OF HIS CLAIM. IT IS THEREFORE NOT A CASE WHERE THE QUERIES WERE RAISED AND SUBMISSIONS WERE ACCEPTED ON FACE VALUE, RATHER THE ASSESSING O FFICER ON RECEIPT OF INITIAL SUBMISSIONS HAS EXAMINED THE SAME AND HAS T HEREAFTER RAISED FURTHER QUERIES AND SOUGHT SUBMISSIONS AND ONCE HE WAS SATISFIED WITH THE CLAIM OF THE ASSESSEE, HE HAS ALLOWED THE SAID CLAIM. THEREFORE, WHERE THE ASSESSING OFFICER HAS TAKEN INTO CONSIDER ATION THE FACTUAL AND LEGAL POSITION AND EXAMINED THE MATTER AT LENGT H AND ALLOWED THE CLAIM OF THE ASSESSEE, THE OPINION SO FORMED BY THE ASSESSING OFFICER CANNOT BE HELD AS ERRONEOUS IN NATURE. IT IS THEREF ORE NOT A CASE OF MERE ACCEPTANCE OF STATEMENT OF THE ASSESSEE WITHOU T DUE VERIFICATION OR A CASE OF ERRONEOUS APPLICATION OF PROVISIONS OF LAW AS ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 22 HELD BY THE LD. PR. CIT RATHER IT IS A CASE WHERE T HE ASSESSING OFFICER HAS DULY TAKEN INTO CONSIDERATION THE FACTUAL AND T HE LEGAL POSITION AS EMANATING FROM CONTRACTUAL TERMS AND CONDITIONS AND THE DECISIONS OF THE HONBLE SUPREME COURT AND THE HONBLE GUJARAT H IGH COURT AND ONLY AFTER SATISFYING HIMSELF HAS ALLOWED THE CLAIM OF THE ASSESSEE. 22. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE NECESSARY ENQUIRIES AND EXAMINATION AS REASONABLY E XPECTED HAVE BEEN CARRIED OUT BY THE ASSESSING OFFICER AND HE HA S TAKEN A PRUDENT, JUDICIOUS AND REASONABLE VIEW AFTER CONSIDERING THE ENTIRE MATERIAL AVAILABLE ON RECORD AND THE ORDER SO PASSED U/S 143 (3) CANNOT BE HELD AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERE ST OF REVENUE. THE IMPUGNED ORDER PASSED BY THE LD PCIT U/S 263 IS ACC ORDINGLY SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER IS SUS TAINED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 07/09/2021. SD/- SD/- ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED:- 07/09/2021. *GANESH KUMAR COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI SATYA NARAYAN DHOOT, JODHPUR ITA NO. 35/JODH/2021 SHRI SATYA NARAYAN DHOOT, JODHPUR VS. ACIT, CIRCLE- 03, JODHPUR 23 2. THE RESPONDENT- ACIT, CIRCLE-03, JODHPUR 3. CIT 4. CIT(A) 5. DR, ITAT, JODHPUR. 6. GUARD FILE { ITA NO. 35/JODH/2021} BY ORDER, ASST. REGISTRAR