Sri Sarvaraya Sugars Ltd., Rayavaram V. THE ADDL. CIT, Kakinada

ITA 367/VIZ/2013

• Counselvise Citation: 36725314 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 27-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Capital asset; Depreciation; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 2

Judgement Text

I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 SRI SARVAR AYA SUGARS LTD., CHELLURU, RAYAVARAM MANDAL, EAST GODAVARI DIST. RAYAVARAM VS. ADDL. C IT, KAKINADA RANGE, KAKINADA PAN/GIR NO. : AAECS 6554 N ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N. HARI RESPONDENT BY : SHRI K.V.N. CHARYA DATE OF HEARING : 03/12/2014 DATE OF PRONOUNCEMENT: 19/12/2014 O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER DATED 25.3.2013 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-11, MUMBAI FOR THE ASSESSMENT YEAR 2009-2010. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PU BLIC LIMITED COMPANY ENGAGED IN THE MANUFACTURE OF SUGAR, GENERATION OF POWER AND BEVER AGES. IT FILED ITS E RETURN OF INCOME ON 29.9.2009 DECLARING TOTAL INCOME OF RS.15,64,79,560 /-. LATER, IT FILED THE REVISED RETURN OF INCOME ON 24.10.2010 DECLARING TOTAL INCOME OF RS.1 5,92,30,380/-. THE SAME WAS PROCESSED I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 2 UNDER SECTION 143(1) OF THE ACT. LATER, REGULAR AS SESSMENT WAS COMPLETED U/S.143(3) OF THE ACT, WHEREIN, THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.21,48,78,516/-. WHILE DETERMINING THE TOTAL INCOME, THE AO MADE THE FOLLO WING ADDITIONS/ DISALLOWANCES: A) INTEREST PAID ON PURCHASE TAX : RS. 9,51,160 /- B) CONTRIBUTION TO DISTRICT COLLECTOR, ETC ; RS. 55,000/- C) LEASE RENTAL PAID TO AGRICULTURISTS : RS. 5, 81,920/- D) WEALTH TAX PAID : RS. 3,40,272/- E) DISALLOWANCE OF CLAIM OF DEPRECIATION : RS.5,2 7,63,534/- F) ELECTRICITY DEVELOPMENT FUND PAID TO APEPDCL: R S. 9,56,520/- 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY PARTLY ALLOWED THE AS SESSEES APPEAL. FURTHER AGGRIEVED, THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS; GROUND NO.1: APPELLANT SUBMITS THAT THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS IN THE CASE OF THE APPELLANT. GROUND NO.2: APPELLANT SUBMITS THAT THE COMMISSIONER OF IN COME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING INTEREST PAYABLE ON PURCHASE TAX AMOUNT ING TO RS.9,51,160/-. APPELLANT RESPECTFULLY SUBMITS THAT THE RATIO OF TH E JUDGMENTS; OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAHALAKSHMI SUGAR M ILLS CO. LTD. V CIT 157 ITR 683(DEL.) (RELIED UPON BY THE COMMISSIONER OF INCOM E TAX (APPEALS) AND OF THE HON'BLE SUPREME COURT IN THE CASE OF MAHALAKSHMI SU GAR MILLS CO. LTD. V CIT 123 ITR 429 (SC) (RELIED UPON BY THE ASSESSING OFFICER) ARE NOT JUDGMENTS IN WHICH THE PROVISIONS OF SECTION 43B HAVE BEEN CONSIDERED AND ALSO ARE NOT APPLICABLE TO THE FACTS IN THE APPELLANTS' CASE AND FURTHER TH AT IN THE JUDGEMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF HINDUSTA N MOTORS LTD. V CIT 218 ITR 450(CAL) WHICH IS APPLICABLE TO THE FACTS IN THE AP PELLANTS' CASE, IT HAS BEEN HELD AFTER HAVING CONSIDERED THE SAID JUDGMENTS, CONSIDE RING SIMILAR PROVISIONS OF THE CUSTOMS ACT,1962; THAT INTEREST PAYABLE UNDER THE S AID ACT IS NOT PART AND PARCEL OF CUSTOMS DUTY AND THAT ACCORDINGLY THE PROVISIONS OF SECTION 43B ARE NOT APPLICABLE. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 3 GROUND NO.3: APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME T AX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING CONTRIBUTION OF AN AMOUNT OF RS.5,000/- MADE TO MAYURA KALAPARISHAT, WHICH WAS MADE AS PART OF COMPANY'S C ORPORATE SOCIAL RESPONSIBILITY. GROUND NO.4(I) : APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITI ON MADE BY THE ASSESSING OFFICER OF THE AMOUNT OF RS. 5,27,63,534 TOWARDS ALLEGED EX CESS DEPRECIATION HOLDING THAT THE TURBINE AND GENERATOR SET ALONE CONSTITUTE CO-GENERATION UNIT AND THAT CONSEQUENTLY OTHER INTEGRAL PANS OF THE SAME UNIT L IKE RCC CHIMNEY, BAGASSE DRIER, D.C DRIER, STEAM PIPING, COAL & GAS FEEDING SYSTEM, COAL HANDLING SYSTEM AND SUB-STATION TOWER LINE, ARE NOT PART OF CO-GENE RATION UNIT. WITHOUT PREJUDICE TO THE ABOVE, APPELLANT SUBMITS T HAT: GROUND NO.4 (II): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF R CC CHIMNEY COSTING RS.28,12,912. GROUND NO.4 (III): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF B AGASSE DRIER COSTING RS. 1,25,3 5,483. GROUND NO.4 (IV): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF D .C.DRIER COSTING RS.1,09,02,253. GROUND NO.4 (V): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF S TEAM PIPING COSTING RS.56,05,451. GROUND NO.4 (VI): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF C OAL & GAS FEEDING SYSTEM COSTING RS.1,03,78,869. GROUND NO.4(VII) THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF C OAL HANDLING SYSTEM COSTING RS.1,23,77,145. GROUND NO.4 (VIII): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM MADE FOR DEDUCTION AS REVENUE EXPENDITURE IN RESPEC T OF SUB-STATION TOWER LINE COSTING RS.8,06,19,966/- GROUND NO. 4(IX): THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN NOT ADMITTING THE APPELLANT'S CLAIM OF EXTINGUISHMENT O F OWNERSHIP RIGHTS OVER ELECTRICAL TOWER LINES COSTING RS.8,06,19,966/- . I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 4 GROUND NO.4(X): THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN DENYING THE CLAIM FOR DEPRECIATION AT THE RATE OF 80% IN RESPECT OF S UB-STATION TOWER LINE COSTING RS.10,77,37,223. GROUND NO.5: APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME T AX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER, IN CONSIDERING AN AMOUNT OF RS.11,25,000/- PAID TOWARD S DEVELOPMENT CHARGES TO M/S. EASTERN POWER DISTRIBUTION COMPANY OF A. P. LT D AS CAPITAL EXPENDITURE. 4. THE LD COUNSEL FOR THE ASSESSEE, SHRI G.V.N. HAR I SUBMITTED THAT GROUND NO.1 IS GENERAL IN NATURE AND GROUND NO.2 IS NOT PRESSED FOR THE RE ASON THAT AS ON DATE, THE LEGAL POSITION IS AGAINST THE ASSESSEE. GROUND NO.3 IS NOT PRESSED F OR THE REASON THAT THE AMOUNT IS VERY SMALL. FURTHER, HE SUBMITTED THAT THE CONCESSION GIVEN BY HIM SHALL NOT OPERATE AS A BAR AGAINST THE APPELLANT IN RAISING SIMILAR CLAIMS AT A FUTURE DAT E. 5. THE MAIN ARGUMENTS OF THE LD COUNSEL FOR THE ASS ESSEE REVOLVE AROUND GROUND NO.4 I.E. DISALLOWANCE OF DEPRECIATION ON CERTAIN EQUIPM ENT FORMING PART OF COGENERATION SYSTEM. THE CONTENTIONS OF THE ASSESSEE ARE AS FOLLOWS: A) THE CLAIM FOR HIGHER DEPRECIATION WITH RESPECT T O DEPRECIATION SCHEDULE IS UNDER THE MAIN CAPTION ENERGY SAVING DEVICES AND UNDER THE SUB-CATEGORY CO- GENERATION SYSTEMS. HE SUBMITTED THAT OUT OF THIS , THE CLAIM OF THE APPELLANT FALLS UNDER THE DESCRIPTION BACK PRESSURE PASS OUT , CONTROLLED EXTRACTION, EXTRACTION CUM CONDENSING TURBINES FOR COGENERATION ALONG WITH PRESSURE BOILERS. B) THESE RULES SIGNIFY TWO THINGS: (I) BENEFIT OF HIGHER DEPRECIATION IS INTENDED FOR ENERGY SAVING. (II) CO-GENERATION IS CONSIDERED AN IMPORTANT CONTR IBUTORY TO ENERGY SAVING AND THEREFORE, THE ENTIRE COGENERATION SYSTEM, AS AN EN ERGY SAVING DEVICE, IS ELIGIBLE FOR HIGHER DEPRECIATION. ENERGY SAVING DEVICE IS M ENTIONED AS TURBINE FOR COGENERATION ALONG WITH PRESSURE BOILERS. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 5 C) HE SUBMITS THAT ALL THE EQUIPMENT LIKE RCC CHIMN EY, BAGASSE DRIER, D.C. DRIER, STEAM PIPING, 12.65 KVA TURBINE, COAL & GAS FEEDING SYSTEM, COAL HANDLING SYSTEM AND SUB-STATION TOWER LINE WHICH ARE CONNECT ED TO THE TURBINE FOR COGENERATION HAVE TO BE INVARIABLY CONSIDERED AS PA RT OF THE COGENERATION SYSTEM. D) RELIANCE IS PLACED ON THE SPEECH OF THE HONBLE FINANCE MINISTER WHILE INTRODUCING THE BILL TO GRANT HIGHER DEPRECIATION F OR DEVICES AS WELL AS SYSTEMS FOR ENERGY SAVING. HE SUBMITS THAT BOTH INDEPENDENT ST AND ALONE DEVICES AS WELL AS INTEGRATED SYSTEMS ARE INCLUDED FOR THE BENEFIT OF HIGHER DEPRECIATION. E) REFERENCE IS MADE TO GUIDELINES OF IREDA (WHICH IS A GOVERNMENT COMPANY UNDER THE ADMINISTRATIVE CONTROL OF THE MINISTRY OF NON-CONVENTIONAL ENERGY SOURCES) TO SUPPORT THE CONTENTION THAT THE ENTIRE CO-GENERATION SYSTEM IS ELIGIBLE FOR HIGHER DEPRECIATION. F) RELIANCE IS PLACED IN PARA 1.1. AT PAGE 71 CONTA INING MATERIAL DOWNLOADED FROM THE WEB, TO EXPLAIN AS TO WHAT IS THE COGENERATION SYSTEM AND IT WAS ARGUED THAT THAT COGENERATION SYSTEMS CONSIST OF A NUMBER OF IN DIVIDUAL COMPONENTS- PRIME MOVER (HEAT ENGINE), GENERATOR, HEAT RECOVERY AND ELECTRICAL INTERCONNECTION CONFIGURED INTO AN INTEGRATED WHOLE. HE ARGUED TH AT THE PHRASE COGENERATION SYSTEM INCLUDES WITHIN ITS FOLD ALL THE INDIVIDUAL COMPONENTS OF THE SYSTEM WHICH ARE INTERCONNECTED. G) HE REFERRED TO PAGES 72, 79 AND 81 TO DRIVE HOME THE POINT THAT CONFIGURATION OF ENTIRE COGENERATION SYSTEM IS OF UTMOST IMPORTANCE IN ENSURING THE OPTIMUM EFFICIENCY OF THE COGENERATION SYSTEM. H) HE REFERRED TO FLOW CHART AT PAGE NOS.141 AND 14 2 OF THE PAPER BOOK TO DEMONSTRATE THE INTERCONNECTIVITY. HE RELIED ON TH E FOLLOWING CASE LAWS: I) ANDHRA ORGANICS VS ACIT (2014) 40 CCH 038 (HYD) (TRIB) II) CIT VS. SOUTH MADRAS ELECTRIC SUPPLY CORPORATI ON LTD.(1966) 60 ITR 491 (MAD) I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 6 III) CIT VS. BSES YAMUNA POWERS LIMITED (2013) 358 ITR 47 (DEL) IV) CIT VS. COCHIN REFINERIES LIMITED (1988) 173 IT R 461 (KER) V) DCIT VS. VIPPYSOLVEX PRODUCTS LIMITED (2007) 164 TAXMAN 483 (MP) 6. WITHOUT PREJUDICE TO THE MAIN ARGUMENTS, ALTERNA TIVELY, LD COUNSEL FOR THE ASSESSEE RAISED ADDITIONAL GROUND WHICH WAS RAISED BEFORE TH E LD CIT(A), THAT COST OF SUB-STATION TOWER LINES, WHICH STOOD HANDED OVER TO APTRANSCO AS PER THE TERMS AND CONDITIONS LAID DOWN BY THEM, SHOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITU RE. IT WAS SUBMITTED THAT BY MISTAKE THE ASSESSEE CLAIMED THE DEPRECIATION ON THE SAME THOUG H THE ASSET DOES NOT BELONG TO IT. HE SUBMITTED THAT THE LD CIT(A) WAS IN ERROR IN NOT AD MITTING THIS ADDITIONAL GROUND OF APPEAL, WHICH IS A LEGAL GROUND, WHEREIN, THE FACTS ARE ON RECORD AND FACTS DO NOT REQUIRE FRESH INVESTIGATION. HE ARGUED THAT THE LD CIT(A) DID NO T FOLLOW THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO., LI MITED VS. CIT 229 ITR 383 (SC). HE PRAYED THAT THIS ALTERNATIVE CLAIM OF THE ASSESSEE SHOULD BE ADMITTED AND ON MERITS, HE RELIED ON THE DECISION OF ITAT JODHPUR BENCH IN THE CASE OF DCIT VS. HINDUSTAN ZINC LIMITED (2002) 77 TTJ (JODH) 352, WHICH HAS BEEN UPHELD BY THE HONBLE RA JASTHAN HIGH COURT REPORTED IN 221 CTR (RAJ) 637 FOR THE PROPOSITION THAT SUCH EXPENDITURE IS TO BE CONSIDERED AS REVENUE EXPENDITURE. 7. THE NEXT ALTERNATIVE CLAIM OF THE ASSESSEE WAS T HAT THE FOLLOWING EQUIPMENTS ARE AN INTEGRAL PART OF THE BOILER AND ARE ELIGIBLE FOR HI GHER DEPRECIATION AS IN THE CASE OF THE BOILER: I) STEAM PIPING; II) COAL & GAS FEEDING SYSTEM; III) COAL HANDLING SYSTEM; IV) RCC CHIMNEY AND I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 7 V) BAGASSE DRIER. 8. RELIANCE WAS PLACED ON THE DECISION OF HONBLE M .P. HIGH COURT IN THE CASE OF VIPPY SOLVEX PRODUCTS LIMITED (SUPRA). SIMILAR ARGUMENTS WERE ADVANCED ON EACH ONE OF THE ITEMS. 9. WITH RESPECT TO GROUND NO.5, THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENT IN QUESTION WAS MADE FOR SANCTION OF HT POW ER LINE AND THE AO HAS WRONGLY DISALLOWED THE SAME AS CAPITAL EXPENDITURE AND THER EAFTER ALLOWED THE DEPRECIATION ON THE SAME. HE ARGUED THAT THE LD CIT(A) WAS FACTUALLY I N ERROR IN STATING THAT THE RELEVANT DOCUMENTS WERE NOT SUBMITTED. HE SUBMITTED THAT AL L THE DOCUMENTS ARE ON RECORD AND COPY OF THE SAME WAS PLACED AT PAGE 117 OF PB. ON THE FIND INGS OF THE LD CIT(A) THAT THE CLAIM IS NOT ADMISSIBLE, AS THE ASSESSEE HAS ENDURING BENEFIT, H E ARGUED THAT THE ARGUMENTS ADVANCED FOR ALLOWING THE EXPENDITURE IN THE CASE OF SUB-STATION POWER LINES SHOULD BE ADOPTED FOR THE SAME. 10. ON THE OTHER HAND, LD D.R. SHRI K.V.N.CHARYA CO NTROVERTED THE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THERE I S NO QUARREL WITH THE PROPOSITION THAT THE COGENERATION SYSTEM IS PER SE ELIGIBLE FOR HIGHER DEPRECIATION AS PER THE INCOME TAX RULES. THE DISPUTE, AS PER THE LD DR, IS AS TO WHETHER A PARTI CULAR ITEM OF EQUIPMENT FORMS PART OF COGENERATION SYSTEM AS CLAIMED BY THE ASSESSEE. HE ARGUED THAT THE ASSESSEE SOUGHT TO INCLUDE ALL SUNDRY EQUIPMENTS WHICH ARE NOT EVEN RE MOTELY CONNECTED WITH COGENERATION SYSTEM. HE SUBMITTED THAT PERUSAL OF THE ASSESSMEN T ORDER AND THE ORDER OF THE LD CIT(A) DEMONSTRATES THAT EACH EQUIPMENT CAN PERFORM COGENE RATION WITHOUT ANY CONNECTIVITY TO THE OTHER EQUIPMENT AS CLAIMED BY THE ASSESSEE. 10.1 HE SUBMITTED THAT THE BOILER WAS INSTALLED DUR ING THE FINANCIAL YEAR 2006-07 AND HIGHER DEPRECIATION WAS CLAIMED ON IT AS ENERGY SAVING DEV ICE AND THE DEPARTMENT HAS ALLOWED THE SAME. HE ARGUED THAT THIS FACT DEMONSTRATES THAT T HE BOILER CAN BE STAND ALONE DEVICE AND PART I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 8 OF IT DOES NOT REQUIRE RCC CHIMNEY, BAGASSE DRIER, D.C. DRIER, STEAM PIPING, TURBINE, COAL & GAS FEEDING SYSTEM, COAL HANDLING SYSTEM AND SUB-STATIO N TOWER LINE FOR PERFORMING ITS FUNCTION. 10.2 HE STRONGLY DISPUTED THE CONTENTION OF THE ASS ESSEE THAT THE ENTIRE COGENERATION SYSTEM IS AN INTEGRAL SYSTEM. HE REFERRED TO THE TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE AS PER INCOME TAX RULES, 1962 AND SUBMITTED THAT THE T ERM USED IN THE TABLE PROVIDING FOR HIGHER RATE AT WHICH DEPRECIATION IS ADMISSIBLE UNDER THE HEAD PLANT AND MACHINERY I.E. (III) (8) (IX) IS ENERGY SAVING DEVICE, BEING AND THIS DEMONSTRATES THAT THE LEGISLATURE INTENDED TO SPECIFICALLY ALLOW THE DEPRECIATION ONLY ON ITEMS MENTIONED IN ( 8) (IX) AND (III). ANY ITEM NOT FALLING WITHIN THE SPECIFIC DESCRIPTION CANNOT BE ELIGIBLE FOR HIG HER DEPRECIATION. FOR THIS PROPOSITION, HE REFERRED TO THE JUDGMENT OF HONBLE ORISSA HIGH COU RT IN THE CASE OF INDUSTRIAL DEVELOPMENT CORPORATION OF ORISSA LIMITED VS CIT, (2004) 268 IT R 130 (ORI). 10.3 HE FURTHER SUBMITTED THAT THE TURBINE ITSELF I S CONSIDERED A SYSTEM BY ITSELF AND CAN PERFORM ON STANDALONE BASIS AND HENCE, COGENERATION SYSTEM CONFINED ONLY TO THE TURBINE AND HIGHER RATE OF DEPRECATION SHOULD BE GRANTED ONLY O N THE COST OF TURBINE. HE FURTHER SUBMITTED THAT BAGASSE DRIER CANNOT BY ANY STRETCH OF IMAGINA TION BE CONSIDERED AS PART OF THE COGENERATION SYSTEM AND IT IS RIDICULOUS TO ARGUE I N THAT MANNER FOR THE REASON THAT THE DRIER OF BAGASSE IS REQUIRED EVEN FOR SUGAR MILLS. 10.4 HE REFERRED TO THE FINDINGS OF THE AO AS WELL AS THE LD CIT(A) AND SUBMITTED THAT THE SUGAR MILLS REQUIRE BAGASSE DRIER AND CANNOT BE TRE ATED AS PART OF COGENERATION SYSTEM. 10.5 HE AGAIN REITERATED THAT THE VERY FACT THAT TH E BOILER WAS INSTALLED DURING THE EARLIER FINANCIAL YEAR AND HIGHER DEPRECIATION WAS CLAIMED DEMONSTRATES THAT IT IS NOT AN INTEGRAL PART OF COGENERATION SYSTEM. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 9 10.6 LD CIT (DR) RELIED ON THE JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF COCHIN REFINERIES LIMITED (SUPRA) AND SUBMITTED THAT THE C OAL HANDLING SYSTEM CANNOT BE REGARDED AS PART OF COGENERATION SYSTEM. HE SUBMITTED THAT THE COAL HANDLING SYSTEM CANNOT BE CONSIDERED AS REQUIRED AS AN INTEGRAL PART OF BOILER AND ALSO SUBMITTED THAT THE HONBLE M.P. HIGH COURT IN THE CASE OF VIPPY SOLVEX PRODUCTS LIMITED (SUPRA) D ID NOT CORRECTLY APPRECIATE THE PROPOSITION LAID DOWN BY THE HONBLE KERALA HIGH COURT IN THE C ASE OF COCHIN REFINERIES LIMITED (SUPRA). HE DREW THE ATTENTION OF THE BENCH TO THE OBSERVATION OF THE LD CIT(A) AT PARA 7.19 TO 7.23. 10.7 ON THE ALTERNATE CLAIM OF THE ASSESSEE THAT TH E COST OF SUB-STATION TOWER LINE WHICH STOOD HANDED OVER TO APTRANSCO AS PER THE TERMS AND CONDITIONS ON TURNKEY BASIS, LD D.R. RELIED ON THE ORDER OF THE LD CIT(A). HE SUBMITTED THAT THE ASSESSEE ON ONE HAND CLAIMED DEPRECIATION ON THE ITEMS AND ON THE OTHER HAND SUB MITTING THAT THIS WAS A MISTAKE AND IN FACT THE SUB-STATION TOWER LINE, ETC WERE HANDED OVER TO APTRANSCO AND THE OWNERSHIP IS NOT WITH THE ASSESSEE AND THUS, THE EXPENDITURE SHOULD BE AL LOWED AS REVENUE EXPENDITURE. HE SUBMITS THAT THIS IS A CONTRADICTORY CLAIM. THOUGH NOT LEA VING HIS GROUND, HE AGREED THAT THE CLAIM IS PURELY LEGAL CLAIM BUT SUBMITTED THAT VERIFICATION OF FACTS IS REQUIRED. LD D.R. COUNTERED THE CLAIM OF THE ASSESSEE EQUIPMENT WISE AND SUPPORTED THE ORDER OF THE AO. 10.8 ON THE DEVELOPMENT CHARGES, LD D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ARGUED THAT THERE IS AN ENDURING BENEFIT TO THE ASS ESSEE AND HENCE, THE CLAIM WAS RIGHTLY REJECTED BY THE AO AS WELL AS THE LD CIT(A). 11. IN HIS REJOINDER, THE LD COUNSEL FOR THE ASSESS EE SUBMITTED THAT IN THE CASE OF IDC OF ORISSA LTD., (SUPRA),THE HONBLE ORISSA HIGH COURT HAS HELD THAT CIRCUIT BREAKER, TRANSFORMER, ISOLATOR, ARRESTOR, CONTROL PANEL, CAPACITOR BANK, ETC., FORMED PART OF AUTOMATIC ELECTRICAL LOAD I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 10 MONITORING SYSTEM, AND THE PROPOSITION LAID DOWN IS THAT THE COMPONENTS FORMING INTEGRAL PART OF THE SPECIFIED CATEGORY IN THE RULES, ARE ENTITLE D TO HIGHER DEPRECIATION. HE CONTENDED THAT THOUGH, EACH COMPONENT MAY BE A SYSTEM BY ITSELF, I T CAN ALSO FORM PART OF INTEGRATED SYSTEM AND HENCE, TURBINE THOUGH MAY BE A SYSTEM BY ITSELF IS STILL PART OF CO-GENERATION SYSTEM. 11.1 WITH REGARD TO BAGASSE DRIER, HE SUBMITTED TH AT EFFICIENT BURNING OF BAGASSEE IS ONE OF THE IMPORTANT FACTORS THAT CONTRIBUTE TO THE OVERAL L EFFICIENCY OF A COGENERATION SYSTEM AND HENCE, SAVING IN CONSUMPTION OF BAGASSE IS NOTHING BUT SAVING OF ENERGY. HE ARGUED THAT IN A COGENERATION SYSTEM, THE BIO MASS FUEL IS BURNT TO FIRE THE BOILER TO GENERATE STEAM WHICH PASSES THROUGH A TURBINE FROM WHICH POWER IS GENERA TED WHILE RETAINING THE HEAT OF THE STEAM FOR BEING UTILIZED IN OTHER MANUFACTURING PROCESSES AND HENCE, IT IS A PART OF OVERALL COGENERATION SYSTEM. 11.2 WITH REGARD TO THE BOILER, IT WAS ARGUED THAT IT HAS DUAL UTILITY, ONE AS STAND-ALONE ITEM AND ANOTHER AS PART OF COGENERATION SYSTEM. HE ARG UED THAT THE GRANT OF DEPRECIATION OF BOILER UNDER ITEM NO.-A (HIGHER RATE FOR HIGH EFFICIENCY BOILERS) CANNOT COME IN THE WAY OF EXAMINING THE CLAIM OF HIGHER DEPRECIATION FOR THE OVERALL CO GENERATION SYSTEM UNDER ITEM E. 11.3 WITH REGARD TO COAL HANDLING SYSTEM, HE SUBMIT TED THAT THE LD CIT(A) HAS NO POWER TO QUESTION THE CORRECTNESS OF THE DECISION RENDERED B Y THE HONBLE M.P. HIGH COURT. HE SUBMITTED THAT THE HONBLE M.P. HIGH COURT HAS HELD THAT ONCE BOILER IS SPECIFIED AS ELIGIBLE FOR HIGHER DEPRECIATION, ALL THE PERIPHERAL SYSTEMS WHI CH FORM INTEGRAL PART OF THE BOILER SHALL ALSO BE ELIGIBLE FOR HIGHER DEPRECIATION. HE SUBMITTED THAT THIS LINE OF REASONING WAS ACCEPTED BY I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 11 THE HONBLE DELHI HIGH COURT IN THE CASE OF BSES YA MUNA POWERS LIMITED (SUPRA) DEALING WITH PERIPHERALS OF A COMPUTER. 11.4 ON ISSUE OF HIGHER RATE OF DEPRECIATION IN THE CASE OF STEAM PIPING, COAL & GAS FEEDING SYSTEM, COAL HANDLING SYSTEM, RCC CHIMNEY AND BAGAS SEE DRIER, LD COUNSEL SUBMITTED THAT THE OBSERVATIONS OF THE LD CIT(A) AT PARA 7.24 AND 7.31 AT PAGES 42 AND 43 SUPPORT THE CASE OF THE ASSESSEE. THE LD CIT(A) HELD THAT THESE ITEMS MA Y BE A PART OF THE POWER PLANT OR EVEN BOILER BUT THEY DO NOT FORM PART OF INTEGRAL PART OF COGEN ERATION SYSTEM. SINCE, BOILER IS ENTITLED FOR HIGHER DEPRECIATION, ALL THESE PERIPHERAL ITEMS OF THE BOILER SHALL ALSO BE ENTITLED FOR HIGHER DEPRECIATION. 11.5 HE REITERATED THAT THE COAL AND GAS FEEDING SY STEM AND COAL HANDLING SYSTEM IS AN INTEGRAL PART OF BOILER AND HENCE, ELIGIBLE FOR DEP RECIATION AT A HIGHER RATE. LD COUNSEL FURTHER ARGUED THAT THE ITEMS DC DRIVES ALSO FALLS WITHIN O NE OF THE SPECIFIED CATEGORIES OF ENERGY SAVING DEVICES AND THEREFORE EVEN ON A STAND ALONE BASIS, DEPRECIATION AT A HIGHER RATE IS ELIGIBLE FOR THESE DC DRIVES. HE POINTED OUT THAT THE LD CIT(A) HAS REMAINED SILENT ON THE MATTER. 12. RIVAL CONTENTION HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD AND ORD ERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED, WE HOLD AS FOLLOWS: 13. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE SEPARATE ADJUDICATION. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 12 14. GROUND NOS.2 & 3 ARE NOT PRESSED WITHOUT PREJUD ICE TO THE RIGHTS OF THE APPELLANT TO TAKE THESE GROUNDS AND ARGUMENTS AT A FUTURE DATE. THUS BOTH THESE GROUNDS ARE DISMISSED AS NOT PRESSED WITH A RIDER THAT THE DECISION HEREIN S HALL NOT BE A PRECEDENT FOR THE FUTURE. 15. GROUND NO.4 IS ON THE ISSUE OF HIGHER DEPRECIAT ION FOR COGENERATION SYSTEM. 16. BOTH PARTIES AGREED THAT THE ASSESSEE IS ENTITL ED FOR HIGHER DEPRECIATION FOR COGENERATION SYSTEM. THE ONLY ISSUE IS WHETHER PARTICULAR EQUIP MENT IS PART OF COGENERATION SYSTEM OR NOT. BEFORE WE GIVE OUR FINDINGS ON EACH AND EVERY ITEM, WE BRIEFLY TOUCH UPON THE FACTS OF THIS ISSUE. THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF SUGAR FOR WHICH PURPOSE, IT REQUIRES STEAM. THE ASSESSEE COMPANY WAS HAVING SO ME BOILERS WHICH WERE SERVING THE PURPOSES OF ITS BUSINESS. DURING THE FINANCIAL YEA R 2006-07, THE ASSESSEE COMPANY DECIDED TO INSTALL 12.65 MW COGENERATION PLANT. AS THE COGENE RATION PLANT REQUIRED A HIGHER EFFICIENCY BOILER, IT ACQUIRED ONE SUCH BOILER, WHICH WOULD FI T INTO THE DESIGN OF COGENERATION PLANT. IT WAS DONE IN THE FINANCIAL YEAR 2006-07. THIS HIGH EFFI CIENCY BOILER WAS BEING USED FOR THE MANUFACTURING ACTIVITY OF THE ASSESSEE IN ADDITION TO THE BOILERS THAT THE COMPANY WAS ALREADY HAVING, WHILE AWAITING THE COGENERATION SYSTEM TO G ET IN STALLED. MEANWHILE, THE ASSESSEE CLAIMED HIGHER DEPRECIATION ON THE HIGHER EFFICIENC Y BOILERS FOR THE ASSESSMENT YEAR 2007-08 ON THE GROUND THAT THIS IS AN ENERGY SAVING DEVICE AND FALLS IN (III) (8)(IX)(A). THE ASSESSING OFFICER ALLOWED THE HIGHER DEPRECIATION DURING THAT YEAR THOUGH THE COGENERATION PLANT HAD NOT BEEN COMMISSIONED. DURING THE PREVIOUS YEAR RELEVA NT TO THE IMPUGNED ASSESSMENT YEAR, THE COGENERATION PLANT HAS BEEN COMMISSIONED. THE ASSE SSEE HAS CLAIMED HIGHER DEPRECIATION IN RESPECT OF FOLLOWING ITEMS ON THE GROUND THAT THEY FORM PART OF COGENERATION SYSTEM: I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 13 I) RCC CHIMNEY II BAGASSE DRIER III) DC DRIER IV) STEAM PIPING; V) 12.65 KVA TURBINE VI) COAL & GAS FEEDING SYSTEM; VII) COAL HANDLING SYSTEM; VIII) SUB-STATION TOWER LINE 17. THERE IS NO DISPUTE ON THE ALLOWABILITY OF 12.6 5 KVA TURBINE FOR HIGHER RATE OF DEPRECIATION. THE DISPUTE RELATES TO OTHER ITEMS O NLY. 18. BEFORE WE CONSIDER EACH ITEM SEPARATELY, WE EXT RACT FOLLOWING NEW APPENDIX -I OF IT RULES, 1962 EFFECTIVE FROM ASSESSMENT YEAR 2006-07 ONWARDS: PART A : TANGIBLE ASSETS ..................................... (III) PLANT AND MACHINERY: . (8)(IX) ENERGY SAVING DEVICES, BEING - A: SPECIALISED BOILERS AND FURNACES (D) HIGH EFFICIENCY BOILERS (THERMAL EFFICIENCY H IGHER THAN 75% IN CASE OF COAL FIRED AND 80% IN CASE OF OIL/GAS FIRED BOILERS) I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 14 . D) COGENERATION SYSTEMS: (A) BACK PRESSURE PASS OUT, CONTROLLED EXTRACTION, EXTRACTION CUM CONDENSING TURBINES FOR CO-GENERATION ALONG WITH PRESSURE BOILERS. . BEFORE GOING FURTHER, WE WOULD CONSIDER THE LEGAL P OSITION ON THE ISSUE. 19. IN THE CASE OF SOUTH MADRAS ELECTRIC SUPPLY COR PORATION LIMITED (SUPRA), THE HONBLE MADRAS HIGH COURT HAS HELD THAT HIGHER RATE OF DEPR ECIATION TO AN ELECTRIC SUPPLY CORPORATION WOULD INCLUDE WITHIN ITS SCOPE DEPRECIATION OF SERV ICE CONNECTION AND PARTS INCLUDING OVERHEAD CABLES AND WIRES. AT PARA-4, IT IS HELD THAT IN O UR OPINION ON THAT ACCOUNT, IT CANNOT BE SAID THAT ELECTRICAL MACHINERY IN CL. E SHOULD BE READ A S EXCLUDING FROM ITS SCOPE OVERHEAD CABLES AND WIRES. THE USE OF THE EXPRESSION ELECTRIC PLA NT, MACHINERY, BOILERS IN CL. E APPEARS TO HAVE BEEN MADE IN A COMPREHENSIVE SENSE SO AS TO IN CLUDE PARTS OF THE PLANT AS WELL AS ELECTRIC MACHINERY. 20. THE HONBLE DELHI HIGH COURT IN THE CASE OF BSE S YAMUNA POWERS LIMITED (SUPRA) HELD AS FOLLOWS: WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS, PRINTERS, SCANNERS AND SERVER ETC, FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT, THE COMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WITHOUT THE COMPUTER. CONSEQUENTLY, AS THEY ARE TH E PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60 %. 20.1 IN THIS CASE, THE COMPUTER SYSTEM BY ITSELF CA N BE USED AS A STANDALONE BASIS WHICH IS LIKE BOILER IN THE CASE OF THE ASSESSEE. BUT THIS DOES NOT MEAN THAT ACCESSORIES AND PERIPHERALS I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 15 ARE NOT ENTITLED TO HIGHER DEPRECIATION. THE REASO NS GIVEN BY THE HONBLE COURT IS THAT THESE PERIPHERALS AND ACCESSORIES CANNOT BE USED WITHOUT A COMPUTER. ON THIS SAME ANALOGY, THE EQUIPMENTS WHICH ARE NECESSARY IN THE SUCCESSFUL OP ERATION OF A COGENERATION SYSTEM ARE PART OF THE COGENERATION SYSTEM AND WOULD BE ENTITLED FO R HIGHER DEPRECIATION IN ADDITION TO HIGHER DEPRECIATION ON THE BOILER AND HIGHER DEPRECIATION ON THE TURBINE WHICH WAS ALLOWED BY THE REVENUE. 21. IN THE CASE OF COCHIN REFINERIES LTD (SUPRA), T HE HONBLE KERALA HIGH COURT AT PARA 6 HELD AS FOLLOWS: THE ASSESSEE HAD CLAIMED DEPRECIATION AND DEVELOPM ENT REBATE AT THE HIGHER RATE ON CERTAIN ASSETS SUCH AS WASTE PONDS, FRESH W ATER TANK, PIPE RACKS, ALLOY PIPING, JETTY FACILITIES, CHERRY PICKER CRANES, ETC . THE ASSESSEE CLAIMED DEPRECIATION AND DEVELOPMENT REBATE ON THESE ITEMS AT THE HIGHER RATE APPLICABLE TO THE REFINERY PLANT. THE ITO, HOWEVER , ALLOWED DEPRECIATION AND DEVELOPMENT REBATE ONLY AT THE LOWER RATE APPLICABL E TO EACH OF THE ASSETS, DEPENDING UPON WHETHER IT REPRESENTED BUILDING, MAC HINERY, ETC. THE AAC, ON APPEAL, ALLOWED DEPRECIATION AND DEVELOPMENT REBATE AT THE HIGHER RATE IN RESPECT OF CERTAIN ITEMS, BUT ALLOWED ONLY LOWER RA TES IN RESPECT OF OTHER ITEMS. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL ALL OWED THE HIGHER RATE OF DEPRECIATION AND DEVELOPMENT REBATE FOR ALL THE ITE MS. IN OUR VIEW, THE TRIBUNAL WAS RIGHT IN DOING SO, FOR BY THE VERY NATURE OF TH E ASSETS IN QUESTION, WE HAVE NO DOUBT THAT THEY FORM PART OF THE REFINERY PLANT AND ARE AS SUCH ENTITLED TO THESE ALLOWANCES AT THE HIGHER RATE. ACCORDINGLY, WE ANSWER QUESTION NO.3 IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 21.1 THE PROPOSITION LAID DOWN IS THAT THE HIGHER R ATE OF DEPRECIATION SHOULD BE ALLOWED EVEN ON SOME OF THE PERIPHERAL ITEMS WHEN THESE ASSETS F ORM PART OF THE REFINERY PLANT WHICH IS ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 16 22. IN THE CASE OF DCIT VS. VIPPY SOLVEX PRODUCTS L IMITED (SUPRA), THE HONBLE M.P. HIGH COURT WAS CONSIDERING THE CASE OF 100% DEPRECIATION ON HIGH EFFICIENCY BOILER. THE AUTOMATIC COAL SUPPLY SYSTEM CONSISTING OF COAL CONTAINER, CO AL CONVEYER, BUCKET ELEVATOR AND DUST COLLECTING SYSTEM WERE CONSIDERED AS INTEGRAL PART OF HIGH EFFICIENCY BOILER AND 100% DEPRECIATION WAS DIRECTED TO BE ALLOWED. THE HONB LE COURT NOTED THE OBSERVATIONS OF THE TRIBUNAL THAT THE BOILER WILL NOT FUNCTION IN THE A BSENCE OF COAL SUPPLY SYSTEM AND HENCE, COAL SUPPLY SYSTEM WAS PART AND PARCEL OF THE BOILER AND HELD THAT THE ENTIRE COAL HANDLING SYSTEM IS ENTITLED TO 100% DEPRECIATION. THE LD CIT(A) DISPU TED THESE FINDINGS OF THE HONBLE M.P. HIGH COURT. WE DO NOT FIND MUCH SUBSTANCE IN THE OBSERV ATIONS OF THE LD CIT(A) AND HENCE WE DO NOT APPROVE THE SAME. 23. IN THE CASE OF ANDHRA ORGANICS VS ADDL. CIT, 40 CCH 038(HYD)(TRIB), IT WAS HELD THAT THE CLAIM OF THE ASSESSEE THAT IT HAS COMMENCED TRI AL PRODUCTION IN THE ABSENCE OF CONTROL PANEL CANNOT BE ACCEPTED. THE AOS FINDINGS IN THAT CASE WAS THAT ON SEARCH OF INTERNET, HE FOUND THAT THE ASSET IS A 3MW COGENERATION CAPTIVE POWER PLANT CONSISTING OF COAL FIRED BOILER WITH EFFICIENCY OF 80% AND TURBINES. THE AO FURTHER WAS OF THE VIEW THAT THE BOILER AND TURBINE ARE NOT TWO DIFFERENT ASSETS BUT PART OF COGENERATION P LANT. HE FURTHER FOUND THAT THE CONTROL PANEL FOR TURBINE WAS PUT TO USE ONLY 6.10.2008. THEREFO RE, IT WAS HELD THAT UNLESS THE ENTIRE SYSTEM BECOMES FUNCTIONAL, DEPRECIATION CANNOT BE ALLOWED ON THE INDIVIDUAL ITEMS. THESE FACTUAL FINDINGS HAVE BEEN RELIED UPON BY LD COUNSEL FOR TH E ASSESSEE. 24. IN THE CASE OF IDC OF ORISSA LTD., (SUPRA), THE HONBLE ORISSA HIGH COURT HELD THAT THE INSTRUMENTS FOR CONTROLLING AND MONITORING ELECTRIC ITY FLOW COMPRISING OF CIRCUIT BREAKER, TRANSFORMER, ISOLATOR, ARRESTOR, CONTROL PANEL, CAP ACITOR BANK, ETC., FORMING PART OF AUTOMATIC I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 17 ELECTRICAL LOAD MONITORING SYSTEM, FELL UNDER ITEM (A) OF CATEGORY B OF ENERGY SAVING DEVICES, HENCE ELIGIBLE FOR 100% DEPRECIATION. 25. LD D.R. RELIED ON THE DECISION OF HONBLE MADRA S HIGH COURT IN THE CASE OF CIT VS TTG INDUSTRIES LTD., 363 ITR 44 (MAD), WHEREIN, THE ISS UE OF 100% DEPRECIATION OF A GENERATOR SET WAS CONSIDERED. IN THIS CASE, THE MACHINERIES IN Q UESTION WERE GENERATOR SET, DRILLING, BORING MACHINES, BORING MACHINE FOR FOUNDATION WORK AND LA THE MACHINE, ETC. THESE WERE APPARENTLY USED BY THE ASSESSEE, FOR VARIOUS ENGINEERING WORKS INCLUDING, THE ACTIVITY OF MANUFACTURE OF WIND MILLS, ELECTRIC GENERATORS AND PUMPS. IN THE DEPRECIATION TABLE, THE WORD EXCLUSIVELY USED HAS NOT BEEN MENTIONED. THE TRIBUNAL RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF AMCO BATTERIES LTD., 91993) 203 ITR 614 (KARN) AND HELD THAT THE TERM EXCLUSIVELY WAS PERHAPS IMPLIED IN THE ORDER. TH E FACT OF THE CASE AT HAND IS DIFFERENT FROM THE CASE OF TTG INDUSTRIES LTD (SUPRA), WHEREIN, THE CA SE OF COGENERATION SYSTEM WAS NOT CONSIDERED. THUS, THE PROPOSITIONS LAID DOWN IN TH IS CASE LAW DO NOT APPLY TO THE FACTS OF THE CASE. 26. RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. H.B. LEASING & FINANCE LTD., 360 ITR 362 (DEL). TH IS IS A CASE WHERE THE HONBLE COURT HELD THAT A TANKER OR A GAS CYLINDER ATTACHED TO THE BOD Y OF A TRUCK CONTINUED TO BE A GAS CYLINDER AND WAS, ACCORDINGLY, ENTITLED TO DEPRECIATION @ 10 0%. THE ARGUMENTS OF THE REVENUE THAT PARTS CANNOT BE SEGREGATED FOR THE PURPOSE OF CLAIM ING DEPRECIATION AT THE DIFFERENT RATES ON DIFFERENT PARTS WAS REJECTED. IN THE CASE AT HAND THE TERM IS USED SYSTEM. HENCE, EVEN SEPARATE PART, WHICH CONSTITUTES SYSTEM ARE ELIGI BLE TO HIGHER DEPRECIATION. THIS CASE RELIED UPON BY THE REVENUE IS OF NO AVAIL. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 18 27. IN THE CASE OF KERALA SPONGE IRON LTD VS ACIT, 32 ITR (TRIB) 0718, RELIED UPON BY LD D.R., THE BENCH WAS CONSIDERING THE CLAIM OF THE AS SESSEE FOR HIGHER DEPRECIATION ON THE GROUND THAT CERTAIN EQUIPMENTS ARE POLLUTION CONTR OL EQUIPMENT. ON FACTS, THE TRIBUNAL CAME TO A CONCLUSION THAT CERTAIN ASSETS LIKE AIR POLLUT ION CONTROL EQUIPMENT AND WATER POLLUTION CONTROL EQUIPMENT, ETC DO NOT QUALIFY AS POLLUTION CONTROL EQUIPMENT. THIS IS A FACTUAL ISSUE AND HAS NO RELEVANCE TO THE CASE AT HAND. 28. IN THE LIGHT OF THE ABOVE LEGAL POSITION, WE NO W CONSIDER THE CONTENTION OF THE ASSESSEE THAT THE HIGHER EFFICIENCY BOILER AND 12.65 KVA TUR BINE HAVE TO BE CONSIDERED TOGETHER ALONG WITH OTHER EQUIPMENTS NECESSARY FOR GENERATION OF P OWER, AS THE INTEGRATED COGENERATION SYSTEM. IN OUR VIEW, THERE CANNOT BE TWO OPINIONS THAT HIGH EFFICIENCY BOILER ALONG WITH TURBINE AND THE ASSOCIATED EQUIPMENTS CONNECTING THEM, INCR EASING ITS EFFICIENCY ETC., ARE TO BE CONSIDERED AS PART OF COGENERATION SYSTEM AND ARE T HEREFORE ELIGIBLE FOR HIGHER DEPRECIATION ALLOWANCE. 29. THE LD CIT(A) OBSERVED THAT RCC CHIMNEY AND BAG ASSE DRIER ARE PART OF THE HIGHER EFFICIENCY BOILER. THIS FACTUAL FINDING IS NOT DIS PUTED BEFORE US BY THE REVENUE. THUS, BOTH THESE ITEMS HAVE TO BE CONSIDERED AS INTEGRAL PART OF THE COGENERATION SYSTEM. THE VERY EXPRESSION COGENERATION REFERS TO SIMULTANEOUS GE NERATION OF TWO FORMS OF POWER I.E. HEAT AND ELECTRICITY. BOILER IS ONE COMPONENT OF SUCH SYSTE M WHEREFROM THE ROOT POWER I.E. STEAM IS GENERATED AND IT IS THIS STEAM THAT IS CONVERTED IN TO ELECTRICITY POWER WITH THE USE OF A TURBINE. THUS, THE BOILER HAS A DUAL UTILITY I.E. AS STANDAL ONE ITEM AND ALSO A PART OF COGENERATION SYSTEM. HIGH EFFICIENCY BOILERS ARE REQUIRED FOR G ENERATION OF POWER. THEREFORE, RCC CHIMNEY AND BAGASSE DRIER FORMING PART OF BOILER SYSTEM ARE ELIGIBLE FOR HIGHER DEPRECIATION. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 19 30. COMING TO DC DRIER WHICH ARE ENERGY SAVING DEVI CES, WE ARE OF THE VIEW THAT THIS CANNOT BE USED INDEPENDENTLY IN A COGENERATION SYSTEM. TH ESE ARE ENERGY SAVING DEVICE AND ARE ELIGIBLE EVEN ON STANDALONE BASIS FOR HIGHER RATE O F DEPRECIATION. THEY FELL WITHIN ONE OF THE SPECIFIC CATEGORY IN ENERGY SAVING DEVICE. HENCE, HIGHER RATE OF DEPRECIATION SHOULD BE ALLOWED ON THIS EQUIPMENT ALSO. 31. STEAM PIPING IS PART OF THE BOILER. WE DO NOT APPRECIATE THE FINDINGS OF THE REVENUE AUTHORITIES THAT STEAM PIPING CANNOT BE CONSIDERED AS PART OF COGENERATION SYSTEM. EVEN APPLYING THE TEST LAID DOWN BY VARIOUS COURTS, WE H AVE TO NECESSARILY HOLD THAT STEAM PIPING CANNOT BE USED INDEPENDENTLY OR STANDALONE BASIS. IT IS AN INTEGRAL PART OF COGENERATION SYSTEM, HENCE, ELIGIBLE FOR HIGHER DEPRECIATION. 32. COMING TO THE COAL & GAS FEEDING SYSTEM AND COA L HANDLING SYSTEM, WE APPLY THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF VIPPY SOLVEX PRODUCTS LTD (SUPRA) AND COME TO OUR CONCLUSION THAT THIS IS AN INTEGRAL PART OF HIGH EFFICIENCY BOILER. THE VERY DESCRIPTION OF NATURE OF THE EQUIPMENT DEMONSTRATES THAT IT CANNOT BE INDEPENDENTLY USED AND HAS TO BE USED ALONG WITH THE BOILER. THUS, WE DIRECT THE AO TO T REAT THE COAL & GAS FEEDING SYSTEM AND COAL HANDLING SYSTEM AS INTEGRATED PART OF COGENERATION SYSTEM AND ALLOW HIGHER DEPRECIATION ON THE SAME. 33. WITH REGARD EXPENDITURE ON SUB-STATION POWER LI NE, WE CANNOT AGREE WITH THE CONTENTION OF THE APPELLANT THAT EXPENDITURE INCURRED ON SUB-S TATION POWER LINE IS ALSO PART OF THE COGENERATION SYSTEM. THIS EXPENDITURE IS NECESSARY FOR ONWARD DISTRIBUTION OF THE POWER GENERATED IN A COGENERATION SYSTEM AND HENCE CANNOT BE CONSIDERED AS AN INTEGRAL PART OF THE COGENERATION SYSTEM. I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 20 34. WE NOW CONSIDER THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THE ISSUE OF EXPENDITURE INCURRED ON SUB-STATION POWER LINE, WHI CH WAS ULTIMATELY HANDED OVER TO APTRANSCO. BOTH THE PARTIES AGREED THAT THIS IS LE GAL CLAIM AND THAT THE FACTS ARE ON RECORD. UNDER THESE CIRCUMSTANCES, WE HOLD THAT THE LD CIT( A) SHOULD HAVE ADMITTED THIS ADDITIONAL GROUND OF THE ASSESSEE AND ADJUDICATED THE SAME FOL LOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC LTD., (SUPRA). 35. COMING TO ALLOWABILITY OF THIS CLAIM, THE HONB LE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ZINC LTD., (2009) 221 CTR (RAJ) 637 C ONSIDERED THE FOLLOWING QUESTION NO.2 AND ANSWER AS FOLLOWS: COMING TO THE QUESTION NO.2, IT IS TO BE NOTICED TH AT THE POWER LINE HAD BEEN ERECTED BY THE ASSESSEE FOR FACILITATING ROUTINE OP ERATIONS AND SMOOTH FUNCTIONING OF THE BUSINESS OF THE ASSESSEE. IT IS NOT DISPUTED BEFORE US THAT THE POWER LINE REMAINS THE PROPERTY OF THE ELECTRICITY BOARD AND THE ASSESSEE HAD NOT ACQUIRED ANY CAPITAL ASSET OR ANY ENDURING BENEFIT OR ADVANTAGE. THEREFORE, FOR THE PARITY OF THE REASONS ASSIGNED BY US IN DECIDIN G QUESTION NO.1, AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE, THE QUESTION NO.2 ALSO DESERVES TO BE DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE. 36. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIRE CT THE AO TO TREAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON CONSTRUCTION OF SUB-STA TION POWER LINES AS INCURRED IN THE REVENUE FIELD AND ALLOW THE CLAIM OF THE ASSESSEE. NEEDLES S TO SAY THAT SINCE THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE IS ALLOWED AS REVENUE EXPE NDITURE THE QUESTION OF ALLOWANCE OF DEPRECIATION DOES NOT ARISE. 37. THIS BRINGS US TO GROUND NO.5 WHICH IS THE CLAI M OF THE ASSESSEE THAT THE EXPENDITURE INCURRED FOR SANCTION OF HT POWER LINE IS IN THE RE VENUE FIELD. THE AMOUNT IS PAID AS NON- REFUNDABLE AMOUNT TO OBTAIN APPROVAL OF POWER DISTR IBUTION COMPANY LTD., FOR EXTENSION OF I.T.A. NO.367/VIZ/2013 ASSESSMENT YEAR:2009-2010 21 POWER SUPPLY. NO ASSET HAS BEEN CREATED AND HENCE, THE QUESTION OF TREATING THE EXPENDITURE AS CAPITAL IN NATURE DOES NOT ARISE. CONSISTENT WI TH THE VIEW TAKEN BY US IN THE CASE OF SUB- STATION POWER LINE, WHICH WAS HANDED OVER TO APTRAN SCO, WE DIRECT THE AO TO ALLOW THIS EXPENDITURE AS IN THE REVENUE FIELD. 38. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19/1 2/2014 . SD/- SD/- (D. MANMOHAN ) (J. SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISHAKHAPATNAM DATED 19/12/2014 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE : 2. THE RESPONDENT. : 3. THE CIT(A) - VISAKHAPATNAM 4. CIT , VISAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//