ACIT, Ludhiana V. Sh. Rakesh Gupta, Ludhiana

ITA 373/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77160 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWIN S
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITA NO. 373 /CHD/2014 ASSESSMENT YEAR : 2009-10 A.C.I.T. CIRCLE I VS. SH. RAKESH GUPTA. LUDHIANA C/O EASTMAN INTERNATIONAL, B-XXX-2185/C LUDHIANA PAN: ACZPG7190A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWIN S RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING 25.6.2014 DATE OF PRONOUNCEMENT 09.07.2014 O R D E R PER T.R.SOOD, A.M THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER PASSED BY THE LD. CIT(A)-I, LUDHIANA ON 06.01.2014. 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS. I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING TH E EXPENDITURE INCURRED RELATING TO ACQUIRE RIGHTS TO USE THE POWER EVACUATION INFRASTRUCTURE FACILITY AS CAPITAL EXPENDITURE WHEREAS HONBLE SUPREME COURT IN THE CASE OF TRAVANCORE COCHIN CHEMICALS LTD. VS. CIT REPORT IN 106 ITR 900(HON'BLE SUPREME COURT) HAS HELD THAT LAYING OF NEW ROAD AND PAYING MONEY TO THE GOVT. OF KERALA IS OF A CAPITAL IN NATURE. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION @ 80% ON THE CONTRIBUTION MADE BY THE ASSESSEE FOR THE USE OF POWER EVACUATION INFRASTRUCTURE FACILITIES IN WIND MILLS WHICH IS A POWER TRANSMISSION DEVICE AND NOT A POWER GENERATION DEVICE, ELIGIBLE FOR DEPRECIATION AT THE NORMAL RATE OF DEPRECIATION I.E.@ 15% 2 III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATIN G THE WIND MILL AS RENEWABLE ENERGY DEVICE WHEREAS THE ASSESSING OFFICER HAS BROUGHT ON RECORD SUFFICIENT MATERIAL TO PROVE THAT WIND MILL WAS IN FACT A PART OF PLANT & MACHINERY AND NOT A RENEWABLE ENERGY DEVICE. 3 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN STALLED WIND MILL. THE ASSESSEE MADE SOME CONTRIBUTION TOW ARDS POWER EVACUATION INFRASTRUCTURE FACILITIES AND CLAI MED 80% DEPRECIATION ON THE SAME. THE DEPRECIATION WAS DIS ALLOWED ON THE BASIS THAT THE ASSESSEE WAS NOT OWNER OF THIS F ACILITY AND IN ANY CASE THIS FACILITY IS NOT IN THE NATURE OF RENE WAL ENERGY DEVICE. IN THIS BACKGROUND THE ASSESSING OFFICER AL LOWED DEPRECIATION ONLY @ 15%. 4 ON APPEAL, THE LD. CIT(A) WAS OF THE OPINION THAT POWER EVACUATION INFRASTRUCTURE FACILITIES IS ABSOLUTELY ESSENTIAL FOR THE WIND MILL TO GENERATE ELECTRICITY TO BE PRACTIC ALLY AVAILABLE TO THE EVENTUAL CUSTOMERS. IN OTHER WORDS, WITHOUT SUCH FACILITY THE INSTALLATION OF WIND MILL WOULD BE MEANINGLESS. HE ALSO OBSERVED THAT POWER EVACUATION INFRASTRUCTURE FACI LITIES BY ITSELF CANNOT BE DESCRIBED AS RENEWAL ENERGY DEVICE . HOWEVER, SAME ALONG WITH ASSOCIATION OF WIND MILL W OULD DETERMINE THE TRUE CHARACTER. ACCORDINGLY HE ALLOW ED THE DEPRECIATION @ 80%. 5 BEFORE US, THE LD. DR FOR THE REVENUE STRONGLY SU PPORTED THE ORDER OF ASSESSING OFFICER. 6 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSE E SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN CASE OF ACIT V. EASTMAN INTERNATIONAL, ITA NO. 1127/CHD/2012. THIS ORDER HAS BEEN FOLLOWED AGAIN I N CASE OF 3 ACIT, CIRCLE-1 VS. M/S EASTMAN INTERNATIONAL, ITA N O. 821& 1127 / CHD/2012. 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION OF THE TR IBUNAL IN CASE OF ACIT V. EASTMAN IMPEX, LUDHIANA, ITAS NO. 8 19 & 820/CHD/2012 AND THE SAME HAS BEEN ADJOURNMENT VIDE PARA 10 WHICH IS AS UNDER: 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE FACTS OF THE PR ESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF TRUMAC ENGINEERING CO. PVT. LTD. MUMBAI VS. ITO(SUPRA) WHEREIN VIDE OR DER DATED 27.06.2008 RELEVANT FINDING GIVEN BY THE ITAT, MUMB AI BENCH I IN PARA 21 TO 24 READ AS UNDER: 21. COMING TO THE NEXT ITEM, I.E. DISALLOWANCE OF DEPRECIATION OF RS. 42,50,000/- IN RESPECT OF CONTR IBUTION MADE TO GEDA, LD. COUNSEL REITERATED THE SUBMISSIONS MAD E BEFORE THE REVENUE AUTHORITIES AND SUBMITTED THAT THE POWE R GENERATED FROM THE WIND MILL FARM AT NAVADRA / BHOG AT SITE IS DELIVERED TO THE SUB-STATION OF GEDA THROUGH HT LIN ES. THIS POWER IN TURN IS TRANSFERRED TO GEDA FOR FURTHER TR ANSMISSION. FOR THIS PURPOSE, CONNECTION OF GRID AT SUBSTATION IS REQUIRED. THE CONTRIBUTION MADE TO GEDA IS TOWARDS SETTING UP OF CENTRALIZED SUBSTATION AT LAMBA, THROUGH WHICH THE ELECTRICITY GENERATED BY THE WIND FARM WOULD BE DELIVERED TO TH E GRID. THE CLAIM WAS MADE ON THE BASIS OF INFORMATION AVAILABL E. IN FACT, SUBSEQUENTLY, ASSESSEE RECEIVED CONFIRMATION, AS ST ATED IN THE PRECEDING PARA, FROM GEDA, FOR FIXING THE CONTRIBUT ION OF RS. 35,60,862.75 OUT OF RS. 42,50,000/- FOR FORMATION O F SUBSTATION AND THE BALANCE, IT WAS INTIMATED, WILL BE UTILIZED TOWARDS RUNNING AND MAINTENANCE OF SUBSTATION. 22. IN THE ALTERNATE, LEARNED COUNSEL SUBMITTED THA T THE PAYMENT MADE TO GEDA AT LEAST TO BE TREATED AS REVE NUE EXPENDITURE. IF THE REVENUE TREATS THIS AS NOT SOME THING OWNED BY THE ASSESSEE (SUBSTATION), THEN IT NATURALLY FOL LOWS THAT ASSESSEE CONTRIBUTED THE ABOVE AMOUNT FOR CREATION OF SUBSTATION, WHICH IS THE PROPERTY OF GEDA. IN THAT CASE, LEARNED COUNSEL SUBMITTED, THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BIRLA JU TE MANUFACTURING LTD., REPORTED IN 182 ITR 497 (CAL) I S CLEARLY APPLICABLE; LEARNED COUNSEL SUBMITTED, THE SAME VIE W HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., REPORTED IN 122 ITR 995 (BOM). 23. LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT T HE ASSESSEE IS NOW IMPROVING THE METHOD OF TRANSACTION BY INSTALLING NEW MACHINERIES, WITHOUT WHICH ALSO THE WINDMILL WILL CONTINUE TO OPERATE. THIS CANNOT BE TREATED AS AN I NTEGRAL PART 4 OF THE WINDMILL AS SUCH. THIS HAS INDEPENDENT STAND ING. ASSESSEES WINDMILL WORKED EVEN WITHOUT THESE MACHI NERIES. AS SUCH LD. DR FOR THE REVENUE SUBMITTED THAT THE O RDERS OF THE REVENUE AUTHORITIES MAY BE UPHELD. 24. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF TH E VIEW THAT THE ASSESSEES APPEAL IS TO BE ALLOWED ON MERIT. FI RSTLY, IT IS TO BE SEEN THAT THESE MACHINERIES HAD NO INDEPENDENT FUNCTIONING AS SUCH. MERELY BECAUSE IT IMPROVES THE WORKING SYSTEM OR CONTROLLING / MONITORING SYSTEM, IT CANNO T BE TREATED AS AN INDEPENDENT MACHINERY AND NOT PART OF THE INT EGRATED MACHINERY. THE SUBMISSION OF THE LEARNED COUNSEL IS THAT IF THE MACHINERY INSTALLED AT THE FIRST STAGE OF INSTALLIN G THE WINDMILL ITSELF, THE CLAIM OF THE ASESSEE; WOULD HAVE BEEN A LLOWED, MERELY BECAUSE FOR SOME REASON OR OTHER IT WAS SUBS EQUENTLY INSTALLED, DOES NOT MEAN THAT IT IS NOT A PART OF T HE MACHINERY AS SUCH,. SINCE THE MACHINERY HAD NO INDEPENDENT FU NCTIONING, WE ARE OF THE VIEW THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BIRLA JUTE MANUFACTURING; LTD. (SUPRA) IS CLEARLY APPLICABLE. IN THE CASE OF EXCEL INDUSTRIES LTD. (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD; P AYMENT MADE FOR OVERHEAD SERVICE LINE, WHICH REMAINED THE PROPERTY OF ELECTRICITY BOARD, IS ALLOWABLE AS REVENUE EXPEN DITURE; ON FACTS, IN THE INSTANT CASE OF THE ASSESSEE, THE PAY MENT TO GEDA IS TO BE ALLOWED IN THE LIGHT OF THIS DECISION OF THE JURISDICTIONAL HIGH COURT. HENCE, APPEAL BY THE ASS ESSEE WITH REGARD TO GROUND NO. 1,2,3 AND 4 ARE ALLOWED. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE OF TRUMA C ENGINEERING CO. PVT. LTD. MUMBAI VS. ITO (SUPRA), S O, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO DE CISIONS DATED 27.06.2008 OF ITAT, MUMBAI BENCH I, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). FOLLOWING THE ABOVE, WE FIND NOTHING WRONG IN THE O RDER OF THE LD. CIT(A) AND WE CONFIRM THE SAME. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 09.07.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH JULY 2014 AG COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR