The Asstt. Commr. of Income Tax, Gandhidham Circle, GANDHIDHAM V. Shri Vasant Manji Thakker, GANDHIDHAM

ITA 443/RJT/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8896 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 09-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Keywords: Business income; Depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV , JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] ACIT, GANDHIDHAM CIRCLE , GANDHIDHAM - KUTCH (APPELLANT) VS SHRI VASANT MANJI THAKKER, GANDHIDHAM P AN: ABCPT42 82E (RESPONDENT) REVENUE BY : S MT. USHA N. SHROTE , SR. D . R. ASSESSEE BY: S H RI KALPESH DOSHI , A.R. DATE OF HEARING : 12 - 01 - 2 018 DATE OF PRONOUNCEMENT : 15 - 02 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO REVENUE S APPEAL S FOR A.Y. 2012 - 13 & 2013 - 14 , AR ISE FROM ORDER OF THE CIT(A) - 3 , RAJKOT DATED 12 - 09 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 442/RJT/2016 1) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.41,03,160/ - MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON WINDMILL. 2) THE LD. CIT(A) HAS E RRED IN DELETING THE ADDITION OF RS.14,29,419/ - MADE ON ACCOUNT OF BUSINESS INCOME BEING PROFIT OF SALE OF LAND. I T A NO S . 442 & 44 3 / RJT /20 16 A .Y. 2012 - 13 & 2013 - 14 I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 2 IT IS THEREFORE PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED TO THE ABOVE EXTENT. ITA NO. 443/RJT/2016 1) T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.49,23,792/ - MADE BY AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON WINDMILL. IT IS THEREFORE, PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED TO THE ABOVE EXTENT. 3. A S THE FACTS OF GROUND NO. 1 OF BOTH ITA 442 & 443/AHD/2016 FOR ASSESSMENT YEAR 2012 - 13 AND 2013 - 14 ARE IDENTICAL THEREFORE FOR THE SAKE OF CONVENIENCE BOTH ARE ADJUDICATED TOGETHER BY TAKING GROUND NO.1 OF ITA442/AHD/2016 AS A LEAD CASE . ITA NO S . 4 42/RJT/2016 & 443/RJT/2016 (GROUND NO. 1) 4 . THE ASSESSEE HAS FILED R ETURN OF INCOME DECLARING LOSS OF RS. - 4 , 27 , 79 , 774/ - ON 11 TH SEPTEMBER, 2012. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 7 TH AUGUST , 2013. ON SCRUTINY , THE ASSESSING OFFICER NOTI CED THAT TH E ASSESSEE HAS CLAIMED DEPRECIATION ON WIND MILL @ 80% IN RESPECT OF ENTIRE WIND MILL INCLUDING THE CIVIL WORK FOUNDATION , ELECTRICAL ITEMS, COMMON POWER EVACUATION, LEASE LAND, NACELLE , HUB ETC. T HE WIND MILL WAS COMMISSIONED ON 29 TH MARCH, 2012. THE ASSESSEE HAS CLAIMED DEPRECIATION @ 40% ON WIND MILL AT RS. 12 , 60 , 68 , 175/ - . THE DEPRECIATION CHART FOR THE WIND MILL AS PROVIDED IN PARA 5 OF THE ASSESSME NT ORDER IS REPRODUCED AS UNDER: - S.NO ITEM COST DEP. CLAIMED FOR FY 2011 - 12 @ 40% WDV AS ON 31.03.2012 I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 3 1 CIVIL WORK AN D FOUNDATION 61,01,485 24,40,594 36,60,891 2 ELECTRICAL I TEMS, COMPONENTS INSTALLATION 44,67,900 17,87,160 26,80,740 3 COMMON POWER EVACUATION 69,48,900 27,79,56 0 41,69,340 4 CONSIDERATION FOR LEASE LAND 33,09,000 13,23,600 19,85,400 5 COMPONENT & ACCESSORIES OF RENEWABLE ENERGY DEVICES 3,23,79,000 12951600 1,94,27,400 6 NECELLE, HUB & BLADES, CONTROLLER, TOWER & HARDWARE 6,99,61,000 2,79,84,400 4,19,76,600 7 LABOUR RELATED WORK FOR INSTALLATION OF WTG 29,00,890 11,60,356 17,40,534 TOTAL 12,60,68,175 5,04,27,270 7,56,40,905 WHILE EXAMIN ING THE CLAIM OF DEPRECIATION ON WIND MILL T HE ASSESSING OFFICER OBSERVE THAT THE FO LL O WING COMPONENT S CANNOT BE TREATED AS PART OF THE ASSET RELATED TO WIND MILL : - (I) CIVIL WORK AND FOUNDATION (II) ELECTRICAL ITEM COMPONENT S INSTALLATION (III) COMPONENT AND ACCESSORIES RENEWABLE ENERGY DEVICES (IV) NECELL E, NUB AND B LADES , CONTROLLER TOWER AND HARDWARE (V) LABOUR RELATED WORK FOR INSTALLATION OF WTG. (VI) CONSIDERATION FOR LEASE LAND I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 4 (VII) LABOUR RELATED WORK FOR INSTALLATION OF WIND MILL CONSEQUENTLY , T HE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEPRECIATION ON THE ABOVE COMPONENTS OF THE WIN D MIL L TO THE AM OUNT OF RS . 4 , 103 , 160/ - . 5. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSSESSEE BY OBSERVING AS UNDER: - 3 .4 DECISION (GROUND NO.1) ''3.4.1 THIS ISSUE IS BASICALLY ARISING FR OM THE AO'S NON ACCEPTANCE OF APPELLANT'S CLAIM OF DEPRECIATION@ 80% ON THE ENTIRE WINDMILL ASSEMBLY INCLUDING COMMON EVACUATION CHARGES ETC. AND SUB - LEASE RIGHT AND RIGHT TO ACCESS. BASICALLY IT IS RELATED TO DISALLOWANCE OF DEPRECIATION ON 2 ITEMS OF EXP ENSES INCURRED AND RELATED TO WINDMILL INSTALLATION I.E. AMOUNTS PAID AS CONTRIBUTION TO COMMON POWER EVACUATION CHARGES AND FOR RIGHT TO ACCESS THE LEASE LAND. THE AO HAS RULED THAT THESE ITEMS DO NOT FALL UNDER THE SPECIFIC ENTRY PROVIDED IN THE DEPRECIA TION SCHEDULE ON WINDMILL AND THUS THEY ARE NOT ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. THE AO HAS NOT AGREED WITH THE CONTENTION OF THE APPELLANT THAT THE WORK UNDERTAKEN BY THE IMPLEMENTING AGENCY TOWARDS CIVIL CONSTRUCTION LIKE LYING OF FOUNDATION, FI TTING OF VARIOUS ELECTRICAL ITEMS ETC. FOR EVACUATION OF POWER AND ACQUIRING RIGHTS FOR ACCESS TO THE LAND INCLUDING SURROUNDING LANDS FOR INSTALLATION OF THE WINDMILL PROPER IS PART AND PARCEL OF THE ENTIRE WINDMILL STRUCTURE WITHOUT WHICH WINDMILL CANNOT OPERATE AND THESE ITEMS WILL HAVE NO VALUE IF THE WINDMILL IS DISMANTLED AND THEREFORE THEY ARE ALSO ELIGIBLE FOR THE SAME HIGHER RATE OF DEPRECIATION AS AVAILABLE TO THE WINDMILL. IT WAS ARGUED BY THE APPELLANT THAT THE FACILITY OF POWER EVACUATION IS NE CESSARY FOR MAKING THE WINDMILL PROJECT OPERATIVE AND THERE ARE UNAVOIDABLE IN ESTABLISHING THE WINDMILL UNIT AND THEREFORE THEY ARE PART AND PARCEL OF THE WINDMILL. THE AO GAVE THE MAIN REASON FOR HIS DISAGREEMENT OVER THESE ITEMS AS THEM NOT FALLING IN T HE SPECIFIC ENTRY PROVIDED FOR DEPRECIATION ON WINDMILL. THUS THE AO HAS NOT DISPUTED THE FACT OF INCURRING EXPENSES ON THE IMPUGNED ITEMS AND THEREFORE THE GRIEVANCE IS PURELY LEGAL IN NATURE. 3.4.2 IT IS APPARENT FROM THE SUBMISSIO NS OF THE LD. AR WHICH HAS BEEN REPRODUCED EARLIER IN TINS ORDER THAT HE HAS FORCEFUL LY AND EMPHATICALLY ARGUED THAT AC) HAS TAKEN A VERY RESTRICTIVE AND UNREASONABLE VIEW BLINDING HIMSELF TO THE FACT THAT THE IMPUGNED ITEMS OF COMMON EVACUATION CHARGES (BASICALLY INFRASLMCTUR AL IN NATURE) AND RIGHT TO ACCESS THE LAND ARE PART AND PARCEL OF THE WINDMILL UNIT, THEY ARE NOT CAPABLE OF SEPARATE AND INDEPENDENT EXISTENCE AND THAT THE WINDMILL CANNOT BE INSTALLED AND OPERATED WITHOUT THESE ITEMS. I AGREE WITH LD. AR. IN THE JUDGEMEN T OF CIT VS. MADRAS AUTO SERVICE (P) LTD. 1998 233 ITR 468 (SC) IT HAS BEEN STATED THAT EVERY OUTLAY IS DEEMED TO BE CAPITAL IN NATURE WHEN IT IS MADE AND IS NECESSARY FOR INITIATION OF A BUSINESS AND HAS BEEN INCURRED FOR BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE WHICH IS ENDURING IN NATURE. LD. AR HAS IMPLICITLY ARGUED THAT THE EXPENSES INCURRED ON THE ITEMS INVOLVED IN THE CONTROVERSY FULFILL ALL THE ABOVE CRITERIA. HE HAS ARGUED THAT HIGHER RATE OF DEPRECIATION IS MEANT TO THE ENTIRE WINDMILL ASSEMB LY AND NOT MERELY TO THE COMPONENTS LIKE WINDMILL TURBINE BECAUSE A STAND ALONE WINDMILL TURBINE WITHOUT SUPPORTING INFRASTRUCTURE (INCLUDING INFRASTRUCTURE FOR EVACUATION FOR POWER) IS OF NO USE!! I TEND TO AGREE WITH THE LD. AR THAT THE WORD USED IN THE APPLICABLE INCOME TAX RULE 'WINDMILL' HAS A WIDE MEANING AND IT CANNOT BE CONFINED TO GENERATOR OR GEAR BOX, ETC ONLY. ANY ACT OR DEED NECESSARY TO BRING WIND TURBINE IN ACTIVE USE OF POWER GENERATION HAS TO BE TREATED AS A PART OF WINDMILL OTHERWISE ACTIV E USE OF WIND TURBINE WILL NOT BE POSSIBLE AND ALL'STANDING EQUIPMENTS WILL BECOME BALD AND USELESS. POWER EVACUATION IS A CRITICAL FUNCTION WITHOUT WHICH THE ENERGY PRODUCED BY THE WINDMILL CANNOT BE UTILIZED AS IT CAN'T FLOW TO THE GRID. SIMILARLY POSSES SION OF LEASE RIGHT & ACCESS TO THE LAND ON WHICH I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 5 WINDMILL TURBINE/ GENERATOR HAS TO BE INSTALLED IS CRITICAL. UNLESS THIS RIGHT TO ACCESS IS ACQUIRED BY THE AGENCY IT CANNOT MOVE IN ITS MACHINERY AND EQUIPMENTS TO INSTALL THE WINDMILL TURBI NE AND HENCE BO OKING EXPENSES I N THESE COUNTS ON THE COST OF THE ASSET PER SE IS NOT ONLY REASONABLE BUT IT ESSENTIAL FOR PROPER ACCOUNTANCY. THE LD. A.R. HAD ALSO SUBMIT TED THE VOUCHE RS AND BILLS RELATED TO INSTALLATION TO W INDMILL AND IT INCLUDES BILLS WITH FOL LOWING DESCRIPTIONS : PARTICULARS AMOUNT CONTRIBUTION TOWARDS POWER EVACUATION INFRASTRUCTURE COST INCURRED BY US FOR EVACUATING THE POWER FROM YOUR WINDMILL FOR LOCATION NO. BSR 018 OF 2.1 MW AT RAJASLHAN TO MAIN GRID CATEGORY OF SERVICE: SUPPLY OF T ANGIBLE GOODS FOR USE SERVICE 63,00,000 LABOUR CHARGES FOR FINAL TESTING AND COMMSSIONING OF ONE WTG FOR YOUR 2.1 MW WINDMILL AT LOCATION NO. BSR 18 AT ABOVE SITE ADDRESS. CATEGORY OF SERVICE: ERECTION, INSTALLATION OR COMMISSIONING SERVICE ,00,000 PROVIDING SUB LEASE RIGHTS OF LAND AND RIGHTS OF SUITABLE ACCESS OF SURROUNDING (INCLUDING FREE ACCESS, RIGHT OF WAY ETC.) FOR WINDMILL PURPOSE FOR YOUR 2.10 MW WTG LAND AT LOCATION NO.BSR - 018 FOR YOUR WINDMILL PROJECT IN THE STATE OF RAJASTHAN AS PER ABOV E MENTIONED SITE ADDRESS CATEGORY OF SERVICE : RENTING OF IMMOVABLE PROPERTY 30,00,000 3.4.3 THE WORK REQUIRED TO ERECT COMMON POWER EVACUATION IS ESSENTIAL FOR INSTALLING THE WINDMILL AND TO BRING IT TO THE FUNCTIONAL LEVEL. THESE EXPENSES CANNOT BE TREATED AS REVENUE EXPENDITURES WHICH INCIDENTALLY WILL BE BENEFICIAL TO THE APPELLANT. THESE EXPENSES ARE CAPITAL IN NATURE WITHOUT ANY DOUBT GIVING ENDURING BENEFIT TO THE APPELLANT AND I AM IN FULL AGREEMENT WITH THE LD. AR THAT DEPRECIATION WILL BE AVA ILABLE ON THIS ITEMAT THE SAME RATE WITH WHICH IT IS AVAILABLE TO THE WINDMILL PER SE. THE AO HAS UNNECESSARILY ADOPTED A VERY RESTRICTIVE VIEW WHEREIN HE HAS RESORTED TO DISSECT THE PURCHASE VALUE OF THE ENTIRE WINDMILL ASSEMBLY IN VARIOUS SUB COMPONENTS I.E. MACHINERY, LABOUR CHARGES, RIGHT TO ACCESS, ETC. AND HAS OPINED THAT 80% DEPRECIATION WILL BE AVAILABLE ONLY TO THE WINDMILL PROPER MENTIONED IN THE DEPRECIATION SCHEDULE IN THE IT RULES. ERECTING AND OPERATING WINDMILL ASSEMBLY IS NOT LIMITED TO INS TALLING A WINDMILL TURB INE ONLY BRINGING, WINDMILL IN EXISTENCE AND MAKING IT OPERATIONAL REQUIRES FULFILLMENT OF VARIOUS SUB COMPONENTS LIKE INSTALLING AND FABRICATING ACCESSORY MACHINERIES, ELECTRIC FITTING, CIVIL CONSTRUCTIONS, HIRING LABOURS, GETTING P ERMISSIONS, GETTING ACCESS TO THE LAND, GETTING POWER CONNECTION, GETTING POWER OUTPUT CONNECTION, GETTING ACCESS TO POOLING STATION, ETC. IT WILL NOT BE PROPER TO ADOPT A DISSECTIVE APPROACH TO LIMIT THE CLAIM OF HIGHER DEPRECIATION ONLY ON THE MAIN MACHI NE OF WINDMILL TURBINE/GENERATOR. RELIANCE IS PLACED ON CIT VS. MADRAS AUTO SERVICE (P) LTD. (1998) 233 ITR 468 (SC), ACIT (OSD) VS. PARRY ENGINEERING AND ELECTRONICS PVT. LTD. BY ITAT AHMEDABAD BENCH IN ITA NO.3317/AHD/203(2011), ENERCON WIND FARMS (JAISA LMER) P. LTD. VS. DEPARTMENT OF INCOME TAX, ITA NO. 6402 TO 6405/MUM/2010, D.MURUGESH. KARUR VS DEPARTMENT OF INCOME TAX, I.T.A. NO. 1938/MDS/2011, M/S. ASIAN HANDLOOM VS. DCIT (I.T.A. NO. NO.2291/MDS/2008 DT.20.11.09), TRUMAC ENGINEERING CO. (P.) LTD. V. ITO MUMBAI ITA NO. 55S/MUM/2003 DATED 27 - 6 - 2008 AND ASST. COMM. IT CIRCLE 1 LUDHIANA VS. RAKESH GUPTA 36 TAXMANN 546 (2013). FURTHER THERE IS CONTRADICTION IN AO'S OBSERVATION THAT COMMON POWER EVACUATION FACILITY IS NOT AN ASSET ACQUIRED BY APPELLANT AND THUS I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 6 APPELLANT IS NOT ENTITLED TO DEPRECIATION ON THE SAME. IN THAT CASE APPELLANT BECOMES ENTITLED TO THE CLAIM OF ENTIRE EXPENSES. THIS OBSERVATION IS NOT WORTH PROLONGING ANY FURTHER. MORE SO EVER, THE APPELLANT HAS DEFINITELY ACQUIRED RIGHT TO USE THE FACILITY OF THE COMMON EVACUATION CHARGES WHICH IS AN INTEGRAL PART OF THE WINDMILL PER SE. THEREFORE I RULE THAT APPELLANT IS ELIGIBLE FOR THE DEPRECIATION ON THE EVACUATION CHARGES (A), 80% AND THE DENIAL OF DEPRECIATION OF RS. 27,79,560/ - IS THEREFORE D ELETED. BALANCE DISALLOWANCE DEPRECIATION OF R S. 13,23, 600/ - IS ON ACCOUNT OF DISALLOWANCE OF DEPRECIA TION ON THE PAYMENTS TOWARDS ACQ UISITION OF SUB - LEASE RIGHTS AND RIGHTS TO ACCESS. THE RULING IN RESPECT OF TH E COMMON EVACUATION CHARGES W ILL EQUALLY B E APPLICABLE ON THESE COMPONENTS ALSO AS THEY ARE VITAL FOR THE MEANINGFUL INSTALLATION AND FUNCTIONING AS WELL AS PART AND PARCEL OF THE ENTIRE WINDMILL ASSEMBLING. IN THE RELIED UPON DECISION OF DC 1T VS. VIPPY SOLVEX PRODUCTS PVT . LTD. 164 TAXMAN 48 3, IT HAS BEEN HELD BY THE HON BLE MADHYA PRADESH HIGH COURT THAT EXPENSES INCURRED FOR THE FOUNDATION OF PLATFORM, ERECTION, INSTALLATION OF PLANT AND MACHINERY, PREPARATION OF CRANE PLATFORM ETC. FOR THE MAIN PURPOSE OF ASSEMBLING OF WINDMILL ARE INTEGRAL PAR T OF WINDMILL AND SAME ARE ENTITLED TO THE SAME RATE OF DEPRECIATION AS AVAILABLE TO THE WINDMILL. I THEREFORE HOLD THAT THE APPELLANT WAS JUSTIFIED IN CLAIMING DEPRECIATION @ 80% ON THESE ITEMS OF ACQUISITION OF SUB - LEASE RIGHTS AND RIGHT TO ACCESS TOWARD S THE LAND AND SURROUNDINGS FOR INSTALLATION OF WINDMILL. TH E DISALLOWANCE OF RS. 13,23,600/ - IS THEREFOR E DELETED. IN EFFECT GROUND NO. 1 IS ALLOWED. 6. DURING T HE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPOR TED THE ORDER OF ASSESSING OFFICER AND CONTENDED THAT LD. CIT(A) HAS ERRED IN ALLOWING THE DEPRECIATION ON THE AFORESAID COMPONENTS OF THE WIND MILLS. ON THE OTHER HAND, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING INFORMATION RELATING TO SUBMISSIO N MADE BEFORE THE LD. CIT(A), COPY OF AUDIT REPORT, INVOICES OF WIND MILL AND JUDICIAL PRONOUNCEMENTS ETC. HE HAS ALSO SUPPORTED THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD C ARE FULLY. THE CIT(A) HAS ALLOWED THE ENTIRE CLAIM OF DEPRECIATION ON WIND MILL AFTER PLACING RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PARRY ENGINEERING & ELECTRONICS PVT. LTD. 49 TAXMANN.COM 252 (GUJARAT) AND OTHER J URISDICTIONAL PRONOUNCEMENTS AS ELABORATED IN DETAIL IN HIS ORDER. AFTER CONSIDERING THE ABOVE FACTS AND JUDICIAL FINDINGS,W E OBSERVE THAT THE CIVIL AND ELECTRONIC WORK, INFRASTRUCTURE COSTS AND INCIDENTAL CHARGES AND OTHER COMPONENTS CITED SUPRA ARE A N INTEGRAL PART OF THE WINDMILL PROJECT AND THE WINDMILL CANNOT FUNCTION WITHOUT SUCH CIVIL STRUCTURE, ELECTRIC FITTINGS AND EQUIPMENTS ETC. THEREFORE, WE ARE OF THE VIEW THAT T HESE COMPONENTS CANNOT BE SEPARATED FOR THE PURPOSE OF APPLYING DEPRECIATION AT I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 7 DIFFERENT RATES. AFTER CONSIDERING THE FACTS OF THE CASE AND THE LEGAL FINDINGS AS ELABORATED IN THE ORDER OF THE LD. CIT(A), WE ARE INCLINED WITH THE DECISION OF LD. CIT(A). THEREFORE, THE GROUND NO. 1 OF APPEAL S OF REVENUE VIDE ITA 442 & 443/AHD/20 16 ARE STANDS DISMISSED. 8. IN THE RESULT, THE APPEAL S OF REVENUE FOR BOTH THE YEAR S ON THIS ISSUE ARE DISMISSED. GROUND NO. 2 OF ITA 442/AHD/2016 9 . DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED T HAT ASSESSEE HAS SH OWN PROFIT OF RS. 14 , 29 , 419/ - FROM SALE OF AGRICULT URAL LAND BEARING SURVEY NO. 14P - 2, SURVEY NO. 17 AND SURVEY NO. 496 P - 3 RESPECTIVELY . ON QUESTIONING , THE ASSESSEE HAS EXPLAINED THAT AGRICULTURAL LAND WAS PURCHASED IN THE YEAR 2007 FOR DOING AGRICULTUR AL ACTIVITIES. HOWEVER, THE LAN D WAS SOLD IN THE YEAR 2011 BECAUSE OF SHORTAGE OF WATER IN THE LAND. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE . HE OBSERVED IT WAS THE INTENTION OF THE ASSESSEE TO S OLD THE IMPUGNED LAND F OR PROFIT. THEREFORE , HE TREATED THE TRANSACTION OF SALE OF AGRICULTURAL LAND BY THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE AND ASSESSED THE SURPLUS ARISING FROM SALE OF LAND AS BUSINESS INCOME . 10. AGGRIEVED ASSESSEE FILED APPE AL BEFORE T H E LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSSEE BY OBSERVING AS UNDER: - 4.2.6 BOTH THE OBSERVATIONS OF THE A.O. I.E. LAND NOT /BEING USED FOR AGRICULTURE PURPOSES AND THAT APPELLANT IS IN THE BUSINESS OF TRADING ESTATE, ARE WITHOUT ANY B ASIS AND EVIDENCE. NOTHING HAS BEEN REPRODUCED IN THIS RESPECT IN THE ASSESSMENT ORDER TO SHOW THAT APPELLANT HAS IN PAST OR PRESENT DERIVED INCOME FROM THE TRADING IN REAL ESTATE. ONLY ON THE BASIS OF A SINGLE TRANSACTION OF SALE OF A PROPERLY WHICH IS CL E ARLY AGRICULTURAL LAND BOUGHT 3 - 5 YEARS BACK IT CANNOT BE SAID THAT THE APPELLANT IS IN THE BUSINESS OF TRADING ESTATE. FURTHER, THE A.O. HAS MENTIONED THAT : '.....THE SERIES OF TRANSACTIONS NARRATED ABOVE CLEARLY LEADS ANY PERSON OF NORMAL PRUDENCE TO BELIEVE THAT THIS IS APPARENTLY NOTHING BUT A PRE PLANNED SCHEME OF EVADING TAX ON THE ABOVE PROFIT THROUGH DUBIOUS AND COLOURABLE DEVISE.....' THIS AGAIN IS A VERY HARSH STATEMENT MADE WITHOUT ANY REASONABLE BASIS. THERE IS NO DOUBT IN THE ACTUAL PURCHAS E OF THE AGRICULTURE LAND AND SALE OF THE I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 8 SAME AFTER THREE TO FIVE YEARS. THE KIND OF TRANSACTION AND THE TIME SPAN INVOLVED THEREIN DO NOT AT ALL SUGGEST ANY SUCH MOTIVE ON THE PART OF THE APPELLANT. 4.2.7 IT IS APPARENT THAT THIS CASE DOES NOT FIT INTO T HE CATEGORY OF A TRADING BUSINESS TRANSACTION IN LAND. THE PROFIT FROM THIS TRANSACTION HAS TO BE TREATED AS GAIN ARISING OUT OF SALE AGRICULTURAL LAND. CONSIDERING THE LANDMARK DECISIONS OF CIT VS. SIDDHARTH J DESAI 28 CTR (GUJARAT) 148 AND CIT VS. REWASA NKER A KOTHARI 201 ITR (GUJARAT) 510 AND RESPECTFULLY FOLLOWING THE SAME 1 DELETE THE AO'S ACTION OF TREATING THE PROFIT FROM THE SAID TRANSACTION AS BUSINESS I NCOME. GROUND NO. 2 IS ALLOWED. 11. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS FURNISHED PAPER BOOK CONTAINING SALE DEED, LETTER FR OM PANCHAYAT, COPY OF FORM 12, COPY OF FORM 7/12, 8A AND DETAILS OF JUDICIAL PRONOUNCEMENTS . HE CONTENDED THAT THE ASSESSING OFFICER HAS WRONGLY TREATED PROFIT ON SALE OF AGRICULTURE LAND AS IN THE NATURE OF TRADE. ON THE OTHER HAND , LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. 12. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THIS IS UNDISPUTED FACTS THAT A S PER COPY OF 7/12 ENCLOSED IN T H E PAPER BOOK, THE AFORESAID LAND WAS CLASSIFIED AS AGRICULTURAL LA N D . THE ASSESS EE HAS PURCHASED THE IMPUGNED AGRICULTURAL LAND IN THE YEAR 2007 & 2008 . THE LAND WAS NOT CONVERTED INTO NON - AGRICULTURAL LAND BEFORE IT SOLD BY THE ASSESSEE. AFTER GOING THROUGH THE MATERIAL ON RECORD W E OBSERVE THAT THE ASSESSING OFFICER FAILED TO SUBSTANTIATE WITH RELEVANT MATERIAL TH AT HOW THE SALE OF THE LAND CAN BE TREATED AS ADVENTURE IN THE NATURE OF TRADE. THEREFORE, I N TOTALITY, WE ARE INCLI NED WITH THE FINDINGS OF T HE LD. CIT(A) AND THE DECISION O F THE ASSESSING OFFICER OF TREATING THE PROFIT FROM SALE OF AGRICULTURAL LAND AS BUSINESS INCOME IS NOT JUSTIFIED . ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 13 . IN THE COMBINED RESUL T, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 15 - 02 - 201 8 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 15 /02 / 201 8 I.T.A NO S . 442 & 443 /RJT /20 16 A.Y. 2012 - 13 & 2013 - 14 PAGE NO ACI T VS. SHRI VASANT MANJI THAKKER 9 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT