ACIT (OSD) RG 8(1), MUMBAI V. ENERCON WIND FARMS ( RAJASTHAN ) P.LTD, MUMBAI

ITA 4895/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83708 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIEL PHILIP
• Keywords: Depreciation

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.4895 /MUM/2012 (A.Y. 2009-10) THE DY. COMMISSIONER OF INCOME TAX, RANGE 8(1), ROOM NO.260A, 2 ND FLOOR,. AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 M/S. ENERCON WIND FARMS (RAJASTHAN) PVT. LTD. ENERCON TOWER, PLOT NO.A-9, VEERA INDUSTRIAL ESTATE, VEER DESAI ROAD, ANDHERI (W), MUMBAI 400053 PAN: AAACE 8156G ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI NIEL PHILIP ()$% * + * + * + * + /RESPONDENT BY : SHRI J.P.BAIRAGRA ' * ,-' / / / / DATE OF HEARING : 18.09.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 18.09.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST ORDER PASSED BY LD. CIT(A)-16, MUMBAI DATED 28/05/2012 FOR ASSES SMENT YEAR 2009-10. GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT ASSESSEE COMPANY IS ELIGIBLE FOR HIGHE R RATE OF DEPRECIATION @ 80% ON THE CIVIL WORK I.E. FOUNDATION, ERECTION AND COMMIS SIONING OF THE WIND MILLS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) FAILED TO APPRECIATE THAT ANY EXPENDITURE FOR CONSTRUCTION OF THE BASE TO INSTALL THE WINDMILL DOES NOT AMOUNT TO EXPENDITURE INCURRED ON WINDMILL ON WHICH HIGHER RATE OF DEPRECIATION @ 8O% IS ALLOWABLE, SINCE, THE BASE CA NNOT BE SAID TO BE A WINDMILL FOR THE PURPOSE OF DEPRECIATION AS PER I.T. RULES, 1962. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN ALLOWING HIGHER RATE OF DEPRECIATION TO THE EXTENT OF RS.13,50,498/- ON THE CIVIL WORK FOR THE FOUNDATION WHICH FALLS IN THE CATEGORY OF BUILDING, IGNORING THE BLOCK OF ASSETS AS SPECIFIED IN THE TABLE OF RATES FOR THE P URPOSE OF ALLOWANCE OF DEPRECIATION IN APPENDIX-I OF THE I.T. RULES AND THAT AS PER PAR T A OF THIS APPENDIX. BUILDING FALLS UNDER A SEPARATE HEAD, WHICH IS ELIGIBLE FOR DEPRECIATION @ 5%. ITA NO.4895 /MUM/2012 (A.Y. 2009-10) 2 2. IT WAS POINTED OUT BY LD. AR THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE TRIBUNAL REN DERED IN RESPECT OF ASSESSMENT YEAR 2004-05 TO 2007-08. REFERENCE WAS MADE TO THE ORDER DATED 21/12/2011 PASSED IN ITA NOS.6402 TO 6405/MUM/2010(A.Y. 2004- 05 TO 2007-08), ITA NO.6390/MUM/2008 (A.Y. 2006-07), ITA NO.6391/MUM/20 10(A.Y. 2007-08) & ITA NO.6392/MUM/2010(A.Y. 2007-08), COPY OF THE ORD ER IS PLACED AT PAGES 1 TO 5 OF THE PAPER BOOK. THE RELEVANT PORTION READ AS UNDER: 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER REGARDING THE CLAIM OF DEPRECIATI ON TO THE EXTENT OF RS. 3,37,62,448/- ON CIVIL WORK, ERECTION AND CO MMISSIONING OF WIND MILL WITHOUT APPRECIATING THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER BY WIND ENERGY THRO UGH WIND FARMS AND SALE THEREOF. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE HAS COMMENCED GENERATION AND SALE OF COMMERCIAL POWER. THE A.O. ASKED THE ASSESSEE TO FURNISH DETAILS OF ASSETS OWNED BY IT. AFTER GOING THROUGH THE DETAILS OF VARIOUS ASSETS, THE A.O. ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF DEP RECIATION ON FOUNDATION, ERECTION AND COMMISSIONING @ 80%. ACCORDING TO THE A.O. THE ASSESSEE COMPANY IS NOT ENTITLED TO DEPRECIATION @ 80% ON CIVIL WORK AND IT IS ENTITLED TO DEPRECIATION @ 5% ONLY. 2.2 IN APPEAL, THE LD. CIT(A) RELYING ON THE DECISI ON OF THE TRIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSESSEE NAMELY ENERCON WINDF ARMS (JAISALMER) PVT. LTD. VIDE ITA NO. 2666/MUM/2009 ORDER DATED 4.6.2010 FOR A.Y. 2004-05 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , THE ORDER OF THE A.O. AND THE FACTS OF THE CASE THAT WIND MILLS ENERGY DEVICES IS ELIGIBLE FOR 80% DEPRECIATION AS PER THE PROVISION OF THE I.T. ACT AND IS CLAIMED BY M/S PFC WHO IS THE OWNER OF THE WIND MILLS IN THIS CASE. THE DISPUTE IS REGARDING THE BASE STRUCTURE I.E. THE FOUNDATION ON WHICH THESE WIND MILLS ARE INSTALLED. THE APPELLANT HAS ALSO CLAIMED DEPRECIATION ON THE EXPENDITURE IN CURRED FOR PRE- INSTALLATION CHARGES, LOAN PROCESSING CHARGES AND T HE FOUNDATION WORKS. IN THIS REGARD, SIMILAR ADDITION WAS MADE B Y THE ASSESSING OFFICE IN THE CASE OF APPELLANTS SISTER CONCERN VI Z. M/S ENERCON WIND FARMS (IAISALMER) PVT. LTD. FOR A.Y. 2004-05 A ND THE SAID ADDITION WAS CONFIRMED BY MY PREDECESSOR. ON FURTH ER APPEAL, THE HONBLE I.T.A.T. VIDE ITS ORDER ITA NO. 2666/MUMN/2 009 DATED 4 TH JUNE 2010 HAS INTER ALIA HELD AS UNDER:- IN VIEW OF OUR FINDING ABOVE AND AFTER CONSIDERING THE CASE LAWS CITED ABOVE, WE ARE OF THE OPINION THAT THE BASEMEN T CONSTRUCTED BY THE ASSESSEE TO INSTALL AND WITHHOLD THE HEAVY W INDMILL IS PART ITA NO.4895 /MUM/2012 (A.Y. 2009-10) 3 AND PARCEL OF THE WINDMILL AND WITHOUT THE SPECIALL Y DESIGNED BASEMENT, THE WINDMILL CANNOT STAND. THEREFORE, IT IS TO BE TREATED AS PLANT AND HIGHER DEPRECIATION CLAIMED BY THE ASS ESEE HAS TO BE ALLOWED. WHEN THE ASSESSEE HAS TAKEN A WINDMILL ON LEASE AND CONSTRUCTED THE BASEMENT FOR INSTALLING THE WINDMIL L FOR GENERATING POWER, DENIAL OF DEPRECIATION TO THE BASEMENT CONST RUCTED BY THE ASSESSEE IS NOT JUSTIFIED IN VIEW OF OUR FINDING TH AT THE BASEMENT IS PART AND PARCEL OF THE WINDMILL AND IS TO BE TREATE D AS PLANT. THE INTENTION OF THE LEGISLATURE IS TO GRANT HIGHER DEP RECIATION TO ENCOURAGE THE ENTREPRENEURS WHO GENERATE POWER THRO UGH WINDMILL. IN THE PRESENT CASE, THOUGH THE ASSESSEE HAS TAKEN THE WINDMILL ON LEASE, THE ASSESSEE HAD INCURRED HUGE E XPENDITURE TO CONSTRUCT THE BASEMENT TO INSTALL THE WINDMILL AND ACTUALLY RUNNING THE WINDMILL. HENCE, THE ASSESSEE IS ELIGIBLE FOR HIGHER DEPRECIATION. SINCE, THE HONBLE I.T.A.T. IS THE LAST FACT FINDIN G AUTHORITY AND THE FINDING OF THE HONBLE TRIBUNAL IS BINDING ON THE LOWER AUTHORITIES, THEREFORE, IT IS HELD THAT THE FOUNDAT ION AND ITS MATERIAL LIKE STEEL, REINFORCED CEMENT, GRAVE, EARTHLING ETC . ARE PART AND PARCEL OF WINDMILL WITHOUT WHICH THE WINDMILL CANNO T COME INTO EXISTENCE AND HENCE THE DEPRECIATION IS ALLOWABLE O N IT @ 80% ON CIVIL WORK I.E. FOUNDATION, ERECTION AND COMMISSION ING OF A WINDMILL. THE ASSESSING OFFICER IS THEREFORE DIREC TED TO TREAT THE FOUNDATION, ERECTION AND COMMISSIONING AS PART AND PARCEL OF WINDMILL AND ALLOW DEPRECIATION ON @ 80%. THUS TH E GROUND OF APPEAL IS ALLOWED. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 2.2 AFTER HEARING BOTH THE SIDES, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSES SEE. THE LD. D.R. COULD NOT PLACE ANY MATERIAL SO AS TO TAKE A CONTRARY VIEW OTHER TH AN THE VIEW TAKEN BY THE TRIBUNAL. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY UPHOLD THE SAME. THE GROUND RAISED BY T HE REVENUE IS ACCORDINGLY DISMISSED. 3. IN THE RESULT, REVENUES APPEAL IN ITA NO. 6402/ MUM/2010 FOR A.Y. 2004-05 IS DISMISSED. 3. LD. DR DID NOT DISPUTE THE SUBMISSION OF LD. AR THAT THE PRESENT ISSUE IS COVERED BY THE AFOREMENTIONED DECISION OF TRIBUNAL IN ASSESSEES OWN CASE. ITA NO.4895 /MUM/2012 (A.Y. 2009-10) 4 4. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES, WE DISMISS THE APPEAL FILED BY THE REVENUE. THE RELEVANT PORTION OF THE TRIBUNALS ORDER IN EARLIER YEARS HAS ALREADY BEEN REPRODUCED. ACCORDI NGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18.09. 2 014. 1 * ./0 2'3 18.09.2014 / * : SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 18 TH SEPT. 2014. VM. 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. =() / THE CIT, MUMBAI. 4. = / CIT(A)-13, MUMBAI 5. ;@: (,' , , / DR, ITAT, MUMBAI 6. :A B / GUARD FILE. 1' 1' 1' 1' / BY ORDER, );, (, //TRUE COPY// C CC C/ // /D D D D (DY./ASSTT. REGISTRAR) , ,, , / ITAT, MUMBAI