M/s. Barmer Agro Gum Ind., JODHPUR V. DCIT, BARMER

ITA 528/JODH/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54384 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Depreciation
• Section: 244A; 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO.528/JU/2009 ASSESSMENT YEAR : 2006-07 PAN: AAFFB 3172 K M/S. BARMER AGRO GUM IND. KRISHI MANDI VS. THE DCI T BARMER CIRCLE- BARMER (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY: SHRI G.R KOKANI DATE OF HEARING: 29-11-2011 DATE OF PRONOUNCEMENT: 09-12-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A), JODHPUR DATED 27-07-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS A S UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) GROSSLY ERRED IN CONFIRMING THE DISALLOWA NCE OF CLAIM OF DEDUCTION U/S 80-IB ON (A) INCOME FROM VISHESH KRIHI UPAJ YOJANA AMOUNTING TO RS. 35,96,534/- (B) INCOME FROM COMMISSION AMOUNTING TO RS. 53,81 7/- 2.2 BEFORE THE LD.CIT(A), IT WAS SUBMITTED THAT NAT URE OF VKUY IS QUITE AKIN TO THE POLICY IN RELATION TO DEPB AND DDB SCHEME AND FOR T HIS REASON THE RELIEF U/S 80IB IS REQUIRED TO BE GRANTED IN RESPECT OF INCOME DERIVE D FROM VKUY IN VIEW OF THE DECISIONS OF VARIOUS JUDICIAL AUTHORITIES. THE AO WAS OF THE VIEW THAT THERE IS NO WAY IN WHICH PARALLELISM COULD BE DRAWN BETWEEN DEPB/ DDB SCHEME OF THE GOVT. AND VKUV. 2 2.3 THE LD.CIT(A) HELD THAT VKUV SCHEME IS SIMILAR TO DEPB/DDB SCHEME. 2.4 WE HAVE HEARD BOTH THE PARTIES. SINCE THE HON'B LE APEX COURT IN THE CASE OF LIBERTY INDIA VS CIT 317 ITR 218 HELD THAT DEPB /DD B CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTR IAL UNDERTAKING U/S 80IB OF THE ACT . IT WAS HELD THAT DEDUCTION U/S 80-IB IS NOT ALLOWAB LE IN RESPECT OF THE CREDIT ON ACCOUNT OF DEPB/DDB. HENCE, IT IS NOT NECESSARY FOR US TO R ECORD THE FINDINGS THAT VKUV IS AKIN TO DEPB / DDB BENEFITS OR NOT. FOLLOWING THE DECIS ION OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA), WE HOLD THAT THE IN COME FROM VKUV AMOUNTING TO RS. 35,96,534/- WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. 2.5 THE SECOND LIMB OF GROUND NO. 1 IS IN RESPECT OF INCOME FROM COMMISSION. THIS INCOME IS ALSO BEING DERIVED FROM INDUSTRIAL UNDERT AKING AND WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE ACT. 3.1 THE SECOND GROUND OF ASSESSEE IS THAT THE LD. C IT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 2,71,697/- FROM THE TOTAL DEPRECIATION CLAIMED AT RS. 46.00 LACS ON THE WINDMILL PLANT BY TREATING THE SA ME AS BUILDING AND RESTRICTING THE RATE OF DEPRECIATION TO 10%. 3.2 THE ASSESSEE INSTALLED THE WINDMILL AT THE FAG END OF THE FINANCIAL YEAR 2005-06. THE AO ON THE BASIS OF THE FUNCTIONAL TEST HELD THA T THE AMOUNT DEBITED ON ACCOUNT OF EARTH WORK, FOUNDATION AND APPROACH ROADS, DEPRECIA TION CANNOT BE A PART OF WINDMILL AND THEREFORE, ALLOWED DEPRECIATION AT 10% AS AGAINST 8 0% CLAIMED BY THE ASSESSEE. DUE TO THIS, DISALLOWANCE OF RS. 2,71,697/- WAS MADE. 3 3.3 THE LD.CIT(A) HAS CONFIRMED THE FINDINGS OF THE AO AFTER RELYING ON THE DECISION OF ITAT PUNE BENCH IN THE CASE OF POONAWALA FINVEST & AGRO (P) LTD. , 118 TTJ 68 AND HELD THAT CIVIL WORK OF CONTROL ROOM, SITE DEVELOP MENT AND THE INTERNAL ROAD DEVELOPMENT CANNOT BE CONSIDERED FOR DEPRECIATION AT 80%. 3.4 WE HAVE HEARD BOTH THE PARTIES. BEFORE US, THE ISSUES STAND COVERED BY THE ORDERS OF ITAT JODHPUR BENCH AS WELL AS ITAT JAIPUR BENCH. THE ITAT JODHPUR BENCH HAS HELD THAT SO FAR AS THE EXPENDITURE ON FOUNDATION I S CONCERNED, THE ASSESSEE IS ENTITLED TO HIGHER DEPRECIATION. HOWEVER, IR CIVIL WORK, THE MA TTER WAS RESTORED BACK ON THE FILE OF THE AO. IT WILL BE USEFUL TO REPRODUCE FOLLOWING P ARAGRAPHS FROM THE ORDER OF THE TRIBUNAL IN ITA NO. 195/JU/2010 DATED 11-02-2011. 12. THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% O N FOUNDATION AS WELL AS OTHER CIVIL WORKS. BOTH THE A O AND THE LD.CIT(A) DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THA T THEY ARE NOT INTEGRAL PART OF THE WIND MILL. THE DEPRECIATION IN RESPECT OF FOUNDATION IS CONCERNED THE FOUNDATION FOR THE PURPOSE OF THE WIN D MILL IS DIFFERENT FROM THE OTHER CIVIL WORKS. WIND MILL IS A HEAVY MA CHINE AND A SPECIALLY DESIGNED FOUNDATION IS REQUIED, THEREFORE, THE AO H AS NOT JUSTIFIED IN COMPARING THE FOUNDATION OF THE WIND MILL FROM OTHE R CIVIL WORKS IN THE CASE OF CIT VS HERDILLIA CHEMICALS LTD. 216 ITR 742 (BOM) WHEREIN THE HON'BLE HIGH COURT OF MUMBAI HAS HELD THE EXPENDITU RE INCURRED ON FOUNDATION FIXING THE PLANT AND MACHINERY WOULD FOR M PART OF THE COST OF PLANT AND MACHINERY AND THE ASSESSEE WOULD BE ENTI TLED TO DEPRECIATION AT THE SAME RATE AS APPLICABLE TO THAT PLANT AND MACHI NERY. IN THE CASE OF ACIT VS MADRAS CEMENTS LTD. , 110 IT 281 (MAD.), HA S HELD THAT THE FOUNDATION WORK DONE FOR FIXING MACHINERY IS TO BE TREATED AS PART OF THE PLANT AND MACHINERY. IN THE CASE OF CIT VS R.G. ISP AT LTD. 123 CTR (RAJ.) WHERE THE JURISDCTIONAL HIGH COURT CATEGORICALLY H ELD THAT THE MASSIVE REINFORCED CONCRETE STRUCTURE, ESPECIALLY DESIGNED TO TAKE UP LOADS, 4 CONSTITUTED PLANT WITHIN THE MEANING OF SECTION 4 3(3) OF THE INCOME TAX ACT, 1961 13. WE THEREFORE, TAKING INTO CONSIDERATION THE FAC TS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE A BOVE CASE LAWS, WE CAME TO CONCLUSION THAT THE FOUNDATION OF THE WINDM ILL IS AMOUNTING TO PART AND PARCEL OF THE WIND MILL AND IT IS PLANT AN D MACHINERY AND ACCORDINGLY THE ASSESSEE IS ELIGIBLE FOR HIGHER RAT E OF DEPRECIATION WHICH WAS CLAIMED. AS FAR AS CIVIL WORK IS CONCERNED, WE FIND THAT IT IS NOT AN INTEGRAL PART OF THE WINDMILL AND HE IS NOT ELIGIBL E FOR HIGHER DEPRECIATION. 14. IN VIEW OF THE ABOVE OBSERVATIONS, WE SET ASIDE THE ORDER PASSED BY THE LD.CIT(A) AND REMIT THE ISSUE MATTER BACK TO THE FILE OF THE AO AND DIRECT THE AO TO ALLOW HIGHER DEPRECIATION C LAIM OF THE ASSESSEE IN RESPECT OF FOUNDATION OF THE WINDMILL. IN SO FAR A S OTHER ALLIED WORKS ARE CONCERNED NORMAL RATE HAS TO BE APPLIED AND THIS GR OUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE S. 3.5 THE JAIPUR BENCH VIDE ITS ORDER IN ITA NO. 745/ JP/07 AND 731/JP/07 DATED 18-07- 2008 IN THE CASE OF M/S. VIJAY INDUSTRIES VS ITO HE LD THAT DEPRECIATION IS TO BE ALLOWED O THE ROOM ALSO. IT WILL BE USEFUL TO REPRODUCE PARA 6 OF ITAT JAIPUR ORDER AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE PROVISIONS OF ALLOWING DEPRECIATION ON TH E WIND MILL IS GOVERNED BY APPENDIX I PARA (XIII) (1) WHICH READS AS UNDER: - (XIII) RENEWABLE ENERGY DEVICES BEING (A) TO (K) .. (L) WIND MILLS AND ANY SPECIALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS 80% IT IS EVIDENT FROM THE AFOREMENTIONED PROVISIONS TH AT THE DEPRECIATION @ 80% HAS TO BE CHARGED ON THE COMPLET E WIND MILL. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN SEGRE GATING THE COST OF THE CONSTRUCTION OF THE ROOM FROM THE SAID WIND MILL. T HE SAID CONSTRUCTION OF 5 THE ROOM , AS ARGUED HAS BEEN SPECIALLY DESIGNED FO R THE PURPOSE OF THE WIND MILL AND THEREFORE, THE LD. CIT(A) IS DIRECTED TO ALLOW THE DEPRECIATION AS PER THE RULES APPLICABLE ON THE WIN D MILLS. THUS GROUND NO. 6 OF THE ASSESSEE IS ALLOWED. 3.6 FOLLOWING THAT ORDERS, WE HOLD THAT THAT DEPRE CIATION @ 80% WILL BE ADMISSIBLE ON THE EARTH WORK, FOUNDATION AND CONTROL ROOM OF T HE WINDMILL. THE ISSUE OF APPROACH ROAD IS RESTORED BACK ON THE FILE OF THE AO IN ACCO RDANCE WITH THE ORDER OF THE ITAT JODHPUR BENCH. 4.1 THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD.CIT(A) HAS ERRED CONFIRMING THE LEVY OF INTEREST CHARGED BY THE AO U /S 234D AND WITHDRAWING INTEREST U/S 244A OF THE INCOME TAX ACT. 4.2 WE HAVE HEARD BOTH THE PARTIES. THE CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09- 12-2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 09 /12/2011 `MISHRA COPY TO: 1. M/S. BARMER AGRO GUM IND. KRISHI MANDI, BARMER 2. THE DCIT, CIRCLE- BARMER 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO.528/JU/09) A.R.. ITAT: JODHPUR 6