Star Flexi Pack Industries, Kolhapur V. DCIT, Central Circle, Kolhapur

ITA 531/PUN/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72372 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 21-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: MAHENDRA MEHTA
• Keywords: Depreciation; Search and seizure; Additional depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS. 530 AND 531/PN/2013 (ASSTT.YEARS : 2003-04 AND 2004-05) STAR FLEXI PACK INDUSTRIES, A/P. KONDIGRE, TAL : SHIROL, DIST : KOLHAPUR PAN NO.AAKFS9335C .. APPELLANT VS. DCIT, CENTRAL CIRCLE, KOLHAPUR .. RESPONDENT ITA NOS. 615 TO 620/PN/2013 (ASSTT.YEARS : 2004-05 TO 2009-10) ACIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. STAR FLEXIPACK INDUSTRIES, 379/2, 380, 382, 383, 384, A/P. VILLAGE KONDIGRE, TAL : SHIROL, DIST : KOLHAPUR-416416 PAN NO.AAKFS9335C .. RESPONDENT CO NOS.86 TO 90/PN/2013 (ARISING OUT OF ITA NOS.615 TO 620/PN/2013) (ASST. YEARS 2005-06 TO 2009-10) STAR FLEXIPACK INDUSTRIES, 379/2, 380, 383, 384, A/P. VILLAGE KONDIGRE, TAL : SHIROL, DIST : KOLHAPUR-416416 PAN NO.AAKFS9335C .. CROSS OBJECTOR VS. DCIT, CENTRAL CIRCLE, KOLHAPUR .. RESPONDENT ASSESSEE BY : SHRI MAHENDRA MEHTA REVENUE BY : SMT. M.S. VERMA DATE OF HEARING : 28-11-2013 DATE OF PRONOUNCEMENT : 29-11-2013 2 ORDER PER R.K. PANDA, AM : THE ABOVE APPEALS FILED BY THE ASSESSEE AND THE REV ENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 18-12-2012 OF THE CIT(A), KOLHAPUR RELATING T O THE RESPECTIVE ASSESSMENT YEARS MENTIONED ABOVE. FOR THE SAKE OF CONVENIENCE, ALL THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. ITA NO.530/PN/2013 (A.Y. 2003-04) (BY ASSESSEE) : 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE LD. OFFICERS BELOW ERRED IN FACTS AND CIRCUMST ANCES OF THE CASE AND IN LAW IN NOT ALLOWING THE CLAIM FOR DEDUCTION U/S.8 0IB(3)(II) OF THE I.T. ACT, OF RS.5,06,482/- THOUGH THE APPELLANT IS ELIGIBLE AND W AS ALLOWED THE SAME IN THE ASSESSMENT U/S.143(3)DATED 29-03-2006. 2. WITHOUT PREJUDICE TO GROUND OF APPEAL NO.1 AND O N FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LA W IT BE HELD THAT THE ADDITION MADE IS BEYOND THE SCOPE AND PROVISIONS OF SECT ION 153A. NO INCRIMINATING DOCUMENT/MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. 3. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, MOD IFY, RECTIFY, DELETE, RAISE ANY GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE DID NOT PRESS GROUND OF APPEAL NO.2 FOR WHICH THE LD. DEPARTMENTA L REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, GROUND OF APPEAL NO.2 I S DISMISSED AS NOT PRESSED. GROUND OF APPEAL NO.3 BY THE ASSESSEE BE ING GENERAL IN NATURE IS DISMISSED. 4. SO FAR AS THE GROUND OF APPEAL NO.1 IS CONCERNED , THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A FIRM ENGAGED I N THE BUSINESS OF MANUFACTURING OF PRINTED POLYSTER FILM, P.P. POUCHE S, INK ETC. THE ORIGINAL RETURN OF INCOME IN THIS CASE WAS FILED ON 29-10-20 03 DECLARING TOTAL INCOME OF RS.15,19,445/- AND THE ASSESSMENT WAS COMPLETED U/S.143(3) DETERMINING 3 THE TOTAL INCOME AT RS.15,19,445/-. THE DEDUCTION CLAIMED U/S.80IB(3) AMOUNTING TO RS.5,06,482/- BEING 25% OF THE ELIGIBL E INCOME WAS ALLOWED IN THE ASSESSMENT COMPLETED U/S.143(3) ON 29-03-2006. SUBSEQUENTLY, A SEARCH OPERATION U/S.132/133A OF THE ACT WAS CARRIED OUT O N 04-02-2009 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AFTER THE SEARCH, THE ASSESSING OFFICER NOTED THAT THE UNIT PROVIDING PRINTED FIRM, PP POUCHES ETC. WAS FORMED ON 12-04-1999 AT VILLAGE KONDIGRE, TALUK SHIROL, DISTRICT KOLHAPUR A S PER 10CCB REPORT AND IT HAS STARTED ITS PRODUCTION DURING F.Y. 1999-2000 AS A SMALL SCALE INDUSTRY. HE NOTED THAT THE INVESTMENT IN FIXED ASSETS IN PLA NT AND MACHINERY AT RS.4.47 CRORES AS ON 31-03-2003 IN THE INSTANT CASE EXCEEDS RS.1 CRORE AND THEREFORE THE ASSESSEE IS NOT A SMALL SCALE INDUSTR Y. FURTHER, TALUK SHIROL, DISTRICT KOLHAPUR IS NOT INCLUDED IN THE SPECIFIED BACKWARD AREAS ELIGIBLE FOR 80IB(3) DEDUCTION AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(3) FOR THE IMPUGNED ASSESSMENT YEAR. HE AC CORDINGLY DISALLOWED THE DEDUCTION CLAIMED U/S.80IB(3) OF THE I.T. ACT, 1961. 5. BEFORE CIT(A) IT WAS CLAIMED THAT DEDUCTION WAS ALLOWED U/S.80IB(3) IN THE ORIGINAL ASSESSMENT PASSED U/S.143(3) AND DI SALLOWANCE WAS MADE BEYOND THE SCOPE AND PROVISIONS OF SECTION 153A AS IT WAS NOT BASED ON ANY NEW MATERIAL FOUND DURING THE COURSE OF SEARCH. RE LYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER SHOULD BE DELETED. 6. HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED WITH TH E EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESS ING OFFICER BY HOLDING AS UNDER : 4 18. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . I HAVE ALSO GONE THROUGH THE RECORDS OF THE CASE AND I FIND THAT THE I SSUE OF ALLOWING DEDUCTION UNDER SECTION 80IB(3) WAS NEVER EXAMINED BY THE ASSESSING OFFICER WITH RESPECT TO THE FACT THAT SHIROL TALUKA OF KOLHAPUR D ISTRICT IS NOT INCLUDED IN SPECIFIED BACKWARD AREA ELIGIBLE FOR DEDUCTION. THE APPELLANT HAS ALSO NOT BEEN ABLE TO POINT OUT ANY CORRESPONDENCE WHEREIN TH EY HAD POINTED OUT THIS FACT TO THE ASSESSING OFFICER DURING THE COURSE OF ORIGI NAL ASSESSMENT UNDER SECTION 143(3). THEY HAVE ALSO NOT POINTED OUT ANY LE TTER OF THE ASSESSING OFFICER WHEREIN HE HAS LOOKED INTO THIS ASPECT. HENCE, AS I HAVE ALREADY HELD IN PARAGRAPH 12 SUPRA EARLIER, THIS IS NOT A CASE OF CHANGE OF OPINION BUT IS A CASE WHERE A NEW FACT HAS BEEN DISCOVERED BY THE ASSESSING OF FICER DURING THE COURSE OF REASSESSMENT IN PURSUANCE OF SEARCH AND SEIZURE. THEREFORE, THE ASSESSING OFFICER WAS ENTITLED TO WITHDRAW THE DEDUCTION WHICH HAS BEEN ERRONEOUSLY ALLOWED EARLIER DUE TO NON-CONSIDERATION OF FACTS RELEVANT FOR ALLOWING THE DEDUCTION. THE DISALLOWANCE MADE IS THER EFORE, CONFIRMED FOR BOTH THE YEARS UNDER CONSIDERATION. 6.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES. ADMITTEDLY, THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS HAS GIVEN A FINDING THAT THE INVESTMENT IN PLANT AND MACHINERY AS ON 31-03-2003 WAS AT RS.4.47 CRORES AND TALUK SHIROL, DISTRICT KOLHAPUR WHERE THE UNIT IS SET UP IS NOT INCLUDED IN SPECIFIED BACKWARD AREAS ELIGIBLE F OR DEDUCTION U/S.80IB. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONTROV ERT THE ABOVE FACTUAL FINDING GIVEN BY THE ASSESSING OFFICER. THE LD. CO UNSEL FOR THE ASSESSEE ALSO COULD NOT CONTROVERT THE FACTUAL FINDING GIVEN BY THE CIT(A) THAT DEDUCTION U/S.80IB(3) WAS NEVER EXAMINED BY THE ASS ESSING OFFICER IN THE ORIGINAL ASSESSMENT. UNDER THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) UPHOLDING THE ACTION OF THE ASS ESSING OFFICER IN DENYING THE DEDUCTION/S.80IB(3). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. ITA NO.531/PN/2013 (A.Y. 2004-05 (BY ASSESSEE) : ITA NO.615/PN/2013 (A.Y. 2004-05 (BY REVENUE) : 8. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 5 1) THE LEARNED OFFICERS BELOW ERRED IN FACTS AND C IRCUMSTANCES OF THE CASE AND IN LAW IN NOT ALLOWING THE CLAIM FOR DEDUCTION U/S 80IB(3)(II) OF THE INCOME TAX ACT OF RS.22,77,863/- THOUGH THE APPELLA NT IS ELIGIBLE AND WAS ALLOWED THE SAME IN THE ASSESSMENT U/S 143(3) DATED 20/12 /2006. 2) THE LEARNED CIT(APPEALS) ERRED IN FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW IN DISALLOWING THE CLAIM OF DEPRECIATION @ 80% ON THE TOTAL COST OF THE WINDMILL BY TREATING PART OF THE COST AS BEING INCURR ED FOR CIVIL WORKS AND THEREBY ALLOWING DEPRECIATION @ 10% ONLY ON SUCH COS TS. IT BE HELD THAT THE ENTIRE COSTS OF WINDMILL, ERECTION, FOUNDATION, INF RASTRUCTURE, INSTALLATION ETC ARE TO BE ALLOWED DEPRECIATION @ 80% AS THEY FORM AN IN TEGRAL PART OF WINDMILL BY APPLYING THE FUNCTIONAL TESTS. 3) WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 1 AND 2 AND ON FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LA W IT BE HELD THAT THE ADDITION MADE IS BEYOND THE SCOPE AND PROVISIONS OF SECT ION . 153A. NO INCRIMINATING DOCUMENT / MATERIAL WAS FOUND DURING T HE COURSE OF SEARCH. 4) THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, MODIFY, RECTIFY, DELETE, RAISE ANY GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARI NG. 8.1 THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF ADDITIONAL DEPRECIATION ON WINDMILL. 9. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND OF APPEAL NO.3 FOR WHICH THE LD. DEPARTMENTA L REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, GROUND OF APPEAL NO.3 I S DISMISSED AS NOT PRESSED. GROUND OF APPEAL NO.4 BEING GENERAL IN N ATURE IS DISMISSED. 10. SO FAR AS GROUND OF APPEAL NO.1 IS CONCERNED, W E FIND THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB(3) TO THE TUNE OF RS.22, 77,863/- WHICH WAS ALLOWED IN THE ORIGINAL ASSESSMENT COMPLETED U/S.14 3(3) . HOWEVER, DURING THE ASSESSMENT PROCEEDINGS AFTER THE SEARCH WAS CON DUCTED THE ASSESSING OFFICER NOTED THAT THE INVESTMENT IN PLANT AND MACH INERY EXCEEDS RS.1 CRORE AND THE UNIT IS SET UP AT A PLACE WHICH IS NOT INCL UDED IN SPECIFIED BACKWARD AREAS ELIGIBLE FOR 80IB(3) DEDUCTION. HE ACCORDING LY DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(3) WHICH WAS UPHELD BY THE LD.CI T(A). 6 11. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.530/PN/2013. WE HA VE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO, THIS GROUND BY THE ASSESS EE IS DISMISSED. 12. SO FAR AS GROUND OF APPEAL NO.2 BY THE ASSESSEE AND THE ONLY GROUND BY THE REVENUE ARE CONCERNED, WE FIND THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE HAD, IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05, INSTALLED NEW WIND MILLS. ON PERUSAL OF DE TAILS FURNISHED BEFORE HIM, THE AO NOTICED THAT THE ASSESSEE HAD CL AIMED DEPRECIATION ON THE ENTIRE EXPENDITURE INCLUDING PURCHASE AND IN STALLATION OF THE WIND MILL. THE ASSESSEE WAS ASKED TO SUBSTANTIATE I TS CLAIM MADE ON THE ASSETS OTHER THAN WIND MILL. 12.1 THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OF FICER THAT THERE WAS NO CIVIL WORK INVOLVED FOR ERECTION OF THE WIND TUR BINE AS PARTS LIKE CONTROL PANELS AND DISPLAY METERS WERE HOUSED WITHI N THE TOWER ITSELF. IT WAS SUBMITTED THAT THE CIVIL WORK DONE IN THE FORM OF FOUNDATION WORK COULD NOT BE SEPARATED FROM THE WIND TURBINE AND TH EREFORE IT WAS ENTITLED FOR DEPRECIATION ON THE ENTIRE COST OF THE WIND TURBINE. NOT BEING SATISFIED WITH THE CONTENTION OF THE ASSESSEE , THE ASSESSING OFFICER, AFTER PERUSING VARIOUS BILLS IN CONNECTION WITH EXPENSES INCURRED ON WIND TURBINE, HELD THAT THE ASSESSEE WA S NOT ENTITLED FOR DEPRECIATION ON CIVIL WORK, ERECTION WORK, INSTALLA TION WORK AND PAYMENT TOWARDS DEVELOPMENT CHARGES. IN THIS REGARD HE RELI ED ON THE ORDER OF THE ITAT IN POONAWALA FINVEST & AGRO (P) LTD. V/S A CIT [2008] 118 TTJ 68 (PUNE). THE ASSESSING OFFICER ALSO REFERRED TO RULE 32(1) O F THE 7 INCOME-TAX RULES 1962, APPENDIX I, PART A, ITEM III (3)(XIII)(I). BASED ON THE ABOVE, HE MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 13. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT IN THE CASE OF POONAWALA FINVEST AGRO PVT. LTD., (SUPRA) THE COST OF TRANSFO RMER UP TO DP STRUCTURE AND INTERNAL LINE UP TO THE METER WAS TO BE HELD AS AN INTEGRAL PART OF THE MAIN PLANT, I.E. WIND TURBINE AND DEPRECIATION @100% WAS ALLOWED. IT WAS SUBMITTED THAT NECESSARY CIVIL WORKS TOWARDS ERECTI ON AND INSTALLATION OF THE WIND TURBINE ARE INTEGRAL PART OF THE WIND MILL WIT HOUT WHICH THE WIND MILL CANNOT COME INTO EXISTENCE AND GENERATE ELECTRICITY AND THEREFORE THE SAME HAS TO BE TREATED AS PART OF THE WIND MILL. 14. HOWEVER, THE LD.CIT(A) WAS NOT FULLY CONVINCED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE REFERRED TO HIS DECIS ION IN THE CASE OF SANJAY D. GHODAWAT WHEREIN HE HAD GIVEN CERTAIN GUIDELINES AND DIRECTED THE AO TO RECOMPUTE THE DEPRECIATION AS PER THE SAID GUIDELIN ES. SINCE THE ASSESSEE IN THE INSTANT CASE HAS FILED A REVISED WORKING OF DEP RECIATION, HE DIRECTED THE ASSESSING OFFICER TO GO THROUGH THE SAME AND ALLOW DEPRECIATION AS PER THE DIRECTIONS GIVEN THEREIN. THE RELEVANT OBSERVATION S OF LD.CIT(A) READ AS UNDER : 28. THE ISSUE OF DISALLOWANCE OF DEPRECIATION CLA IMED ON WINDMILL HAD COME UP BEFORE ME IN THE CASE OF SHRI SANJAY D GHODAWAT (INDIVIDUAL) IN APPEAL NO.KOP/608, 609, 613, 612, 6 11, 610/10-11 DATED 09/07/2012 FOR ASSESSMENT YEARS 2004-05 TO 2009-10. IN THE SAID ORDER, AFTER EXAMINING IN DEPTH THE LEGAL ASPE CTS OF DEPRECIATION AND THE FUNCTIONAL INTERDEPENDENCE OF THE WIND TURB INE AND THE FOUNDATION, I HAVE HELD THAT THE COST OF THE NEW WI ND TURBINE WILL INCLUDE COST OF COMPONENT AND ACCESSORY, COST OF CO MPONENT FOR GENERATION OF ELECTRICITY SUPPLY OF ROTOR BLADES, E LECTRICAL ITEMS, COMPONENTS OF RE DEVICE, COST OF TUBULAR TOWER, COS T OF WORK INCLUDING FOUNDATION WORK AND LABOUR RELATED COST. THE RELEVANT PORTION OF THE ABOVE APPELLATE ORDER IS REPRODUCED HEREUNDER: 8 51. WHAT IS NOTICEABLE IS THAT THESE STRUCTURES AL SO HAVE A FOUNDATION. A FOUNDATION IS MADE TO PROVIDE STABILI TY TO THE STRUCTURE WHICH IT SUPPORTS. IT DERIVES ITS NATURE AND CHARACTER FROM THE SUPERSTRUCTURE THAT IS BUILT OVER IT. THER EFORE, A FOUNDATION USING THE SAME TECHNIQUES AND PRINCIPLES OF CIVIL CONSTRUCTION WILL BECOME A PART OF A BUILDING IF IT IS ASSOCIATED WITH THE SUPERSTRUCTURE WHICH CAN BE TER MED AS A BUILDING. SOME FOUNDATION WILL ACQUIRE FUNCTIONAL ATTRIBUTES OF A PLANT IF A PLANT AND MACHINERY IS SUPPORTED BY IT. THEREFORE, WE FIND A CONCRETE STRUCTURE OF A BRICK KILN OR A REFRACTORY KILN TO BE A PLANT AS ALSO THE CONCRETE STRUCTURE OR SHELL WHICH SURROUNDS THE LATTICE IN A COOLING T OWER TO BE AN ASH HANDLING AND EVACUATION SYSTEM WHICH IS A N AIR POLLUTION CONTROL EQUIPMENT USED IN ELECTRICITY GEN ERATING PLANTS, PETRO CHEMICAL COMPLEXES, FERTILIZER COMPLE XES ETC. IN THE SAME WAY, THE FOUNDATION OF A WTGS IS A PART OF THE PLANT WHICH IT SUPPORTS. IT PLAYS A PASSIVE ROLE IN PRODUCTION OF ELECTRICITY BY INCREASING THE OPERATIONAL EFFICI ENCY OF THE WIND TURBINE. IT IS USED FOR THE PURPOSES OF BUSINE SS AND NOT FOR THE PURPOSE OF HOUSING THE BUSINESS. IN THE INSTANT CASE THE BUSINESS IS PRODUCTION OF ELECTRICITY WHIC H IS DONE BY THE WTGS OF WHICH THE FOUNDATION IS AN INTEGRAL PART. AS I HAVE MENTIONED EARLIER, THE CONCEPT OF BUILDING C ANNOT BE ARTIFICIALLY ENLARGED TO INCLUDE ANY STRUCTURE WHIC H IS NOT USED FOR HOUSING, ACCOMMODATING OR PROVIDING SHELTE R AND WHICH DOES NOT FALL WITHIN THE EXTENDED MEANING GIV EN IN THE NOTES TO NEW APPENDIX I OF INCOME-TAX RULES. I AM THEREFORE CONVINCED THAT THE COST OF FOUNDATION SHO ULD BE INCLUDED AS THE COST OF WIND MILL/WTGS. 29. THUS, SINCE THE ISSUE INVOLVED BEING IDENTICAL , THE DECISION GIVEN IN SANJAY GHODAWAT (INDIVIDUAL), WILL APPLY TO THE INSTANT CASE AS WELL. IT IS PERTINENT TO MENTION HERE THAT THE ISSUE OF D EPRECIATION ON WINDMILL WAS DECIDED IN IDENTICAL MANNER BY ME IN T HE CASE OF CHAPHALKAR BROTHERS IN APPEAL NO.SLI/330/10-11 DATE D 12/09/2011 IN FAVOUR OF THE ASSESSEE. THE APPELLATE ORDER WAS AGITATED IN APPEAL BEFORE THE ITAT IN THE CASE OF M/S CHAPHALKAR BROTH ERS. HOWEVER, A PERUSAL OF THE ITAT'S ORDER SHOWS THAT MY DECISION IN ALLOWING THE CLAIM OF DEPRECATION ON COST OF FOUNDATION OF WIND TURBINE WHICH WAS COMMISSIONED IN FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2008- 09 WAS NOT AGITATED IN APPEAL BY THE DEPARTMENT. I N THE SAID CASE, I HAVE DETERMINED THE VARIOUS COMPONENTS WHICH GO ON TO MA KE UP THE CASE OF THE WINDMILL. THESE COMPONENTS ARE LISTED OUT IN TH E TABLE BELOW: SR.NO. PARTICULARS 1. COST OF WIND TURBINE GENERATOR 2. A) COST OF COMPONENT & ACCESSORY (COPPER WOUND WITH ACCESSORIES B) COST OF COMPONENT FOR GENERATION OF ELECTRICIT Y SUPPLY OF ROTOR BLADES C) ELECTRICAL ITEMS, COMPONENTS OF RE DEVICE 3. COST OF TUBULAR TOWER 4. COST OF WORK INCLUDING FOUNDATION WORK 5. LABOUR RELATED COST A) INSTALLATION OF WINDMILL B) INSTALLATION OF ELECTRICAL LINE FOR POWER TRAN SMISSION AND METER C) FINAL TESTING AND COMMISSIONING 6. REIMBURSEMENT OF POWER EVACUATION FACILITY AND C REATION OF INFRASTRUCTURE 9 30. THEREAFTER I HAD DIRECTED THE ASSESSING OFFICER IN THE ABOVE REFERRED ORDER TO RECOMPUTED THE DEPRECIATION ALLOW ANCE ACCORDING TO THE FOLLOWING :- I) COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL I TEMS MENTIONED AT 1 TO 5 ABOVE, II) COST OF POWER EVACUATION FACILITY AND INFRASTR UCTURE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDIN G/ROADS AND WINDMILL IN 60 : 40 RATIO, III) COST OF OTHER MISCELLANEOUS EXPENSES WILL BE APPORTIONED ON PRORATA BASIS BETWEEN WINDMILL AND INFRASTRUCTURE F ACILITIES. 31. HOWEVER, I FIND THAT THE APPELLANT HAS PROVIDE D ME WITH BILLS OF M/S.ENERCON (INDIA) LTD. WHICH DO NOT GIVE THE BREA KUP OF THE COST OF WINDMILL AS PER THE CHART GIVEN ABOVE. UNDER THESE CIRCUMSTANCES, ONE WOULD ONLY HAVE TO MAKE SOME GUESSWORK AS TO WHAT C ONSTITUTES THE CHARGE OF POWER EVACUATION FACILITY AND CREATION OF INFRASTRUCTURE. THE INFRASTRUCTURE CREATION COST WILL ALSO INCLUDED THE COST OF MAKING ROADS, PROVIDING FREE ACCESS, KEEPING THE AREA VACA NT ETC., WHICH WOULD NOT QUALIFY AS A WINDMILL. 32. THE APPELLANT HAS GIVEN A REVISED WORKING OF D EPRECIATION WHICH HAS BEEN CLAIMED TO BE IN ACCORDANCE WITH THE ABOVE GUIDELINES. THE ASSESSING OFFICER IS DIRECTED TO GO THROUGH THE REVISED WORKING GIVEN, A COPY OF WHICH IS ATTACHED AS PER ANNEXURE- A HEREWITH AND ALLOW THE DEPRECIATION AS PER MY DIRECTIONS ABOVE. THE APPEAL ON THIS GROUND IS PARTIALLY ALLOWED. 14.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 15. AFTER HEARING BOTH THE SIDES, WE FIND THE COORD INATE BENCH OF THE TRIBUNAL VIDE ORDER OF EVEN DATE IN ITA NO. 609 TO 614/PN/2013 AND CO NOS. 80 TO 85/PN/2013 IN THE CASE OF ACIT VS. M/S. EVERREADY INVESTMENT PVT. LTD., (WHICH IS A SISTER CONCERN OF THE ASSESS EE GROUP) HAS DECIDED AN IDENTICAL ISSUE AND HAS OBSERVED AS UNDER : 7. MISCELLANEOUS A) PROCESSING CHARGES B) INTEREST OF LOAN CAPITALIZED C) PROFESSIONAL FEES D) REGISTRATION FEES E) SUBSTATION CHARGES F) FRANKING CHARGES G) MEDA OR EQUIVALENT CHARGES 10 4. THE REVENUE HAS CONTESTED THE PARTIAL RELIEF ALLO WED BY THE CIT(A) WHEREAS THE ASSESSEE BY WAY OF CROSS-OBJECTION NO.3 HAS CO NTESTED THAT THE ENTIRE CIVIL COST OF RS.20,00,000/- BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDMILL BY APPLYING THE FUNCTIONAL TEST AND TH US BE ALLOWED DEPRECIATION AT THE HIGHER RATE. 5. IN THIS BACKGROUND, WE HAVE CONSIDERED THE RIVAL SU BMISSIONS. IT WAS A CONVERGENCE OF OPINION BETWEEN THE ASSESSEE AND THE L EARNED CIT(DR) THAT SO FAR AS THE COST OF FOUNDATION OF WINDMILL IS CONCERN ED, THE SAME IS LIABLE TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WINDM ILL HAVING REGARD TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CA SE OF AMINITY DEVELOPERS & BUILDERS VIDE ITA NO. 1505/PN/2011 DATED 12.12.201 2 AND ALSO IN TERMS OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. LTD. VIDE INCOME TAX APPEAL NO . 1326 OF 2010 DATED 14.06.2011. THE TRIBUNAL IN THE CASE OF AMINITY DEV ELOPERS & BUILDERS (SUPRA) BY APPLYING THE FUNCTIONAL TEST HELD THAT T HE COST INCURRED ON THE FOUNDATION OF THE WINDMILL IS TO BE CONSIDERED AS AN I NTEGRAL PART OF THE COST OF WINDMILL ERECTION AND IS THUS ELIGIBLE FOR THE DEP RECIATION @ 80%, PRESCRIBED FOR WINDMILL. THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF COOPER FOUNDARY PVT. LTD. (SUPRA) HAS ALSO UPHELD THE PROPOSITION THAT CEMENT, CONCRETE FOUNDATION IS TO BE INCLUDED IN THE COST OF WINDMILL, WHILE GRANTING DEPRECIATION @ 80% ON THE WINDMILL. THERE FORE, ON THE BASIS OF THE AFORESAID, IN-PRINCIPLE THE PLEA OF THE ASSESSEE IS LIABL E TO BE UPHELD. 6. SO, HOWEVER IT IS PERTINENT TO OBSERVE THAT THE CO ST OF CIVIL WORKS, ETC. AMOUNTING TO RS.20,00,000/- INCURRED BY THE ASSESSEE CAN NOT BE SAID TO BE ENTIRELY TOWARDS THE COST OF CIVIL WORK FOUNDATION FO R THE WINDMILL. THE LEARNED COUNSEL HAS REFERRED TO THE COPY OF INVOICE R AISED BY SUZLON DEVELOPERS PRIVATE LIMITED FOR THE COST OF CIVIL WORK , ETC. AMOUNTING TO RS.20,00,000/- WHICH SHOWS THAT IT IS A COMPOSITE BILL F OR FOUNDATION OF WINDMILL, PLINTH FOR TRANSFORMER, WINDMILL CONTROL R OOM, SITE DEVELOPMENT AND INTERNAL ROAD DEVELOPMENT, ETC. IT IS IN THIS CO NTEXT, ON BEING UNABLE TO DECIPHER THE EXACT COST OF THE CIVIL FOUNDATION WORK FOR WINDMILL/TRANSFORMER, THE LEARNED CIT(A) HAS APPORTIO NED THE COST BETWEEN THE BUILDINGS/ROADS AND WINDMILL IN THE RATIO OF 60:4 0. THE LEARNED COUNSEL VEHEMENTLY POINTED OUT THAT THOUGH SEPARATE COSTS WERE NOT ENUMERATED BY SUZLON DEVELOPERS PRIVATE LIMITED WHO HAD UNDERTAKEN THE EXECUTION OF WORK, YET THE ITEMS OF CIVIL WORK ON ACCOUNT OF BUIL DINGS/ROADS WAS MINIMAL AND THEREFORE APPORTIONMENT MADE BY THE CIT(A) WAS U NJUSTIFIED. THE LEARNED COUNSEL FURTHER POINTED OUT THAT THE MAJOR C OSTS ARE IN RELATION TO THE CONSTRUCTION OF CIVIL FOUNDATION FOR THE WINDMILL/OT HER EQUIPMENT REQUIRED FOR POWER GENERATION AND IS LIABLE TO BE CONSIDERED A S A PART OF WINDMILL FOR THE PURPOSES OF GRANT OF DEPRECIATION @ 80%. 7. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, AND ALSO THE PLEA RAISED BEFORE US, IN OUR CONSIDERED OPINION IT WOULD MEET TH E ENDS OF JUSTICE IF 60% OF COST OF CIVIL WORK IS APPORTIONED TO CIVIL WORK IN VOLVED IN THE ERECTION OF FOUNDATION OF WINDMILL/OTHER POWER EQUIPMENT AND 40 % BE APPORTIONED TOWARDS OTHER CIVIL WORKS WHICH SHALL BE ELIGIBLE FOR THE LOWER RATE OF DEPRECIATION. THE COST OF CIVIL WORK APPORTIONED T OWARDS THE ERECTION OF FOUNDATION FOR WINDMILL SHALL BE ELIGIBLE FOR DEPREC IATION @ 80% AND THE BALANCE OF THE COST SHALL BE ELIGIBLE FOR DEPRECIATIO N @ 10%, AS ALLOWED BY THE ASSESSING OFFICER. THE ORDER OF THE CIT(A) IS THEREFORE SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ALLOWANC E OF DEPRECIATION ACCORDINGLY. 11 15.1 SINCE BOTH THE SIDES AT THE TIME OF HEARING HA D EXPRESSED THEIR WILLINGNESS TO FOLLOW THE OUTCOME OF THE ABOVE DECI SION, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE TRIBUNAL CITED (SUPRA) WE RESTORE THE ISSUE TO THE FILE OF T HE ASSESSING OFFICER WITH A DIRECTION TO RE-COMPUTE THE DEPRECIATION IN THE LIG HT OF THE ABOVE DECISION OF THE TRIBUNAL. THE GROUNDS RAISED BY THE ASSESSEE A S WELL AS THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.616/PN/2013 (2005-06) (BY REVENUE) : CO NO. 86/PN/2013 (2005-06 (BY ASSESSEE) : 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND OF APPEAL NO.1 OF THE C.O. FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, GROU ND OF APPEAL NO.1 OF THE C.O. IS DISMISSED AS NOT PRESSED. 17. SO FAR AS GROUND OF APPEAL BY THE REVENUE AND C ROSS OBJECTION NO.2 BY THE ASSESSEE ARE CONCERNED, THEY ARE IDENTICAL T O THE ONLY GROUND OF APPEAL BY THE REVENUE AND GROUND OF APPEAL NO.2 OF THE C.O . BY THE ASSESSEE FOR A.Y. 2004-05. WE HAVE ALREADY DECIDED THE ISSUE AN D THE GROUNDS HAVE BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER TO RECOMPUTE THE DEPRECIATION WITH CERTAIN DIRECTIONS. FOLLOWING TH E SAME RATIO, THE GROUND BY THE REVENUE AS WELL AS THE GROUND IN THE C.O. BY TH E ASSESSEE ARE SET-ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR RE-COMPUTATIO N OF THE DEPRECIATION. ACCORDINGLY, THE ABOVE GROUNDS ARE ALLOWED FOR STAT ISTICAL PURPOSES. ITA NOS.617 TO 620/PN/2013 (A.YRS. 2006-07 TO 2009- 10) (BY REVENUE) : CO NOS.87 TO 90/PN/2013 (A.YRS. 2006-07 TO 2009-10) (BY ASSESSEE) : 18. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENU E IN ALL THESE APPEALS AS WELL AS BY THE ASSESSEE IN THE CROSS OBJECTIONS. 12 19. SO FAR AS THE GROUND OF CROSS OBJECTION NO.1 BY THE ASSESSEE IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAME FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. ACCORDINGLY, GROUND OF NO.1 OF THE CROSS OBJECTION BY THE ASSESSEE IS D ISMISSED AS NOT PRESSED. 20. SO FAR AS GROUND OF REVENUE AND GROUND OF CROSS OBJECTION NO.2 IN ALL THE ABOVE APPEALS ARE CONCERNED, THEY ARE IDENTICAL TO GROUND OF REVENUE AND GROUND NO.2 OF THE CROSS OBJECTION BY THE ASSESSEE FOR A.Y. 2005-06. WE HAVE ALREADY DECIDED THE ISSUE AND THE MATTER HAS B EEN RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. FOL LOWING THE SAME RATIO, THE ABOVE GROUNDS ARE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- COMPUTATION OF DEPRECIATION AS PER THE SAME GUIDELI NES. THE GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT, ITA NO.530/PN/2013 IS DISMISSED WHEREAS THE OTHER APPEALS AND COS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29-11-2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 29 TH NOVEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE