The Standard Textiles, Karur V. DCIT, Trichy

ITA 548/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4879 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. ITA NO.548/MDS./2011 ASSESSMENT YEAR:2005-06 M/S.THE STANDARD TEXTILES , POST BOX NO.78, BALAJI NAGAR, SEMMADAI, SALEM MAIN ROAD, KARUR. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE II, TIRUCHIRAPALLI. PAN AAAFT 1844 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.SRIDHAR DEPARTMENT BY : SHRI K E B RENGARAJAN O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEV ANCE IS THAT DEPRECIATION OF RS.76 LAKHS CLAIMED ON WIND MILL WA S DISALLOWED FOR THE REASON THAT ONLY TRIAL PRODUCTIO N WAS DONE AND WIND MILL WAS NOT CONNECTED TO THE POWER GRID. 2. SHORT FACTS, APROPOS ARE THAT ASSESSEE ENGAGED IN T HE BUSINESS OF EXPORTING COTTON FABRICS HAD IN THE RELEVANT PREVIOUS YEAR CLAIMED DEPRECIATION ON A WIND MILL. ASSESSEE PRODUCED A LETTER ISSUED BY THE EXECUTIVE ENGINEER, TAMIL NADU ELECTRICITY BOARD (TNEB), WHICH STATED THAT TH E WIND MILL PAGE OF 6 ITA. 548/MDS/11 THE STANDARD TEXTILES 2 WAS COMMISSIONED ON 05.03.05. AS PER THE ASSESSEE, THE TRIAL PRODUCTION WAS STARTED AND IT WAS NOT NECESSARY TO PRODUCE ELECTRICITY FOR THE WHOLE OF THE YEAR FOR CLAIMING DEPRECIATION. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION T HAT AS PER THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE MEMBER(GENERATION) TNEB, WIND MILL WOULD BE CONNECT ED TO THE POWER GRID ONLY ON COMMISSIONING OF 22 KV ENERC ON FEEDER. THEREFORE, AS PER THE ASSESSING OFFICER, W IND MILL COULD NOT BE CONSIDERED CONNECTED TO THE GRID TILL THE TRANSFORMER WAS COMMISSIONED. ASSESSEE HAVING NOT P UT THE WIND MILL TO ACTUAL USE, DEPRECIATION COULD NOT BE ALLOWED. RELIANCE WAS PLACED ON THE DISMISSAL OF AN SLP FILE D AGAINST THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF DINSESH KUMAR GULAB CHAND AGARWAL VS. UNION OF INDI A 266 ITR (ST) 106. 3. IN ITS APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A), SUBMISSION OF THE ASSESSEE WAS THAT COMMISSIONING C ERTIFICATE ISSUED BY THE EXECUTIVE ENGINEER (TNEB) ON 08.03.05 CLEARLY MENTIONED THAT IT WAS TIED UP WITH THE TNEB GRID. AS PER THE ASSESSEE, THE SAID CERTIFICATE ALSO MENTIONED INIT IAL READING AS ON 05.03.05. ASSESSEE ARGUED THAT USE OF MACHINE F OR TRIAL PRODUCTION WAS AS MUCH USE OF A MACHINE THAT WOULD ENTITLE IT TO CLAIM DEPRECIATION. ACCORDING TO IT, THERE WAS NO REQUIREMENT THAT WIND MILL SHOULD KEEP ON PRODUCING POWER EVERY DAY OF THE YEAR AND EVEN IF IT HAD PRODUCED POWER ONLY FOR A MOMENT, IT WOULD BE ELIGIBLE FOR CLAIM OF DEP RECIATION. HOWEVER, THE COMMISSIONER OF INCOME TAX(A) WAS NOT IMPRESSED. ACCORDING TO HIM, THE WIND MILL WAS NOT PUT IN USE. PAGE OF 6 ITA. 548/MDS/11 THE STANDARD TEXTILES 3 IT WAS NOT CONNECTED TO THE GRID. FROM THE REMAND R EPORT GIVEN BY THE ASSESSING OFFICER, THE LD. COMMISSIONER OF I NCOME TAX(A) CONCLUDED THAT THERE WAS NO CONCRETE PROOF G IVEN BY THE ASSESSEE REGARDING COMMISSIONING OF THE WIND MI LL AND GENERATION OF POWER. HE THEREFORE SUSTAINED THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER. 4. NOW BEFORE US LD. AR STRONGLY ASSAILING THE OR DER OF THE AUTHORITIES BELOW SUBMITTED THAT ASSESSING OFFICER HAD SIMPLY WENT BY THE AGREEMENT DT.15.01.2005 ENTERED INTO BY THE ASSESSEE WITH MEMBER (GENERATION)TNEB, AS PER WHICH IT HAD TO COMPLY WITH CERTAIN TECHNICAL AND OTHER REQUIREM ENTS. LD. AR ARGUED THAT ASSESSEE HAD COMPLIED WITH SUCH REQUIREMENTS, REMITTED THE NECESSARY FEES TO THE TN EB AND ONLY THEREAFTER THE COMMISSIONING CERTIFICATE WAS G IVEN BY THE EXECUTIVE ENGINEER, TNEB . HENCE, ACCORDING TO HIM ASSESSEE HAD STARTED PRODUCING POWER AND IT WAS AL SO CONNECTED TO THE GRID. DEPRECATION AS PER LD. AR W AS UNJUSTLY DENIED TO IT. PER CONTRA LD. DR SUPPORTED THE ORDERS OF THE AUTHO RITIES BELOW. 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE RIVAL CONTENTIONS. ADMITTEDLY, ASSESSI NG OFFICER HAD WENT BY THE AGREEMENT ENTERED INTO BY THE ASSES SEE WITH MEMBER(GENERATION) TNEB AND SAID AGREEMENT DT.18.01 .05 GAVE THE REQUIREMENTS THAT WERE TO BE COMPLIED BY T HE ASSESSEE BEFORE COMMISSIONING OF THE WIND MILL. IN OUR OPINION, THIS AGREEMENT ENTERED INTO ON 18.01.05 CO ULD NOT BE PAGE OF 6 ITA. 548/MDS/11 THE STANDARD TEXTILES 4 CONSIDERED AS AN EVIDENCE FOR SHOWING THAT ASSESSE E WAS NOT CONNECTED TO THE GRID AS ON 31.03.2005. MAY BE THE AGREEMENT MENTIONED THAT COMMISSIONING OF A 22 KV ENERCON FEE DER WAS REQUIRED FOR CONNECTING TO THE GRID. BUT THERE IS N OTHING ON RECORD PLACED BY THE ASSESSING OFFICER TO SHOW THAT SUCH A FEEDER WAS NOT COMMISSIONED UPTO 31.03.05. ADMITTED LY THE EXECUTIVE ENGINEER OPERATION AND MAINTENANCE FOR TN EB VIDE ITS LETTER DT.08.03.05 HAD GIVEN THE COMMISSIO NING CERTIFICATE TO THE ASSESSEE AND THE SAID COMMISSION ING CERTIFICATE ALO REFLECTED THEREIN THE INTIAL READIN G ON 05.03.05. THERE IS NO CASE FOR THE REVENUE SUCH INITIAL READ ING WAS ZERO, IT CANNOT BE PRESUMED THAT CERTIFICATE OF EXE CUTIVE ENGINEER STATING THAT THE WIND MILL WAS TIED UP WIT H TNEB GRID WAS FABRICATED. WE CANNOT ALSO PRESUME THAT THERE W AS NO PRODUCTION OF WIND MILL AT ALL AFTER ITS COMMISSION ING ON 05.03.05 UPTO 31.03.05. IN OUR OPINION, ASSESSEE H AD CLEARLY ESTABLISHED USE OF THE WIND MILL FOR PRODUCTION OF ELECTRICITY. ELECTRICITY AS A PRODUCT, UNLIKE OTHER TANGIBLE MAT ERIAL, WOULD BE THE SAME WHETHER IT RESULTS OUT OF A TRIAL PRODU CTION OR OF A COMMERCIAL PRODUCTION. NOBODY WOULD ATTEMPT TO TOUC H A ELECTRICAL WIRE CARRYING POTENTIAL DIFFERENCE, JUST FOR A REASON THAT THE ELECTRICITY CHARGED THERE IN, WAS FROM THE TRIAL PRODUCTION OF A GENERATOR UNIT AND NOT FROM COMMERC IAL PRODUCTION. ELECTRICITY AS A COMMODITY REMAINS THE SAME WHETHER IN TRIAL PRODUCTION OR COMMERCIAL PRODUCTI ON. RULES RELATING TO NECESSITY OF ESTABLISHING COMMENCEMENT OF COMMERCIAL PRODUCTION CANNOT BE TRANSPORTED TO A CA SE WHERE PAGE OF 6 ITA. 548/MDS/11 THE STANDARD TEXTILES 5 THE COMMODITY PRODUCED IS ELECTRICITY. ASSESSEE WA S CLEARLY ELIGIBLE FOR DEPRECIATION AND IT WAS UNJUSTLY DENIE D. DISALLOWANCE STANDS DELETED. APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/- SD/- ( GEORGE MATHAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND JUNE, 2011. KSS COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE PAGE OF 6 ITA. 548/MDS/11 THE STANDARD TEXTILES 6 DATE INITIALS 1. DRAFT DICTATED ON 23.06.11 2. DRAFT PLACED BEFORE AUTHORITY 23.06.11 3. DRAFT PLACED BEFORE THE 23.06.11 SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S. 6. KEEP FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE 9. DATE OF DISPATCH OF ORDER