BLP Wind Project (Amberi) P. Ltd., New Delhi V. DCIT, New Delhi

ITA 5804/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9255 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH MISHRA
• Keywords: Wholly owned subsidiary

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 5804/DEL/2016 [ASSESSMENT YEAR: 2012-13] BLP WIND PROJECT [AMBERI] PVT. LTD VS. THE D .C.I.T 77, POORVI MARG, VASANT KUNJ CIRCLE 4(2) NEW DELHI NEW DELHI PAN: AAECB 8224 G [APPELLANT] [RESPONDENT] DATE OF HEARING : 07.01.2020 DATE OF PRONOUNCEMENT : 08.01.2020 ASSESSEE BY : SHRI RAJIV JAIN, CA REVENUE BY : SHRI VED PRAKASH MISHRA, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 2, NEW DELHI DATED 29.07.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 47,19,047/- BY DISALLOWING AND RESTRICTING THE CLAIM OF EXPENDITUR E DEBITED TO THE P&L A/C TO THE EXTENT OF INCOME BY HOLDING T HAT THE EXPENSES WERE PRE OPERATIVE EXPENSES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE APPELLANT COMPANY WAS INCORPORATED ON 23.12.2011 AN D IS A WHOLLY OWNED SUBSIDIARY OF BHARAT LIGHT AND POWER PVT. LTD. RETURN OF INCOME DECLARING LOSS OF RS. 47,19 ,047/- WAS FILED ON 29.09.2012. RETURN WAS SELECTED FOR SCRUT INY ASSESSMENT AND ACCORDINGLY, STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY EXPE NSES DEBITED IN THE PROFIT AND LOSS ACCOUNT SHOULD NOT B E CAPITALISED AS THE OPERATION OF THE COMPANY HAS COM MENCED FROM APRIL 2012 AND NOT IN THE RELEVANT F.Y. 3 5. IN ITS REPLY, THE ASSESSEE CLAIMED THAT IT HAD S TARTED ITS BUSINESS OPERATIONS IMMEDIATELY AFTER ITS INCORPORATION ON 2 3.12.2011. THE ASSESSEE STRONGLY CONTENDED THAT BUSINESS OF THE AS SESSEE WAS READY TO COMMENCE AND IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD HAVE ACTUALLY COMMENCED ITS BUSINESS AS ASSETS WERE READ Y TO USE. IN SUPPORT, RELIANCE WAS PLACED ON VARIOUS JUDICIAL DE CISIONS. 6. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO ADDED THE EXPENSES OF RS. 47, 19,047/- AND TREATED THEM AS PREOPERATIVE EXPENSES. THE OBSERVA TIONS OF THE ASSESSING OFFICER READ AS UNDER: (A) THE AUDITOR HAD CLEARLY PROVIDED IN NOTE 1 THAT THE WIND ARMS ARE IN VARIOUS STAGES OF COMPLETION AS O N 31ST MARCH, 2012 AND EXPECTED TO START COMMERCIAL OPERATION BY APRIL, 2012. THUS, IT IS CLEAR THAT TH E PLANTS WERE NOT READY TO BE USED TO CLAIM THAT BUSINESS HA S COMMENCED. B) THE ASSESSEE HAS SUBMITTED COMMISSIONING CERTIFICA TE TO JUSTIFY THAT BUSINESS HAD COMMENCED. BUT ON PERU SAL OF THAT CERTIFICATE, IT IS FOUND THAT THE CERTIFICA TE WAS COMMUNICATED TO THE ASSESSEE COMPANY VIDE LETTER 4 DATED 17/04/2012 WHICH ALSO CLEARLY SHOWS THAT THE BUSINESS WAS NOT COMMENCED ON OR BEFORE 31 ST MARCH. 2012. FURTHER, IT IS ONLY PART OF THE PLANT WHICH W AS COMMISSIONED AND NOT COMPLETE PROJECT. C) FURTHER, IN BALANCE SHEET FOR THE YEAR ENDING 2012 , IT IS CLEARLY REFLECTED BY THE ASSESSEE ITSELF THAT TH E WIND TURBINES WERE NOT TAKEN INTO FIXED ASSETS, BUT THE EXPENSES ON THE SAME WERE SIMPLY CAPITALIZED AND SH OWN AS CAPITAL ADVANCE' IN ASSET SIDE. THIS MAKES IT V ERY CLEAR, THAT THE ASSESSEE HAD ITSELF CONSIDERED THAT THE BUSINESS HAS NOT YET COMMENCED 7. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT COULD NOT CONVINCE HIM. 8. WHILE DISMISSING THE APPEAL, THE LD. CIT(A) OBSE RVED AS UNDER: 3.2.3 IN ADDITION, THE APPELLANT ALSO PRODUCED BOTH BEFORE THE A.O. AS WELL AS THE UNDERSIGNED, LETTER DATED 17.04 .2012 FROM THE SUPERINTENDENT ENGINEER, SANGLI UNDER MAHARASHT RA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. TO THE EFFECT THAT 5 THREE WIND ELECTRIC GENERATORS OF THE APPELLANT COM PANY HAD BEEN COMMISSIONED ON 31.03.2012, BESIDES METERING E QUIPMENT AND THAT THE QUANTUM OF ENERGY PUMPED INTO MSEDCLS GRID BY THE WINDMILL, WILL BE GIVEN BY M/S. K.P. POWER P VT. LTD. (DEVELOPING AGENCY). MSEDCL WOULD ONLY BE CONCERNED WITH THE NET ENERGY RECORDED BY THE MAIN METER AT RESPEC TIVE FEEDERS AT SUB-STATIONS, AS PER THE CERTIFICATE DAT ED 17.04.2012. HOWEVER, DESPITE PRODUCING THE FOUR CER TIFICATES REGARDING THE APPELLANTS ENROLLMENT/REGISTRATION U NDER CENTRAL AND STATE SALES TAX, VAT, ETC. AS WELL AS T HE CERTIFICATE DATED 17.04.2012 THAT THREE WIND GENERA TORS HAD BEEN COMMISSIONED ON 31.03.2012, THE APPELLANT HAS NOT PROVIDED ANY EVIDENCE/DETAILS REGARDING THE ENERGY RECORDED BY THE METERS IN RESPECT OF THE COMMISSIONED WIND GENERATORS OR THE BILLS RAISED ON THE MSEDCL. THE A PPELLANT HAS ALSO NOT BEEN ABLE TO REBUT THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE AUDITOR HAD CLEARLY MENT IONED IN NOTE-1 TO THE FINAL ACCOUNTS THAT THE WIND FARMS WE RE IN VARIOUS STAGES OF COMPLETION ON 31.03.2012. NOT ONL Y THIS, IT IS SIGNIFICANT THAT NONE OF THE WIND TURBINES HAS BEEN INCLUDED IN THE FIXED ASSETS BY THE APPELLANT IN THE BALANCE SHEET AS ON 31.03.2012 AND RATHER THE EXPENDITURE ON THE SAME H AS BEEN SHOWN AS CAPITAL ADVANCE. IF SOME OF THE WIND TURBI NES WERE READY TO COMMENCE PRODUCTION OF ELECTRICITY, THEY S HOULD HAVE BEEN SHOWN UNDER THE HEAD FIXED ASSETS INSTEAD OF ADVANCES, AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER. 6 EVEN THE JUDGEMENTS RELIED UPON BY THE APPELLANT D O NOT COME TO ITS RESCUE E.G. IN THE CASE OF THE ASSESSEE COMPANY HAD NOT ONLY GOT ITSELF REGISTERED UNDER THE SHOP A ND ESTABLISHMENT ACT, BUT HAD ALSO RENTED OUT OFFICE P REMISES, OPENED BANK ACCOUNT, APPOINTED EMPLOYEES, ETC. SIMI LARLY, IN THE CASE OF STONES & MINERAL ASSOCIATES LTD., THE COURT RELIED ON THE FACT THAT THE ASSESSEE HAD ALREADY PAID CERT AIN AMOUNT FOR SUPPLY OF GOODS, THEIR POLISHING AND CUTTING BE SIDES OBTAINING LEASE FOR EXCAVATION OF MATERIAL FROM MIN ES AND ALSO GETTING REGISTERED AS AN EXPORTER. THE AFORESAID IN STANCES ESTABLISH THAT THE BUSINESS OF AN ASSESSEE CANNOT B E SAID TO (EVEN IF NOT COMMENCED) MERELY BY OBTAINING CERTIFI CATES OF REGISTRATION/ENROLLMENT/COMMISSIONING, ETC. AS IN T HE CASE OF THE APPELLANT WITHOUT ANY OTHER ACTIVITY LIKE OPENI NG OF OFFICE PREMISES, OPENING OF BANK ACCOUNT, APPOINTMENT OF E MPLOYEES, PAYMENT FOR SUPPLY OF GOODS, ETC. WHEN THE APPELLAN T ITSELF HAS REFRAINED FROM DEPICTING ANY OF THE WIND TURBIN ES AS ASSETS IN ITS BALANCE SHEET AT THE END OF THE YEAR UNDER APPEAL, AND HAS CLASSIFIED THEM UNDER ADVANCES, THE OBVIOUS INFERENCE IS THAT ITS ASSETS/BUSINESS WERE NOT EVEN SET UP BY 31.03.2012. THE QUESTION OF COMMENCEMENT WOULD ARIS E ONLY THEREAFTER. THEREFORE, I UPHOLD THE ACTION OF THE A SSESSING OFFICER IN DISALLOWING THE CLAIM OF EXPENSES MADE B Y THE APPELLANT BY TREATING THEM AS PREOPERATIVE EXPENSES AND CAPITALIZING THEM. WITH THESE OBSERVATIONS, GROUND NO. 1 OF THE APPEAL IS DISMISSED. 7 9. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 10. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER. 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE AUDITOR OF THE APPELLANT COMPANY HAS SPECIFICALLY MENTIONED THAT T HE WIND FARMS ARE IN VARIOUS STAGES OF COMPLETION AS ON 31.03.2012 AN D EXPECTED TO START COMMERCIAL OPERATIONS BY APRIL 2012. WE ALSO FIND THAT THE AUDITOR HAS GIVEN AN ADVERSE COMMENT ON THE CERTIFICATE OF COMM ISSIONING AND HAS FURTHER POINTED OUT THAT IN THE BALANCE SHEET FOR T HE YEAR ENDING 2012, WIND TURBINES WERE NOT TAKEN INTO FIXED ASSETS, BUT THE EXPENSES OF THE SAME WERE SIMPLY CAPITALISED AND SHOWN AS CAPITAL ADVANCE. EVEN BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD N OT CONTROVERT TO THE OBSERVATIONS OF THE AUDITOR, NOR COULD BRING ANY EV IDENCE TO SUPPORT THE CLAIM THAT BUSINESS HAS COMMENCED DURING THE YE AR UNDER CONSIDERATION ITSELF. ON THE FACTS OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). 8 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IN ITA NO. 5804/DEL/2016 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON . 01.2020. SD/- SD/- (BHAVNESH SAINI) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 TH JANUARY, 2020. VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR 9 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER