Regen Powertech Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 61/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4897 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2017
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Depreciation; Tangible material; Difference of opinion; Assessment record; Capital receipt; Revised return; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , ' # BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NOS. 61 & 62/MDS/2017 / ASSESSMENT YEAR : 2009-10 & 2010-11 M/S. REGEN POWERTECH PRIVATE LIMITED, 7TH FLOOR, KRM PLAZA, NORTH TOWER, NO.2, HARRINGTON ROAD, CHETPET, CHENNAI - 600 031. [PAN: AADCR 5531M] VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -5(1), CHENNAI - 600 034. ( / APPELLANT) ( /RESPONDENT) % & / APPELLANT BY : SHRI B. RAMAKRISHNAN, FCA )*% & / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT & /DATE OF HEARING : 21.03.2017 & /DATE OF PRONOUNCEMENT : 06.04.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE ASSESSEE HAS FILED APPEALS AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNAI IN ITA NO. 146 & 188/2015- 16/CIT(A)-3 DATED 28.10.2016 PASSED U/S. 143(3) R.W .S. 147 AND 250 OF THE INCOME TAX ACT. SINCE, THE ISSUES IN THESE APPEALS ARE COMMON IN NATURE, THESE :-2-: I.T.A. NOS. 61 &62/MDS/2017 APPEAL ARE CLUBBED AND HEARD TOGETHER AND DISPOSED BY THE COMMON ORDER. FOR THE SAKE OF CONVENIENCE WE FIRST TAKE UP ASSESSEE A PPEAL ITA NO. 62/MDS/2017 FOR THE ASSESSMENT YEAR 2010-11 AND THE FACTS NARRA TED THEREIN. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2.1 FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE RE-OPENING OF ASSESSMENT U/S. 147 WHICH WAS EARLIER COMPETED U/S. 143(3) OF THE ACT. 2.2 FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ALLOWANCE OF DEPRECIATION ON MACHINERY USED FOR MANUFACTURING THE ALLOWANCE O F DEPRECIATION ON MACHINERY USED FOR MANUFACTURING RENEWABLE ENERGY D EVICES AT 15% INSTEAD OF 80% AS PER APPENDIX-I OF RULE 5 OF THE I T RULES, 1962 IN SL. NO. PART A, III 8(XIII)(R) AS CLAIMED BY THE APPELLANT IN THE REVISED RETURN WHICH WAS ACCEPTED IN THE ORIGINAL ASSESSMENT PROCEEDINGS . 2.3 FOR THAT THE LD CIT(A) ERRED IN HOLDING THAT TH E PLANT & MACHINERY USED FOR MANUFACTURING OF RENEWABLE ENERGY DEVICES ARE NOT E LIGIBLE FOR 80% WHICH IS IN DIRECT CONFLICT WITH APPENDIX-I OF RULE 5 OF THE IT RULES, 1962, IN SL. NO. PART A, III 8(XIII)(R). 2.4 FOR THESE GROUNDS AND SUCH OTHER GROUNDS THAT M AY BE ADDUCED BEFORE OR DURING, THE HEARING OF THE APPEAL, IT IS PRAYED THA T THE HON'BLE TRIBUNAL MAY BE PLEASED TO PASS SUCH OTHER ORDERS AS THE HON 'BLE TRIBUNAL MAY DEEM FIT. :-3-: I.T.A. NOS. 61 &62/MDS/2017 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS IN THE BUSINESS OF MANUFACTURE OF WIND ENERGY CONVERTERS A ND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 15.10.201 0 WITH NIL INCOME AND SUBSEQUENTLY FILED REVISED RETURN OF INCOME ON 30.1 1.2011. THE CASE WAS SELECTED FOR SCRUTINY AND THE ORDER U/S. 143(3) OF THE ACT PASSED ON 28.03.2013. THE ASSESSING OFFICER FOUND THERE IS ESCAPEMENT OF INCOME AND ISSUED NOTICE U/S. 148 OF THE ACT, WHEREAS THE ASSESSEE FILED A L ETTER TO TREAT THE RETURN OF INCOME FILED ON 30.11.2011 IN COMPLIANCE TO THE NOT ICE. ON REQUEST OF THE ASSESSEE TO FURNISH THE RE-ASSESSMENT FOR RE-OPENIN G OF THE ASSESSMENT THE LD. AO PROVIDED THE RE-ASSESSMENT BY LETTER DATED 21.07 .2015 AND ASSESSEE RAISED OBJECTIONS FOR RE-OPENING OF ASSESSMENT IN LETTER D ATED 29.07.2015 AND LD. AO DISPOSED OFF THE OBJECTIONS BY SPEAKING ORDER DATED 30.10.2015. THE ASSESSING OFFICER ON PERUSAL OF THE ASSESSMENT RECORD FOUND T HE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION OF RS. 6,80,52,188/-. BUT AS PER THE ANNEXURE ATTACHED TO THE FORM 3CD AND THE DEPRECIATION ALLOWABLE AS PER INCOME TAX ACT CERTIFIED BY THE CHARTERED ACCOUNTANT RS. 6,22,47,477/-. HENCE, THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION OF RS. 58,04,771/- AND THE ASSE SSEE WAS ISSUED LETTER FOR TO SUBMIT THE DETAILS IN SUPPORT OF THE CLAIM. THE LD . AR APPEARED FROM TIME TO TIME AND FILED THE INFORMATION AND DISCUSSED THE DI SPUTED ISSUES AND CLAIM OF DEPRECIATION. THE LD. AR SUBMITTED THAT THE ASSESS EE HAS FILED THE REVISED RETURN ON 30.11.2011 RECTIFYING THE ERROR OF CLAIM OF DEPRECIATION AT 15% INSTEAD OF 80% ON THE PLANT & MACHINERY USED IN THE MANUFAC TURE OF ANY OF THE RENEWABLE ENERGY DEVICES AND THE ASSESSEE IS INVOLV ED IN BUSINESS OF :-4-: I.T.A. NOS. 61 &62/MDS/2017 MANUFACTURE OF RENEWABLE DEVICES. THE LD. AO CONSI DERED THE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE PROVISIONS OF THE ACT AND THE INCOME TAX RULES IN ALLOWING THE DEPRECIATION ON PLANT & MACHINERY AND FURTHER LD. AO DISCUSSED THE DISPUTED ISSUE AT PARA 3 OF THE ASSESSMENT ORDER AN D OBSERVED THAT THE ASSESSEE COULD NOT SUBSTANTIATED ITS CLAIM WITH EVIDENCE AND THE ASSETS WERE NOT PUT TO USE AND DISALLOWED THE EXCESS CLAIM OF DEPRECIATION OF RS. 58,04,711/- WITH OTHER ADDITIONS AND PASSED THE ORDER U/S. 143 R.W.S. 147 OF THE ACT DATED 27.01.2016. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR A RGUED THE GROUNDS AND SUBSTANTIATED THE CLAIM WITH THE SUBMISSIONS. THE LD. AR SUBMITTED THAT AT THE TIME OF FILING ORIGINAL RETURN OF INCOME DEPRECIATI ON WAS CLAIMED AT 15% ON THE PLANT & MACHINERY AND SUBSEQUENTLY, THE ASSESSEE FI LED REVISED RETURN CLAIMING DEPRECIATION ON THE PLANT & MACHINERY FOR MANUFACTU RE OF RENEWABLE ENERGY DEVICES AT 80% OF VALUE. THE LD. CIT(A) FOUND THE ASSESSEE IS IN THE BUSINESS OF RENEWABLE ENERGY DEVICES AND LD. AO RELIED ON THE A UDIT REPORT FILED ALONG WITH THE REVISED RETURN AND THE CLAIM OF DEPRECIATION IS NOT ACCEPTABLE. THE LD. AR SUBSTANTIATED HIS ARGUMENTS WITH THE RATE OF DEPREC IATION AS PER INCOME TAX ACT, APPENDIX-I OF RULE 5 OF IT RULES 1982 APPLICABLE IN RESPECT OF PLANT & MACHINERY, BUT THE LD. CIT(A) OBSERVED THAT THE RENEWABLE DEVI CES ARE ALLOWED TO DEPRECIATION AT 80% BUT NOT THE PLANT & MACHINERY U SED FOR MANUFACTURE OF RENEWABLE ENERGY DEVICES AND CONFIRMED THE RE-ASSES SMENT AND THE ACTION OF THE ASSESSING OFFICER AND DISMISSED THE ASSESSEE'S APPEAL. :-5-: I.T.A. NOS. 61 &62/MDS/2017 5. AGGRIEVED BY THE CIT(A) ORDER, ASSESSEE HAS FILE D AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. AR SUBMITTED THAT THE RE-ASSESSMENT WAS WITHIN FOUR YEARS AND THE EARLIER ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AND DUE TO CHANGE IN RATE OF CLAIM OF DEPRECIATION THE REVISED RETURN WAS FILED AND THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FAC T THAT THE DEPRECIATION ON MACHINERY USED FOR MANUFACTURE OF RENEWABLE ENERGY IS ELIGIBLE FOR DEPRECIATION AT 80% INSTEAD OF 15% AND PRAYED FOR ALLOWING THE A PPEAL. CONTRA, LD. DR RELIED ON ORDER OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AR ARGUED ON THE VALID ITY AND LEGAL IMPLICATIONS OF RE- ASSESSMENT PROCEEDINGS AS BAD AND THERE IS NO VALID REASON AND NO TANGIBLE MATERIAL WAS AVAILABLE ON RECORD FOR ISSUING NOTICE U/S. 148 OF THE ACT AS IT IS ONLY A MERE CHANGE OF OPINION ON THE SAME SET OF FACTS W HICH WAS CONSIDERED IN THE ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT WAS PASS ED ON 28.03.2013 IN THE PRESENT CASE, WHERE RE-OPENING OF ASSESSMENT WAS WI THIN FOUR YEARS, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THERE W AS REASON TO BELIEVE THAT THE INCOME OTHERWISE CHARGEABLE TO TAX HAS ESCAPED INCO ME AND ISSUED NOTICE U/S. 148 OF THE ACT. AS PER THE INFORMATION THE ASSESSE E HAS CLAIMED THE SUBSIDIARY RECEIVED LOAN ANDHRA PRADESH GOVERNMENT AS CAPITAL RECEIPT AND NOT OFFERED TO TAX AND HIGHER CLAIM OF DEPRECIATION. THE LD. AO P ROVIDED THE REASONS ON THE REQUEST OF THE ASSESSEE AND CONSIDERED THE OBJECTIO NS ON CHALLENGING THE RE- :-6-: I.T.A. NOS. 61 &62/MDS/2017 OPENING AND FURTHER THE LD. AO HAS PASSED A SEPARAT E ORDER BASED ON THE INFORMATION, DETAILS AND REASONS FOR RE-OPENING OF ASSESSMENT AND OBJECTIONS FILED BY THE ASSESSEE AS RE-ASSESSMENT PROCEEDINGS ARE VALID IN EYES OF LAW. PRIMA FACIE, THE PRESENT LD. AO HAS RELIED ON THE R ECORDS AND TANGIBLE MATERIAL THAT THE PREDECESSOR HAS NOT VERIFIED AND BELIEVED THAT THERE IS INCOME ESCAPED ASSESSMENT. WE ARE OF THE OPINION THAT THE ORIGINA L ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AND IT IS SETTLED LAW THAT O N THE BASIS OF MATERIAL AVAILABLE WITH THE ASSESSING OFFICER, IT IS OPINIONED THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BE FORMED AND IN ORIGINAL ASSESS MENT THE LD. AO HAS NOT EXAMINED THESE ASPECTS AND PASSED THE ORDER. ACCOR DINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND WE ARE INCLINE D TO UPHOLD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE VALIDIT Y OF RE-ASSESSMENT PROCEEDINGS AND DISMISS THE ASSESSEE'S GROUND. 7. THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT & MACHINERY AND THE LD. AR SUBMITTED THAT THE WAS CLAIMED AT 15% AS A GAINST AT 80% ELIGIBLE ON THE PLANT & MACHINERY USED FOR MANUFACTURE OF RENEWABLE ENERGY DEVICES AND THEREFORE FILED THE REVISED RETURN OF INCOME. WHER EAS, THE ASSESSING OFFICER IN THE RE-ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESS EE HAS CLAIMED HIGHER DEPRECIATION IN THE RETURN OF INCOME. THE LD. AR S UBSTANTIATED HIS ARGUMENTS AND DREW OUR ATTENTION TO APPENDIX-I OF RULE 5 OF T HE IT RULES, 1962, IN SL. NO. PART A, III 8(XIII) AND EXPLAINED THAT AS PER CLAUS E (L) WIND MILLS AND ANY SPECIALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS AND CLAUSE (R) MACHINERY :-7-: I.T.A. NOS. 61 &62/MDS/2017 AND PLANT USED IN THE MANUFACTURE OF ANY OF THE ABO VE SUB ARE ALLOWED DEPRECIATION AT 80%. THE LD. AR ALSO FILED THE FIN ANCIAL STATEMENTS, AUDIT REPORT TO SUBSTANTIATE THE METHOD OF ACCOUNTING AND THE RA TE OF DEPRECIATION CLAIMED UNDER THE COMPANIES ACT. FURTHER, THE LD. AR FILED COPY OF FORM 3CD CONTAINING STATEMENT OF PARTICULARS FURNISHED IN 44AB AT CLAUS E 14, WHERE THE ASSESSEE HAS CLAIMED DEPRECIATION AT 15% AND INCLUDES ADDITION T O THE PLANT & MACHINERY. WE FOUND THE ASSESSEE IN PLANT & MACHINERY HAS CLAIMED DEPRECIATION ON WIND MAST AT RATE OF 15% ALONG WITH OTHER ASSETS. FURTHER, TH E LD. AR EXPLAINED THAT THE PLANT & MACHINERY USED FOR WIND ENERGY ARE ELIGIBLE FOR HIGHER RATE OF DEPRECIATION AND IN THE NOTES TO ACCOUNTS IN SCHEDU LE-19, DEPRECIATION WAS CLAIMED ON THE STRAIGHT LINE METHOD UNDER COMPANIES ACT. 7.1 WHEREAS, THE LD. DR SUBMITTED THAT THE ASSESSE E HAS CLAIMED HIGHER DEPRECIATION ON THE ASSETS OTHER THAN WIND MILLS MA CHINERY AND THE LD. AO WAS CORRECT IN DISALLOWING THE CLAIM. WE CONSIDERING T HE APPARENT FACTS, MATERIAL ON RECORD, FIND SOME OF THE ASSETS OF WIND MILLS WHERE DEPRECIATION WAS CLAIMED AT LOWER RATE INSTEAD OF RATES PRESCRIBED UNDER SCHEDU LE. 7.2. IN OUR OPINION, THE ASSESSING OFFICER HAS TO R E-EXAMINE THE FACTS WITH THE EVIDENCE AND VERIFY THE ASSETS USED IN WIND MIL L MANUFACTURING AND APPLY DEPRECIATION RATES AS PRESCRIBED UNDER THE SCHEDULE . HENCE, IN THE INTEREST OF JUSTICE, WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY, EXAMINE AND ALLOW THE DEPRECIATION IN RESPECT OF AS SETS OF WIND MILL :-8-: I.T.A. NOS. 61 &62/MDS/2017 MANUFACTURING AND WIND MILLS AT A PRESCRIBED RATE A ND THE ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING TO SUBSTAN TIATE ITS CLAIM AND SHALL COMPUTE IN FILING THE RELEVANT INFORMATION AND ACCO RDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 8. SIMILARLY, ASSESSEE APPEAL IN ITA NO. 61/MDS/201 7 WAS FILED ON SIMILAR ISSUES. ACCORDINGLY, WE REMIT THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER AS DISCUSSED IN ITA NO. 62/MDS/2017 AT PARA 7 AND ALLO W THE ASSESSEE APPEAL FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE ASSESSEE APPEALS IN ITA NO. 6 1/MDS/2017 & 62/MDS/2017 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 6TH DAY OF ARIL, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) $ /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 6TH APRIL, 2017. JPV & )'23 43 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 )'' /DR 6. 9 /GF