Asst. CIT, Central Circle, Kolhapur V. M/s. Everready Investment Pvt. Ltd., Mumbai

ITA 611/PUN/2013

• Counselvise Citation: 61124514 RSA 2013
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: MAHENDRA MEHTA
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS. 609 TO 614/PN/2013 (ASSESSMENT YEARS : 2003-04 TO 2008-09) ASST. COMMISSIONER OF INCOME TAX, (CENTRAL CIRCLE), KOLHAPUR . APPELLANT VS. M/S. EVERREADY INVESTMENT PVT. LTD., FLAT NO.22, A/P ROYAL ACCORD, PLOT NO. 17, OPP. LOKHANDWALA, ANDHERI (W), MUMBAI 400 053. PAN : AAACE3436B . RESPONDENT C.O. NOS. 80 TO 85/PN/2013 (ARISING OUT OF ITA NOS.609 TO 614/PN/2013) (ASSESSMENT YEARS : 2003-04 TO 2008-09) M/S. EVERREADY INVESTMENT PVT. LTD., FLAT NO.22, A/P ROYAL ACCORD, PLOT NO. 17, OPP. LOKHANDWALA, ANDHERI (W), MUMBAI 400 053. PAN : AAACE3436B . CROSS OBJECTOR VS. DY. COMMISSIONER OF INCOME TAX, (CENTRAL CIRCLE), KOLHAPUR . APPELLANT IN THE A PPEAL DEPARTMENT BY : MR. A. K. MODI ASSESSEE BY : MR. MAHENDRA MEHTA DATE OF HEARING : 28-11-2013 DATE OF PRONOUNCEMENT : 29-11-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEALS OF THE REVENUE AND CROSS-OBJ ECTIONS PREFERRED BY THE ASSESSEE RELATING TO ASSESSMENT YEARS 2003-0 4 TO 2008-09 INVOLVE CERTAIN COMMON ISSUE AND THEREFORE THEY HAVE BEEN C LUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED F OR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS. 609 TO 614/PN/2013 C.O. NOS. 80 TO 85/PN/2013 2. ALL THE APPEALS OF THE REVENUE AND THE CROSS-OBJ ECTIONS OF THE ASSESSEE ARISE FROM A CONSOLIDATED ORDER OF THE CIT (A) DATED 18.12.2012 FOR THE CAPTIONED ASSESSMENT YEARS WHICH, IN-TURN, HAS ARISEN FROM ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER U/S 143(3) R .W.S. 153C OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR EACH OF THE ASSESSMENT YEA RS. THE SUM AND SUBSTANCE OF THE DISPUTE IN THE CAPTIONED PROCE EDINGS RELATES TO THE DEPRECIATION ON THE COST OF WINDMILL. THE ASSESSIN G OFFICER NOTICED THAT DURING THE ASSESSMENT YEAR 2003-04, ASSESSEE HAD IN STALLED A WINDMILL COSTING OF RS.4,65,00,000/-. ON THE ENTIRE COST OF WINDMILL, DEPRECIATION WAS CLAIMED @ 80% ON ALL ASSETS EXCLUDING LAND. IT WAS FURTHER NOTICED THAT THE COST OF WINDMILL AT RS.4,65,00,000/- INCLUDED AN AM OUNT OF RS.20,00,000/- TOWARDS COST OF CIVIL WORKS, ETC. IN TERMS OF INVOI CE DATED 28.01.2003 ISSUED BY THE SUZLON DEVELOPERS PRIVATE LIMITED. AS PER THE ASSESSING OFFICER, DEPRECIATION ON THE COST OF CIVIL WORK, ETC. WAS NO T ELIGIBLE FOR THE HIGHER RATE OF DEPRECIATION OF 80% SINCE DEPRECIATION @ 80% WAS AL LOWABLE ONLY IN RESPECT OF THE COST OF WINDMILL. ACCORDINGLY, DEPRECIATION ON THE COST OF CIVIL WORK AMOUNTING TO RS.20,00,000/- WAS ALLOWED @ 10% AND F OR THE BALANCE IT WAS ALLOWED @ 80%, AS CLAIMED BY THE ASSESSEE. FOR ASS ESSMENT YEAR 2003-04 THIS RESULTED IN REDUCTION OF THE DEPRECIATION CLAI M BY RS.7,00,000/-. SIMILARLY, THE DEPRECIATION ON THE WINDMILL WAS RECOMPUTED FOR EACH OF THE SUBSEQUENT ASSESSMENT YEARS WHICH ARE BEFORE US BY CONSIDERING THE COST OF CIVIL WORK TO BE ELIGIBLE FOR THE DEPRECIATION @ 10% AND THE BALA NCE OF COST OF WINDMILL @ 80%. 3. IN APPEAL BEFORE THE CIT(A), ASSESSEE CHALLENGED THE PARTIAL DENIAL OF DEPRECIATION. THE CIT(A) HAS ALLOWED PARTIAL RELIE F WHEREBY HE HAS UPHELD THE PROPOSITION THAT THE COST OF FOUNDATION OF WINDMILL IS LIABLE FOR DEPRECIATION @ 80%. AFTER DISCUSSING HIS PROPOSITION IN PARAS 2 0 AND 21 HE HAS ENCLOSED ANNEXURE- A TO HIS ORDER CONTAINING THE REVISED WOR KING OF THE DEPRECIATION. IN TERMS OF THE SAID ANNEXURE, OUT OF THE TOTAL COST O F CIVIL WORKS, ETC. AMOUNTING ITA NOS. 609 TO 614/PN/2013 C.O. NOS. 80 TO 85/PN/2013 TO RS.20,00,000/-, 40% IS ATTRIBUTED TO THE COST OF FOUNDATION OF WINDMILL SO AS TO BE ELIGIBLE FOR DEPRECIATION @ 80% AND THE BALAN CE 60% OF THE COST OF CIVIL WORK, ETC. IS HELD TO BE ELIGIBLE FOR THE DEPRECIAT ION @ 10%, BEING BUILDINGS/ROADS. AGAINST THE AFORESAID DECISION OF THE CIT(A), REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFORE US. 4. THE REVENUE HAS CONTESTED THE PARTIAL RELIEF ALL OWED BY THE CIT(A) WHEREAS THE ASSESSEE BY WAY OF CROSS-OBJECTION NO.3 HAS CONTESTED THAT THE ENTIRE CIVIL COST OF RS.20,00,000/- BE CONSIDERED A S AN INTEGRAL PART OF THE COST OF WINDMILL BY APPLYING THE FUNCTIONAL TEST AND T HUS BE ALLOWED DEPRECIATION AT THE HIGHER RATE. 5. IN THIS BACKGROUND, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT WAS A CONVERGENCE OF OPINION BETWEEN THE ASSESSEE AND THE LEARNED CIT(DR) THAT SO FAR AS THE COST OF FOUNDATION OF WINDMILL IS CON CERNED, THE SAME IS LIABLE TO BE CONSIDERED AS AN INTEGRAL PART OF THE COST OF WI NDMILL HAVING REGARD TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF AMINITY DEVELOPERS & BUILDERS VIDE ITA NO. 1505/PN/2011 DATED 12.12.20 12 AND ALSO IN TERMS OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT 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 DE VELOPERS & BUILDERS (SUPRA) BY APPLYING THE FUNCTIONAL TEST HELD THAT THE COST INCURRED ON THE FOUNDATION OF THE WINDMILL IS TO BE CONSIDERED AS A N INTEGRAL PART OF THE COST OF WINDMILL ERECTION AND IS THUS ELIGIBLE FOR THE DEPR ECIATION @ 80%, PRESCRIBED FOR WINDMILL. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COOPER FOUNDARY PVT. LTD. (SUPRA) HAS ALSO UPHELD THE PROPOSITION T HAT CEMENT, CONCRETE FOUNDATION IS TO BE INCLUDED IN THE COST OF WINDMIL L, WHILE GRANTING DEPRECIATION @ 80% ON THE WINDMILL. THEREFORE, ON THE BASIS OF THE AFORESAID, IN-PRINCIPLE THE PLEA OF THE ASSESSEE IS LIABLE TO BE UPHELD. ITA NOS. 609 TO 614/PN/2013 C.O. NOS. 80 TO 85/PN/2013 6. SO, HOWEVER IT IS PERTINENT TO OBSERVE THAT THE COST OF CIVIL WORKS, ETC. AMOUNTING TO RS.20,00,000/- INCURRED BY THE ASSESSE E CANNOT BE SAID TO BE ENTIRELY TOWARDS THE COST OF CIVIL WORK FOUNDATION FOR THE WINDMILL. THE LEARNED COUNSEL HAS REFERRED TO THE COPY OF INVOICE RAISED BY SUZLON DEVELOPERS PRIVATE LIMITED FOR THE COST OF CIVIL WORK, ETC. AM OUNTING TO RS.20,00,000/- WHICH SHOWS THAT IT IS A COMPOSITE BILL FOR FOUNDAT ION OF WINDMILL, PLINTH FOR TRANSFORMER, WINDMILL CONTROL ROOM, SITE DEVELOPMEN T AND INTERNAL ROAD DEVELOPMENT, ETC. . IT IS IN THIS CONTEXT, ON BEING UNABLE TO DECIPHE R THE EXACT COST OF THE CIVIL FOUNDATION WORK FOR WINDMILL/TRAN SFORMER, THE LEARNED CIT(A) HAS APPORTIONED THE COST BETWEEN THE BUILDINGS/ROAD S AND WINDMILL IN THE RATIO OF 60:40. THE LEARNED COUNSEL VEHEMENTLY POINTED O UT THAT THOUGH SEPARATE COSTS WERE NOT ENUMERATED BY SUZLON DEVELOPERS PRIV ATE LIMITED WHO HAD UNDERTAKEN THE EXECUTION OF WORK, YET THE ITEMS OF CIVIL WORK ON ACCOUNT OF BUILDINGS/ROADS WAS MINIMAL AND THEREFORE APPORTION MENT MADE BY THE CIT(A) WAS UNJUSTIFIED. THE LEARNED COUNSEL FURTHER POINT ED OUT THAT THE MAJOR COSTS ARE IN RELATION TO THE CONSTRUCTION OF CIVIL FOUNDA TION FOR THE WINDMILL/OTHER EQUIPMENT REQUIRED FOR POWER GENERATION AND IS LIAB LE TO BE CONSIDERED AS A PART OF WINDMILL FOR THE PURPOSES OF GRANT OF DEP RECIATION @ 80%. 7. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, AND A LSO THE PLEA RAISED BEFORE US, IN OUR CONSIDERED OPINION IT WOULD MEET THE ENDS OF JUSTICE IF 60% OF COST OF CIVIL WORK IS APPORTIONED TO CIVIL WORK INV OLVED IN THE ERECTION OF FOUNDATION OF WINDMILL/OTHER POWER EQUIPMENT AND 40 % BE APPORTIONED TOWARDS OTHER CIVIL WORKS WHICH SHALL BE ELIGIBLE F OR THE LOWER RATE OF DEPRECIATION. THE COST OF CIVIL WORK APPORTIONED T OWARDS THE ERECTION OF FOUNDATION FOR WINDMILL SHALL BE ELIGIBLE FOR DEPRE CIATION @ 80% AND THE BALANCE OF THE COST SHALL BE ELIGIBLE FOR DEPRECIAT ION @ 10%, AS ALLOWED BY THE ASSESSING OFFICER. THE ORDER OF THE CIT(A) IS THER EFORE SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ALL OWANCE OF DEPRECIATION ACCORDINGLY. ITA NOS. 609 TO 614/PN/2013 C.O. NOS. 80 TO 85/PN/2013 8. THUS, IN SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, THE SAME IS DISMISSED AND THE GROUND OF APPEAL NO. 3 IN THE CRO SS-OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 9. IN SO FAR AS THE FOLLOWING GROUNDS OF CROSS-OBJE CTION NO. 1 AND 2 ARE CONCERNED, 1. THE LEARNED CIT(APPEALS) ERRED IN FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW BY HOLDING THAT NOTICE UNDER SE CTION 153C WAS CORRECTLY ISSUED AND HENCE NOT TREATING THE ASSESSMENT MADE U NDER SECTION 143(3) R.W.S. 153C AS VOID ABINITIO. HENCE IT IS PRAYED TH AT NOTICE ISSUED UNDER SECTION 153C BE HELD AS BAD IN LAW AND HENCE THE AS SESSMENT MADE UNDER SECTION 143(3) R.W.S. 153C BE TREATED AS NULL AND V OID ABINITION. 2. WITHOUT PREJUDICE TO GROUND NO. 1 THE ADDITION M ADE BY LEARNED ASSESSING OFFICER BY DISALLOWING CLAIM OF D EPRECIATION @ 80% ON CIVIL WORK WHEN SUCH DISALLOWANCE IS NOT MADE ON THE BASI S OF ANY MATERIAL SEIZED DURING THE COURSE OF SEARCH AND HENCE ADDITION MADE UNDER SECTION 153C BE DELETED AS THE ADDITION MADE ON THIS ACCOUNT IS BEY OND THE SCOPE OF SEC. 153A. THEY HAVE NOT BEEN PRESSED AT THE TIME OF HEARING A ND ACCORDINGLY DISMISSED AS WITHDRAWN. 10. ACCORDINGLY, THE CROSS-OBJECTION IS PARTLY ALLO WED. 11. THE AFORESAID DECISION SHALL APPLY TO ALL THE C APTIONED APPEALS OF THE REVENUE AND CROSS-OBJECTIONS OF THE ASSESSEE. 12. RESULTANTLY, WHEREAS THE APPEALS OF THE REVENUE ARE DISMISSED, THE CROSS-OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 29 TH NOVEMBER, 2013 SUJEET ITA NOS. 609 TO 614/PN/2013 C.O. NOS. 80 TO 85/PN/2013 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE