CHANDULAL SURAJMAL, MUMBAI V. ACIT RG 17(3), MUMBAI

ITA 6134/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88621 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2013
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI VK;DJ VIHYH; VF/KDJ.K] LH U;K;IHB EQACBZ BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K ITA NO. 6134 /MUM/201 3 ASSESSMENT YEAR: - 2010 - 11 M/S CHANDUMAL SURAJMAL BOMBAY COTTON MILL COMPOUND KALACHOWKY ROAD, MUMBAI 400 033. VS.` ACIT 17(3) OR CIT CITY 17 5 TH FLOOR, PIRAMAL CHAMBERS, LAL BAUG, MUMBAI APPELLANT / VIHYKFKHZ RESPONDENT / IZR;FKHZ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.09.2013 OF CIT(A) FOR THE A.Y. 2010 - 11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: - GROUND NO. 1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE RATE OF DEPRECIATION @15% INST EAD OF 80% ON WIND MILL PARTS AS FOLLOW. TRANSFER OF DEVELOPMENT RIGHTS FOR INSTALLATION PAID TO ANDHRA GOVERNMENT RS. 16 LAC ERECTION & COMMISSIONING EXPENSES OF WIND TURBINE LABOUR CHARGES RS. 18 LAC TRANSPORTATION EXPENSES & COMMISSIONING CHARGES RS. 15 LAC CORRECT AMOUNT: - (18+15) ASSESSEE BY / FU/KKZFJRH FD VKSJ LS SHRI N.R. AGRAWAL REVENUE BY / JKTLP DH VKSJ LS SHRI H.P. HAOKIP DATE OF HEARING 09 - 3 - 2015 DATE OF PRONOUNCEMENT 18 .03.2015 ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 2 | P A G E 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING AND MAKING OF VARIOUS DESIGNS FOR THE GARMENTS/HOME TEXTILES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SET UP A WINDMI LL FOR GENERATION OF ELECTRICITY AND CLAIMED DEPRECIATION AT THE RATE OF 80%. THE ASSESSING OFFICER HAS NOTED THAT VARIOUS ITEMS ON WHICH THE DEPRECIATION AT THE RATE OF 80% CLAIMED BY THE ASSESSEE ARE NOT ELIGIBLE FOR HIGHER DEPRECIATION AND ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE HIGHER DEPRECIATION ON CERTAIN ITEMS WHICH ARE AS FOLLOWS: - (A) TUBULAR STEEL TOWER (B) WIND TURBINE CONVERTER (C) DISTRIBUTION TRANSFORMER AND DP STRUCTURE OF WIND TURBINE CONVERTER (D) TRANSFER OF DEVELOPMENT RIGHTS OF INSTALLATION OF WIND ENERGY CONVE RTER (E) CIVIL & INDUSTRIAL CONSTRUCTION OF WIND TURBINE CONVERTER (F) EXPENSE ON ERECTION & COMMISSIONING OF WIND TURBINE CONVERTER. 3. THE ASSESSING OFFICER HELD THAT THESE PARTS ARE NOT ACTUAL WINDMILLS AND ACCORDINGLY RESTRICTED THE HIGHER DEPRECIATION AT THE RATE OF 80% TO THE REMAINING COST OF THE WIND TURBINE CONVERTER AT RS. 2.91 CRORE ONLY . THE DEPRECIATION ON REST OF THE ASSETS WERE ALLOWED AT NORMAL RATE. 4. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A). THE CIT(A) ALLOWED THE HIGHER DEPRECIATION ON TWO ITEMS NAMELY TUBULAR STEEL POWER AND DISTRIBUTION TRANSFORMERS AND DP STRUCTURE BUT CONFIRMED THE REMAINING DISALLOWANCES MADE BY THE ASSESSING OFFICER . ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 3 | P A G E 5. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE HAS INVITED OUT ATTENTION TO THE VARIOUS ITEM ON WHICH THE ASSESSING OFFICER DISALLOWED THE HIGHER RATE OF DEPRECIATION ELIGIBLE FOR WIND MILLS AND SUBMITTED THAT OUT OF THE SIX ITEMS ON WHICH THE ASSESSING OFFICER HAS DISALLOWED THE HIGHER RATE OF DEPRECIATION, CIT(A) HAS ALLOWED ON TWO ITEMS AND THE REMAINING ITEMS ARE ALSO ELIGIBLE FOR HIGHER DEPRECIATION AT THE RATE OF 80% IN VIEW OF THE VARIOUS DECISION OF THIS TRIBUN AL WHICH ARE AS UNDER: - (I) ACIT VS. M/S DEVENTHIRA SPINNERS (P) LTD [ITA NO. 452/MDS/2013 ] (II) ACIT VS. MAHARISHI UDYOG [ ITA NO. 50/AHD/2011] (III) DCIT VS. M/S RAJHANS METALS LTD. [ ITA NO. 4882/MUM/2012] (IV) DCIT VS. SUSHANT M. JADAV [ ITA NO. 166/PN/2012] (V) M/S MALLOW INTERNATIONAL & ORS. VS. DCIT[ 564 TO 567/MDS/2010] (VI) CIT VS. K.K ENTERPRISES (2014) 108 DTR (RAJ) 109 (VII) ASST. COMMISSIONER OF INCOME TAX VS. M/S VELATHAL SPINNING MILLS P. LTD. [ ITA NO. 2082&2083/MDS/2010] 6. ON THE OTHER HAND, THE LD. DR HAS RELIE D UPON THE ORDERS OF AUTHORITIES BELOW. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSING OFFICER HAS RECORDED THE DETAILS OF THE VARIOUS ITEMS PURCHASED BY THE ASSESSEE IN RELATION TO SETTING UP THE WIND MILL DURING THE YEAR UNDER CONSIDERATION IN THE TABLE GIVEN AT PAGE NO. 3 OF THE ASSESSMENT ORDER AS UNDER: - ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 4 | P A G E SR. NO. INVOICE NO./ DATE DESCRIPTION AMOUNT 1. 9101602492/ 31.03.2010 SUPPLY OF WINDMILL DEVICE - TUBULAR STEEL TOWER, 56 METERS HEIGHT FOR ENERCON MAKE WIND TURBINE CONVERTER, 800KV, TYPE E - 53 50,00,000 2. 9101602014/ 30.03.2010 ENERCON MAKE WIND TURBINE CONVERTER, 800KV, TYPE E - 53 COMPRISING OF: - A. 3 BLADES B. 1 SYNCHRONOUS TYPE GENERATOR PER SET C. 3 POWER CABINETS - PER SET D. 1 CONTRO L CABINET PER SET. 2,91,00,000 3. 9101602517/ 31.03.2010 WINDMILL DEVICE 950 KVA, 33 KV/400V, 3PH, DISTRIBUTION TRANSFORMER AND DP STRUCTURE OF ENERCON MAKE WIND TURBINE CONVERTER, 800KW, TYPE E - 53 23,00,000 4. INV/DR/084/2009 - 10/ 31.03.2010 TRANSFER OF DEVELOPMENT RIGHTS FOR INSTALLATION OF WIND ENERGY CONVERTER AT KRISHNA SITE - ANDHRA PRADESH FOR E - 53 (800KW) MACHINE. 16,00,000 5. 9101602394/ 31.03.2010 CIVIL & INDUSTRIAL CONSTRUCTION OF ENERCON MAKE WIND TURBINE CONVERTOR, 800KW, TYPE E - 53, INCLUDING SUPPLY, CONSTRUCTION OF 11/22/33KV INTERNAL LINES INCLUDING PACKAGING, HANDLING, LOADING, UNLOADING, INSURANCE COVER UP TO COMMISSION AT YOUR WIND FARM SITE AT KRISHNA, STATE ANDHRA PRADESH. 18,00,000 6. 9101602395/ 31.03.2010 ERECTION & COMMISSIONING OF ENERCON MAKE WIND TURBINE CONVERTER , 800 KW TYPE E - 53 AT YOUR WIND FARM SITE AT KRISHNA ANDHRA PRADESH 18,00,000 7. TRANSPORTATION 15,00,000 TOTAL 4,31,00,000 8. THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE ONLY IN RESPECT OF ITEM NO. 2 AND DISALLOWED THE HIGHER RATE OF DEPRECIATION ON REST ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 5 | P A G E OF ITEMS. THE CIT(A) HAS FURTHER ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF ITEM AT SERIAL NO. 1 TO 3 AND CO NSEQUENTLY, THE ASSESSEE HAS THE GRIEVANCE IN RESPECT OF THE REMAINING FOUR ITEMS ON WHICH THE HIGHER RATE OF DEPRECIATION WAS DENIED. OUT OF THESE FOUR ITEMS, FIRST ITEM IS THE TRANSFER OF DEVELOPMENT RIGHTS FOR INSTALLATION OF WIND ENERGY CONVERTER OF RS. 16,00,000/ - . AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE CHENNAI BENCHES OF THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S DEVENTHIRA SPINNERS (P) LTD (SUPRA) VIDE ORDER DATED 2.5.2013 IN PARA 5 AS UNDER: - 5. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDER OF THE TRIBUNAL IN ITA NOS.2082 & 2083/MDS./2010. WE FIND THAT THE ISSUE IN HAND HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSE E BY D BENCH OF THIS TRIBUNAL IN THE AFORESAID APPEALS IN ASSESSEE'S OWN CASE. THE TRIBUNAL HAS HELD THAT ALL THE FOUR COMPONENTS OF WINDMILL VIZ. CIVIL WORK, INSTALLATION OF ELECTRICAL LINE FOR POWER TRANSMISSION, INFRASTRUCTURE FEE PAID TO TNEB AND TRA NSFORMER, ARE INTEGRAL PART OF WINDMILL AND ARE THUS ENTITLED FOR THE DEPRECIATION @ 80%. THE TRIBUNAL IN ITS ORDER HAS OBSERVED THAT THERE IS NO PROVISION FOR SEGREGATING THE VALUE OF THE ASSET FOR THE PURPOSE OF DEPRECIATION WHEN THE ASSET IS A SINGLE ID ENTIFIABLE UNIT. 9. WE FURTHER NOTE THAT SIMILAR ISSUE WAS ALSO CONSIDERED BY THE AHMEDABAD BENCHES OF THIS TRIBUNAL IN THE CASE OF ACIT VS. MAHARISHI UDYOG (SUPRA) VIDE ORDER DATED 12.12.2014 IN PARA 6 AS UNDER: - 6. BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE NOW STANDS COVERED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PARRY ENGINEERING AND ELECTRONICS P. LTD., IN TAX APPEAL NO.604 OF 2012, ORDER DATED 29.01.2013, WHEREIN IT WAS HELD AS UNDER: - 5. WE ARE OF THE OPI NION THAT THE APPROACH OF BOTH THE AUTHORITIES IS PERFECTLY JUSTIFIED. WINDMILL WOULD REQUIRE A SCIENTIFICALLY DESIGNED MACHINERY IN ORDER TO HARNESS THE WIND ENERGY TO THE MAXIMUM POTENTIAL. SUCH DEVICE HAS TO BE FITTED AND MOUNTED ON A CIVIL CONSTRUCTION , EQUIPPED WITH ELECTRIC FITTINGS IN ORDER TO TRANSMIT THE ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 6 | P A G E ELECTRICITY SO GENERATED. SUCH CIVIL STRUCTURE AND ELECTRIC FITTINGS, THEREFORE, IT CAN BE WELL IMAGINED, WOULD BE HIGHLY SPECIALIZED. THUS, SUCH CIVIL CONSTRUCTION AND ELECTRIC FITTING WOULD HAVE NO USE OTHER THAN FOR THE PURPOSE OF FUNCTIONING OF THE WINDMILL. ON THE OTHER HAND, IT CAN BE EASILY IMAGINED THAT WINDMILL CANNOT FUNCTION WITHOUT APPROPRIATE INSTALLATION AND ELECTRIFICATION. IN OTHER WORDS, THE INSTALLATION OF WINDMILL AND THE CIVIL ST RUCTURE AND THE ELECTRIC FITTINGS ARE SO CLOSELY INTERCONNECTED AND LINKED AS TO FORM THE COMMON PLANT. AS ALREADY NOTED, THE LEGISLATURE HAS PROVIDED FOR HIGHER RATE OF DEPRECIATION OF 80 PER CENT ON RENEWABLE ENERGY DEVISES INCLUDING WINDMILL AND ANY SPE CIALLY DESIGNED DEVISE, WHICH RUNS ON WINDMILL. THE CIVIL STRUCTURE AND THE ELECTRIC FITTING, EQUIPMENTS ARE PART AND PARCEL OF THE WINDMILL AND CANNOT BE SEPARATED FROM THE SAME. THE ASSESSEE'S CLAIM FOR HIGHER DEPRECIATION ON SUCH INVESTMENT WAS, THEREFO RE, RIGHTLY ALLOWED.. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PARRY ENGINEERING AND ELECTRONICS P. LTD. (SUPRA), WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 10. ACCORDINGLY, IN VIEW OF THE ABOVE DECISIONS OF THE TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE OF HIGHER DEPRECIATION AT THE RATE OF 80% ON INSTALLATION WORK OF WIND MILL. 11. THE NEXT ITEM IS REGARDING CIVIL & INDUSTRIAL CONSTRUCTION OF WIND MILL TURBI NE CONVERTER INCLUDING THE SUPPLY AND CONSTRUCTION OF INTERNAL LINES. WE NOTE THAT IN THE CASE OF DCIT VS. M/S RAJHANS METALS LTD. (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN PARA 9 TO 11 AS UNDER: - 9. WE HAVE GONE THROUGH THE ABOVE DECISION. WE FIND THAT THE TRIBUNAL HAS HELD THAT THE BASEMENT CONSTRUCTED BY ASSESSEE, TO INSTALL AND WITHHOLD THE HEAVY WIND MILL, IS PART AND PARCEL OF THE WIND MILL AND IS ELIGIBLE FOR CLAIM OF DEPRECIATION. THE RELEVA NT FINDINGS OF THE TRIBUNAL ARE EXTRACTED AS UNDER: ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 7 | P A G E 3. THE AR APPEARING ON BEHALF OF ASSESSEE POINTED OUT THAT SIMILAR ADDITION WAS DELETED BY THE COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05, IN ITA NO.2666/MUM/2009 DATED 04.06.20 10, HAVE HELD IN PARAS 7 & 8 AS UNDER: '7. IN VIEW OF OUR FINDING ABOVE AND AFTER CONSIDERING THE CASE - LAWS CITED ABOVE, WE ARE OF THE OPINION THAT THE BASEMENT CONSTRUCTED BY ASSESSEE TO INSTALL AND WITHHOLD THE HEAVY WINDMILL IS PART AND PARCEL OF THE WINDMILL AND WITHOUT THE SPECIALLY DESIGNED BASEMENT, THE WINDMILL CANNOT STAND. THEREFORE, IT IS TO BE TREATED AS PLANT AND HIGHER DEPRECIATION CLAIMED BY ASSESSEE HAS TO BE ALLOWED. WHEN ASSESSEE HAS TAKEN A WINDMILL ON LEASE AND CONSTRUCTED THE BASEMENT FOR INSTALLING THE WINDMILL FOR GENERATING POWER, DENIAL OF DEPRECIATION TO THE BASEMENT CONSTRUCTED BY ASSESSEE IS NOT JUSTIFIED IN VIEW OF OUR FINDING THAT THE BASEMENT IS PART AND PARCEL OF THE WINDMILL AND IS TO BE TREATED AS PLANT. THE INTENTION OF T HE LEGISLATURE IS TO GRANT HIGHER DEPRECIATION TO ENCOURAGE THE ENTREPRENEURS WHO GENERATE POWER THROUGH WINDMILL. IN THE PRESENT CASE, THOUGH ASSESSEE HAS TAKEN THE WINDMILL ON LEASE, ASSESSEE HAD INCURRED HUGE EXPENDITURE TO CONSTRUCT THE BASEMENT TO INS TALL THE WINDMILL AND ACTUALLY RUNNING THE WINDMILL. HENCE ASSESSEE IS ELIGIBLE FOR HIGHER DEPRECIATION. 8. IN VIEW OF THE FOREGOING REASONS WE HOLD THAT THE LOWER AUTHORITIES HAVE NOT TAKEN A CORRECT VIEW IN DISALLOWING THE CLAIM OF ASSESSEE. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT FOR ALLOWING THE CLAIM OF ASSESSEE FOR HIGHER RATE OF DEPRECIATION AT 80%'. IN PARA 3.6 OF THE IMPUGNED ORDER, THE CIT (A) OBSERVES,'SINCE THE HON'BLE ITAT IS THE LAST FACT FINDING AUTHORITY AN THE FINDING OF THE HON'BLE TRIBUNAL IS BINDING ON LOWER AUTHORITIES, THEREFORE, IT IS HELD THAT THE FOUNDATION AND ITS MATERIAL LIKE STEEL, REINFORCED CEMENT, GRAVE, EARTHLING ETC. ARE PART AND PARCEL OF WINDMILL WITHOUT WHICH THE WINDMILL CANNOT COME INTO EXISTENCE AND HENCE THE DEPRECIATION IS ALLOWABLE ON IT @ 80% ON CIVIL WORK I.E FOUNDATION, ERECTION AND COMMISSIONING OF A WINDMILL. THE ASSESSING OFFICER IS THEREFORE, DIRECTED TO TREAT THE FOUNDATION, ERECTION AND COMMISSIONING AS PART AND PARCEL OF WI NDMILL AND ALLOW DEPRECIATION ON 80%. THUS THE GROUND OF APPEAL IS ALLOWED' 4. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05, RELYING ON WHICH THE CIT (A) HAS GIVEN THE RELIEF TO ASSESSEE FOL LOWING DEPRECIATION, WE DO NOT ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 8 | P A G E FIND ANY REASON TO DISTURB THE FINDINGS OF THE CIT (A) AND DEVIATE FROM THE ORDER OF THE COORDINATE BENCH, WE ALLOW THE DEPRECIATION AS CLAIMED. 10. THE LD. D.R. HAS NOT BROUGHT BEFORE US ANY DECISION CONTRARY TO THE ABOVE F INDINGS GIVEN BY THE CO - ORDINATE BENCH OF THE TRIBUNAL RELATING TO THE ISSUE UNDER CONSIDERATION. HENCE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE FINDING OF THE LD. CIT(A) RELATING TO GROUND NO.2 I.E. CLAIM OF DEPRECIATION ON CONSTRUCTION WORK FOR IN STALLATION OF WIND MILL IS UPHELD . 11. SINCE WE HAVE UPHELD THE ORDER OF THE LD. CIT(A) ON MERITS RELATING TO THE ENTITLEMENT OF THE CLAIM OF THE ASSESSEE TO CLAIM DEPRECIATION ON CIVIL CONSTRUCTION WORK OF THE WIND MILL, THEREFORE THE APPEAL OF THE REVENU E, SUBJECT TO OUR FINDINGS GIVEN ON GROUND NO.1, IS TREATED AS DISMISSED. 12. WE FURTHER NOTE THAT A SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCHES OF THIS TRIBUNAL IN THE CASE OF M/S MALLOW INTERNATIONAL VS. DCIT (SUPRA) VIDE ORDER DATED 9.7.2010 I N PARA 6 TO 8 AS UNDER: - 6. WE HAVE HEARD THE RIVAL CONTENTIONS. VIS - - VIS WITH THE ARGUMENT OF THE LEARNED D.R. THAT ONLY SUCH ITEMS WHICH ARE ESSENTIAL FOR SETTING UP OF A WINDMILL COULD BE CONSIDERED PART THEREOF, THERE CANNOT BE ANY DISPUTE. HOWEVER, IN NONE OF THE RELEVANT ASSESSMENT ORDERS, THE A.O. HAD GIVEN ANY FINDING THAT CLAIM OF CIVIL WORK AND ELECTRICAL FITTINGS WERE NOT PART OF THE WINDMILL. THOUGH INITIALLY THE A.O. HAS TAKEN A STAND THAT CIVIL WORK AND ELECTRICAL FITTINGS DID NOT FORM PART OF WINDMILL, LATER BASED ON ASSESSEES REPLY, HIS CONCLUSION AS A PART WAS THAT ELECTRICAL FITTINGS AND EQUIPMENTS THOUGH ATTACHED TO THE WINDMILL, COULD NOT BE CONSIDERED AS ITS PART WARRANTING HIGHER RATE OF DEPRECIATION. IN OTHER WORDS, THE A.O. HAS ACC EPTED THE POSITION THAT CIVIL WORK AND ELECTRICAL EQUIPMENTS WERE FOR THE INSTALLATION OF WINDMILL. THIS BEING SO, IN OUR OPINION, SUCH EXPENSES COULD NOT BE CONSIDERED AS ITEMS WHICH WERE NOT NECESSARY FOR INSTALLATION OF THE WINDMILL. 7. WITH REGARD TO THE CLAIM OF ENHANCED DEPRECIATION FOR CIVIL AND ELECTRICAL FITTINGS, FOR WINDMILLS IN OUR OPINION, THE DECISION IN THE CASE OF M/S ASIAN HANDLOOM REFERRED TO ABOVE IS CLEARLY IN FAVOUR OF ASSESSEE. THIS WAS FURTHER AFFIRMED BY A SUBSEQUENT DECISION OF A C OORDINATE BENCH IN THE CASE OF M/S BRITISH WEAVING COMPANY V. DCIT IN I.T.A. NO.511/MDS/2009 DATED 12TH MARCH, 2010. PARAS 2 TO 6 OF THIS ORDER ARE REPRODUCED FOR THE SAKE OF BREVITY: - ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 9 | P A G E 2 AS CLEAR FROM THE GROUNDS THE ISSUES CONCERNS DEPRECIATION ON WIND MILLS. ASSESSEE HAD CLAIMED DEPRECIATION AVAILABLE AT HIGHER RATE FOR WIND MILL ON THE CIVIL WORK AS WELL AS ELECTRICAL FILLINGS. ASSESSING OFFICER WAS OF THE OPINION THAT FOR THE WIND MILL SUPPLIED BY NEG MION, NO BREAK UP OF COST WAS AVAILABLE FROM THEIR INVOICE. ACCORDING TO HIM, ON ELECTRICAL FITTINGS DEPRECIATION COULD BE ALLOWED ONLY AT 7.5%. VALUE OF ELECTRICAL FITTING WAS ESTIMATED AT RS.40 LAKHS. RESULT WAS THAT THERE WAS A DISALLOWANCE OF RS.5 LAKH ON DEPRECIATION. ASSESSEES APPEAL BEFORE THE CIT (A) WAS UNSUCCESSFUL. 3. NOW BEFORE US THE LD. AR, RELYING ON A CO - ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF M/S.ASIAN HANDLOOM VS. DCIT (ITA NO.2291/MDS/2008 DT.20.11.09) ARGUED THAT THE DISALLOWANCE ON DEPRECIATION WAS UNCALLED FOR. PER CONTRA THE LD. DR RELYING ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NESTLE INDIA LTD., VS. DCIT 111 TTJ 498 SUBMITTED, THAT IF FUNCTIONAL TEST WAS APPLIED, ELECTRICAL INSTALLATION COULD NOT BE TREATED ON PAR WITH A WINDMILL, FOR GRANTING HIGH DEPRECIATION. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. TREATMENT OF CLAIM OF DEPRECIATION ON A WINDMILL INSTALLATION HAS BEEN DEALT WITH AT PARA 12 OF THE ORDER OF THIS CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASIAN HANDLOOM VS. DCIT (SUPRA) AND THIS IS REPRODU CED HEREUNDER. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPARATUS THAT HARNESSES WIND POWER, FOR A VARIETY OF USES LIKE PUMPING WATER, DRIVING OF SAW MILL, GRINDING CONE AND/OR DRIVING EL ECTRICAL TURBINES. A TYPICAL WIND MILL, AS INSTALLED BY THE ASSESSEE, WHICH IS OF SUZLON CORPORATION, WOULD CONSIST OF A SPECIALIZED FOUNDATION, ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONNECTED IN THE TOP IS A REVOLVING APPARATUS TO WHICH DIFFERENT NUMBERS OF ARMS ARE ATTACHED. WHEN IT IS USED FOR PRODUCING ELECTRICITY, THESE ARE CALLED WIND TURBINES AND SERVES AS A SIGNIFICANT SOURCE OF ELECTRICAL ENERGY. BEING A NONCONVENTIONAL SOURCE OF ENERGY WITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAVE BEEN GIVEN SPECIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THAT FOR A WINDMILL TO BE SUSTAINABLE IT HAS TO BE ERECTED IN A PLACE WHERE SUSTAINABLE WIND FLOW IS AVAILABLE WITH A LAND SUITABLE TO A FOUNDATION ON WHICH, A STRUCTURE STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AND SPECIALIZED AREA SPECIFICALLY EAR - MARKED TO FACILITATE A FLOW OF WIND WITHOUT HINDRANCE, AND SPECIALIZED ELECTRICAL FITTIN GS AND HIGH TENSION LINES ARE ALL BASIC REQUIREMENTS FOR A WIND MILL PLANT. NONE OF THESE REQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 10 | P A G E DETACHED FROM WHAT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE ESSENTIAL. ALL THESE ARE NECESSARY INPU TS GOING INTO ULTIMATE COST OF SUCH WIND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALLY DEMARCATED APPURTENANT THERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUILDING WHICH IS ADJUNCT TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS. ON THE OTHER HAND THESE CAN BE DEEMED ONLY A PART OF A WINDMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCLUSION WE ARE FORTIFIED BY DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION (247 ITR 268) WHERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WAS A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECHNICAL REQUIREMENT, IT WOULD QUALIFY TO BE TREA TED AS A PLANT. IN OUR OPINION, THE EXPENSES RELATING TO THE LAND AND FOUNDATION SPECIALLY INCURRED WITH A VIEW TO SERVE THE TECHNICAL REQUIREMENTS WOULD ALSO BECOME A PART OF THE PLANT IN A CASE THAT OF A WIND MILL. SIMILARLY, IN THE CASE OF CIT V. HERDIL IA CHEMICALS (216 ITR 742), HONBLE JURISDICTIONAL HIGH COURT HELD THAT HUGE LAND MEASURING 360 ACRES TAKEN ON EASE FOR THE PURPOSE OF ERECTION OF PLANT AND MACHINERY WHERE THE ENTIRE FACTORY WAS TO BE CONSTRUCTED IN THIS LAND AND EXPENSES INCURRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND FOR THE PURPOSE OF LEVELING THE LAND, FORMED A PART OF THE COST OF THE PLANT. IF WE LOOK AT APPENDIX I TO THE INCOME - TAX RULES, PRESCRIBING THE RATES OF DEPRECIATION, IT CAN BE SEEN THAT LEGISLATURE HAS GIVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI - POLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARENTLY, THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFF - SETTING THE IMPAIRMENT IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE S UCH ENTREPRENEUAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF RENEWABLE ENERGY SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMITED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES, IT WOULD DEFEAT THE VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE, IN OUR OPINION, ASSESSEES CLAIM FOR DEPRECIATION SHOULD NOT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFICER. THEREFORE, DISALLOWANCE OF RS. 1,17,00,000/ - , 13 LAKHS, 23,51,576/ - AND RS . 5,73,824/ - ON ACCOUNT OF DEPRECIATION CLAIM STANDS CANCELLED. GROUND NOS. 5 TO 19 OF THE ASSESSEE STAND ALLOWED. 5. AS FOR THE DECISION OF DELHI BENCH IN NESTLE INDIA LTD.S CASE (SUPRA) RELIED ON BY THE LD. DR, IT WAS REGARDING A CLAIM OF DEPRECIATION O N UPS ATTACHED TO A COMPUTER AND HAS NO RELEVANCE WHATSOEVER ON FACTS HERE. 6. WE, THEREFORE, HAVE NO HESITATION TO QUASH THE DISALLOWANCE OF DEPRECIATION MADE. SUCH DISALLOWANCE STANDS DELETED. ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 11 | P A G E 8. HENCE WE HAVE NO HESITATION TO HOLD THAT THE ASSESSEES C ONCERNED WERE ELIGIBLE FOR DEPRECIATION ON WINDMILLS INCLUDING CIVIL WORK AND ELECTRICAL FITTINGS. THE A.O. IS DIRECTED TO ALLOW DEPRECIATION ACCORDINGLY. 13. IN VIEW OF THE DECISION OF THIS TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CON SEQUENTLY THE CLAIM OF DEPRECIATION AT 80% ON CIVIL AND INDUSTRIAL CONSTRUCTION INCLUDING THE INTERNAL TRANSMISSION LINE IS ALLOWED. 14. THE NEXT ITEM IS REGARDING ERECTION & COMMISSIONING OF THE WIND MILL TURBINE CONVERTER. AS WE HAVE CONSIDERED THE OTHE R CONSTRUCTION AND INSTALLATION WORK AS PART OF SETTING UP OF WIND MILL, THEREFORE, THE EXPENDITURE INCURRED ON ERECTION & COMMISSIONING OF WIND MILL CANNOT BE GIVEN A DIFFERENT TREATMENT THAN THE PART OF SETTING UP OF THE WIND MILL. THERE IS NO DISPUTE TH AT THESE EXPENSES ARE TREATED AS CAPITAL EXPENSES AND ARE INCURRED IN RELATION TO SETTING UP OF WIND MILL, THEREFORE, FOR THE PURPOSE OF DEPRECIATION, THESE EXPENSES SHALL BE PART OF THE COST OF SETTING UP OF WIND MILL. 15. THE NEXT ITEM IS TRANSPORTATION COST OF THE WIND MILL DEVICE & OTHER ITEMS. THE ASSESSING OFFICER HAS ALLOWED THE NORMAL DEPRECIATION ON THIS AMOUNT OF RS. 15,00,000/ - . IT IS PERT INENT TO NOTE T HAT WHEN THE COST OF TRANSPORTATION IS CAPITALIZED, THE SAME WILL FORM PART OF THE COST OF ASSET WHICH HAS BEEN TRANSPORTED TO THE SITE OF THE ASSESSEE. THEREFORE, THE TRANSPORTATION COST WILL BE THE PART AND PARCEL OF THE COST OF WIND MILL AND THE SAME IS ELIGIBLE FOR HIGHER DEPRECIATION AT THE RATE OF 80% BEING PART OF THE COST OF WIND MILL. ITA NO. 6134/MUM/2013 ASSESSMENT YEAR: - 2010 - 11 12 | P A G E 16. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW QUA THIS ISSUE AND ALLOW THE CLAIM OF ASSESSEE. 17 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 1 8 T H DAY OF MARCH 2015 VKNS'K DH ?KKS'K.KK [KQYS U;K;KY; ES FNUKAD 1 8 T H EKPZ 2015 DKS DH XBZA S D / - S D / - ( RAJENDRA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER / YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; ) MUMBAI DATED 1 8 .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI