Vaata Smart Limited, CHENNAI V. CIT (A), CHENNAI

ITA 636/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6347 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC C BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.636/MDS/2017 ( / ASSESSMENT YEAR: 2012-13) M/S. VAATA SMART LIMITED, (FORMERLY KNOWN AS VAATA INFRA LTD), NO.7, 11 TH AVENUE, ASHOK NAGAR, CHENNAI 600 083. VS THE ACIT, CORPORATE CIRCLE-3, CHENNAI-34. PAN: AADCC3678E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE /RESPONDENT BY : SHRI SUPRIYOPAL, JCIT /DATE OF HEARING : 13.06.2017 ! /DATE OF PRONOUNCEMENT : 14.08.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-11, CHENNAI DATED 10.01.2017 IN ITA NO.155/15-16/CIT(A) -11 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S.143 (3) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION AMOUNTI NG TO 2 ITA NO.636/MDS/2017 RS.27,68,500/- ON THE TWO WINDMILLS PURCHASED BY TH E ASSESSEE WHICH HAD BECOME SCRAP. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF GENERATI NG POWER AND ENERGY, FILED ITS RETURN OF INCOME FOR THE ASSESSME NT YEAR 2012-13 ON 28.09.2012 ADMITTING LOSS OF RS.34,71,202/-. TH E CASE WAS SELECTED FOR SCRUTINY AND FINALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 25.03.2015, WHEREIN THE LD .AO DISALLOWED RS.27,68,500/- TOWARDS DEPRECIATION ON WINDMILLS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LD.AO THAT THE ASSESSEE HAD PURCHASE D 8 WINDMILLS FROM M/S. FENNER INDIA LIMITED AND THE ASSESSEE HAD DISCLOSED THE ADDITION OF FIXED ASSET AS ON 30.09.2011 AT RS.1,38 ,42,500/- IN ITS BOOKS OF ACCOUNTS, HOWEVER CLAIMED DEPRECIATION ON THESE WINDMILLS FOR THE WHOLE YEAR. ON FURTHER EXAMINATI ON IT WAS REVEALED THAT THE ASSESSEE HAD INSTALLED ONLY SIX W INDMILLS DURING THE SECOND HALF OF THE YEAR. HENCE, THE LD.AO ALLO WED 50% OF THE DEPRECIATION CLAIMED BY THE ASSESSEE AND ALSO DISAL LOWED DEPRECIATION WITH RESPECT TO THE OTHER TWO WINDMILL S, WHICH WAS NOT INSTALLED. DURING THE APPELLATE PROCEEDINGS, IT WA S SUBMITTED BY 3 ITA NO.636/MDS/2017 THE ASSESSEE THAT THOUGH THE ASSESSEE HAS PURCHASED 8 WINDMILLS, ONLY 6 WINDMILLS COULD BE ERECTED BY SALVAGING THE COMPONENTS FROM THE OTHER TWO WINDMILLS WHICH WAS BEYOND REPAI R. THE LD.CIT(A) REJECTED THE CLAIM OF THE ASSESSEE BECAUS E THE ASSESSEE HAD NOT ADDUCED SUFFICIENT EVIDENCE BEFORE HIM TO ESTABLISH ITS CLAIM BY OBSERVING AS UNDER:- 4.3.2 DURING THE APPEAL PROCEEDING, THE APPELLANT S AR HAS SUBMITTED THAT ALTHOUGH THE MAIN INTENTION WAS TO S ALVAGE COMPONENTS OF THE 8 WINDMILL SPARES, ONLY 6 WEGS CO ULD BE MADE INTO WORKING CONDITION AND OPERATIONAL. DURIN G THE APPEARANCE BEFORE THE CIT(A) ON 3.1.2017, THE APPEL LANTS AR CLARIFIED THAT 8 OLD WIND MILLS WERE PURCHASED WHIC H WERE DISMANTLED AND SHIFTED TO THE APPELLANTS PLACE AND WERE CONVERTED INTO 6 WINDMILLS/ THE APPELLANTS ARGUME NT THAT 8 OLD WIND MILLS WERE CONVERTED INTO 6 WINDMILLS AND THEREFORE DEPRECIATION HAD TO BE ALLOWED FOR 8 WIND MILLS IS NOT AN ACCEPTABLE ARGUMENT. THERE IS NO EVIDENCE WHATSOEV ER FOR SUCH CONVERSION. AS PER THE PROVISION OF SEC.32 OF THE IT ACT, DEPRECIATION CAN BE GIVEN ONLY FOR THE WIND MILLS W HICH HAVE BEEN INSTALLED AND COMMISSIONED BEFORE THE END OF T HE RELEVANT PREVIOUS YEAR. ADMITTEDLY, THE 7 TH AND 8 TH WIND MILLS WERE NEVER COMMISSIONED. JUST BECAUSE THE APPELLANT PRO DUCED THE INVOICES FOR HAVING PURCHASED 8 OLD WIND MILLS, IT DOES NOT PROVE THAT ALL THE 8 WIND MILLS WERE INSTALLED, COM MISSIONED AND PUT TO USE DURING THE RELEVANT PREVIOUS YEAR AS REQUIRED U/S.32 OF THE IT ACT. 4.3.3 IN VIEW OF THE ABOVE REMARKS, THE AO'S RESTRI CTION OF DEPRECIATION TO 6 WIND MILLS IS UPHELD AND THE APPE LLANTS GROUND ON THIS ISSUE IS DISMISSED. 4 ITA NO.636/MDS/2017 5. BEFORE US, THE LD.AR REITERATED THE SUBMISSION B EFORE THE LD.REVENUE AUTHORITIES AND ARGUED STATING THAT SINC E THE SPARES FROM THE TWO IRREPARABLE WINDMILLS WERE SALVAGED AN D USED IN THE OTHER SIX WINDMILLS, DEPRECIATION MAY BE GRANTED ON THE ENTIRE COST OF THE 8 WINDMILLS. THE LD.DR ON THE OTHER HAND RE LIED ON THE ORDERS OF THE LD. REVENUE AUTHORITIES. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS O F THE CASE, IT IS APPARENT THAT THE ASSESSEE HAD INCURRED EXPENDITURE FOR THE PURCHASE OF 8 WINDMILLS OUT OF WHICH ONLY 6 WINDMIL LS COULD BE ERECTED. THE OTHER 2 WINDMILLS WERE BEYOND REPAIR AND THE SPARES SALVAGED FROM THEM WERE UTILIZED FOR ERECTING THE O THER 6 WINDMILLS. HENCE, THE COST OF PURCHASE OF THE 2 IRREPARABLE WI NDMILLS HAS TO BE NECESSARILY ADDED TO THE COST OF THE 6 WINDMILLS WH ICH WERE REPAIRED AND ERECTED. IF THE CLAIM OF THE ASSESSEE IS PROVED OTHERWISE, I.E., THE SPARES OF THE TWO IRREPARABLE WINDMILLS ARE NOT SALVAGED AND USED FOR REPAIRING THE OTHER 6 WINDMIL LS, THEN THE ENTIRE TWO WINDMILLS HAVE TO BE SOLD AT SCRAP VALUE WHICH WILL RESULT IN HIGHER CLAIM OF DEDUCTION BY WAY OF LOSS INCURRE D BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS. HOWEVE R, THE ASSESSEE HAS PREFERRED TO CLAIM LESSER DEDUCTION BY WAY OF 5 ITA NO.636/MDS/2017 DEPRECIATION. IN THIS SITUATION, I DO NOT FIND ANY REASON TO DISBELIEVE THE FACTS NARRATED BY THE ASSESSEE. HENCE, I HEREB Y DIRECT THE LD.AO TO GRANT DEPRECIATION TO THE ASSESSEE AGAINST THE PURCHASE OF 8 WINDMILLS HOWEVER AFTER CONSIDERING THE PERIOD OF USAGE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THE 14 TH AUGUST, 2017, AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER '# /CHENNAI, $% /DATED 14 TH AUGUST, 2017 JR % '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF