M/s. Preetam Enterprises, V. Deputy Commissioner of Income-tax,

ITA 642/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2755 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 642/PN/2014 $& ' !(' / ASSESSMENT YEAR : 2007-08 M/S. PREETAM ENTERPRISES, 1325/91, SHIVAJI UDYAM NAGAR, KOLHAPUR-416008 PAN : AACFP2436P ....... / APPELLANT )& / V/S. DCIT, CIRCLE 1, KOLHAPUR / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 21-12-2015 / DATE OF PRONOUNCEMENT : 04-02-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-KOLHAPUR DATED 13-01 -2014 FOR THE ASSESSMENT YEAR 2007-08. 2 ITA NO. 642/PN/2014, A.Y. 2007-08 2. THE ASSESSEE HAS IMPUGNED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING THE HIGHER RATE OF DEPRECIATION ON THE FOLLOWING COMPONENTS OF WINDMILL: I. CIVIL WORK INCLUDING FOUNDATION AND OTHER ALLIED WORK. II. LABOUR CHARGES FOR FINAL TEXT AND COMMISSIONING OF WIND MILL. III. LABOUR CHARGES FOR INSTALLATION. IV. COMMON POWER EVACUATION INFRASTRUCTURE FACILITY. V. MEDHA CHARGES. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RE CORDS ARE: THE ASSESSEE HAD SET UP WINDMILL FOR GENERATION OF ELECTRICITY. I N THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE CLAIMED DEPRECIAT ION @ 80% ON VARIOUS COMPONENTS OF WINDMILL WHICH INCLUDE CIVIL WORK FOR FOUNDATION OF WINDMILL, LABOUR CHARGES FOR FINAL TESTING AND COMMISSIONING, LABOUR CHARGES FOR INSTALLATION, COMMON POWER EVACUATION INFRASTRUCTURE FACILITY AND MEDHA CHARGES. IN T HE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER DISA LLOWED DEPRECIATION TO THE TUNE OF ` 36,27,900/- BY RESTRICTING THE RATE OF DEPRECIATION @ 10% ON ALL THE ABOVE COMPONENTS AND DENY ING DEPRECIATION ON MEDHA CHARGES ` 3,01,800/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 01-03-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTE D THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE FINDINGS OF THE ASSESSING OFFICER IN RESTRICTING THE DEPRECIATION @ 10%. NOW, THE ASSE SSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST THE FINDINGS OF CO MMISSIONER OF INCOME TAX (APPEALS). 3 ITA NO. 642/PN/2014, A.Y. 2007-08 4. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE ISSUE RAISED IN THE PRESENT APPEAL RELATING TO T HE ADMISSIBILITY OF DEPRECIATION @ 80% ON VARIOUS COMPONENTS OF WINDMILL HAS BEEN ADJUDICATED BY THE TRIBUNAL IN SEVERAL CASES. THE TRIBUN AL HAS BEEN CONSISTENTLY HOLDING THAT THE ASSESSEES ARE ELIGIBLE TO CLA IM HIGHER RATE OF DEPRECIATION ON ALL THE COMPONENTS OF THE WINDMILL, WHETHE R IT BE CIVIL WORK OR ELECTRICAL TRANSMISSION WIRES OR OTHER ALLIED COM PONENTS IN INSTALLATION AND COMMISSIONING OF WINDMILL. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. DR. SANTOSH KUMAR PRABHU VS. ASST. COMMISSIONER OF INCOME TAX, ITA NO. 1294/PN/2014 FOR THE ASSESSMENT YEAR 2008 -09 DECIDED ON 28-10-2015. II. ACIT VS. TOPAZ INVESTMENTS PVT. LTD., ITA NOS. 2285 TO22 89 AND 2291/PN/2012 FOR ASSESSMENT YEARS 2003-04 TO 2007-08 AND 2009-10 DECIDED ON 30-12-2013. 5. ON THE OTHER HAND SHRI DHEERAJ KUMAR JAIN REPRESEN TING THE DEPARTMENT VEHEMENTLY DEFENDED THE FINDINGS OF THE COMM ISSIONER OF INCOME TAX (APPEALS). HOWEVER, THE LD. DR FAIRLY ADMITTED THAT THE TRIBUNAL HAD DECIDED THIS ISSUE IN VARIOUS CASES HOLDING THA T THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION @ 80% ON CIVIL WORK INCLUDING FOUNDATION, LABOUR CHARGES AND OTHER INFRASTRUCTURE FACILITY RELATING TO THE WINDMILL. 6. BOTH SIDES HEARD. THE ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ONLY ISSUE RAISED IN THE APPEAL BY THE ASSESSEE IS D ISALLOWANCE OF HIGHER RATE OF DEPRECIATION ON VARIOUS CONSTITUENTS OF WIND MILL. THE 4 ITA NO. 642/PN/2014, A.Y. 2007-08 DEPRECIATION CLAIMED BY THE ASSESSEE AND DEPRECIATION ALLOW ED BY THE DEPARTMENT ON VARIOUS COMPONENTS OF WINDMILL IS TABULATED HERE-IN- UNDER: PARTICULARS CLAIMED BY THE ASSESSEE @ 80% ALLOWED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) @ 10% DEPRECIATION DISALLOWED CIVIL WORK INCLUDING FOUNDATION ` 17,07,907/ - ` 2,13,488/ - ` 14,94,419/ - LABOUR CHARGES FOR FINAL TEST AND COMMISSIONING ` 53,875/ - ` 6,734/ - ` 47,141/ - LABOUR CHARGES FOR INSTALLATION ` 8,44,045/ - ` 1,05,505/ - ` 7,34,540/ - COMMON POWER EVACUATION INFRASTRUCTURE FACILITY ` 12,00,000/ - ` 1,50,000/ - ` 10,50,000/ - MEDA PROCESSING AND APPLICATION FEE ` 2,41,440/ - ` NIL ` 2,41,440/ - 7. THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE ON TH E DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DR. SANTOSH KUMAR PRABHU VS. ASST. COMMISSIONER OF INCOME TAX (SUPRA). THE TRIBUNAL IN THE SAID CASE HAS HELD THAT THE ASSESSEE IS E LIGIBLE TO CLAIM DEPRECIATION @ 80% ON ALL THE ABOVE COMPONENTS. THE RELE VANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL IS AS UNDER: 6. THE LD. AR HAS DRAWN SUPPORT FROM THE ORDER OF CO-ORDINATE BENCH IN THE CASE OF DCIT VS. SUSHANT M. JADHAV (SUPRA) T O SHOW THAT DEPRECIATION @ 80% IS ALLOWABLE ON ALL THE ABOVE CO MPONENTS OF THE WINDMILL, EXCEPT EXPENDITURE ON KEEPING THE AREA VA CANT FOR FREE ACCESS. WE FIND THAT IN THE CASE OF DCIT VS. SUSHANT M. JAD HAV (SUPRA), THE CO- ORDINATE BENCH AFTER PLACING RELIANCE ON THE DECISI ON OF M/S. WESTERN PRECICAST PVT. LTD. VS. JCIT (SUPRA), HAS DECIDED T HE ISSUE IN FAVOUR OF THE 5 ITA NO. 642/PN/2014, A.Y. 2007-08 ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF TRI BUNAL IN ITA NO.166/PN/2012 READS AS UNDER:- 5. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ID ENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S. WESTERN PRECICAST PVT. LTD. VS. JCIT, RANGE-I, SANGLI, ITA NO. 1495/PN/2011 ORDER DATED 30-01-2013. THE TRIBUNAL FOLLOWED THE DECISION IN THE ASSESSEE OWN CASE FOR THE A.Y. 2007-08. THE OPERATIVE PART OF THE TRIBUNALS DECISION IS AS UND ER: 4. WE HAVE HEARD THE RIVAL PARTIES. THE LD. COUNSE L SUBMITS THAT IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08, T HE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL AND HAS ALLOWED THE CLAIM OF ASSESSEES ON DEPRECIATION AT 80% ON THE FOUNDATION, ERECTION AND INSTALLATION COST OF THE W IND MILL. THE LD. COUNSEL HAS FILED THE COPY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08. WE HAV E ALSO HEARD THE LD. D.R. WE FIND THAT THE ISSUE OF THE R ATE OF DEPRECIATION APPLICABLE TO THE COST OF FOUNDATION O F ERECTION AND COMMISSIONING HAS ALREADY BEEN CONSIDERED BY TH E TRIBUNAL IN ASSESEES OWN CASE FOR THE A.Y. 2007-08 . THE TRIBUNAL HAS HELD THAT FOUNDATION IS THE INTEGRAL P ART OF THE WIND MILL AND SAME IS ELIGIBLE FOR DEPRECIATION AT THE RATE WHICH IS APPLICABLE TO THE WIND MILL. IN THE SAME WAY THE TRIBUNAL ALSO ALLOWED THE DEPRECIATION RATE WHICH I S APPLICABLE TO THE WIND MILL FOR THE ERECTION AND IN STALLATION COST OF THE WIND MILL. THE OPERATIVE PART OF THE T RIBUNAL ORDER IS AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN ORDER TO APPRECIATE THE DISPUTE, THE FOLLOWING BREA K-UP OF EXPENSES ON ACCOUNT OF ERECTION AND COMMISSION OF WINDMILL I I.E. WINDMILL INSTALLED IN THE PRECEDING ASSESSMENT YEAR 2006-07 WOULD BE NECESSARY AS CONTAINED IN PARA 2.5 OF ORDER OF THE CIT(A):- S.NO. DATE NATURE OF WORK EXPENDITURE RS. 1. 30-03-2006 TOWARDS SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD WITH VCB, OUTDOOR TYPE CT & PT AND HT TRANSMISSION 30,93,500/- 6 ITA NO. 642/PN/2014, A.Y. 2007-08 LINE FROM WINDMILL TO GRID INTERCONNECTION POINT INCLUDING HT METERING FOR 1.25 MW WINDMILL AT LOCATION NO. K437 AT ABOVE SITE ADDRESS. 2. 30-03-2006 LABOUR CHARGES TOWARDS FINAL TESTING AND COMMISSIONING FOR 1.25 MW WINDMILL AT LOC NO. K437. 1,10,200/- 3. 30-03-2006 TOWARDS LABOUR CHARGES FOR WORK EXECUTED, FOR ERECTION AND INSTALLATION OF WINDMILL CONSISTING OF : UNLOADING AND SAFE KEEPING OF MATERIAL, ASSEMBLY, ERECTION AND INSTALLATION OF WINDMILL TOWER AND WIND TURBINE GENERATOR FOR 1.25 MW WINDMILL AT LOCATION NO K-437 AT ABOVE SITE ADDRESS. 14,32,600/- 4. 04-03-2006 PROCESSING FEES 2,58,970/- 5. 31-12-2005 MEDA PROCESSING AND APPLICATION FEES 6,28,750/- 6. 31-03-2006 CONTRIBUTION TOWARDS COMMON POWER EVACUATION INFRASTRUCTURE FACILITY 37,50,000/- 8. IN RESPECT OF ABOVE SIX COMPONENTS OF COST OF WI NDMILL CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER ALLO WED DEPRECIATION AT 15% AND NOT AT 80% AS CLAIMED BY TH E ASSESSEE. THE CIT(A) HOWEVER, CONSIDERED THE ITEMS OF COSTS AT NO 1 TO 5 QUALIFYING FOR HIGHER RATE OF DE PRECIATION BEING INTEGRAL PART OF WINDMILL. IN SO FAR AS ITEM NO. 1 IS CONCERNED, THE COST OF RS. 30,93,500/- IS TOWARDS SUPPLY OF ELECTRICAL ITEMS OF THE WINDMILL ITSELF. THE CI T(A) HAS OBSERVED THAT SUCH COST IN THE INSTALLATION OF WIND MILL HAS BEEN FOUND BY THE TRIBUNAL IN THE CASE OF POONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA) AS AN INTEGRAL P ART OF THE WINDMILL COST AND THEREFORE, FOUND TO BE ELIGIBLE F OR DEPRECIATION EQUIVALENT TO THAT OF THE WINDMILL. N O DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE AND THEREFORE, FOLLOWING THE PRECEDENT IN THE CASE OF P OONAWALA FINVEST AND AGRO PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) WHICH WE HERE BY AFFIRM. 7 ITA NO. 642/PN/2014, A.Y. 2007-08 9. TO THE SIMILAR EFFECT IS THE NATURE OF COST ENUM ERATED IN ITEMS NO. 2 AND 3 RELATING TO LABOUR CHARGES FOR ER ECTION AND INSTALLATION OF WINDMILL. SUCH EXPENDITURE FOR MS INTEGRAL PART OF COST OF THE WINDMILL AND THEREFORE , THERE IS NO MISTAKE ON THE PART OF THE CIT(A) TO HAVE CONSID ERED SUCH EXPENDITURE AS ELIGIBLE FOR DEPRECIATION AT 80 %. 5. WE THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL CITED SUPRA HOLD THAT BOTH THE PARTIES BELOW WERE NOT JUSTIFIED IN CALCULATING AND DISALLOWING THE DEPRECIATION ON THE COST OF FOUNDATION, COMMISSIONING AND ERECTION OF THE WIND M ILL. ACCORDINGLY, WE ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE ADDITION MADE BY THE A.O. BY MAKING THE DISALLOWANCE TOWARDS ALLEGED EXCESS CLAIM OF DEPREC IATION. 6. IN OUR OPINION, THE LD.CIT(A) HAS RIGHTLY ALLOWE D THE CLAIM OF THE ASSESSEE, AS ISSUE ARISING FROM THE GROUNDS TAKEN BY THE REVENUE COVERS IN FAVOUR OF THE ASSESSEE BY THE DEC ISION CITED (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE O RDER OF THE LD.CIT(A), AND ACCORDINGLY THE SAME IS CONFIRMED. 7. SINCE THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL, WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION @ 80% ON THE FOLLOWING COMPONENTS / CONSTITUENTS OF WINDMILL:- SR. NO. PARTICULARS 1. INSTALLATION, CIVIL WORK 2. MEDA PROCESSING FEE 3. MEDA APPLICATION FEE 4. ELECTRICAL INSTALLATION 5. LABOUR CHARGES FOR ERECTION AND INSTALLATION 6. LABOUR CHARGE FOR FINAL TESTING 7. OTHER PRE-OPERATION EXPENSES CAPITALIZED THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FIND INGS OF THE CO-ORDINATE BENCH. 8 ITA NO. 642/PN/2014, A.Y. 2007-08 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ACCEPTED IN THE AFORESAID TERMS. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. TOPAZ INVESTMENTS PVT. LTD. (SUPRA). 8. NOTHING CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. T HEREFORE, WE RESPECTFULLY FOLLOW THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL AND ALLOW THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 04 TH DAY OF FEBRUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 04 TH FEBRUARY, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A), KOLHAPUR 4. ' / THE CIT-II, KOLHAPUR 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE