Shah Lulla Estate Developers, Sangli V. DCIT, Cir.-2, Sangli

ITA 653/PUN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60015 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO. 653/PN/2010 (ASSTT. YEAR : 2006-07 ) SH AH LULLA ESTATE DEVELOPERS ... APPELLANT AMRAI ROAD, SANGLI PAN : NOT AVAILABLE V. D CIT, CIRCLE 2, SANGLI RESPONDENT APPELLANT BY : SHRI. NIKHIL PATHAK RESPONDENT BY : MS. NEERA MALHOTRA DATE OF HEARING : 23/01/12 DATE OF PRONOUNCEMENT : -3-12 ORDER PER I.C. SUDHIR, JM THE FIRST APPELLATE ORDER HAS BEEN QUESTIONED BY T HE ASSESSEE IN THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) (CIT (APPEALS)) ERRED ON FACTS AND IN LAW IN RESTRICTING THE DEPRECIATION IN RESPECT OF COST TO THE EXTENT OF RS . 30.00 LAKHS COVERED BY THE TWO INVOICES OF RS.15.00 LAKHS EACH TO 10% ON THE GROUND THAT THE ENTIRE AMOUNT OF RS. 30 LAKHS WAS PAID FOR DEVELOPMENT OF APPROACH ROADS AND INTE RNAL ROADS. 2. THE LEARNED CIT(APPEALS) HAVING RECORDED THE FAC TS THAT SECOND INVOICE IS FOR RS.15,00,000/- TOWARDS ERECT ION AND COMMISSIONING OF W.T.C. ALONGWITH TRANSFORMER ON WH ICH SERVICE TAX @ 10 % IS LEVIED. ANOTHER INVOICE FOR RS.15,00,000/- IS FOR EARTH WORK AND FOUNDATION FOR W.T.C. INCLUDING CONSTRUCTION OF APPROACH ROAD AND INTERNA L ROADS, SUPPLY OF D.P. STRUCTURAL POLES, ETC. WRONGLY PROCEEDED ON THE FOOTING THAT THE AMOUNT OF RS.30.00 LAKHS WAS SPENT ONLY FOR DEVELOPMENT OF A PPROACH ROADS AND INTERNAL ROADS. THE CONCLUSION OF THE CI T (APPEALS) ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 2 IS CONTRARY TO THE FACTS RECORDED BY HIM IN THE APP EAL ORDER ITSELF. WITHOUT PREJUDICE TO THE ABOVE 3. THE LEARNED CIT (APPEALS) AT THE MOST OUGHT TO H AVE ALLOCATED PART OF COST OF RS. 15.00 LAKHS OUT OF TH E THIRD INVOICE TOWARDS CONSTRUCTION OF APPROACH ROADS AN D INTERNAL ROADS WHEN IT IS CLEAR FROM THE DESCRIPTION OF THE INVOICE THAT THE ENTIRE AMOUNT OF RS. 15.00 LAKHS DOES NOT REPR ESENT THE COST OF APPROACH ROADS AND INTERNAL ROADS. 4. THE LEARNED CIT(APPEALS) ERRED IN DENYING DEPREC IATION AT 80% IN RESPECT OF 2 ND INVOICE OF RS.15,00,000/- WHICH IS FOR THE ERECTION AND COMMISSIONING OF W.T.C. ALONGWITH TRANSFORMER BY HOLDING THE SAME AS REPRESENTING COS T OF DEVELOPMENT OF APPROACH ROADS AND INTERNAL ROADS. 5. THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE TH AT THERE IS NO CONTROL ROOM CONSTRUCTED IN THE CASE OF APPELLANT A ND THEREFORE THE DECISION IN THE CASE OF POONAWALA FIN EVEST & AGRO PVT. LTD. VS. ACIT (118 TTJ 68) IS NOT APPLICA BLE IN THE APPELLANTS CASE. 6. THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALLOWED THE DEPRECIATION AT 80% ON THE SAID AMOUNT OF RS. 30 L AKHS COVERED BY THE TWO INVOICES UNDER REFERENCE. 7. THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEPRE CIATION @ 80% ON THE SAID AMOUNT OF RS. 30.00 LAKHS. 2. THE RELEVANT FACTS ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. UNDER CONSIDERATION, THE ASSESSEE ACQUIRED, IN STALLED AND COMMISSIONED WIND TURBINE UNIT FOR GENERATION OF PO WER AND CLAIMED DEPRECIATION AT THE RATE OF 80% OF THE COST THEREOF . THE DETAILS OF TOTAL ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 3 COST OF ACQUISITION AND INSTALLATION OF THE WIND TU RBINE UNIT FURNISHED ARE AS UNDER : SR. NO. PARTICULARS AMOUNT (RS.) ANNEXURE REF (I) WIND TURBINE UNIT (INVOICE NO.9101506359 3,40, 00,000 A DTD. 28-12-2005 FROM ENORCON (INDIA) LTD.) (II) ERECTION AND COMMISSIONING CHARGES (INVOICE NO.9101506535 DTD. 17-02-2005 15,00,000 B ( III) CIVIL CONSTRUCTION OF WINDMILL FOUNDATION (INVOICE NO. 9101506534 15,00 ,000 DTD. 17-02-2005 FROM ENORCON (INDIA) LTD.) ___ _______ 3,70,00,000 (IV) INFRASTRUCTURE DEVELOPMENT CHARGES 16,90,000 TOTAL 3,86,8 0,000 THE A.O. ALLOWED CLAIMED DEPRECIATION AT THE RATE O F 80% ONLY ON THE COST OF RS. 340 LAKHS INCURRED ON WIND TURBINE AND HELD THAT ALL OTHER EXPENSES INCURRED ON FOUNDATION, ERECTION AND INSTA LLATION ARE DIFFERENT FROM THE WIND TURBINE UNIT AND THUS THEY ARE NOT EN TITLED FOR DEPRECIATION AT THE RATE OF 80%. HE ALLOWED DEPRECIATION ON THO SE EXPENSES AT THE RATE OF 15% AS APPLICABLE FOR OTHER GENERAL MACHINE RY. IN OTHER WORDS, THE A.O DENIED DEPRECIATION AT HIGHER RATE OF 80% I N RESPECT OF RS. 30 LAKHS I.E. COST OF ERECTION AND COMMISSIONING (RS. 15,00,000/-) AND COST OF FOUNDATION, CIVIL WORK AND INSTALLATION (RS. 15, 00,000/-). THESE EXPENSES HAVE BEEN SHOWN HEREINABOVE AT SRL. NOS. ( II) AND (III) IN THE ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 4 DETAILS. THE A.O. ALLOWED DEPRECIATION AT THE RATE OF 10% ON FOUNDATION AND CIVIL WORK. LD. CIT(A) HAS UPHELD THE SAME. 3. BEFORE THE TRIBUNAL, THE LD. A.R. REFERRED THE C OPIES OF RELEVANT BILLS MADE AVAILABLE AT PAGE NOS. 5 TO 7 OF THE PAPER BOO K FILED ON BEHALF OF THE ASSESSEE. THE LD. A.R. SUBMITTED THAT AS PER S EC. 32(1) DEDUCTION ON ACCOUNT OF DEPRECIATION IS TO BE ALLOWED AT A PRESC RIBED % ON THE ACTUAL COST OF ASSET PUT TO USE DURING THE YEAR. SECTION 43(1) DEFINES ACTUAL COST AS THE ACTUAL COST OF ASSETS TO THE ASSESS EE REDUCED BY THAT PORTION OF THE COST THEREOF IF ANY AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. HE SUBMITTED THAT IN THE ABSENCE OF AN EXHAUSTIVE DEFINITION, THE EXPRESSION ACTUAL COST HAS TO BE UNDERSTOOD IN ACCORDANCE WITH THE GENERALLY ACCEPTED ACCOUNTIN G PRINCIPLES. HE SUBMITTED FURTHER THAT AS PER APPENDIX I OF I.T. R ULES 1962, ITEM III (8)(XIII)(1), THE DEPRECIATION AT ACCELERATED RA TE OF 80% IS ALLOWABLE IN RESPECT OF RENEWABLE DEVICES BEING WIND MILLS AND SPECIFICALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS. HE PLACED RELIAN CE ON THE FOLLOWING DECISIONS : 1) HABIB HUSSAIN VS. CIT (1963), 48 ITR 859 (BOM ) 2) PERIYAR AND PARREKILLII RUBBER VS. CIT,(1999), 181 ITR 396 (KER.) 3) CIT VS. TATA MILLS LTD. (1979), 118 ITR 496 (BO M) 4) CIT VS. COOPER FOUNDARY PVT. LTD. , ITA NO. 1326 OF 2010, ORDER DATED 14 TH JUNE 2011 OF HONBLE HIGH COURT OF BOMBAY (COPY SUPPLIED). 5) POONAWALA FINWEST & AGRO (P) LTD. VS. ACIT (200 8), 12 DTR 211 (PUNE). ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 5 4. THE LD. D.R. ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE F AILED TO FURNISH THE DETAILS OF EXPENDITURE ON WHICH DEPRECIATION AT THE RATE OF 80% WAS CLAIMED. HE SUBMITTED THAT EXPENSES ARE NOT SPECIF IED. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT IN ITS RECENT DECISION IN THE CASE OF CIT VS. COOPER FOUNDARY PV T. LTD. (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN PLEASED TO APPROVE THE DECISION OF THE TRIBUNAL HOLDING THAT RCC FOUNDATION FORMS INTEGRAL PART OF THE WIND MILLS, HENCE ENTITLED FOR THE DEPRECIATION AT THE RATE OF 80% ON THE COST INCURRED ON THE SAID RCC FOUNDATION. THE TRIB UNAL HAS DECIDED THE ISSUE IN VIEW OF THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. HERDILLA CHEMICALS LTD. (1995) 216 ITR 742 (BOM). THE TRIBUNAL THEREIN HAS RECORDED THE RELEVANT FACTS THAT THE WI NDMILL WAS REQUIRED TO BE INSTALLED ON SPECIAL FOUNDATION OF REINFORCED CE MENT CONCRETE AND THAT THE SAID REINFORCED CEMENT CONCRETE FORMED THE INTE GRAL PART OF THE WIND MILL. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALA FINWEST & AGRO (P) LTD. VS. ACIT (SUPRA) ON THE BASIS OF FUN CTIONAL TEST HAS COME TO THE CONCLUSION THAT THE TRANSFORMER UPTO D.P. ST RUCTURE IS GADGET FOR TRANSMISSION OF POWER GENERATED BY WIND MILL UPTO S UB-STATION OF MSEB AT SITE, AND IS INTEGRAL PART OF THE WIND MILL ELIGIBL E FOR HIGHER PERCENTAGE OF DEPRECIATION, WHEREAS CLAIM OF ASSESSEE ON HIGHER P ERCENTAGE OF DEPRECIATION FAILED ON CIVIL WORK OF CONTROL ROOM, CITE DEVELOPMENT AND INTERNAL ROADS ADJUNCT TO A WIND MILL IN ABSENCE OF DEMONSTRATION OF THE ASSESSEE THAT THEY WERE ESPECIALLY DESIGNED SO AS T O FACILITATE POWER GENERATION IN THE WIND MILL OR DISTRIBUTION THEREOF . WE THUS FUND THAT THE ISSUES RAISED IN THE PRESENT APPEAL ARE FULLY COVER ED BY THESE TWO DECISIONS OF HONBLE BOMBAY HIGH COURT AND PUNE BEN CH OF THE TRIBUNAL. IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. LTD. (S UPRA), IT APPEARS THAT ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 6 THE ASSESSEE WAS ABLE TO DEMONSTRATE BEFORE THE TRI BUNAL THAT WIND MILL WAS ERECTED ON THE REQUIRED SPECIAL FOUNDATION OF REINFORCED CEMENT CONCRETE, HENCE IT WAS HELD THAT THE SAID REINFORC ED CEMENT CONCRETE FORMED THE INTEGRAL PART OF THE WIND MILL. UNDER T HESE CIRCUMSTANCES, WE SET ASIDE THE MATTER REGARDING THE CLAIMED DEPRECIA TION ON THE EXPENSES INCURRED ON THE ITEMS OTHER THAN WIND TURBINE UNIT TO DECIDE THE SAME IN VIEW OF THE ABOVE CITED 2 DECISIONS OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. COOPER FOUNDARY PVT. LTD. (SUPRA) A ND OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALA FINWEST AND A GRO PVT. LTD.(SUPRA) SO FAR AS DEPRECIATION CLAIMED ON CONSTRUCTION OF T HE FOUNDATION ON WHICH WIND MILL WAS ERECTED AND IN VIEW OF THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALA FINWEST AND A GRO PVT. LTD. VS. ACIT (SUPRA) IN RELATION TO THE EXPENSES INCURRED ON OTH ER ITEMS, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E TO FURNISH DETAILS OF THE EXPENDITURE IN SUPPORT. THE GROUNDS ARE THUS A LLOWED FOR STATISTICAL PURPOSES. 6. IN RESULT, APPEAL IS ALLOWED FOR STATISTICAL PUR POSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19TH MARCH 2012. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 19TH MARCH, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA . NO.653//PN/2010 SHAH LULLA ESTATE DEVELOPES. A.Y. 2006-07 PAGE OF 7 7 3. THE CIT I/II, KOLHAPUR / CIT (CENTRAL ), PUNE 4. THE CIT(A)- I, KOLHAPUR 5. THE D.R. B BENCH, PUNE 6. GUARD FILE /-TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE