M/s. Jsons Foundry Pvt. Ltd., Sangli V. Joint Commissioner of Income-tax,

ITA 654/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1860 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Depreciation; Business expenditure; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 654 /PN/201 4 / ASSESSMENT YEAR : 20 1 0 - 11 M/S. JSONS FOUNDRY PVT. LTD., PLOT NO.G 13, KUPWAD MIDC BLOCK, KUPWAD, TAL. MIRAJ, SANGLI 416436 . / APPELLANT PAN: AA ACJ6740K VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 1, SANGLI . / RESPONDENT . / ITA NO. 783 /PN/201 4 / ASSESSMENT YEAR : 20 10 - 11 THE JT. COMMISSIONER OF INCOME TAX, RANGE 1, SANGLI . / APPELLANT VS. M/S. JSONS FOUNDRY PVT. LTD., PLOT NO.G 13, KUPWAD MIDC BLOCK, KUPWAD, TAL. MIRAJ, SANGLI 416436 . / RESPONDENT PAN: AAACJ6740K ASSESSEE BY : NONE (WRITTEN SUBMISSIONS) REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 0 9 . 0 5 .201 6 / DATE OF PRONOUNCEMENT: 13 . 0 5 .201 6 ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 2 / / ORDER PER SUSHMA CHOWLA, J M : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST THE ORDER OF CIT (A) , KOLHAPUR , DATED 1 0 . 0 1 .20 1 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST ORDER PAS SED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . (IN SHORT THE ACT) . 2 . NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS AND HAS POINTED OUT THAT THE ISSUE RAISED IN BOTH THESE APPEALS IS COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2009 - 10 . ACCORDINGLY, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND AFTER HEARING T HE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 3. THE CROSS APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 4 . THE ASSESSEE IN ITA NO.654/PN/2014 HAS RAISED THE FOLLOWING GROUNDS 4 . THE ASSESSEE IN ITA NO.654/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: - 1 . IN THE VIEW OF FACTS & CIRCUMSTANCES, THE ASSESSING OFFICER HAS DISALLOWED THE EXCESS CLAIM DEPRECIATION ON WINDMILLS OF RS.1,11,59,251/ - 2 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) KOLHAPUR HAS ERRED IN UPHOLDING THE EXCESS DEPRECIATION DISA LLOWED BY ASSESSING OFFICER. 3 . THE APPELLANT SUBMITS THAT THE ADDITION MADE BE DELETED. 4 . THE APPELLANT CRAVES LEAVE TO ADD, MODIFY OR WITHDRAW IN ANY GROUNDS OF APPEAL. ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 3 5 . THE REVENUE IN ITA NO.783/PN/2014 HAS ALSO RAISED THE FOLLOWING GROUND S OF APPEAL: - [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX[APPEALS], - KOLHAPUR ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE CLAIMING DEDUCTION U / S 80LA(5) OF THE I. T. ACT, ON THE PROFITS EARNED FROM GENERATION & S ALE OF ELECTRICITY FROM SATARA UNIT, IN THE PROCESS IGNORING THE FACT THAT THE ASSESSEE COMPANY HAD INCURRED LOSSES FROM GENERATION AND SALE OF ELECTRICITY FROM TAMILNADU, RAJASTHAN AND KARNATAKA UNIT WHICH WERE REQUIRED TO BE FIRST SET OFF AGAINST THE PRO FITS EARNED AT SATARA UNIT IN TERMS OF PROVISIONS OF SECTION 70 OF THE I. T. ACT AND RESULTANT PROFITS WAS TO BE ALLOWED AS DEDUCTION IN TERMS OF THE PROVISIONS OF SECTION 80 IA(1) OF THE I. T. ACT, 1961. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX[APPEALS], KOLHAPUR ERRED IN HOLDING THAT, 'EVERY UNIT CONSTITUTES A SEPARATE UNDERTAKING ENGAGED IN THE ELIGIBLE BUSINESS AND LOSSES FROM ONE UNIT CANNOT BE SET OFF AGAINST PROFITS OF ANOTHER UNIT ENGAGED IN THE SAME BUSINESS FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IA', AS THE PROVISIONS OF SECTION 80LA OF THE I. T. ACT REFERS TO PROFITS AND GAINS DERIVED BY AND UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SECTION (4) OF SE CTION 80IA WHICH IN THE CONTEXT OF THE ASSESSEE - COMPANY WOULD IMPLY THAT PROFIT AND GAINS EARNED BY THE ASSESSEE - COMPANY FROM THE ELIGIBLE BUSINESS OF GENERATION OF ELECTRICITY WOULD BE CONSIDERED FOR ALLOWING THE DEDUCTION AND NOT THE PROFITS EARNED BY INDIVIDUAL UNITS ENGAGED IN THE BUSINESS OF GENERATING ELECTRICITY. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX[APPEALS], KOLHAPUR ERRED IN NOT FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF GUJAR AT IN THE CASE IF SINTEX INDUSTRIES LTD. VS. A.C.LT. 37 TAXMAN 217(GUJ.) WHEREIN THE HON'BLE GUJARAT HIGH COURT HELD THAT DEDUCTION IS NOT ALLOWABLE, INVOLVING IDENTICAL FACTS. [4] ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOM E TAX (APPEALS), KOLHAPUR ERRED IN DELETING THE DISALLOWANCE OF GARDENING EXPENSES AS THE SAID EXPENSES ARE NOT BUSINESS EXPENSES AND WAS HENCE CORRECTLY DISALLOWED BY THE ASSESSING OFFICER. [5] THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX[APPEALS], K OLHAPUR BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. [6] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 4 6 . THE ASSESSEE IS AGGRIEVED BY NON - ALLOWANCE OF DEPRECIATIO N ON WINDMILLS TO THE TUNE OF RS. 1,11,59,251/ - . 7. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF IRON, STEEL, STAINLESS STEEL AND ALLOY STEEL CASTING, INDUSTRIAL VALVES AND ALSO GENERATION OF ELECTRICITY FROM WINDMILL S. THE ISSUE RAISED BY WAY OF GROUNDS OF APPEAL IN ASSESSEES APPEAL IS IN RESPECT OF DEPRECIATION ON WINDMILLS. THE ASSESSING OFFICER IN TURN, FOLLOWING THE DECISION OF HIS PREDECESSOR IN THE EARLIER YEARS, HAD ALLOWED THE DEPRECIATION ON (I) FOUNDATION WORK, ROAD DEVELOPMENT, ETC. @ 10%, (II) ERECTION AND COMMISSIONING WORK TREATING AS PLANT & MACHINERY @ 15% AND (III) 80% ON WINDMILLS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD INSTALLED ONE WINDMILL AT RAJASTHAN AND THE SECOND AT KOREGAON. IN THE KOREGAON UNIT, THE ASSESSEE HAD INCURRED FOUNDATION CHARGES OF RS.25 LAKHS AND IN RESPECT OF RAJASTHAN UNIT, THE FOUNDATION CHARGES WERE TO THE EXTENT OF RS.18 LAKHS. THE ASSESSEE CLAIMED THAT ENTIRE EXPENDITURE WITH COST OF WINDMILL WAS ENTITLED TO DEPRECIATION @80% , WAS NOT ALLOWED BY THE ASSESSING OFFICER, IN VIEW OF SIMILAR DISALLOWANCE BEING MADE IN ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 . THE ASSESSING OFFICER RE - WORKED THE EXCESS CLAIM OF ASSESSEE ON WINDMILL AND DEPRECIATION TO BE ALLOWED AS PER DETAILED CHART UNDER PARA 3.6 OF THE ASSESSMENT ORDER AND DISALLOWED EXCESS CLAIM OF DEPRECIATION ON WINDMILL TO THE EXTENT OF RS. 1,11,59,251/ - . 8. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER IN THIS REGARD. ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 5 9. WE FIND THAT SIMILAR ISSUE OF CLAIM O F DEPRECIATION @80% BOTH ON COST OF WINDMILL AND CIVIL STRUCTURE INCLUDING ERECTION AND COMMISSIONING AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 2349/PN/2012 IN AN APPEAL FILED BY THE REVENUE RELATING TO ASSESSMENT YEAR 2009 - 10 AND VIDE ORD ER DATED 28.01.2014 , THE CLAIM OF ASSESSEE WAS HELD TO BE ALLOWABLE AND NO RESTRICTION HAD TO BE MADE IN ALLOWING THE DEPRECIATION ON COST OF FOUNDATION AS WELL AS COST INCURRED ON ERECTION AND COMMISSIONING OF WINDMILL. WE FURTHER FIND THAT PUNE BENCH OF TRIBUNAL IN VARIOUS CASES OF WINDMILL OWNERS HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION @80% ON THE COST OF FOUNDATION AS WELL AS ON ERECTION AND COMMISSIONING OF WINDMILLS. SINCE THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS IDENTI CAL TO THE ISSUE BEFORE THE TRIBUNAL , WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER. FURTHER, THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE CIT VS. JSONS FOUNDRIES PVT. LTD. IN IN COME TAX APPEAL NO.2035 OF 2013, VIDE JUDGMENT DATED 08.03.2016 HAD ALLOWED THE CLAIM OF ACCELERATED DEPRECIATION ON THE COST OF FOUNDATION AND INSTALLATION AND COMMISSIONING WORK OF WINDMILLS. FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION @80% ON THE COST OF FOUNDATION, ELECTRIFICATION AND COMMISSIONING OF WINDMILL AS CLAIMED BY THE ASSESSEE @80%. CONSEQUENTLY, GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 10. NOW, COMING TO THE APPEAL FILED BY THE REVENUE . 11. THE ISSUE IN THE PRESENT APPEAL IS AGAINST DISA LLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT AT RS. 57,78,702/ - . THE ISSUE ARISING IN THE PRESENT APPEAL IN THE APPEAL FILED BY THE REVENUE IS WHETHER THE PROFIT OF ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 6 EACH WINDMILL INSTALLED IS TO BE CALCULATED SEPARATELY I.E. ON STANDALONE B ASIS WITHOUT CONSIDERING THE LOSSES OF OTHER UNITS FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. THE ASSESSEE WAS OPERATING SEVERAL WINDMI LLS, WHICH WERE RUNNING IN LOSSES. HOWEVER, IN RESPECT OF SATARA WINDMILL, THE ASSESSEE CL AIMED DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROFITS AND LOSSES OF ALL WINDMILLS HAVE TO BE TAKEN TOGETHER AND IF AFTER SET OFF, THERE ARE PROFITS AVAI LABLE, THEN DEDUCTION UNDER SECTION 80IA OF THE ACT IS TO BE ALLOWED. THE ASSESSEE HAD AGITATED BEFORE THE ASSESSING OFFICER THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS NOT TO BE COMPUTED ON THE COMBINED PROFITS OF ALL THE WINDMILLS TAKEN TOGETHER. THE CLAIM OF ASSESSEE WAS REJECTED AND THE ASSESSING OFFICER RE - WORKED THE DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. 12. THE CIT(A) HOWEVER, ALLOWED THE CLAIM OF ASSESSEE IN THIS REGARD HOLDING THAT EACH OF UNIT WAS TO BE CONSIDERED ON STANDALONE BASIS. THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 (SUPRA) IN TURN, RELYING ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2006 - 07 A ND 2007 - 08 IN ITA NOS.815, 1494, 891 & 1600/PN/2011, ORDER DATED 30.01.2013 , HELD THAT TERM BUSINESS IN SECTION 80IA(5) OF THE ACT IS TO BE CONSTRUED AS BUSINESS O F UNDERTAKING OR ENTERPRISE I.E. EVERY UNIT CONSTITUTE A SEPARATE UNDERTAKING ENGAGED IN THE ELIGIBLE BUSINESS AND LOSSES FROM ONE UNIT COULD NOT BE SET OFF AGAINST THE PROFITS OF OTHER UNITS IN ORDER TO COMPUTE THE DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. 13. BEFORE THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE, THE CLAIM OF DEDUCTION UNDER SECTION 80IA(5) OF THE ACT AROSE IN APPEAL FILED BY THE ITA NO. 654 /PN/20 1 4 ITA NO.783/PN/2014 M/S. JSONS FOUNDRY PVT. LTD. 7 REVENUE AND THE SAID QUESTION OF LAW HAS BEEN ADMITTED. THE REVENUE THUS, HA S FILED THE PRESENT APPEAL. HOWEVER, WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006 - 07, 2007 - 08 AND 2009 - 10 . FOLLOWING THE SAME PARITY OF REASONING, WE FIND NO MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE AND THE SAME ARE DISMISSED. 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON TH IS 13 TH DAY OF MAY , 201 6 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 13 TH MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I /II, KOLHAPUR / CIT (CENTRAL) , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE