ACIT, Virudhunagar V. M/s. V.V.Vanniaperumal & Sons, Virudhunagar

ITA 703/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52203 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHA JI P JACOB SRDR
• Assessee Lawyers: S SHANMUGAVEL
• Keywords: Depreciation

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 703/MDS/2011 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, VIRUDHUNAGAR. VS. M/S. V.V.VANNIAPERUMAL & SONS, 443, MAIN ROAD, VIRUDHUNAGAR. [PAN: AACFV2382G] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, SR-DR ASSESSEE BY : SHRI S. SHANMUGAVEL, C.A. DATE OF HEARING : 22 . 1 2 .2011 DATE OF PRONOUNCEMENT 22.12.2011 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) II, MADURAI DATED 18.01.2011 IN THE ASSESSME NT YEAR 2006-07. 2. THE REVENUE HAS TAKEN FOUR GROUNDS OF APPEAL AN D THE SOLE ISSUE INVOLVED IN ALL THE GROUNDS IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEPRECIATION AT THE RATE O F 40%, WHICH WAS THE DEPRECIATION ALLOWABLE ON WIND MILL ON ELECTRICITY INSTALLATION AND CIVIL WORKS. 3. THE LD. CIT(A), WHILE ALLOWING DEPRECIATION TO THE ASSESSEE AT THE SAME RATE AT WHICH DEPRECIATION IS ALLOWABLE ON WIN D MILL INSTEAD OF ALLOWING DEPRECIATION AT THE RATE OF 15% ON ELECTRICITY FITT ING AND AT THE RATE OF 10% ON I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.7 77 70 00 03 33 3/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 2 CIVIL WORKS FOLLOWED THE ORDER OF THE CHENNAI A B ENCH OF THE TRIBUNAL IN I.T.A. NO. 2291/MDS/2008 IN THE ASSESSMENT YEAR 20 05-06 ORDER DATED 20.11.2009 IN THE CASE OF ASIAN HANDLOOM VS. DCIT, CIRCLE II, TRICHY, WHERE IT WAS HELD AS UNDER: 5.3 HONBLE ITAT BENCH A CHENNAI IN ITA NO.2291/M DS/2008 ASSESSMENT YEAR 2005-06 IN THE CASE OF ASIAN HANDLO OM VS. DEPUTY CIT, CIRCLE II, TRICHY IN ITS ORDER DT. 20 TH NOVEMBER 2009 HELD THAT ASSESSEE WAS ENTITLED TO ITS CLAIM OF DEPRECIATION ON THE TOTAL COST. RELEVANT PORTION OF THE ITAT ORDER IS REPRODUCED: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPARATUS THAT HARNE SSES WIND POWER, FOR A VARIETY OF USES LIKE PUMPING WATER, DRIVING OF SAW MILL, GRINDING CONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL, A S 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 ELEC TRICAL ENERGY. BEING A NON- CONVENTIONAL SOURCE OF ENERGY WITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAVE BEEN GIVEN SPE CIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THAT FOR A WI NDMILL 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 STRUCTU RE STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AND SPECIALIZED AREA SPECIFICALLY EAR-MARKED TO FAC ILITATE A FLOW OF WIND WITHOUT HINDRANCE, AND SPECIALIZED ELECTRICAL FITTI NGS AND HIGH TENSION LINES ARE ALL BASIC REQUIREMENTS FOR A WIND MILL PLANT. N ONE OF THESE REQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN DETACHED FROM WH AT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE ESSENTIAL. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH WIND MILL. THE FOU NDATION 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 TH ESE CAN BE DEEMED ONLY A PART OF A WINDMILL FOR HARNESSING WIND ENERGY. IN C OMING TO THIS CONCLUSION WE ARE FORTIFIED BY DECISION OF HONBLE KARNATAKA H IGH COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION (247 ITR 268) WH ERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WA S A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUILDING HAS BE EN SO PLANNED AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.7 77 70 00 03 33 3/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 3 CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECH NICAL REQUIREMENT, IT WOULD QUALIFY TO BE TREATED AS A PLANT. IN OUR OPINION, T HE 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. HERDILIA CH EMICALS (216 ITR 742), HONBLE JURISDICTIONAL HIGH COURT HELD THAT HUGE LA ND 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 A ND EXPENSES INCURRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND F OR THE PURPOSE OF LEVELING THE LAND, FORMED A PART OF THE COST OF THE PLANT. I F WE LOOK AT APPENDIX I TO THE INCOME-TAX RULES, PRESCRIBING THE RATES OF DEPRECIA TION, IT CAN BE SEEN THAT LEGISLATURE HAS GIVEN HIGHER DEPRECIATION RATE OF 8 0% ON ANTI-POLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES . APPARENTLY, THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFF-SETT ING THE IMPAIRMENT IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOU RAGE SUCH ENTREPRENEUAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZA TION OF RENEWABLE ENERGY SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMI TED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES, IT WOUL D DEFEAT THE VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED F OR. THEREFORE, IN OUR OPINION, ASSESSEES CLAIM FOR DEPRECIATION SHOULD N OT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFICER. THEREFORE, D ISALLOWANCE OF ` . 1,17,00,000/- 13 LAKHS, ` .23,51,576/- AND ` .5,73,824/- ON ACCOUNT OF DEPRECIATION CLAIM STANDS CANCELLED. GROUND NOS. 5 TO 19 OF THE ASSESSEE STAND ALLOWED. 4. THE LD. DR SHRI SHAJI P. JACOB, SR-DR RELIED ON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE LD. AR SHRI S. SHANM UGAVEL, CHARTERED ACCOUNTANT SUPPORTED THE ORDER OF THE LD. CIT(A). T HE LD. DR COULD NOT POINT OUT ANY DISTINGUISHING FACTS IN THE CASE OF THE ASS ESSEE TO NOT TO FOLLOW THE ABOVE QUOTED ORDER OF THE TRIBUNAL. HE ALSO COULD N OT POINT OUT BY BRINGING ANY MATERIAL ON RECORDS THAT THE ABOVE QUOTED ORDER OF THE TRIBUNAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. THEREFORE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ) AND THE SAME IS CONFIRMED. THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.7 77 70 00 03 33 3/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 4 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON 22.12.2011. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 22.12.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.