Deputy Commissioner of Income-tax, V. M/s. Suttati Enterprises Ltd., Pune

ITA 8/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1632 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-06-2016
• Assessment Year: misc
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• 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. 08/PN/2015 $& ' !(' / ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE ....... / APPELLANT )& / V/S. M/S. SUTTATI ENTERPRISES LTD., 109/4, RAMTEKDI INDUSTRIAL ESTATE, HADAPSAR, PUNE-411013 PAN : AACCS4191H / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 30-06-2016 / DATE OF PRONOUNCEMENT : 30-06-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 14-1 0-2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FABRICATION OF SHEE T METAL AND MANUFACTURING OF AUTO COMPONENTS. THE ASSESSEE HAS ALS O INSTALLED 2 ITA NO. 08/PN/2015, A.Y. 2010-11 TWO WINDMILLS. THE ASSESSEE IN ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR CLAIMED DEPRECIATION ON WINDMILLS @ 80%. TH E ASSESSING OFFICER DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS INTER ALIA DISALLOWED HIGHER RATE OF DEPRECIATION ON CERTAIN C OMPONENTS OF WINDMILLS. THE ASSESSING OFFICER RESTRICTED THE DEPRECIATIO N TO 10%. FURTHER, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF DISCOUNT OFFERED BY THE ASSESSEE TO ONE OF ITS CUSTOMERS, M/S. ASE A BROWN BOVERI (ABB). AGGRIEVED BY THE ASSESSMENT ORDER DATED 26-03-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) ASSAILING THE ADDITIONS/DISALLOWANCES MADE BY THE A SSESSING OFFICER. IN RESPECT OF HIGHER RATE OF DEPRECIATION CLAIMED ON WINDMILL COMPONENTS, THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEP TED THE CONTENTIONS OF THE ASSESSEE IN PRINCIPLE AND REMITTED THE M ATTER BACK TO THE FILE OF ASSESSING OFFICER TO GRANT DEPRECIATION @ 80% ON VARIOUS COMPONENTS OF WINDMILL VIZ. ERECTION AND COMMISSIONING EXPENSE S, FABRICATION EXPENSES, ELECTRICAL WORK, REIMBURSEMENT OF EXPE NSES AND CAPITALIZATION OF EXPENSES. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER DIRECTED THE ASSESSING OFFICER TO ALLOCATE COST/EXP ENSES IN ACCORDANCE WITH THE DECISION OF TRIBUNAL IN THE CASE OF AS STT. COMMISSIONER OF INCOME TAX VS. M/S. WESTERN PRECICAST PVT . LTD. IN ITA NO. 2524/PN/2012 FOR THE ASSESSMENT YEAR 2009-10 DECIDED ON 22-01-2014. IN RESPECT OF DISCOUNT OFFERED BY THE ASSESSEE TO ABB O N ACCOUNT OF EARLY PAYMENTS, THE COMMISSIONER OF INCOME TAX (APPEALS ) ACCEPTED THE EXPLANATION FURNISHED BY THE ASSESSEE AND ALLOWED THE SAME. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO. 08/PN/2015, A.Y. 2010-11 3. THE GROUNDS RAISED BY THE REVENUE IN APPEAL ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-III HAS ERRED IN DIRECTING THE ASSESSING OFFICER' TO EXAMINE THE BRE AK-UP OF THE ERECTION AND COMMISSIONING EXPENSES CLAIMED BY THE ASSESSEE AT RS.34,57,548/- WHICH AMOUNTS TO SETTING ASIDE AND B EYOND: THE POWERS GIVEN UNDER THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW AND FACT, THE CIT(A) ERRED IN HOLDING THAT FABRICATION COST I S INTEGRAL PART OF WIND MILL AND HENCE DEPRECIATION IS ALLOWABLE THERE ON @ 80%. 3. ON THE FACTS RAND IN THE CIRCUMSTANCES OF THE CASE IN LAW AND FAD, THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE ON ELE CTRICAL ITEMS IS THE INTEGRAL PART OF WIND MILL AND DEPRECIATION THE REON IS ALLOWABLE @ 80%. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN HOLDING THAT THE DEPRECIATION ON REIMBURSEMENT O F TRANSFER CHARGES IS ALLOWABLE AFTER APPORTIONMENT AT 8% ON T HE WIND MILLS AND 10% ON THE BALANCE. 5. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE CIT(A) ERRED IN HOLDING THAT THE DEPRECIATION ON EXPENSES RELATING TO BANK CHARGES, FRANKING CHARGES, LOAN PROCESSING FEE , ETC. IS TO BE ALLOWED AFTER APPORTIONING IT IN 80:10. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL)-III HAS ERRED IN ALLOWING THE DISCOUNT CLAIMED BY THE ASSESSEE WHEN NO AGREEMENT OR RATE CONTRACT WAS EXECUTED EARLIER. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF AP PELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 4. SHRI ANIL CHAWARE REPRESENTING THE DEPARTMENT SUBMITT ED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRAN TING HIGHER RATE OF DEPRECIATION ON CERTAIN COMPONENTS/COSTS OF THE WINDMILL WHICH INCLUDES ERECTION AND COMMISSIONING COSTS, FABRICATION COSTS, ELECTRICAL 4 ITA NO. 08/PN/2015, A.Y. 2010-11 ITEMS, REIMBURSEMENT OF TRANSFER CHARGES AND CERTAIN OTHE R EXPENDITURE WHICH WERE CAPITALIZED BY THE ASSESSEE. THE LD. DR SUBMITT ED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING T HAT THE AFORESAID COMPONENTS OF COSTS INCURRED ARE INTEGRAL PART OF THE WINDMILL. IN RESPECT OF DISCOUNT OFFERED BY THE ASSESSEE TO ABB, THE LD. DR CONTENDED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PLACE ON RECORD ANY AGREEMENT OR RATE CONTRACT UNDER WHICH THE DISCOU NT HAS BEEN OFFERED TO THE SAID COMPANY. THE LD. DR VEHEMENTLY SUPPO RTED THE ORDER OF ASSESSING OFFICER AND PRAYED FOR REVERSING THE FIND INGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON BOTH THESE ISSUES. 5. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON BEH ALF OF THE ASSESSEE SUBMITTED THAT THE COMPONENTS/EXPENDITURE ON WHICH THE DEPRECIATION @ 80% HAS BEEN ALLOWED BY THE COMMISSIONER O F INCOME TAX (APPEALS) ARE INTEGRAL PART OF THE WINDMILL. THE ITEMS OF EXPENDITURE ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIAT ION @ 80% AND HAS BEEN RESTRICTED TO 10% BY THE ASSESSING OFFICER ARE AS UND ER : SR. NO. PARTICULARS DEPRECIATION CLAIMED BY THE ASSESSEE DEPRECIATION DISALLOWED BY THE A.O. 1 ERECTION AND COMMISSIONING 34,18,803/ - 29,91,454/ - 2 FABRICATION 9,60,000/ - 8,40,000/ - 3 ELECTRICAL WORK 24,00,000/ - 21,30,000/ - 4 REIMBURSEMENT OF EXPENSES 21,60,000/ - 18,90,000/ - 5 CAPITALIZATION OF EXPENSES (LOAN PROCESSING FEES, BANK CHARGES ETC.) 4,55,024/ - 3,98,147/ - TOTAL 93,93,827/ - 82,49,601/ - 5.1 THE LD. AR CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED DEPRECIATION @ 80% ON THE AFORESAID CO MPONENTS BY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. COOPER FOUNDARY P VT. LTD. IN 5 ITA NO. 08/PN/2015, A.Y. 2010-11 INCOME TAX APPEAL NO. 1326 OF 2010 DECIDED ON 14 TH JUNE, 2011, DECISION OF TRIBUNAL IN THE CASE OF POONAWALA FINVEST & AGRO (P) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX REPORTED AS 118 TT J (PUNE) 68 AND IN THE CASE OF ASSTT. COMMISSIONER OF INCOME TAX VS. M /S. WESTERN PRECICAST PVT. LTD. IN ITA NO. 2524/PN/2012 FOR THE ASSES SMENT YEAR 2009-10 DECIDED ON 22-01-2014. THE LD. AR FURTHER SUBM ITTED THAT IN RESPECT OF REIMBURSEMENT OF TRANSPORT CHARGES AND STAT UTORY FEES PAID BY WINDMILL MANUFACTURER/SUPPLIER ON BEHALF OF THE ASSESSEE, T HE SAME WAS RECOVERED BY THE MANUFACTURER/SUPPLIER FROM THE ASS ESSEE HENCE, THE ASSESSEE HAS CAPITALIZED THE SAID EXPENDITURE. THE LD . AR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CHALLAPALLI SUGARS LIMIT ED VS. COMMISSIONER OF INCOME TAX REPORTED AS 98 ITR 167 (SC). THE LD. AR FURTHER SUBMITTED THAT IN RESPECT OF CERTAIN COMPONENTS THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DETERMINING THE DEPRECIATION AFTER ALLOCATING THE EXPENDITURE ON VARIOUS COMPONENTS ON WHICH HIGHER DEPRECIATION IS TO BE GRANTED AND THE OTHER COMPONENTS ON WHICH THE NORMAL RATE OF DEPRECIATION IS TO BE APPLIED. 5.2 IN RESPECT OF DISALLOWANCES OF DISCOUNT OFFERED BY THE A SSESSEE TO ABB, THE LD. AR CONTENDED THAT THE ASSESSEE HAD GIVEN D ISCOUNT OF ` 1,64,000/- TO ABB AS AN INCENTIVE FOR EARLY PAYMENT. THE SAID DISCOUNT IS ONLY 3% OF THE TOTAL PAYMENT RECEIPTS. UNDE R NORMAL BUSINESS TRANSACTIONS THE ASSESSEE OFFERS 90 DAYS CRED IT. M/S. ABB MADE THE PAYMENT WITHIN A SHORT SPAN OF TIME I.E. LESS THAN 10 DAYS. THEREFORE, THE ASSESSEE OFFERED THE DISCOUNT FOR EARLY PA YMENTS. THE LD. AR VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INC OME TAX 6 ITA NO. 08/PN/2015, A.Y. 2010-11 (APPEALS) ON BOTH THESE ISSUES AND PRAYED FOR DISMISSING T HE APPEAL OF THE REVENUE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE DEPARTMENT IN ITS APPEAL HAS RAISED AS MANY AS 7 GROUND S. THE GROUND NOS. 1 TO 5 RELATE TO THE SINGLE ISSUE I.E. THE HIGH ER RATE OF DEPRECIATION @ 80% ALLOWED BY THE COMMISSIONER OF INCOME T AX (APPEALS) BY CONSIDERING VARIOUS COSTS AS INTEGRAL PART OF WINDMILL. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONE R OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISIONS OF CO-ORDINATE BENCH OF THE TRIBUNAL AND THE JUD GMENT OF HON'BLE HIGH BOMBAY HIGH COURT. THE COMMISSIONER OF INCOM E TAX (APPEALS) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE B Y HOLDING AS UNDER : 5.3 I HAVE PERUSED THE SUBMISSION MADE AND EXAMINE D THE SUPPORTING BILLS FILED IN THE PAPER BOOK. THE ERECT ION AND COMMISSIONING EXPENSES ASSOCIATED WITH THE CONSTRUCTION OF THE WI NDMILL TOWER ARE MENTIONED IN THE BILLS AS 'CIVIL & INDUSTRIAL CONSTRUCTION OF ENERCON MAKE WIND TURBINE CONVERTOR,' INCLUDING SUPPLY, CON STRUCTION OF INTERNAL LINES INCLUDING PACKAGING, HANDLING, LOADING, UNLOA DING, INSURANCE COVER UPTO COMMISSION AT WINDMILL SITE'. UNDOUBTEDLY, COS T OF REINFORCED CEMENT FOUNDATION AND LABOUR CHARGES INCURRED FOR E RECTION AND COMMISSIONING OF WINDMILL HAVE BEEN HELD BY THE JUR ISDICTIONAL HIGH COURT & ITAT VIZ. THE HON'BLE BOMBAY HIGH COURT IN COOPER FOUNDARY PVT. LTD. (SUPRA) AND THE PUNE ITAT IN THE CASES OF WESTERN PRECICAST PVT. LTD. IN ITA NO. 1495/PN/2011 AND J. SONS FOUNDARY PVT. LTD IN ITA NO. 2349/PN/2012, TO BE AN INTEGRAL PART OF THE WINDMIL LS AND THERE IS NO FUNCTIONAL DIFFERENTIATION BETWEEN THE TWO AS MADE OUT BY THE ASSESSING OFFICER. THEREFORE THE COST INCURRED ON THE ABOVE I TEMS IS ENTITLED FOR THE SAME RATE OF DEPRECIATION AS THAT FOR THE WIND MILLS. HOWEVER, THE HON'BLE PUNE ITAT IN THE ABOVE REFERRE D CASES AND ALSO IN THE CASE OF POONAWALLA FINVEST & AGRO P. LTD. (118 TIJ 68) HAS GONE BY THE FUNCTIONAL TEST AND THE INTENTION OF THE LEGISL ATURE IN HOLDING THAT CIVIL WORK SUCH AS CONSTRUCTION OF CONTROL ROOM, SITE DEV ELOPMENT, INTERNAL 7 ITA NO. 08/PN/2015, A.Y. 2010-11 ROAD DEVELOPMENT, BEING STRUCTURES THAT SURROUND TH E WINDMILL HAVE NO RELATION WITH THE FOUNDATION/ERECTION/COMMISSIONING /INSTALLATION OF THE WINDMILL AND SINCE THEY ARE NOT SPECIALLY DESIGNED DEVICES WHICH RUN ON THE WINDMILL, THESE ITEMS ARE NOT ENTITLED FOR HIGH ER DEPRECIATION. KEEPING IN VIEW THESE DECISIONS, IT IS FOUND TO BE A FIT CA SE TO DIRECT THE ASSESSING OFFICER TO EXAMINE THE BREAKUP OF THE ERECTION AND COMMISSIONING EXPENSES CLAIMED BY THE APPELLANT AT RS.34,57,548/- (FIRST HALF OF THE YEAR) AND RS.16,31,912/-(SECOND HALF OF THE YEAR), AND ALLOW HIGHER DEPRECIATION @80% ONLY ON COST OF REINFORCED CEMENT FOUNDATION AND LABOUR CHARGES INCURRED FOR ERECTION AND COMMISSION ING OF WINDMILL SINCE THEY FORM INTEGRAL PART OF THE WIND MILLS. HOWEVER ANY EXPENDITURE INCURRED ON CIVIL WORK, CONSTRUCTION OF CONTROL ROO M, SITE DEVELOPMENT, INTERNAL LINES OR SUCH STRUCTURES SURROUNDING THE W IND MILLS THAT CANNOT BE SAID TO BE INTEGRAL PART OF THE WIND MILLS WOULD NOT BE ENTITLED TO DEPRECIATION OF THE HIGHER RATE OF 80% AND SUCH DEP RECIATION WOULD ONLY BE ALLOWED @ 10%. 5.3.1 SO FAR AS THE FABRICATION COST IS CONCERNED, THE BILLS PRODUCED INDICATE THAT THE PAYMENT WERE MADE TO ENERCON FOR S UPPLY OF WIND MILL DEVICE CONSTITUTING TWO NUMBERS OF STEEL SECTIONS F OR TUBULAR CONCRETE TOWER OF 74 MT HEIGHT. THIS ITEM FORMS AN INTEGRAL PART OF THE WIND MILL STRUCTURE ITSELF AND WOULD FALL UNDER THE CATEGORY OF COST OF WIND MILL. IT IS THEREFORE HELD THAT, AS PER THE JUDICIAL PRECEDENTS DISCUSSED ABOVE, THE APPELLANT IS ENTITLED TO DEPRECIATION AT 80% OF THE FABRICATION COSTS SINCE IT IS ULTIMATELY AN INTEGRAL PART OF WIND MILL. 5.3.2 THE THIRD ITEM OF EXPENDITURE ARE ELECTRICAL ITEMS AND REPRESENT THE COST OF DISTRIBUTION TRANSFORMER AND DP STRUCTU RE FOR THE WIND TURBINE CONVERTOR. IN THE CASE OF POONAWALLA FINVES T & AGRO P. LTD. (118 TTJ 68) THE ITAT PUNE TOOK A VIEW THAT THE ELE CTRICAL TRANSFORMER AND INTERNAL LINES WERE REQUIRED IN ORDER TO TRANSF ER AND TRANSMIT THE ELECTRICITY SO GENERATED TO THE MSEB SUBSTATION, WI THOUT WHICH THE ELECTRICAL POWER GENERATED BY THE WINDMILL WOULD BE A WASTE. APPLYING THE SAME TEST TO THE ELECTRICAL COMPONENT, INSTALLATION CHARGES AND MATERIAL CHARGES TOWARDS THE ELECTRICAL LINE INSTALLED FOR POWER TRANSMISSION AND METERING, THE PUNE ITAT IN T HEIR SUBSEQUENT DECISION IN THE CASE OF WESTERN PRECICAST PVT. LTD (ITA NO. 1495/PN/2011) FOR THE A.Y. 2007-08 AND 2008-09, ALL OWED THE ENTIRE EXPENDITURE ON ACCOUNT OF SUPPLY OF ELECTRICAL ITEM S, LABOUR CHARGES FOR INSTALLATION OF THE ELECTRICAL LINE, ETC., AS F ORMING AN INTEGRAL PART OF THE WINDMILL AND THEREFORE ENTITLED TO HIGHER DEPRE CIATION AT THE RATE APPLICABLE TO RENEWABLE ENERGY DEVICE/WINDMILL. KEE PING IN VIEW THE DECISIONS OF THE JURISDICTIONAL ITAT CITED SUPRA, I T IS HELD THAT THE 8 ITA NO. 08/PN/2015, A.Y. 2010-11 APPELLANT WAS ENTITLED TO HIGHER DEPRECIATION ON TH E ELECTRICAL ITEMS FOR RS.20,00,000/- EACH IN THE FIRST AND SECOND HAL F RESPECTIVELY. 5.3.3 THE FOURTH ITEM OF EXPENDITURE REPRESENTS REIMBURSE MENT OF TRANSPORT CHARGES AND STATUTORY FEES PAID BY WIND M ILL MANUFACTURER/SUPPLIER ENERCON ON BEHALF OF THE APPE LLANT. THE PPELLANT HAS PLACED RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGARS LTD. (98 ITR 167) ST ATING THAT EXPENDITURE INCURRED ON FREIGHT, INSURANCE ETC. WER E REQUIRED TO PUT AN ASSET IN WORKING CONDITION AND MUST BE INCLUDED IN ACTUAL COST. THERE IS NO DOUBT THAT THE TRANSPORTATION AND STATU TORY FEES REIMBURSED TO THE SUPPLIER FORM PART OF THE ACTUAL COST AND NEED TO BE CAPITALISED. TO THAT EXTENT, THERE IS NO QUARREL WI TH THE RATIO LAID DOWN BY THE SUPREME COURT. HOWEVER THE QUESTION IS WHETHER AFTER CAPITALISATION, THESE EXPENSES ARE ENTITLED FOR HIG HER RATE OF DEPRECIATION AT THE RATE APPLICABLE TO WINDMILL STR UCTURE OR NOT. IN THIS REGARD, THE PUNE ITAT HAS IN THE CASES CITED HEREIN BEFORE HELD THAT DEPRECIATION ON CIVIL WORK RELATING TO THE WIND MIL L IS TO BE RESTRICTED TO 10% AND SIMILAR RESTRICTION OF DEPRECIATION ON E LECTRICAL ITEMS. AS PER THE DETAILS FURNISHED THE COST OF THE TWO WIND MILLS INSTALLED DURING THE YEAR, ONE IN THE FIRST HALF AND THE OTHE R IN THE SECOND HALF, IS RS.3.48 CRORES EACH. THE REIMBURSEMENT OF TRANSPORT CHARGES AND STATUTORY FEES NEED TO BE NECESSARILY ALLOCATED TO THE WIND MILL COST (I.E. INCLUSIVE OF COST OF WIND MILLS ITSELF, FOUNDATION WORK, ELECTRICAL WORK RELATING TO TRANSFORMER AND DPS STRUCTURES) AND OTH ER COST (FOR STRUCTURE SURROUNDING THE WIND MILLS AS WELL AS ELECTRICAL IT EMS OTHER THAN ELECTRICAL TRANSFORMER AND INTERNAL LINES) AND THER EAFTER DEPRECIATION IS TO BE ALLOWED AFTER SUCH APPORTIONMENT AT 80% ON THE W IND MILLS COST AND @ 10% ON THE BALANCE. THIS WOULD BE IN ACCORDANCE WIT H THE RATIO LAID ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5.3.4 THE FINAL ITEM OF EXPENDITURE IS CAPITALIZATION OF EXPENSES RELATING TO BANK CHARGES, FRANKING CHARGES, LOAN PROCESSING FEES ETC. IN RESPECT OF LOAN AVAILED BY THE APPELLANT FOR PURCHASE OF WIND MILLS. AS HELD BY THE JURISDICTIONAL ITAT, AND AS DISCUSSED IN THE PRECED ING PARA, THE FUNCTIONAL TEST IS TO BE APPLIED BY THE ASSESSING O FFICER FOR APPORTIONMENT OF THE EXPENSES RELATED TO WIND MILLS COST VIS-A-VI S OTHER COST (FOR STRUCTURE SURROUNDING THE WIND MILLS) AND DEPRECIAT ION IS TO BE ALLOWED @ 80% AND 10% RESPECTIVELY. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 9 ITA NO. 08/PN/2015, A.Y. 2010-11 7. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDING S OF COMMISSIONER OF INCOME TAX (APPEALS) AND THE DECISIONS ON W HICH THE RELIANCE HAS BEEN PLACED. NO MATERIAL OR DECISION HAS BEE N PLACED BEFORE US BY LD. DR TO TAKE US TO A CONTRARY VIEW. WE D O NOT FIND INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING HIGHER RATE OF DEPRECIATION ON THE VARIOUS COMPONE NTS OF THE WINDMILL AS IMPUGNED BY THE DEPARTMENT. THE COMMISSIONER O F INCOME TAX (APPEALS) IN A VERY REASONABLE AND JUSTIFIED MAN NER HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR COMPUTING THE HIGHER RATE OF DEPRECIATION ON THE COSTS/EXPENSES A FTER ALLOCATING THE SAME TO THE COMPONENTS ON WHICH DEPRECIATION @ 80% IS TO BE ALLOWED AND THE COMPONENTS ON WHICH THE NORMAL RATE OF DEPRECIATION @ 10% IS TO BE GRANTED. THE FINDINGS OF COMMISSIONER OF INC OME TAX (APPEALS) ARE WELL REASONED HENCE, REQUIRES NO INTERFERENCE. ACCORDINGLY, GROUND NOS. 1 TO 5 RAISED BY THE DEPARTMEN T IN ITS APPEAL ARE DISMISSED BEING DEVOID OF ANY MERIT. 8. IN GROUND NO. 6 THE DEPARTMENT HAS ASSAILED THE FINDIN GS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING DISCOUNT OFFERE D BY THE ASSESSEE ON ACCOUNT OF EARLY PAYMENTS. IT IS A WE LL KNOWN FACT THAT THE SUPPLIER OFFERS DISCOUNTS FOR CASH PAYMENTS AND EARLY PAYMENTS IN THE COMMON BUSINESS TRANSACTIONS. IN THE PRESENT CASE THE ASSESSEE HAS OFFERED DISCOUNT OF APPROXIMATELY 3% OF THE TOTAL PAY MENTS TO M/S. ABB FOR MAKING PAYMENT WITHIN 10 DAYS OF ISSUANCE OF INVOICE S AS AGAINST THE NORMAL CREDIT PERIOD OF 90 DAYS OFFERED BY THE ASSESSEE. FOR OFFERING SUCH CREDIT DISCOUNTS/INCENTIVES THERE NEED NOT B E ANY WRITTEN AGREEMENT. SUCH DISCOUNTS ARE OFFERED DURING THE NORMAL COURSE OF BUSINESS. WE DO NOT FIND ANY ERROR IN THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE DISALLOWANC E OF 10 ITA NO. 08/PN/2015, A.Y. 2010-11 ` 1,64,000/- ON ACCOUNT OF TRADE DISCOUNT GIVEN BY THE ASS ESSEE TO M/S. ABB. THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ARE UPHELD AND THE GROUND NO. 6 RAISED BY THE DE PARTMENT IN ITS APPEAL IS DISMISSED BEING DEVOID OF ANY MERIT. 9. THE GROUND NO. 7 RAISED IN THE APPEAL BY THE DEPARTM ENT IS GENERAL IN NATURE, HENCE, REQUIRES NO ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON THURSDAY, THE 30 TH DAY OF JUNE, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH JUNE, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-III, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE