D.M.Kathir Anand, Vellore V. ACIT, Vellore

ITA 829/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68871 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: G BASKAR
• Keywords: Revision of order; Depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI. BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 829/MDS/2013 ASSESSMENT YEAR: 2008-09 SHRI D.M. KATHIR ANAND, NO.7, 5 TH EAST CROSS STREET, GANDHI NAGAR, VELLORE 632 006. [PAN : AIYPK0589J] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, VELLORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. BASKAR, ADVOCATE RESPONDENT BY : SHRI S. DAS GUPTA, JCIT DATE OF HEARING : 0 8 . 1 0.2013 DATE OF PRONOUNCEMENT : 02.12.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX VIII, CHENNAI DATED 06.0 3.2013 RELEVANT TO THE ASSESSMENT YEAR 2008-09 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF PURCHASE AND SALE OF MINERAL WATER, ITC PRODUCTS ET C. AND ALSO GENERATION OF POWER THROUGH WIND MILL, HAD FILED HIS RETURN ADMIT TING TOTAL INCOME OF ` .6,50,33,500/-, WHICH INCLUDES CAPITAL GAINS AT ` .5,08,92,200/- AND AGRICULTURAL INCOME OF ` .5,89,753/-. THE RETURN OF THE ASSESSEE WAS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 2 PROCESSED UNDER SECTION 143(1) AND LATER THE CASE W AS TAKEN UP FOR SCRUTINY AND AFTER FOLLOWING DUE PROCESS, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY DETERMINING TOTAL INCO ME AT ` .6,58,89,953/-. LATER ON, A NOTICE UNDER SECTION 263 OF THE ACT DAT ED 02.05.2012 WAS ISSUED AND SERVED ON THE ASSESSEE. THE RELEVANT PORTION OF THE NOTICE IS REPRODUCED AS UNDER: SUBSEQUENTLY A PERUSAL OF THE DETAILS FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSING YEAR 2008-09 SHOWED THAT THE ASSESSEE HAS CLAIMED LOSS OF RS.3,6 1,07,788/- FROM WIND MILL BUSINESS WHICH INCLUDED DEPRECIATION LOSS OF RS. 2, 95,60,437/- CLAIMED @ 80% ON THE COST OF A NEW 600 KV WIND MILL, WHICH IS STA TED TO HAVE BEEN ERECTED ON 1-9-2007. HOWEVER, THE ERECTION INVOICES AVAILABLE ON RECORD SHOWS THAT THE WIND MILL ERECTION WAS COMPLETED ONLY ON 30-9-2007. FURTHER ACCORDING TO THE TEDA GUIDELINES, THE PROCEDURE FOR OBTAINING A SANC TION FOR INSTALLATION OF WIND MILL AND FOR CONNECTING THE SAME WITH THE POWE R GRID ARE AS UNDER:- (I) THAT THE ASSESSEE SHOULD APPLY FOR TIE-UP ARRA NGEMENT WITH TNEB GRID AND EXECUTE THE INTERFACING WORK, WHICH AS PER TNEB NORMS, SUPERVISION CHARGES @ 7% HAS TO BE PAID TO TNEB FOR INTERFACING LINES WORKS BEFORE TAKING UP THE INTERFACING WORK; (II) ARRANGE FOR ERECTION OF WIND ELECTRIC GENERAT ORS FROM APPROVED MANUFACTURERS'. (III) DEVELOPMENT CHARGES TOWARDS INFRASTRUCTURE F ACILITIES FOR EVACUATION FACILITIES OF ELECTRIC POWER REQUIRES TO BE REMITTE D TO TNEB AFTER ERECTION OF THE WIND MILL; AND (IV) SAFETY CERTIFICATE HAS TO BE OBTAINED FROM CH IEF ELECTRICAL INSPECTOR OF THE STATE GOVERNMENT: AND (V) THE MINIMUM TIME REQUIRED FOR COMPLETION OF AL L THE ABOVE PROCEDURE WOULD BE ABOUT 15 DAYS. 4. FURTHER PERUSAL OF THE DETAILS AVAILABLE ON RECO RD SHOWS THAT THE INITIAL PAYMENT TOWARDS SUPERVISION CHARGES MADE. BY THE AS SESSEE TO THE TNEB WAS ONLY ON 30.9.2007. AS ALL THE OTHER PROCEDURES ARE REQUIRED TO TAKE PLACE ONLY AFTER THE INITIAL PAYMENT, AND THAT AS THE ASSESSEE HAS MADE THE PAYMENT ONLY ON I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 3 30.09.2007, THE ERECTION WORK OF THE WIND MILL COUL D NOT HAVE BEEN COMPLETED AND PUT TO USE ON OR BEFORE 30.09.2007. IN ADDITION , IT IS SEEN FROM THE DETAILS AVAILABLE ON RECORD THAT THE QUANTITY OF POWER GENE RATED BY THE ASSESSEE'S NEW 600 KW WIND MILL WAS MORE THAN TWO AND A HALF TIMES THE POWER GENERATED BY THE ASSESSEE'S 225 K.V. WIND MILL EXCEPT FOR THE MO NTH OF OCTOBER, 2007. THUS IT IS CLEAR AND LOGICAL THAT THE SAID NEW 600 K.W WIND MILL WAS COMMISSIONED FOR PRODUCTION ONLY IN THE SECOND HALF OF OCTOBER 2007 AND THAT DEPRECIATION WAS TO BE RESTRICTED TO 40% THAN THAT WAS CLAIMED AT 80% I N THE RETURN OF INCOME. HOWEVER WHILE FINALIZING THE SCRUTINY ASSESSMENT FO R THE ASSESSMENT YEAR 2008- 09 U/S 143(3) OF THE INCOME TAX ACT. 1961 ON 15-12- 2010, THE ASSESSING OFFICER HAS OMITTED TO CONSIDER THIS ISSUE BY RESTRICTING T HE CLAIM OF THE ASSESSEE DEPRECIATION ON THE NEW 600 KV WIND MILL GENERATOR. ACCORDINGLY PROCEEDINGS U/S 263 OF THE INCOME-TAX ACT, 1961 WAS INITIATED F OR THE ASSESSMENT YEAR 2008- 09 BY ISSUE OF SHOW CAUSE NOTICE UNDER THE SAID SEC TION ON 02-05-2012 TO PASS AN ORDER U/S 263 OF THE INCOME-TAX ACT, 1961 AS THE FACTS AND CIRCUMSTANCES OF THE CASE DEEM IT FIT.' 3. IN RESPONSE TO THE SHOW-CAUSE NOTICE, THE ASSES SEE HAS FILED A REPLY VIDE HIS LETTER DATED 05.12.2012. IN HIS REPLY, HE HAS STATED THAT IN THE ASSESSMENT YEAR 2008-09, HE ORDERED A WIND MILL FRO M M/S. SUZLON ENERGY LIMITED AND ON 01.09.2007, HE PLACED THE ERECTION A ND COMMISSIONING ORDER AND PAID NEARLY 74 LAKHS TO M/S. SUZLON.THE WIND MI LL WAS DELIVERED BY THE MANUFACTURER, ERECTED AND COMMISSIONED AFTER DUE IN SPECTION BY THE CHIEF ELECTRICAL INSPECTOR TO THE GOVERNMENT. IT WAS ALSO SUBMITTED THAT AFTER INSPECTION THE AUTHORITIES OF THE TAMIL NADU INSPEC TORATE AND TN ELECTRICITY BOARD, APPROVAL WAS ACCORDED TO THE ASSESSEE FOR SU PPLY OF ELECTRICITY TO THE TN ELECTRICITY BOARD. TNEB PURCHASED THE ELECTRICIT Y GENERATED FROM THE SAID WIND MILL AND THE SALE PROCEEDS ARE BEING OFFERED F OR TAXATION REGULARLY. THE ASSESSEE ALSO AVAILED BANK LOAN FROM INDIAN BANK. T HE SUPERINTENDENT ENGINEER, TNEB, UDUMALPET HAD ISSUED A CERTIFICATE BY STATING THAT THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 4 ASSESSEES WIND MILL GENERATED AS ON 30.09.2007 : E X MF = 0.04X1000 = 40 UNITS AND THIS CERTIFICATE WAS NOT DISPUTED BY THE DEPARTMENT. HE ALSO SUBMITTED THAT THE CHENNAI BENCH OF THE TRIBUNAL IN I.T.A. NO. 942/MDS/2012 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 30 .01.2013 HAS ALSO CONSIDERED SIMILAR ISSUE IN ASSESSEES OWN CASE AND REQUESTED THAT THE SAME MAY KINDLY BE FOLLOWED. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ALL TH ESE DETAILS WERE FURNISHED TO THE ASSESSING OFFICER. THE ASSESSING O FFICER HAS SPECIFICALLY VERIFIED THE INVOICES RAISED BY THE SUPPLIER, M/S S UZLON ENERGY LIMITED, INSPECTION REPORT ISSUED BY TNEB, APPROVAL BY CHIEF ELECTRICAL INSPECTOR TO GOVERNMENT, PRODUCTION REPORT ETC. AFTER BEING CONV INCED THAT THE OPERATION OF THE WIND MILL WAS STARTED ON 30.09.2007 AND THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF TH E ACT. THEREFORE, IT IS NOT OPEN FOR THE LD. CIT TO INITIATE PROCEEDINGS UN DER SECTION 263 OF THE ACT. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSEE WAS ORDERED A WINDMILL TO M/S. SUZLON ENERGY LIMITED ON 01.09.2007 AND SAYS THAT ELECTRICITY WAS GENERATED ON 30.09.2007. IT IS NOT POSSIBLE FOR ANYBODY TO COMPLETE ERECTION OF WINDMILL AND GENERATION OF ELE CTRICITY. HE ALSO POINTED OUT THAT THE ASSESSEE HAD APPLIED A LOAN WITH INDIA N BANK ON 07.09.2007 AND THE SAID LOAN WAS SANCTIONED VIDE LETTER DATED 20.09.2007. SO WITHOUT RECEIVING THE LOAN, THE ASSESSEE SAYS HE HAS COMPLE TED THE PROJECT AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 5 GENERATED ELECTRICITY IS UNBELIEVABLE. FURTHER, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY ERECTION AND COMM ISSIONING CERTIFICATE ISSUED BY M/S. SUZLON ENERGY LIMITED. THE LD. DR HA S POINTED OUT FROM PAPER BOOK PAGE NO. 15 THAT THE INVOICE OF THE COMP LETION OF CIVIL WORK OF WIND MILL WAS ON 22.09.2007. ALL THE ABOVE FACTS LE ADS TO THAT IT IS IMPOSSIBLE FOR THE ASSESSEE TO COMMENCE PRODUCTION OF ELECTRIC ITY ON 30.09.2007 AND SUPPORTED THE ORDER PASSED BY THE LD. CIT. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE C ASE OF THE ASSESSEE IS THAT THE ASSESSEE IS IN THE BUSINESS OF POWER GENER ATION THROUGH WIND MILL. ACCORDINGLY TO THE ASSESSEE THE WIND MILL WAS ERECT ED, COMMISSIONED AND AFTER DUE INSPECTION BY THE CHIEF ELECTRICAL INSPEC TOR TO THE GOVERNMENT, THE WIND MILL PRODUCED THE ELECTRICITY ON OR BEFORE 30. 09.2007. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT THE RATE O F 80%. THE DOUBT EXPRESSED BY THE LD. CIT THAT WHEN THE ASSESSEE HAS STARTED T HE PROJECT ON 01.09.2007, HE COULD NOT HAVE BEEN COMPLETED ON 30.09.2007, WIT HIN A SHORT SPAN OF TIME, KEEPING IN VIEW THAT THE ASSESSEE HAD RECEIVE D THE LOAN FROM THE INDIAN BANK ON 28.09.2007. BUT IT IS A FACT THAT TH E ASSESSEES WIND MILL WAS ERECTED AND GENERATED 40 UNITS OF ELECTRICITY ON 30 .09.2007 VIDE LR.NO.SE/UEDC/UDT/AO/AS/JA4/F.WINDFARM S.C.NO. 1491 /C/07 OF SE, TNEB, UDUMALPET. WHEN THE ASSESSEE ERECTED THE WIND MILL AND GENERATED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 6 WIND POWER, IT CANNOT BE SAID THAT IT IS IMPOSSIBLE FOR THE ASSESSEE TO GENERATE ELECTRICITY. IN THIS CASE, THE ASSESSEE HA S GENERATED THE POWER FROM THE WIND MILL AND THE SAME WAS SOLD TO THE TNE B AND THE SALE PROCEEDS ARE BEING OFFERED FOR TAXATION. THEREFORE, UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT A SSESSEE HAS NOT ERECTED THE WIND MILL ON OR BEFORE 30.09.2007. IT IS NOT TH E CASE OF THE LD. CIT THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE DETAILS. ALL THE DETAILS IN RESPECT OF THE ERECTION OF THE WIND MILL SUBMITTED BEFORE THE ASSE SSING OFFICER INCLUDING THE CERTIFICATE ISSUED BY THE S.E., UDUMALPET ELECY. DI STN. CIRCLE, UDUMALPET. THE CERTIFICATE ISSUED BY THE S.E. WAS NOT CHALLENG ED BY THE DEPARTMENT. THEREFORE, IN OUR VIEW, IT IS NOT A FIT CASE TO INV OKE SECTION 263 OF THE ACT. APART FROM THAT, IN SIMILAR CIRCUMSTANCES FOR THE A SSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE, THE TRIBUNAL, ON THE BASIS OF THE CERTIFICATE ISSUED BY THE S.E., TNEB AND ALSO BY FOLLOWING THE DECISION O F THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. METAL POWDER COMPA NY LIMITED [2012] 75 DTR (MAD) 233. IN THIS CASE, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION BASED ON THE CERTIFICATE ISSUED BY THE STATE ELECTRICITY BOARD. THE HONBLE HIGH COURT UPHELD THE ORDER OF T HE TRIBUNAL ON THE GROUND THAT WHEN THE DEPARTMENT HAS NOT QUESTIONED THE CERTIFICATE ISSUED BY THE STATE ELECTRICITY BOARD, THE TRIBUNAL WAS JU STIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION. KEEPIN G IN VIEW OF THE ABOVE FACTS, WE FIND THAT THE ORDER PASSED BY THE LD. CIT IS NOT SUSTAINABLE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.829 829829 829/M/ /M/ /M/ /M/13 1313 13 7 THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT AN D THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 2 ND OF DECEMBER, 2013 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 02.12.2013 VM/- TO: THE ASSESSEE/A.O./CIT(A)/CIT/D.R.