M/s. Narbheram Vishram, Jamshepur V. DCIT, Jamshepur

ITA 87/RAN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60093 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 28-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEEPAK ROUSHAN
• Assessee Lawyers: D K GOLECHHA
• Keywords: Depreciation

Judgement Text

ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE: SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 87 / RANCHI / 20 10 ASSESSMENT YEAR : 2007 - 08 M/S. NARBHERAM VISHRAM SINGHBHUM WEST VS. DCIT, CIRCLE - 2 JAMSHEDPUR (APPELLANT) (RESPONDENT) PAN NO. AABFN 7217R APPELLANT BY: SHRI D.K. GOLECHHA, FCA RESPONDENT BY: SHRI DEEPAK ROUSHAN, D.R. DATE OF HEAR I NG: 13.02.2012 DATE OF PRONOUNCEMENT: 17 .02.2012 ORDER PER B.R. MITTAL, JUDICIAL MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE FOR THE ASSES SMENT YEAR 2006-07 AGAINST THE ORDER OF THE LD. CIT(A) DATED 16.3.2010 . 2. THERE ARE 2 GROUNDS OF APPEAL. IN GROUND NO.1 O F THE APPEAL, THE ASSESSEE HAS DISPUTED THE ORDER OF LD. CIT(A) IN CO NFIRMING THE DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE @ 100% ON T HE TOTAL AMOUNT OF RS.27 LAKHS IN RESPECT OF THE FOLLOWING PAYMENTS MA DE: SITE NATURE OF EXPENSES AMOUNT DHULE (MAHARASTRA) STAMP DUTY, REGIST RATION CHARGES FOR LAND 56,320/- -DO- COST OF LAND 1,20,000/- -DO- PROVIDING EASY AND FREE ACCESS AND KEEPING AREA VACANT SURROUNDING THE LAND OF THE WIND MILL 13,23,680/- KUTCH (GUJRAT) PROVIDING EASY AND FREE ACCESS AND KEEPING AREA VACANT SURROUNDING THE LAND OF THE WIND MILL 12,00,000/- TOTAL 27,00,000/- ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 2 3. THE RELEVANT FACTS GIVEN RISE TO THIS APPEAL ARE THAT THE ASSESSEE HAS ACQUIRED TWO WIND MILLS IN THE STATE OF GUJRAT AND MAHARASTRA. THE ASSESSING OFFICER ON PERUSAL OF BILLS, WORK ORDER AND RESPECT IVE LEDGERS OF VARIOUS EXPENSES RELATING TO WIND MILLS OBSERVED THAT MAIN COMPONENTS OF EXPENSES OF WIND POWER PROJECT ARE:- PURCHASE OF ROTOR BLADE S, WIND TURBINE GENERATOR, TUBULAR TOWER, LAND/CIVIL WORK AND PAYME NT MADE TO STATE ELECTRICITY BOARD. ON PERUSAL OF DETAILS, THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE MADE PAYMENTS TO M/S. SARAJAN REALITIE S LIMITED FOR ACQUISITION OF LAND, REGISTRATION COST AND PROVIDING EASY AND F REE ACCESS AND KEEPING AREA VACANT SURROUNDING THE LAND OF THE WIND MILLS. THE ASSESSEE CLAIMED 100% DEPRECIATION ON SUCH PAYMENT I.E. PAYMENTS FOR WHICH DETAILS GIVEN HEREIN ABOVE IN PARA-2. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSEE CONTENDED THAT TO GENERATE WIND POWER, IT REQUIRES LARGE OPEN AREA, OTHERWISE WIND POWER PROJECT WILL NOT WORK AT ALL. DUE TO ABOVE R EASON, LAND WILL CERTAINLY COMES UNDER MAJOR PART/TOOL FOR SET UP OF WIND POWE R PROJECT AND THEREFORE, THIS SHOULD BE CONSIDERED UNDER THE HEAD OF PLANT AND MACHINERY. THE ASSESSEE STATED THAT LAND COST HAS BEEN BOOKED IN T HE BLOCK OF ASSETS BECAUSE OF (A) THE AMOUNT IS NOT PAID FOR LAND BUT COST OF EASY AND FREE ACCESS AND KEEPING THE AREA VACANT SURROUNDING WIND TOWER (B) THE SAID LAND HAS NO COMMERCIAL VALUE (C) THE TOWER PORTION OF TH E LAND IS HANDED OVER TILL WIND POWER LIFE AND THERE AFTER LAND WILL BE HANDED OVER BACK TO WIND POWER PROVIDER AFTER LIFE IS OVER (D) ASSESSEE CANNOT SEL L OR USE THE LAND FOR OTHER PURPOSE EXCEPT THE USE OF WIND POWER OR HANDED OVER BACK TO REAL OWNER OR WIND POWER PROJECT PROVIDER (E) THAT TYPE OF LAND I S SPECIFICALLY EARMARKED FOR WIND POWER AND ASSESSEE IS TO FOLLOW ALL THE INSTRU CTIONS SET BY AUTHORISED DEPARTMENT AS WELL AS OTHER GOVERNMENT ORGANIZATION (F) SAID LAND IS INTEGRAL PART OF THE PROJECT AND HAS NO APPRECIATION VALUE ( G) LAND HAS BEEN HANDED OVER FIRST TO THE WIND POWER DEVELOPER AND THE AREA OCCUPIED BY THE TOWER IS HANDED OVER UNDER AGREEMENT TO THE ASSESSEE FOR LIF E OF THE PROJECT AS PER THE PROVISIONS APPLICABLE IN RESPECT OF THE SAID LA ND. THE ONLY OWNER OF THE SAID LAND IS WIND POWER PROJECT PROVIDER. ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 3 5. THE ASSESSEE IS HOLDING AND BEARING THE COST OF LAND AND REST OF ALL THE CONTROL, CHECKS, PLAN, DECISION, ETC. ABOUT SUCH LA ND IS BEING UNDERTAKEN SOLELY BY THE WIND POWER PROVIDER. 6. THE PAYMENT MADE BY THE ASSESSEE IN RESPECT OF T HE LAND SHOULD NOT BE CO-RELATED WITH THE DEFINITION OF LAND AS DEFIN ED IN INCOME-TAX ACT. 7. THE ASSESSING OFFICER DID NOT ACCEPT ABOVE REASO NING OF THE ASSESSEE TO PROVIDE 100% CLAIM OF DEPRECIATION ON THE LAND V ALUE AND STATED THE FOLLOWING REASONS. 1. AS PER RATE OF DEPRECIATION CHART VIDE PART A, PARA III (8)(XIII), 80% RATE OF DEPRECIATION IS ALLOWABLE ON WIND MILLS AND ANY SPECIALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS. SO IT IS CLEARLY MENTIONED IN THE RESPECTIVE SCHEDULE THAT O NLY THE MACHINERY AND PLANT USED IN PRODUCTION OF ELECTRICI TY BY WIND MILL IS ELIGIBLE TO GET DEDUCTION AT THE HIGHER RAT E OF DEPRECIATION I.E. 80%. SO THE QUESTION OF CLAIMING DEPRECIATION APART FROM THE PLANT & MACHINERY OF WIND MILL, HERE THE LAND, DOES NOT ARISE. 2. MOST OF THE COST BORNE BY THE ASSESSEE IS FOR DEVEL OPMENT OF LAND. SO IT HAS NO RELATION WITH THE SUPER STRUCTU RE OR ERRECTION OF WIND MILL. HENCE, IT COULD NOT BE A PART AND PA RCEL OF WIND MILL. 3. LAND HAS ALWAYS AN APPRECIATION VALUE DUE TO ITS SC ARCITY. THE ASSESSEE HAS PURCHASED THE LAND IN ITS OWN NAME UPO N WHICH CONSTRUCTION OF WIND MILL WAS MADE. IN CASE OF NAT URAL CALAMITY OR BY ANY OTHER REASON, THE WIND MILL MAY BE DESTROYED BUT THE NATURE OF LAND WILL REMAIN SAME A ND ITS EXISTENCE WILL ALWAYS THERE. SO, NO ARGUMENT FOR D EPRECIATION AGAINST LAND IS APPLICABLE. 4. INCOME TAX ACT AND RULES NEVER PROVIDES ANY DEPRECI ATION AGAINST LAND BECAUSE LAND ALWAYS HAS APPRECIATION V ALUE. 8. IN VIEW OF ABOVE, THE ASSESSING OFFICER ALLOWED 50% DEPRECIATION ON THE WIND MILLS AND ACCORDINGLY DISALLOWED RS.13,15, 000/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED THE AS SESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 9. ON BEHALF OF THE ASSESSEE SIMILAR SUBMISSIONS WE RE MADE AS MADE BEFORE THE ASSESSING OFFICER. IT WAS CLAIMED THAT DEPRECIATION ON THE ENTIRE ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 4 BLOCK OF ASSET INCLUDING COST OF LAND SHOULD BE ALL OWED UNDER THE HEAD PLANT AND MACHINERY THAT THE LAND IS NOT PART AND PARCEL OF THE WIND MILL SUPER STRUCTURE. 10. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF ASSE SSING OFFICER AND HAS HELD THAT NO DEPRECIATION IS ALLOWABLE ON THE LAND UNDER THE INCOME-TAX RULES EVEN IN CASE OF FACTORY ON WHICH PLANT AND MACHINER Y IS INSTALLED. HENCE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. ON BEHALF OF THE ASSESSEE THE LD. A.R. MADE HIS SUBMISSIONS REITERATING WHICH WERE MADE BEFORE THE AUTHORITIES BELOW. THE LD. A.R. HAS ALSO FILED A W RITTEN SUBMISSION WHICH READS AS UNDER: IN COMING TO THE CONCLUSION, THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) HAS OVERLOOKED THE FACTS (AS BROUGHT ON RECORD IN THE ASSESSMENT ORDER AT PARA 2) THAT OUT OF THE TOTAL A MOUNT OF RS.27,00,000/-, THE COST OF LAND AMOUNTS TO JUST RS.1,20,000/-, BES IDES STAMP DUTY AND REGISTRATION CHARGES OF A SUM OF RS.56,320/-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO OVERLOOKED THE FACTS THAT A SUM OF RS.13,23,680/- HAS BEEN SPENT OVER DEVELOPMENTAL WO RK OF PROVIDING EASY AND FREE ACCESS AND KEEPING AREA VACANT SURROUNDING THE LAND OF THE WIND MILL VACANT, WHICH IN REALITY PARTAKES THE CHARACTE RISTICS OF A PLANT, DEFINED BY THE HONBLE SUPREME COURT IN CIT VS. KARNATAKA P OWER CORP 247 ITR 268, TO MEAN EVEN A BUILDING WHERE IT IS FOUND TO SERVE SPECIAL TECHNICAL REQUIREMENT OF THE ASSESSEES BUSINESS. THE CASES OF THE ASSESSEE ALSO RESTS UPON THE RULINGS IN CIT VS. MADRAS CEMENT 110 ITR 2 81; CIT VS. MEZAGON DOCK 191 ITR 460; CIT VS. R.G. ISPAT 210 ITR 108; A SSOCIATED CEMENT VS. CIT 221 ITR 215, WHICH SAYS THAT EVEN A REINFORCED CONCRETE FOUNDATION BUILT ON OPEN LAND TO SUPPORT A MACHINERY; A DRY DOCK FOR SHIP BUILDING AND REPAIRING; PLATFORM FOR MACHINERY, OBSERVATION TOWE RS, WILL ALL CONSTITUTE `PLANTS AND WOULD BE ENTITLED FOR A DEPRECIATION A LLOWANCE AT THE RATE PRESCRIBED FOR `PLANT. MOREOVER, THE CASE OF THE APPELLANT ALSO RESTS UPON THE RATIO DECINDENDI IN CIT VS. ALPS 65 ITR 377 ( SC) AND IN CIT VS. HARDILLIA 216 ITR 742; CIT VS. SOUTHERN PETRO CHEMICALS 233 I TR 391, ACCORDING TO WHICH, THOUGH THE DEPRECIATION IS NOT ALLOWABLE ON THE COST OF LAND ON WHICH THE BUILDING IS ERECTED, IT IS ALLOWABLE ON, (AS TH E CASE HERE IS), LAND DEVELOPMENT COST. THE CASE OF THE APPELLANT IS ALS O WOVEN ROUND THE RATIO OF THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COU RT IN WHICH IT HAS BEEN HELD THAT THE DETERMINATION DEPENDS UPON THE TYPE O F BUSINESS, WHICH THE ASSESSEE CARRIES, FOR INSTANCE, A ROAD (WHETHER KAT CHA OR METALLED) FOR TESTING VEHICLES WITHIN AN AUTOMOBILE PLANT CAN BE NOTHING BUT A `PLANT. APPLYING THE TEST, THE ANDHRA PRADESH HIGH COURT IN CORAMAND AL FERTILISERS 156 ITR 283 HAVE HELD EVEN A ROAD MEANT FOR TRANSPORT OF RA W MATERIAL FOR MANUFACTURE OF FERTILIZERS WITHIN THE FACTORY TO BE `PLANT. THE CASE OF THE ASSESSEE ALSO RESTS UPON THE RATIO DECIDENDI IN CIT VS. KARNATAKA POER CORP. 247 ITR 263 IN WHICH THE FULL BENCH OF THE HONBLE SUPREME COURT HAVE HELD ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 5 THAT WHERE IT IS FOUND AS A FACT, THAT EVEN A BUILD ING PLANNED AND CONSTRUCTED, SO AS TO SERVE THE ASSESSEES SPECIAL TECHNICAL REQ UIREMENT, WILL QUALIFY TO BE TREATED AS A `PLANT. IT MAY FURTHER BE STATED TH AT THE NATURE OF THE CLAIM HAD BEEN EXPLAINED IN THE STATEMENT OF FACTS PORTIO N OF THE APPEAL MEMO SUBMITTED TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). HOWEVER, IN REACHING AT THE DECISION, THE SAID STATEMENT [CO PY ENCLOSED FOR READY REFERENCE] HAS BEEN COMPLETELY IGNORED, FOR NEITHER IS THERE ANY MENTION OF THE SAME IN THE APPELLATE ORDER PASSED BY LEARNED C OMMISSIONER OF INCOME TAX (APPEALS), NOR IS THERE ANY MENTION OF `REASON FOR NOT ALLOWING THE CLAIM ON THE AFORESAID POINT. 11. THE LD. A.R. SUBMITTED THAT THE COST INCURRED B Y THE ASSESSEE FOR ACQUIRING RIGHT OF EASY AND FREE ACCESS OF LAND TO KEEP THE AREA VACANT SURROUNDING WIND POWER IS TO BE TREATED AS INFRASTR UCTURE DEVELOPMENT COST OF WIND POWER PROJECT AND THEREFORE DEPRECIATION SH OULD BE ALLOWED AS PER APPENDIX-1, PART-A, ITEM NO.XIII (M) OF THE SCHEDUL E OF THE DEPRECIATION. ON THE OTHER HAND, THE LD. D.R . SUPPORTED THE ORDER OF AUTHORITIES BELOW AND HE SUBMITTED THAT NO DEPRECIATION CAN BE ALLOWED ON LA ND AND THE EXCESS LAND COULD NOT BE A PART OF WIND POWER TOWER. THE LAND IS OWNED BY THE ASSESSEE AND EVEN IF LIFE OF THE PROJECT IS OVER, THE LAND W ILL GO BACK TO THE OWNER FOR WHICH THE ASSESSEE WILL GET THE NEGOTIABLE PRICE. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY ASSESSEE, AS MENTIONED HEREIN ABOVE AND HAVE ALSO CONSIDERED THE CASES CITED THEREIN. WE ARE OF THE CONSIDERED VIEW THAT THE CITATIONS OF THE CASES GIVEN BY THE ASSESSEE AR E NOT RELEVANT TO THE FACTS OF THE CASE AS IN THOSE CASES, THE DEPRECIATION WAS NOT CLAIMED ON THE LAND BUT ON CAPITALIZATION OF DEVELOPMENT COST THAT HAD TAKEN PLACE ON THE LAND AND/OR THE CONSTRUCTION MADE ON THE SAID LAND. HOW EVER, IN THE CASE BEFORE US, WE OBSERVE THAT THE ASSESSEE HAS SPECIFICALLY S TATED THAT PAYMENT OF AGGREGATING RS.27 LAKHS FOR THE LAND VALUE SURROUND ING THE LAND OF THE WIND MILL WHICH HAS BEEN KEPT VACANT. IT IS NOT A CASE WHERE ANY DEVELOPMENT HAS BEEN MADE BY THE ASSESSEE ON THE LAND PURCHASED WHI CH HAS BEEN CAPITALIZED BUT IT IS A CASE WHERE THE LAND AS SUCH HAS BEEN PU RCHASED BY THE ASSESSEE WITHIN THE VICINITY OF THE WIND MILL AND ON THAT LA ND THE ASSESSEE HAS CLAIMED DEPRECIATION @ 100% TREATING IT AS A PART AND PARCE L OF PLANT AND MACHINERY. ITA NO87/RANCHI/2010 M/S. NARBHERAM VISHRAM, SINGBH UM WEST 6 WE DO NOT FIND MERIT IN THE CONTENTION OF THE LD. A .R. AND HOLD THAT NO DEPRECIATION COULD BE CLAIMED ON THE VACANT LAND WH ICH HAS BEEN ACQUIRED BY THE ASSESSEE. HENCE, WE REJECT THE GROUND OF APPEA L TAKEN BY THE ASSESSEE BY CONFIRMING THE ORDER OF LD. CIT(A). 13. IN SECOND GROUND THE ASSESSEE HAS DISPUTED THE CHARGE OF INTEREST U/S 234C OF THE INCOME-TAX ACT. SINCE THE CHARGE OF IN TEREST IS CONSEQUENTIAL, NO ADJUDICATION IS CALLED FOR. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17.02.2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI, DATED 17 TH FEBRUARY, 2012 COPY TO 1 M/S. NARBHERAM VISHRAM, KACHI DHUWDA, PO GUA, SINGH BHUM WEST (JHARKHAND) 2 DCIT, CIRCLE - 2, JAMSHEDPUR 3 CIT, JAMSHEDPUR 4 THE CIT (A) , JAMSHEDPUR 5 THE DR, ITAT, DHANBAD 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RANCHI/PATNA