HARDEEP SINGH SETHI, Jaipur V. DCIT, Jaipur

ITA 891/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5658 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Depreciation
• Section: 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 891/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 D.C.I.T., CIRCLE 7, JAIPUR. CUKE VS. SH. HARDEEP SINGH SETHI, PROP. M/S PINKCITY ENTERPRISES, C 358, PRADHAN MARG, MALVIYA NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABXPS 4077 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/01/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 11/01/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(APPEALS)-III, JAIPUR DATED 27/07/2016 FOR THE AS SESSMENT YEAR 2012-13, WHEREIN THE REVENUE HAS TAKEN SOLE GROUND OF APPEAL, WHICH IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT CIVIL WORKS, FOUNDATION WORKS ARE INTEGRAL PART OF WIND MILLS AND THEREBY ALLOWING DEPRECIATION @ 80% ON THE SAME. ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 2 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE HAS CLAIMED DEPRECIATION ON THREE WINDMILLS @ 80% CONSIDERING ALL THE PLANT, MACHINERY & CIVIL CONSTRUCTION WORK IN THE SAME BLOC K OF WINDMILL. AS PER PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) READ WITH THE RULE 5 OF THE INCOME TAX RULES, 19 62 (IN SHORT THE RULES), DEPRECIATION @ 80% IS ALLOWABLE FOR ENERGY DE VICES ONLY AND NOT ON BUILDING FOUNDATION AND OTHER ACCESSORIES CO NNECTED WITH WINDMILL. AS PER THE DEFINITION AS GIVEN IN INCOME TA X RULES OF RENEWABLE OF ENERGY DEVICES, THERE IS NO INTENTION T O INCLUDE FOUNDATION WORK, PLATFORM FOR WINDMILL, SUPPLY OF ELECTRICAL ITE MS, CIVIL WORK ETC. IN THE ABOVE BLOCK OF ASSETS. BASED ON THAT, THE ASSES SING OFFICER RESTRICTED THE DEPRECIATION ON CIVIL WORK @ 10% AND O N ELECTRIC INSTALLATION @ 15% AS AGAINST 80% CLAIMED BY THE ASS ESSEE IN RESPECT OF ALL THE THREE WINDMILLS. AN EXCESS DEPRECIATION A MOUNTING TO RS.31,27,792/- WAS DISALLOWED AND ADDED BACK TO THE T OTAL INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. A.R. SUBMI TTED THAT THOUGH THE CIVIL CONSTRUCTION IS IN THE NATURE OF FOUNDATION A ND ALLIED WORK BUT ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 3 WITHOUT WHICH THE TOWER OF THE WIND POWER PLANT CANT B E INSTALLED. WHETHER A CIVIL STRUCTURE IS A PART OF THE PLANT OR PART OF THE BUILDING IS TO BE EXAMINED WITH REFERENCE TO THE FUNCTIONAL TEST OF SUCH STRUCTURE. IF WITHOUT SUCH STRUCTURE THE PLANT CANT FUNCTION, THE COST OF STRUCTURE IS PART OF THE PLANT. SIMILARLY ERECTION AND INSTALLAT ION OF ELECTRIC ITEMS ARE PART & PARCEL OF THE WINDMILL AND WITHOUT THESE ITEMS WINDMILL CANT RUN. IN PRESENT CASE ALSO WITHOUT THE EXPENDITURE ON CIVI L CONSTRUCTION INCURRED BY WAY OF FOUNDATION OF THE PLANT, INTERNAL LINES AND THE ALLIED WORK, THE PLANT COULD NOT FUNCTION AND THEREFORE THE EXPENDITURE INCURRED ON ALL THESE ITEMS IS A PART OF WIND PLANT ENTITLED FOR DEPRECIATION @ 80%. 3.1. THE LD. CIT(A) FOUND FORCE IN THE ARGUMENT OF TH E LD. A.R. THAT CIVIL CONSTRUCTION AS WELL AS ELECTRIC INSTALLATION ARE PART OF THE WINDMILL AND WITHOUT IT THE WINDMILL CANT BE RUN. THE LD. CIT(A ) FURTHER RELIED ON THE DECISION OF ITAT JAIPUR BENCH IN CASE OF ACIT VS . DEEPAK VEGPRO PRIVATE LIMITED AND THE DECISION OF HONBLE RAJASTH AN HIGH COURT IN CASE OF CIT(A) VS. K.K. ENTERPRISES 108 DTR 109 (RAJ.) A ND ALLOWED THE DEPRECIATION @ 80% ON THE CIVIL CONSTRUCTION AS WELL AS ELECTRIC INSTALLATION. AGAINST THE SAID ORDER, THE DEPARTMEN T IS IN APPEAL BEFORE US. ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 4 3.2. THE LD. DR SUBMITTED THAT AS PER INCOME TAX RULE S APPENDIX- 1(III)(8)(XIII), THE DEPRECIATION IS ALLOWED ON RENE WABLE ENERGY DEVICES BEING WINDMILLS AND ANY SPECIALLY DESIGNED DEVICES WH ICH RUN ON WINDMILLS AND NOT TO OTHER CIVIL AND ELECTRIC ITEMS. THE LD. DR ACCORDINGLY SUBMITTED THAT THE FINDINGS OF THE LD. CIT(A) ARE ERRONEOUS AND CANT BE SUSTAINED. 3.3. THE LD. A.R. REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE MATTER IS SQUARELY COV ERED BY THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CAS E OF CIT VS. K.K. ENTERPRISES (SUPRA). 3.4. IN CIT VS. M/S K.K. ENTERPRISES, THE ISSUE BEFO RE THE HONBLE RAJASTHAN HIGH COURT WAS WHETHER THE ASSESSEE WAS ENTI TLED TO CLAIM DEPRECIATION ON THE COST INCURRED IN CIVIL WORK AND FOUNDATION, ELECTRICAL ITEMS, COMPONENT AND INSTALLATION AND COMMON POWER E VACUATION WHILE INSTALLING WINDMILLS. THE HONBLE RAJASTHAN HIGH COUR T FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF C IT(A) VS. PARRY ENGINEERING AND ELECTRICAL PVT. LTD. ALLOWED THE DEP RECIATION ON SUCH ITEMS @ 80%. THE OPERATIVE PART OF THE RULING IS CO NTAINED AT PARAS 6 & 7 OF ITS ORDER WHICH IS REPRODUCED AS UNDER: ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 5 6. THE ISSUE INVOLVED IN THESE APPEALS HAS BEEN CON SIDERED BY THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.604/ 2012, DECIDED ON 29.1.2013, IN COMMISSIONER OF INCOME TAX, AHMEDABAD-III V. PARRY ENGINEERING AND ELECTRONICS PVT. LTD. IN THE CASE AFORESAID HONBLE GUJARAT HIGH COU RT HELD THAT WINDMILL WOULD REQUIRE SCIENTIFICALLY DESIGNED MACHINERY IN ORDER TO HARNESS THE WIND ENERGY TO THE MAXIMUM POTENTIAL. SUCH DEVICE HAS TO BE FITTED AND MOUNTED ON A CIVIL CONSTRUCTION, EQUIPPED WITH ELECT RIC FITTINGS IN ORDER TO TRANSMIT THE ELECTRICITY SO GE NERATED. SUCH CIVIL STRUCTURE AND ELECTRIC FITTINGS, THEREFO RE, IT CAN BE WELL IMAGINED, WOULD BE HIGHLY SPECIALIZED. THUS, SUCH CIVIL CONSTRUCTION AND ELECTRIC FITTING WOULD HAVE NO USE OTHER THAN FOR THE PURPOSE OF FUNCTIONING OF THE WINDMILL. ON THE OTHER HAND, IT CAN BE EASILY IMAGINED THAT WINDMILL CANNOT FUNCTION WITHOUT APPROPRIATE INSTALLATION AND ELECTR IFICATION. IN OTHER WORDS, THE INSTALLATION OF WINDMILL AND THE CIVIL STRUCTURE AND THE ELECTRIC FITTINGS ARE SO CLOSELY INTERCONNECTED AND LINKED AS TO FORM THE COMMON PLA NT. AS ALREADY NOTED, THE LEGISLATURE HAS PROVIDED FOR HIG HER RATE OF DEPRECIATION OF 80 PER CENT ON RENEWABLE ENERGY D EVICES INCLUDING WINDMILL AND ANY SPECIALLY DESIGNED DEVICE , WHICH RUNS ON WINDMILL. THE CIVIL STRUCTURE AND THE ELECTRI C FITTING, EQUIPMENTS ARE PART AND PARCEL OF THE WINDMILL AND C ANNOT BE SEPARATED FROM THE SAME. THE ASSESSEE CLAIM FOR H IGHER DEPRECIATION ON SUCH INVESTMENT WAS, THEREFORE, RIGH TLY ALLOWED. ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 6 7. WE ARE IN ABSOLUTE AGREEMENT WITH THE REASONING G IVEN BY HONBLE THE GUJARAT HIGH COURT. WE ACCEPT THE SAME AND FOR THE SAME REASONS THESE APPEALS ARE DISMISSED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MATTER IS SQUARELY COVERED BY THE DECISION OF HONBLE RAJASTHAN HIGH C OURT IN CASE OF K.K. ENTERPRISES (SUPRA). NO CONTRARY RULING HAS BEEN CI TED AT THE BAR. IN LIGHT OF ABOVE , WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDI NG OF THE LD. CIT(A) AND THE SAME IS HEREBY CONFIRMED AND THE ASSESSEE HELD ELIGIBLE TO CLAIM DEPRECIATION ON CIVIL WORK AND ELE CTRICAL INSTALLATION @ 80%. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/01/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/01/2017. * SANJEEV. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE D.C.I.T., CIRCLE-7, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- SH. HARDEEP SINGH SETHI, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) ITA 891/JP/2016_ SHRI HARDEEP SINGH SETHI 7 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 891/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR