Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 6977 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 30 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-01-2019
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
B
Assessment Year
2010-2011
Appeal Filed On
09-08-2018
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE -B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 949/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2010-11 ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-1, KOTA CUKE VS. M/S SHREE AGENCIES PVT. LTD., B-45, I.P.I.A. JHALAWAR ROAD, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAFCS3329A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAN SINGH (ADDL.CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 10/10/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 08/01/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 24.05.2018 FOR A.Y. 2010-11 WHEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 4,11,896/ - MADE BY ON ACCOUNT OF LOADING UNLOADING EXPENSES. ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 2 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASES, THE CI T(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS. 1,16,943/- OUT OF TOTAL RS. 2,33,887/- MADE BY ON ACCOUNT OF OFFICE EXPENSES. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS. 3,79,975/- MADE BY ON ACCOUNT OF EXCESS CLAIM ON VEHICLE. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,51,48,014/- MADE BY AO ON ACCOUNT OF DEPRECIATION ON WIND MILL. (V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 8,16,265/- MADE U/ S 36(1)(III). (VI) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 11,38,784/- MADE BY TH E AO U/S 14A. 2. REGARDING GROUND NO. 1, BRIEFLY STATED, THE FACT S OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED LOADING AND UNLOADING EXPE NSES OF RS. 41,18,961/- IN ITS EOU DIVISION. AS PER ASSESSING O FFICER, MAJORITY OF THE EXPENSES ARE INCURRED IN CASH AND CLAIMED ON SELF M ADE VOUCHERS AND NO SUPPORTING EVIDENCE IS ATTACHED WITH THESE VOUCHERS . THEREFORE, THE CLAIM MADE BY THE ASSESSEE WAS HELD NOT VERIFIABLE IN ENT IRETY AND 10% OF ABOVE EXPENSES I.E. A SUM OF RS. 4,11,896/- OF THE TOTAL EXPENSES WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) HELD THAT SINCE NO SPECIFIC DISCREPANCY IN PARTICULAR VOUCHERS HAVE BEEN BROUGHT TO NOTICE BY THE AO, HE IS NOT IN AGREEMENT WITH THE DISALLOW ANCE @ 10% MADE BY THE AO IN RESPECT OF LOADING AND UNLOADING EXPENSES AS THESE ARE NORMAL ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 3 BUSINESS EXPENSES AND AO HIMSELF HAS ACCEPTED 90% O F THESE EXPENSES AS ALLOWABLE, THEREFORE GENUINE EXPENSES. THE DISALLOW ANCE OF RS. 4,11,896/- WAS ACCORDINGLY NOT UPHELD AND WAS DIRECTED TO BE D ELETED. WE DO NOT FIND ANY INFIRMITY IN THE SAID FINDING OF THE LD. CIT(A) . HENCE, THE GROUND OF APPEAL TAKEN BY THE REVENUE APPEAL IS DISMISSED. 3. REGARDING GROUND NO. 2, THE FACTS OF THE CASE AR E THAT THE ASSESSEE HAS CLAIMED OFFICE EXPENSES AT RS. 23,38,872/-. ON VERIFICATION OF EXPENSES, IT WAS FOUND BY THE AO THAT SOME OF THE EXPENSES AR E CLAIMED ON SELF MADE VOUCHERS AND NO SUPPORTING DETAILS ARE AVAILABLE. I N SOME OF THE EXPENSES, PERSONAL EXPENDITURE INCURRED BY THE DIRECTORS OF T HE COMPANY CANNOT BE DENIED. THUS, CONSIDERING THIS FACT, THE WHOLE EXPE NDITURE CLAIMED CANNOT BE TREATED FOR THE PURPOSES OF BUSINESS. HENCE, 10% OF ABOVE EXPENDITURE CLAIMED I.E. RS. 2,33,887/- WAS DISALLOWED AND ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS RESTRICTED THE DIS ALLOWANCE TO 5% AND THE BALANCE DISALLOWANCE WAS DIRECTED TO BE DELETED. WE DO NOT FIND ANY INFIRMITY IN THE SAID FINDING. HENCE, THE GROUND NO . 2 OF REVENUES APPEAL IS DISMISSED. 4. REGARDING GROUND NO. 3, THE FACTS OF THE CASE AR E THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE COMPANY HAS CLAIMED INSURANCE, DEPRECIATIO N AND CAR EXPENSES IN THE P & L ACCOUNT, THOUGH THESE VEHICLES WERE OWNED BY THE DIRECTORS. THEREFORE, THE ASSESSEE WAS REQUIRED TO GIVE SEPARA TE DETAILS OF EXPENDITURE CLAIMED ON ACCOUNT OF EXPENSES, INSURAN CE AND DEPRECIATION OF THE VEHICLES REGISTERED IN THE NAME OF THE DIRECTOR S, AND ASKED TO EXPLAIN AS TO WHY THE DISALLOWANCE MAY NOT BE MADE TO THE T OTAL INCOME, DUE TO ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 4 NON OWNERSHIP OF THE VEHICLES IN THE NAME OF THE AS SESSEE COMPANY. IN COMPLIANCE TO ABOVE, THE ASSESSEE HAS FILED DETAILS OF DEPRECIATION, INSURANCE & CAR EXPENSES CLAIMED IN RESPECT OF THE FOLLOWING VEHICLES (OWNED BY THE DIRECTORS) AS UNDER:- VEHICLE NO. DEPRECIATION INSURANCE PETROL & DIESEL EXPENSES REPAIR AND MAINTENANCE RJ 20 CA 1000 17657 21066 97784 84703 RJ 20 IC 2085 7535 33291 12647 RJ 20CA 1484 3459 85553 16280 17657 32060 216628 113630 FROM THE PURCHASES BILLS AND THE COPIES OF THE REG ISTRATION CERTIFICATES, IT WAS NOTED BY THE AO THAT THE ABOVE VEHICLES WERE OWNED BY THE DIRECTORS. HENCE, THE COMPANY HAS NO LEGAL ENTI TLEMENT OF VEHICLES BECAUSE THE ASSESSEE HAS NOT PROVIDED ANY EVIDENCE FOR USE OF ASSETS FOR BUSINESS PURPOSES OF COMPANY, OTHER THAN USED BY TH E DIRECTORS. IT SHOWS THAT THE VEHICLES ARE REGISTERED IN THE PERSONAL NA ME OF THE DIRECTORS AND DEPRECIATION AND OTHER INCIDENTAL EXPENSES CLAIMED BY THE ASSESSEE ARE TO BE DISALLOWED. IT IS HELD IN THE CASE OF ASSAM PEST ICIDES & AGRO CHEMICALS VS. CIT [1997] 227 ITR 846 (GAU) THAT MERE PAYMENT BY ITSELF WOULD NOT ENTITLE AN ASSESSEE TO DEDUCTION OF AN EXPENDITURE, UNLESS THE SAME WAS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF THE PROOF AT ALL RELEVANT TIMES RESTS UPON THE ASSESSEE. FURTHER, I T WAS HELD IN CASE OF KALPAKA TOURIST HOME (P) LTD VS CIT [1998] 172 ITR 364 (KER) THAT THE DEDUCTION UNDER SECTION 32(1) CANNOT BE CLAIMED BY SOMEONE HAVING NO REAL CONNECTION WITH THE ASSETS AND THE CLAIMANT MU ST BE ONE WITH MUCH MORE THAN SOME THREADS OF RIGHT. DEPRECIATION IS CL AIMABLE BY THE OWNER ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 5 WHO USES THE ASSETS IN QUESTION. THEREFORE, DEPRECI ATION AND OTHER EXPENSES CLAIMED BY THE ASSESSEE ARE NOT ALLOWABLE IN THE CASE OF THE COMPANY AND ACCORDINGLY, TOTAL AMOUNT OF RS. 3,79,9 75/- (17,657 + 32,060 + 21,66,28 + 11,36,30) WAS DISALLOWED AND ADDED TO TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) REFERRING TO THE DECIS ION OF THE HONBLE ALLAHABAD HIGH COURT IN CASE OF CIT, VARANASI VS. V ARANASI AUTO SALES (P.) LTD. 190 TAXMAN 60 (ALLAHABAD) AND THE DECISION OF HONBLE SUPREME COURT IN CASE OF I.C.D.S LTD VS. CIT [2013] 29 TAXMANN.CO M 129 (SC) HAS HELD THAT THE DISALLOWANCE MADE BY THE AO IN RESPECT OF VEHICLE RELATED DEPRECIATION AND OTHER EXPENSES CANNOT BE UPHELD. IT WAS FURTHER HELD BY THE LD. CIT(A) THAT THE AO HAS ALSO NOT BROUGHT ON RECORD THAT THE PAYMENT FOR THESE VEHICLES WAS MADE BY THE DIRECTORS IN THE IR PERSONAL CAPACITY. 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE ASSESSEE HAS PURCHASED VEHICLES FOR THE PURPOSE OF ITS BUSIN ESS USE. THE ENTIRE COST INCURRED FOR PURCHASE OF VEHICLES WERE SHOWN IN THE COMPANYS BOOKS OF ACCOUNTS AND TREATED AS BUSINESS ASSETS. THE REGIST RATION OF VEHICLES IN NAMES OF DIRECTOR WERE OBTAINED FOR MERE CONVEYANCE PURPOSES. THE VEHICLES WERE OWNED BY THE COMPANY AND WERE USED FO R THE PURPOSE OF ITS BUSINESS, THEREFORE, THE LD. CIT(A) WAS RIGHT IN AL LOWING THE CLAIM OF DEPRECIATION AND THE OTHER EXPENDITURE INCURRED FOR RUNNING AND MAINTENANCE OF THIS VEHICLE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GIVEN THE FACT THAT THE VEHICL ES HAVE BEEN PURCHASED ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 6 BY COMPANY FROM THE OWN FUNDS AND THE SAME HAVE BEE N UTILIZED FOR THE PURPOSE OF ITS BUSINESS AND THE ASSETS BEING DULY E FFECTED IN THE COMPANIES OF BOOKS OF ACCOUNTS, MERELY ON ACCOUNT OF FACT THA T THE VEHICLES HAVE BEEN REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSE SSEE COMPANY, THE ASSESSEES CLAIM FOR DEPRECIATION AND OTHER VEHICLE RUNNING AND MAINTENANCE EXPENSES CANNOT BE DENIED. THE DECISIO NS RELIED ON BY THE LD. CIT(A) SUPPORTS THE CASE OF THE ASSESSEE. IN THE R ESULT, THE GROUND TAKEN BY THE REVENUES APPEAL IS DISMISSED. 8. REGARDING GROUND NO. 4, BRIEFLY STATED, THE FACT S OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY HAS INCREASED ITS WIND POWER INSTALLED CAPACITY FROM 1.40 MW TO 2 .65 MW BY INSTALLATION OF A NEW 1.25 MW WIND MILL POWER PLANT AT VILLAGE, AKAL, DIST. JAISALMER (RAJASTHAN). THE NEW WIND POWER PLANT WAS INSTALLED ON 31.03.2010 AND ACCORDINGLY, THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 25,14,80,14/- AT THE RATE OF 50% OF THE NORMAL ALLOWABLE DEPRECIATION RATE OF 80% ON SUCH ASSETS. IN ORDER TO VERIFY THE ASSESSEES CLAIM OF DEPRECIATION, A SHOW CAUSE WAS ISSUED TO THE ASSESS EE, HOWEVER THE SUBMISSION SO FILED BY THE ASSESSEE REGARDING COMMI SSIONING OF THE SAID WIND MILL POWER PLANT AS ON 31.03.2010 WAS NOT FOUN D ACCEPTABLE BY THE ASSESSING OFFICER DUE TO THE FOLLOWING REASONS:- I) THE ASSESSEE HAS GIVEN BREAK UP OF NET EXPORT UNITS (KWH) AS STATED TO HAVE BEEN RECORDED AT MAIN METER OF RVPNL (JOINT ENERGY METER READING STATED TO HAVE BEEN TAKEN ON DATED 02.04.2010 FOR T HE MONTH OF MARCH 2010), AS UNDER:- S. NO. CUSTOMER CAPACITY (MW) BREAK UP OF ENERGY (KWH) ENERGY DELIVERED AT COMMON DELIVERY POINT (KWH) ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 7 EXPORT IMPORT NET EXPORT KWH EXP ORT IMPORT NET EXPORT KWH 1600 160 1440 4 SHREE AGENCIES PVT LTD 1.25 22 2 20 HOWEVER, THE AFORESAID CALCULATIONS HAVE NOT BEEN A UTHENTICATED BY ANY OF THE COMPETENT AUTHORITIES OF RPPC. II) THE SO CALLED COMMISSIONING OF THE WIND MILL PO WER PLANT ON 31.03.2010 IS ONLY A COLOURFUL DESIGN ON THE PART O F THE ASSESSEE TO SHOW SALE OF ENERGY ON 31.03.2010 ITSELF SO THAT DEPRECI ATION MAY BE AVAILED BY IT. III) NO EVIDENCE REGARDING INSTALLATION OF JOINT ME TER AT COMMON DELIVERY POINT HAS BEEN FILED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. IV) NECESSARY EVIDENCE REGARDING THE ORIGINAL READI NG OF THE POWER PRODUCED HAS NOT BEEN FURNISHED. V) IT IS ABSOLUTELY UNBELIEVABLE THAT SALE OF ENERG Y (WORTH RS. 86/- ONLY) WOULD HAVE BEEN EFFECTED ON 31.03.2010 ITSELF, AS T HERE IS NO EVIDENCE OF EVEN ANY TRIAL RUN OF THE WIND MILL POWER PLANT. VI) CERTIFICATE REGARDING COMMISSIONING OF THE PLAN T HAS BEEN ISSUED ON 21.04.2010 I.E. AFTER 21 DAYS, WHICH IS NOT TRUSTWO RTHY. VII) EVIDENCE OF PERMISSION OF ELECTRICAL INSPECTOR FOR WTGS HAS NOT BEEN FURNISHED. ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 8 VIII) IN THE DIRECTORS REPORT FILED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, IT HAS BEEN STIPULATED THAT :- DURING THE YEAR THE COMPANY HAS INCREASED ITS INST ALLED CAPACITY FROM 1.40 MW TO 2.65 MW BY INSTALLATION A NEW 1.25 MW WIND POWER PLANT AT VILLAGE, AKAL, DIST JAISELMER ( RAJASTHAN). THE NEW WIND POWER PLANT WAS INSTALLED AND STARTED GENE RATING POWER IN THE MONTH OF MARCH 2010. THE POWER PURCHASE AGREEME NT FOR THE NEW POWER PLANT WITH THE STATE GOVERNMENT OF RAJAST HAN WAS SIGNED ON DATED WITH IN AGREED RATE OF RS. 4.28/- FIXED FOR THE PERIOD OF 20 YEARS. THE VENDOR OF THE WIND POWER PLANT HAS AS SURED A MINIMUM GENERATION OF 20.00 LAKHS UNIT PER YEAR. THE REVENUE FROM ITS ALREADY INSTALLED 1.40 MW POW ER PLANT HAS DECREASED SLIGHTLY TO RS. 63.72 LAKHS FROM RS. 69.53 LAKHS, MAINLY DUE TO THE BREAKDOWN OF OUR 0.35 MW WIND POWER PLAN T AT BARAMASAR, DIST JAISELMER. AS PER THE SAID CLAUSE, THE DATE OF SIGNING OF POWE R PURCHASE AGREEMENT HAS BEEN LEFT BLANK, WHICH CLEARLY SHOWS THAT POWER PURCHASE AGREEMENT WAS NOT SIGNED AS ON 31.03.2010, BUT IT WAS SIGNED AFTER 31.03.2010 AND SHOWN TO HAVE BEEN SIGNED ON 23.03.2010 SIMPLY TO D EFRAUD THE REVENUE BY CLAIMING THE DEPRECIATION AND REDUCING THE PROFI TS. IX) NO DOCUMENTARY EVIDENCE REGARDING CONNECTIVITY OF THE DELIVERY POINT TO THE POWER PLANT HAS BEEN FURNISHED. X) SALE OF ENERGY FOR RS. 86/- ONLY IS STRATEGY CLE VER ON THE PART OF THE ASSESSEE TO SHOW RUNNING OF THE POWER PLANT IN ORDE R TO CLAIM THE DEPRECIATION. ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 9 XI) THE WIND MILL POWER PLANT PROVIDER HAS ISSUED A INVOICE NO. 321 DATED 31.03.2010, IN RESPECT OF LABOUR CHARGES FOR RS. 1,12,506/-. IT IS, THEREFORE, IS ABSOLUTELY UNBELIEVABLE THAT THE GENE RATION OF POWER WOULD HAVE STARTED ON 31.03.2010 ITSELF, WHEN FINAL TESTI NG WAS NOT OVER ON 31.03.2010. XII) FURTHER ANOTHER DEBIT NOTE NO. 59 DATED 31.03. 2010 HAS BEEN ISSUED IN THE NAME OF THE ASSESSEE COMPANY BY SYNEFRA ENGI NEERING & CONSTRUCTION LIMITED (FORMALLY KNOWN AS SUZLON INFR ASTRUCTURE LTD.) WHICH CONTAINS THE FOLLOWING NARRATIONS:- PROVIDING SUB LEASE RIGHTS OF LANDS AND RIGHTS OF SUITABLE ACCESS OF RS. 10,00,000/- SURROUNDING (INCLUDING FREE ACCESS, RIGHT OF WAY ETC.) FOR WINDMILL PURPOSE FOR 1.25 MW WTG BEING INSTALLE D AT AKAL SITE, RAJASTHAN, IN RESPECT OF 1 WTG (LOCATION NO. AK-224 ) THE SAID DEBIT NOTE IS A CLEAR CUT EVIDENCE THAT TH E SUB LEASE RIGHTS OF LANDS AND RIGHT SUITABLE SURROUNDING WERE PROVIDED TO THE ASSESSEE COMPANY ONLY ON 31.03.2010. FURTHER, THE DEBIT NOTE HAS BEEN ISS UED BY SYNEFRA ENGINEERING & CONSTRUCTION LIMITED (FORMALLY KNOWN AS SUZLON INFRASTRUCTURE LTD.) ON ITS LETTER HEAD; WHILE THE INVOICE NO. 321 DATED 31.03.2010 REFERRED TO IN PARA XI ABOVE HAS BEEN IS SUED BY SUZLON INFRASTRUCTURE SERVICES LIMITED, WHEN THE NAME SYNE FRA ENGINEERING & CONSTRUCTION LIMITED HAS ALREADY COME INTO BEING ON 31.03.2010 ITSELF. HENCE, THERE IS CONTRADICTION OF THE INVOICE DATE A ND DEBIT NOTE DATE. HENCE, CONSIDERING THE TOTALITY OF THE CIRCUMSTANTI AL EVIDENCE AND THE ABOVE NOTED OBSERVATIONS, IT WAS HELD THAT THE WIND MILL POWER PLANT INSTALLED DURING THE YEAR DID NOT SELL ANY POWER ON 31.03.201 0 AND THEREFORE, WAS NOT ENTITLED TO DEPRECIATION OF RS. 2,51,48,014/- A S THE ASSET WAS NOT PUT ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 10 INTO USE BEFORE 31.03.2010. HENCE, DEPRECIATION OF RS. 2,51,48,014/- WAS DISALLOWED AND ADDED TO THE A SSESSEES TOTAL INCOME. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IN SUPPORT OF ITS CLAIM, IT SUBMITTED T HE FOLLOWING DOCUMENTS WHICH WERE ALSO CLAIMED TO HAVE BEEN SUBMITTED BEFO RE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS :- A) COMMISSIONING REPORT DATED 31.03.2010 ISSUED JO INTLY BY THE COMMITTEE COMPRISING OF OFFICERS/REPRESENTATIVES OF PRECL, JAISELMER, AVVNL, AJMER RVPNL JAISELMER, JVVNL, JAISELMER AND M/S SUZLON. B) WIND PROJECT- COMMISSIONING CERTIFICATE NO. SE ( RDPPC)/XEN (C & R)/D-160 DATED 21.04.2010 ISSUED BY SUPERINTENDING ENGINEER (RDPPC) AJMER DISCOM, JAIPUR. C) POWER PURCHASE AGREEMENT MADE AND ENTERED INTO E FFECTIVE AS OF 23 RD DAY OF MARCH 2010 AMONGST SHREE AGENCIES PVT. LTD. , SUZLON ENERGY LTD & AJMER VIDYUT VITRAN NIGAM LTD. D) COPY OF JOINT METER READING TAKEN ON 2 APRIL 201 0 FOR THE MONTH OF MARCH 2010 AS PER WHICH NET POWER GENERATION FOR TH E MONTH OF MARCH 2010 WAS 20 UNITS WHICH WAS SOLD TO AJMER DISCOM RA JASTHAN. 10. ON APPEAL, THE LD CIT(A) HAS EXAMINE THE AFORES AID DOCUMENTATION IN DETAIL AND GIVEN HIS DETAILED FINDINGS. FURTHER, T HE LD. CIT(A) HAS RELIED ON THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF MR . V. K. RAJENDRAN PROP ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 11 ARASI FABRICS, KARUR VS. DEPUTY COMMISSIONER OF INC OME TAX, CIRCLE-II, TRICHY (IN ITA NO. 823/MDS/2011), THE DECISION OF G UJARAT HIGH COURT IN CASE OF ASSTT. CIT VS. ASHIMA SYNTEX LTD., [2002] 2 51 ITR 133 (GUJ.) AND THE DECISION OF PUNJAB AND HARYANA HIGH COURT IN CA SE OF CIT VS. OSWAL WOOLLEN MILLS LTD. 289 ITR 261 SIDES VARIOUS OTHER DECISIONS AND THE FOLLOWING LEGAL PROPOSITION LAID DOWN THEREIN HELD THAT THE LEGAL OPINION ALSO FAVOURS THE ALLOWABILITY OF DEPRECIATION IN THE INS TANT CASE. ACCORDINGLY, DEPRECIATION OF RS. 2,51,48,014/- WAS DIRECTED TO B E ALLOWED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSE D THE MATERIAL AVAILABLE ON RECORD. THE CASE OF THE REVENUE IS TH AT THE WIND MILL PLANT WAS NOT COMMISSIONED AS ON 31.3.2010 AND THERE IS N O SALE OF POWER SO GENERATED DURING THE YEAR, HENCE, THE WIND MILL PLA NT WAS NOT PUT TO USE AS ON 31.3.2010 AND THUS NOT ELIGIBLE FOR DEPRECIATION FOR THE IMPUNGED ASSESSMENT YEAR. IN SUPPORT, THE REVENUE HAS RAISE D VARIOUS CONTENTIONS REGARDING AUTHENCITY OF VARIOUS DOCUMENTATION SO SU BMITTED BY THE ASSESSEE COMPANY. WE FIND THAT THE SAID CONTENTION S OF THE REVENUE HAVE BEEN DULY ADDRESSED BY THE LD CIT(A) WHO HAS EXAMIN ED THE AFORESAID DOCUMENTATION IN DETAIL AND HIS DETAILED FINDINGS A RE CONTAINED AT PAGES 26 AND 27 OF HIS ORDER WHICH READS AS UNDER: AS REGARDS THE VARIOUS DOUBTS RAISED BY THE AO IN RESPECT OF THE DISALLOWANCE OF DEPRECIATION ON THE WINDMILL BECAUS E OF IT NOT BEING USED FOR COMMERCIAL PRODUCTION, THE FOLLOWING DOCUMENTS PROVE OTHERWISE;- (I) THE COMMISSIONING REPORT DATED 31.03.2010 OF A COMM ITTEE CONSTITUTED BY SUPERINTENDING ENGINEER (RDPPC), AJM ER DISCOM FOR ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 12 FOLLOWING UP ON THE TURBINE GENERATOR WHICH MENTION S THAT THE WIND TURBINE GENERATOR (WTGS) ARE CONNECTED TO THE NEWLY COMMISSIONED MAIN METER SR. NO. MSB10307 & BACKUP METER MSB10309 WHIC H IS CONSIDERED AS THE METERING ARRANGEMENT. THE JOINT INSPECTION REPO RT OF THIS METERING ARRANGEMENT IS REFERRED AS ENCLOSED. THE COMMITTEE IS CONSTITUTED OF 4 SENIOR OFFICIALS OF THE STATE ELECTRICITY DEPARTMENT & COPY OF THE PERMISSION OF ELECTRICAL I NSPECTORS FOR THE WTGS IS ALSO ENCLOSED. (II) THE COMMISSIONING CERTIFICATE DATED 21.04.2010 IS I SSUED CERTIFYING THE COMMISSIONING HAVING BEEN DONE ON 31.03.2010, S UCCESSFULLY. THE CERTIFICATE IS ISSUED BY SUPERINTENDING ENGINEER (R DPPC) AJMER DISCOM, JAIPUR OFFICE. A COPY OF THE SAID CERTIFICATE IS AL SO ISSUED TO THE CHIEF ENGINEER (RDPPC) JAIPUR & CHIEF ENGINEER (COMMERCIA L) AVVNL, AJMER, BESIDES OTHERS & THE WTG COMPANY. (III) THE POWER PURCHASE AGREEMENT BETWEEN THE APPELLANT ASSESSEE M/S SHREE AGENCIES P. LTD. SUZLON ENERGY LTD. AND AJMER VIDYUT VITRAN NIGAM LTD. (AVVNL) IS DATED 23 RD DAY OF MARCH, 2010 FOR 1.25MV WIND POWER PLANT OF THE ASSESSEE. ON BEHALF OF THE AVVNL, IT IS SIGNED BY THE MD OF A VVNL, WHO IS A SENIOR GOVERNMENT FUNCTIONARY & NOT ANY PRIVATE PARTY. THE TARIFF IS FIXED @ 4.28/KWH & RS. 4.50/KWH FOR DIFFERENT DISTRICTS. (IV) AS PER THE JOINT METER READING REPORT OF SUZLON ENE RGY LTD. OF THE 220 KV SUB-STATION AKAL, JAISALMER TAKEN ON 02/04/10 (S UCCEEDING THE ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 13 COMMISSIONING BY DEFAULT) IS 20 KWH EXPORTED, WHICH MULTIPLIED WITH RS. 4.28/KWH ISSUES TO RS. 86/- AS MENTIONED IN THE A.O S ORDER. THUS, FIRST OF ALL, WITH SEVERAL GOVERNMENT DEPARTM ENTS & OFFICIALS INVOLVED IN THE WHOLE PROCESS SHOWING ACTUAL GENERATION OF E NGERY (POWER) AFTER COMMISSION OF THE WTG, IT WOULD NOT BE HELD TO BE A COLOURFUL DESIGN BY THE A.O. WITHOUT BRINGING ON RECORD ANY COLLUSION T O CLAIM BOGUS DEPRECIATION. MERELY MENTIONING OF SUCH PROJECTS VI S--VIS THE STATE GOVERNMENT, THE AOS ARGUMENTS APPEAR AT BEST THEOR ETICAL & CONJECTURAL. THE A.O DID NOT SEEK ANY CONFIRMATION FROM THE ELEC TRICITY DEPARTMENT TO COUNTER ACT THE ASSESSEES CLAIM OF IF HE HAD ANY D OUBTS REGARDING THE CLAIM OF DEPRECIATION. HIS OBSERVATIONS REGARDING THE INV OICES, DEBIT NOTES OF POWER PLANT PROVIDER ARE ALSO NOT BASED ON INDEPEND ENT COGENT EVIDENTIARY MATERIAL WHICH COULD ESTABLISH ANY DISCREPANCY BEYO ND DOUBT IN THE CLAIM MADE. IT WAS ALSO NOT THE A.OS CASE THAT THE WINDM ILL COULD NOT HAVE BEEN INSTALLED AT SITE DUE TO TRANSPORTATION IN SHORT P ERIOD OR THAT PAYMENT HAD NOT BEEN MADE TILL DATE OF COMMISSION AS WAS IN SOM E OTHER CASES OF THIS NATURE. UNDER THE CIRCUMSTANCES, EVEN IF HYPOTHETICALLY IT IS TO BE BELIEVED THAT THE DOUBTS OF THE A.O WERE IN PLACE, THEN HE HAS NOT D ENIED THAT THE WINDMILL WAS READY & IN PLACE. 12. THE COMMISSIONING OF THE WIND MILL POWER PLANT HAS BEEN DULY CERTIFIED AS ON 31.03.2010, THE POWER PURCHASE AGRE EMENT IS IN PLACE AND THERE IS ACTUAL GENERATION OF ELECTRICITY EVEN THOU GH TO THE TUNE OF 20KWH ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 14 WHICH HAS BEEN DULY EXPORTED OUT TO THE COMMON ELEC TRICITY GRID. THERE IS THUS NO DISPUTE THAT THE WIND MILL HAS BEEN COMMISS IONED AND PUT TO USE DURING THE YEAR. IN LIGHT OF SAME, WE DONOT SEE AN Y INFIRMITY IN THE ABOVE FINDINGS OF THE LD CIT(A) WHO HAS RIGHTLY DIRECTED THE ALLOWANCE OF DEPRECIATION ON SUCH WIND MILL PLANT INSTALLED AND COMMISSIONED DURING THE YEAR. IN THE RESULT, GROUND OF REVENUES APPEAL IS DISMISSED. 13. REGARDING GROUND NO. 5 OF THE REVENUES APPEAL REGARDING DISALLOWANCE OF INTEREST U/S 36(1)(III), BRIEFLY THE FACTS OF TH E CASE ARE THAT THE ASSESSEE HAS SHOWN INVESTMENTS IN QUOTED AND UNQUOTED SHARES TO THE EXTENT OF RS. 1,59,79,841/- AS ON 31.03.2010 AS AGAINST INVES TMENTS OF RS. 69,10,229/- AS ON 31.03.2009. THE ASSESSEE HAS SHOW N LONG TERM CAPITAL GAIN ON SALE OF SHARES AT RS. 13,06,533/-, WHICH HAS BEEN CLAIMED EXEMPT U/S 10(38), BESIDES DIVIDEND AT RS. 37,991/- FROM SHARES. TOTAL EXEMPT INCOME HAS BEEN CLAIMED AT RS. 13,44,671/-. THE ASSESSEE HAS RAISED LOANS FROM THE VARIOUS PERSONS/ BANKS AGAINST WHICH INTEREST OF RS. 77,96,715/- HAS BEEN PAID. AS PER T HE ASSESSING OFFICER, INVESTMENT IN QUOTED AND UNQUOTED SHARES IS NOT INC IDENTAL TO THE BUSINESS PURPOSES OF THE ASSESSEE, AS THERE IS NO C OMMERCIAL EXPEDIENCY FOR THE ASSESSE COMPANY TO UTILIZE ITS BORROWED FUN DS FOR INVESTMENT IN THE SHARES AGAINST WHICH EXEMPT INCOME HAS BEEN EAR NED. INVESTMENTS IN SHARES HAVE INCREASED BY RS, 90,69,612/- (159798 41-6910229). THE ASSESSEE HAS PAID INTEREST OF RS. 9,07,131/-@ 9% ON THE UNSECURED LOANS. INTEREST CHARGEABLE ON THE INVESTMENTS MADE DURING THE YEAR AT RS, 90,69,612/- @ 9% COMES TO RS. 8,16,265/. HENCE, CONSIDERING THE TOTALITY OF THE FACTS, INTEREST TO THE TUNE OF RS. 8,16,265/- WAS DISALLOWED U/S 36(1)(III) AND ADDED TO THE ASSESSE' S TOTAL INCOME. ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 15 14. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) REFER RED TO THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF HERO CYCLES (P .) LTD VS. COMMISSIONER OF INCOME-TAX (CENTRAL), LUDHIANA 63 TAXMANN.COM 30 8 (SC) AND THE DECISION OF THE RAJASTHAN HIGH COURT IN CASE OF CIT VS. VIJAY SOLVEX LTD. 59 TAXMANN.COM 294 (RAJ) AND HELD THAT IN THE ASSESSEE S CASE, NOT ONLY THE INVESTMENTS WERE MADE IN EARLIER YEARS BUT AO HAS N OT PROVED ANY NEXUS BETWEEN THE INTEREST BEARING BORROWED FUNDS AND THE INVESTMENTS MADE. HOWEVER, THE ASSESSEE THROUGH FINANCIAL STATEMENTS HAS PROVED THAT HE HAD SUFFICIENT OWN FUNDS TO MAKE THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME AND ALSO THAT THE BORROWED FUNDS HAVE BEEN U TILIZED FOR BUSINESS PURPOSES. THE LD. CIT(A) FURTHER HELD THAT THE ASSE SSEES OWN FUND BEING SUBSTANTIALLY HIGHER THAN THE INVESTMENTS AND EVEN OTHERWISE, NO NOTIONAL INTEREST OR HYPOTHETICAL INTEREST COULD HAVE BEEN D ISALLOWED ON SUCH FACTS. HE ACCORDINGLY DIRECTED THE DELETION OF ADDITION OF RS. 8,16,265/- MADE U/S 36(1)(III) OF THE ACT. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IN ABSENCE OF NECESSARY NEXUS BEING ESTABLISHED BETWEEN THE BORROWED FUNDS AND THE INVESTMENT YIELD ING EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE. FURTHER, THE LD CIT(A ) HAS RETURNED A FINDING THAT ASSESSEES OWN FUNDS BEING GREATER SUCH INVEST MENTS. IN VIEW OF THE SAME, WE FIND THAT NO DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS CAN BE MADE IN THE HANDS OF THE ASSESSEE. THE DECISIONS RELIED UPON BY THE LD CIT(A) SUPPORTS THE CASE OF THE ASSESSEE. IN THE R ESULT, THE GROUND OF REVENUES APPEAL IS DISMISSED. ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 16 16. REGARDING GROUND NO. 6, BRIEFLY STATED, THE FAC TS OF THE CASE ARE THAT THE ASSESSEE HAS SHOWN NET PROFIT AT RS. 6,94,52,30 9/- AS ON 31.03.2010 AND AFTER DEDUCTION OF EXEMPT INCOME OF RS. 13,44,6 71/-, THE RESULTANT NET PROFIT COMES TO RS. 6,81,07,785/-. THE ASSESSEE HAS INCURRED EXPENSES ON ACCOUNT OF DIRECTORS REMUNERATIONS AT RS. 1,44,00, 000/- OFFICE EXPENSES AT RS. 38,22,756/- AND TELEPHONE EXPENSES AT RS. 5,20, 509/-, WHICH ARE ALSO PARTLY INCIDENTAL TO EARNING OF EXEMPT INCOME. RATI O OF EXEMPT INCOME OVER NET PROFIT COMES TO 1.97%. HENCE, 1.97% OF TOTAL EX PENSES CLAIMED IN RESPECT OF DIRECTORS REMUNERATION, OFFICE EXPENSES AND TELEPHONE EXPENSES AGGREGATING AT RS. 1,87,43,965/- I.E. A SUM OF RS. 3,69,256/- WAS DISALLOWED U/S 14A, BEING EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. 17. THE LD. CIT(A) REFERRING TO THE DECISION OF RAJ ASTHAN HIGH COURT IN CASE OF PR. COMMISSIONER OF INCOME TAX, CENTRAL, JA IPUR (RAJ.) VS. M/S DEEPAK VEGPRO PVT. LTD AND OTHERS DECISION OF HONB LE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT, JALANDHAR-1, JALANDHAR VS. MAX INDIA LTD. 80 TAXMANN.COM 98 (PUNJAB & HARYANA) HELD THAT THE AO ACTION DOES NOT APPEAR TO BE ON SOUND FOOTINGS IN RESPECT OF THE DI SALLOWANCE MADE U/S 14A. THEREFORE, HE DIRECTED THE DELETION OF SAID DI SALLOWANCE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS INVOKED THE PROVIS IONS OF SECTION 14A IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO EXEM PT INCOME AND THEN HAS GONE AHEAD AND HAS DISALLOWED 1.97% OF EXPENSES CLA IMED IN RESPECT OF DIRECTORS REMUNERATION, OFFICE EXPENSES AND TELEPH ONE EXPENSES WITHOUT APPLYING THE PROVISIONS LAID DOWN IN RULE 8D OF INC OME TAX RULES. THERE IS ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 17 NO DISPUTE THAT THE ASSESSEE HAS EARNED EXEMPT INCO ME DURING THE YEAR AND INCURRENCE OF CERTAIN ADMINISTRATIVE EXPENSES A RE ALSO NOT BEING DISPUTED. THEREFORE, THE DISALLOWANCE TOWARDS THE ADMINISTRATIVE EXPENSES INCURRED IN RELATION TO EXEMPT INCOME HAS TO BE DET ERMINED IN TERMS OF SECTION 14A READ WITH RULE 8D(III) OF THE ACT. DURI NG THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED A WORKING W HEREIN DISALLOWANCE UNDER RULE 8D(III) HAS BEEN WORKED OUT AT RS 57,225 . THE MATTER IS ACCORDINGLY SET-ASIDE TO THE FILE OF THE AO TO VERI FY AND DETERMINE THE QUANTUM OF DISALLOWANCE AS PER RULE 8D(III) OF THE ACT. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 08/01/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08/01/2019. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ASSTT. COMMISSIONER OF INCOME-TAX, C IRCLE-1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S SHREE AGENCIES PVT. LTD., KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 949/JP/2018} ITA NO. 949/JP/2018 ACIT, KOTA VS. MS SHREE AGENCIES PVT. LTD., KOTA 18 VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
