DCIT, Trichy V. The Standard Textiles, Karur

ITA 977/CHNY/2015

• Counselvise Citation: 97721714 RSA 2015
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , ! , ' #$ BEFORE SHRI N.R.S.GANESAN, JUDICIAL MMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ ITA NO. 977/MDS/2015 / ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), TRICHY-620 001. APPELLANT) V. M/S. THE STANDARD TEXTILES, POST BOX 78, BALAJI NAGAR, SEMMADAI, SALEM MAIN ROAD, KARUR. PAN AAAFT1844M RESPONDENT) / APPELLANT BY : SHRI A.V.SREEKANTH, JCIT / RESPONDENT BY : SHRI A.S.SRIRAMAN, ADVOCATE ! / DATE OF HEARING : 14.07.2015 '# ! / DATE OF PRONOUNCEMENT: 17.07.2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 09 .01.2015. - - ITA 977/15 2 2. THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL I S THAT THE CIT(APPEALS), TRICHY ERRED IN ALLOWING THE ASSESSEE S APPEAL BY DIRECTING THE ASSESSING OFFICER TO ALLOW HIGHER RAT E OF DEPRECIATION @ 80% ON CIVIL WORK AND ELECTRICAL FIT TINGS INSTALLED IN WINDMILL WITHOUT APPRECIATING THE DIFFERENCE OR CLASSIFYING COMPONENTS & ACCESSORIES OF WINDMILL, ELECTRICAL IT EMS, CIVIL STRUCTURES, INSTALLATION OF ELECTRICAL LINE FOR POW ER TRANSMISSION AND METERING WHICH ARE NOT INTRICATE PART OF WIND M ILL AND NOT SPECIFICALLY DESIGNED DEVICES WHICH RUN ON WIND M ILLS AND THEREFORE THEY WOULD NOT QUALIFY FOR HIGHER DEPRECI ATION @ 80% AS PER DEPRECIATION SCHEDULE. 3. THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF ` 14 LAKHS ON ACCOUNT OF WINDMILL DEPRECIATION CLAIMED BY THE ASSESSEE AT 80% WHEREAS THE ASSESSING OFFICER ALLOWED ONLY 10%. THE ASSESSEE IN ITS SUBMISSIONS STATED THAT THE ASSESSING OFFICER SEPAR ATED THE COST OF WINDMILL INTO CIVIL CONSTRUCTION , ELECTRICAL FITTINGS ESTIMATED AT ` 20 LAKHS AND DISALLOWED THE CLAIM OF THE ASSESSEE M ADE AT 80% AND BY ALLOWING ONLY 10% ON THE CLAIM. THE ASSE SSEE IN ITS ARGUMENTS STATED THAT THE DEPRECIATION IS ALLOWABLE AT THE RATE OF - - ITA 977/15 3 80% ON THE ENTIRE DEVICE WHICH IS CAPABLE OF GENERA TING ELECTRICITY USING WIND ENERGY. THERE IS NO PROVISIO N IN THE ACT TO BIFURCATE THE DEVICE INTO SEVERAL PARTS AND ALLOW D EPRECIATION AT DIFFERENT RATES AS DONE BY THE ASSESSING OFFICER . T H E FOUNDATION , CIVIL AND ELECTRICAL WORKS ARE NECESSARY FOR THE IN STALLATION OF THE WINDMILL AND IS CLEARLY PART AND PARCEL OF WINDMILL PROJECT ON WHICH DEPRECIATION A T THE RATE OF 80% IS ALLOWABLE. THIS ISSUE HAS BEEN HELD IN FAVOUR OF THE APPELLANT BY VARIOUS CASE LAWS BY THE JURISDICTIONAL ITAT SUC H AS ASIAN HANDLOOM VS DCIT IN ITA NO.2291/MDS/2008 DATED 20.1 1 . 2009 AND M/S BRITISH WEAVING COMPANY VS DCIT ITA NO.511/MDS/2009 DATED 12.03.2010 AS WELL AS D . MURUGESH , KARUR VS ITO IN ITA NO. 1938/MDS/2011. AFTER GOING THROUGH THE VARIOUS CASE LA WS CITED SUPRA WHICH WERE ALL HELD IN FAVOUR OF THE ASSESSEE THAT THE CI V IL CONSTRUCTION, ELECTRICAL FITTINGS IS A PART AND PARCEL OF WINDMILL PROJECT AND DEPRECIATION HAS TO BE ALLOWED AT 80%, THE CIT(APPEALS) DIRECTED THE ASSESSING OFF ICER TO ALLOW THE CLAIM OF THE ASSESSEE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED IN - - ITA 977/15 4 FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL, IN THE CASE OF M/S. ASIAN HANDLOOMS V. DCIT IN ITA NO.176/MDS/201 0 DATED 6 TH JULY, 2012, WHEREIN THE TRIBUNAL BY FOLLOWING THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.2291/MDS/2 008 DATED 20.11.2009 HAS HELD AS UNDER: 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPARATUS THAT HARNESSES WIND POWER , FOR A VARIETY OF USES LIKE PUMPING WATER, DRIVING O F SAW MILL, GRINDING CONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL, AS INSTALLED BY THE ASSESSEE, WHICH IS OF SUZLON CORPORATION, WOULD CONSIST OF A SPECIALIZED FOUNDATION, ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONNECTED IN THE TOP IS A REVOLVING APPARATUS TO WHICH DIFFERENT NUMBERS OF ARMS ARE ATTACHED. WHEN IT IS USED FOR PRODUCING ELECTRICITY, THESE ARE CAL LED WIND TURBINES AND SERVES AS A SIGNIFICANT SOURCE OF ELECTRICAL ENERGY. BEING A NON-CONVENTIONAL SOURCE OF ENERGY WITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAVE BEEN GIVEN SPECIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THAT FOR A WINDMILL TO BE SUSTAINABLE IT HAS TO BE ERECTED IN A PLACE WHERE SUSTAINABLE WIND FLOW IS AVAILABLE WITH A LAND SUITABLE TO A FOUNDATION ON WHICH, A STRUCTURE STRO NG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AND SPECIALIZ ED AREA SPECIFICALLY EAR-MARKED TO FACILITATE A FLOW O F WIND WITHOUT HINDRANCE, AND SPECIALIZED ELECTRICAL FITTINGS AND HIGH TENSION LINES ARE ALL BASIC - - ITA 977/15 5 REQUIREMENTS FOR A WIND MILL PLANT. NONE OF THESE REQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN DETACHED FROM WHAT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE ESSENTIAL. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH W IND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALLY DEMARCATED APPURTENANT THERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUILDING WHICH IS ADJUNCT TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS. ON THE OTHER HAND THESE CAN BE DEEMED ONLY A PART OF A WINDMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCLUSIO N WE ARE FORTIFIED BY DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION (247 ITR 268) WHERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WA S A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT T HAT THE BUILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECHNICAL REQUIREME NT, IT WOULD QUALIFY TO BE TREATED AS A PLANT. IN OUR OPINION, THE EXPENSES RELATING TO THE LAND AND FOUNDATION SPECIALLY INCURRED WITH A VIEW TO SERVE THE TECHNICAL REQUIREMENTS WOULD ALSO BECOME A PART OF THE PLANT IN A CASE THAT OF A WIND MILL. IF WE LOOK AT APPENDIX I TO THE INCOME-TAX RULES, PRESCRIBING THE RATES OF DEPRECIATION, IT CAN BE SEEN THAT LEGISLAT URE HAS GIVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI- POLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARENTLY, THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFF-SETTING THE IMPAIRMEN T IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE SUCH ENTREPRENEUAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF RENEWABLE ENERG Y SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMI TED - - ITA 977/15 6 MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES, IT WOULD DEFEAT THE VERY PURPOSE FO R WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE, IN OUR OPINION, ASSESSEES CLAIM FOR DEPRECIATION SHOULD NOT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFICER. THEREFORE, DISALLOWANCE OF RS. 1,17,00,000/-, 13 LAKHS, 23,51,576/- AND RS. 5,73,824/- ON ACCOUNT OF DEPRECIATION CLAIM STANDS CANCELLED. GROUND NOS. 5 TO 19 OF THE ASSESSEE STAND ALLOWED. 5. BEING SO, TAKING A CONSISTENT VIEW, WE ARE OF TH E OPINION THAT THE CIT(APPEALS) IS JUSTIFIED IN GRANTING DEPR ECIATION AT 80% ON THE WINDMILL INCLUDING CIVIL CONSTRUCTION, ELECT RICAL FITTINGS ATTACHED TO IT, WHICH IS A PART AND PARCEL OF WINDM ILL PROJECT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON FRIDAY, THE 17 TH OF JULY, 2015 AT CHENNAI. SD/- SD/- ( $ . . $ . %& ) ( ' ( ) * ) N.R.S.GANESAN + ,-./01.2334.15+ 6 78 /JUDICIAL MEMBER ! 789::3;/<./<=>?@>1 '6 /CHENNAI, A7 /DATED, THE 17 TH JULY, 2015. MPO* - - ITA 977/15 7 7& BCDC /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. E+ /CIT(A) 4. E /CIT 5. CF% G /DR 6. %HI /GF.