ACIT, Jaipur v. M/S RAJASTHAN ELECTRONICS &, Jaipur

ITA 1319/JPR/2010 | 2007-2008
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 131923114 RSA 2010
Assessee PAN AABCR1528G
Bench Jaipur
Appeal Number ITA 1319/JPR/2010
Duration Of Justice 7 month(s) 26 day(s)
Appellant ACIT, Jaipur
Respondent M/S RAJASTHAN ELECTRONICS &, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 08-07-2011
Assessment Year 2007-2008
Appeal Filed On 12-11-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO. 1319/JP/2010 ASSESSMENT YEAR : 2007-08 PAN: AABCR 1528 G THE ACIT VS. M/S. RAJASTHAN ELECTRONICS & INSTRUM ENTS LTD. CIRCLE- 7 2 KANAKPURA INDLL. AREA JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SUNIL MATHUR ASSESSEE BY : SHRI SHARVAN KUMAR GUPTA ORDER PER N.L. KALRA AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)- III JAIPUR DATED 13-08-2010 FOR THE ASSESSMENT Y EAR 2007-08. 2.1 THE GROUND OF APPEAL RAISED BY THE REVENUE IS A S UNDER:- ;;ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN:- ALLOWING THE DEPRECIATION OF RS. 2 32 00 000/- ON WIND MILLS WHICH WAS DISALLOWED BY THE AO WITHOUT APPRECIATING THE FULL FACTS AS NARRATED BY THE AO I N HIS ASSESSMENT ORDER THAT THE WIND MILLS ACTUALLY COULD NOT PUT TO USE BEFORE THE END OF THE FINANCIAL YEAR. 2 2.2 THE ASSESSEE COMPANY ISSUED A LETTER OF INTENT TO M/S. VESTAS RRB INDIA LTD. CHENNAI (HEREINAFTER REFERRED TO AS VES TAS RRB) ON 22 ND SEPT. 2006 FOR INSTALLATION OF TWO WIND MILLS ON TURN KEY BASIS IN JAISALMER. THE SALIENT POINTS IN THE LETTER OF INTENT HAVE BEEN ME NTIONED BY THE AO IN HIS ORDER AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER. THE RE WAS AN EPC CUM O&M CONTRACT BETWEEN THE ASSESSEE AND VESTAS ON 16- 11-2006 AND AS PER THIS AGREEMENT THE COMPLETION TIME PERIOD WAS DETE RMINED AS 26-01-2007. BEFORE THE AO THE ASSESSEE CLAIMED THAT WIND MILLS WERE SUCCESSFULLY COMMISSIONED ON 29-03-2007. A COPY OF COMMISSIONING CERTIFICATE WAS ISSUED BY THE EXECUTIVE ENGINEER (C&M) RVPN BARME R ON 30-03-2007. THE ASSESSEE ALSO PRODUCED THE COPY OF WHEELING AGR EEMENT AND POWER PURCHASE CUM WHEELING AND BANKING AGREEMENT DATED 1 5-02-2007 BETWEEN THE ASSESSEE AND VESTAS WITH RAJASTHAN VIDYUT PRASA RAN NIGAM LTD.. THE ASSESSEE HAS FURNISHED THE MONTHLY GENERATION RECO RD FOR THE MONTH OF MARCH 2007 ON THE BASIS OF WHICH THE INVOICES HAD BEEN RAISED BY THE ASSESSEE SUBSEQUENTLY. A COPY OF JOINT INSPECTION R EPORT DATED 25-01-2007 WAS FILED. THE AO EXAMINED THE DETAILS AND HELD THA T THE CLAIM REGARDING COMMISSIONING OF BOTH THE WIND MILLS ON 29-03-2007 COULD NOT BE CONCLUSIVELY ESTABLISHED DUE TO THE FOLLOWING OBSER VATIONS. 3 1. THOUGH THE CONTRACT HAD BEEN EXECUTED ON 16-11-2 006 THE FIRST PAYMENT OF 5% OF THE CONTRACT AMOUNT S MO BILIZATION ADVANCE HAD BEEN PAID TO THE CONTRACTOR ONLY ON 1-3 -2007. IT IS NORMALLY EXPECTED THAT ONLY AFTER PAYMENT OF MOBILI ZATION ADVANCE THE CONTRACTOR WOULD COMMENCE ITS WORK. 2. AS PER LETTER OF INTENT 85% OF CONTRACT VALUE W AS PAYABLE ON RECEIPT OF ALL MATERIAL ON SITE. HOWEVER EVEN T ILL 31-03-07 ONLY RS. 71 LAC HAD BEEN PAID TO THE CONTRACTOR TH AT TOO ON THE BASIS OF ADHOC PAYMENT. THIS INSPECTION REPORT DATE D 25-1-2007 IS CONTRADICTORY TO THIS CLAUSE OF THE LETTER OF IN TENT. 3. M/S. VESTA RRB HAS ISSUED ALL THE BILLS ON A SIN GLE DATE I.E. ON 31-03-2007. IT IS NOT CLEAR AS TO IF THE CO MMISSIONING WAS COMPLETED ON 29-03-2007 THEN WHY THE BILLS HAD BEEN RAISED SUBSEQUENT TO THIS DATE. 4. THE WHEELING AGREEMENT DATED 15-02-2007 WITH RRVPNL AND RECL CLEARLY STATED THAT THE POWER PRODU CED DESIRES TO SET UP SUCH WIND ENERGY BASED POWER PLA NT WHICH INDICATES THAT THE INSTALLATION PROCESS MUST HAVE C OMMENCED SUBSEQUENT TO 15-02-07. THIS IS CONTRADICTORY TO TH E JOINT INSPECTION REPORT DATED 25-01-2007. 5. EVEN IF IT IS CONSIDERED THAT THE CONTRACTOR HAS STARTED THE WORK IMMEDIATELY AFTER RECEIPT OF THE MOBILIZATION ADVANCE ON 1-3-07 THE CIVIL WORK AND ERECTION OF WIND FARM WO ULD HAVE TAKEN MORE THAN A MONTH FOR COMPLETION. HENCE THE COMMISSIONING SHOWN ON 29-03-07 DOES NOT APPEAR PRA CTICALLY FEASIBLE. 4 6. THE COMMON DELIVERY POINT OF RRVPNL WHERE JOINT METER READING IS TAKEN HAS BEEN SHOWN TO RECEIVE IN PUT FROM 27 WIND MILLS 25 OF WHICH BELONGED TO RSMML AND BALAN CE 2 MILLS HAVE BEEN SHOWN IN THE NAME OF THE ASSESSEE. HENCE EVEN IF M/S. JAIPUR DISCOM RECEIVES ELECTRICITY FROM THE COMMON DELIVERY POINT IT DOES NOT CONCLUSIVELY PROVE THAT ELECTRICITY HAS BEEN GENERATED BY THE WIND MILLS OF THE ASSESSEE 7. FURTHER THE RECEIPT OF ELECTRICITY BY JAIPUR DI SCOM DOES NOT CONCLUSIVELY PROVE THAT BOTH THE WIND MILLS WER E OPERATIONAL AND NOT ONE OF THE TWO MILLS. 8. ONLY A SMALL QUANTITY OF ELECTRICITY GENERATION HAS BEEN SHOWN IN MARCH 2007 (3 DAYS) BY THE WIND MILLS AM OUNTING TO 300 UNITS AND 8302 UNITS AS COMPARED TO TOTAL DELIV ERY OF 11.14 LACS UNITS TO COMMON DELIVERY POINT. EVEN IN THE M ONTH OF APRIL 2007 THE PRODUCTION SHOWN IS QUITE LESS BE ING 73551/- UNITS ONLY AS COMPARED TO PRODUCTION OF WIND MILLS OF RSMML OR THE PRODUCTION SHOWN BY THE ASSESSEE IN SUBSEQUE NT MONTHS. 9. THE INVOICE IN RESPECT OF ELECTRICITY SALE FOR MARCH 2007 AND APRIL 2007 HAVE BEEN RAISED ON M/S. JAIPUR DIS COM AFTER A LONG GAP ON A SINGLE DATE I.E. 7-6-2007 BEFORE RAIS ING THE INVOICE ON 19-06-07 FOR THE MONTH OF MAY 2007. THE INVOICE NUMBERS WERE 20085004 AND 20085005 RESPECTIVELY BO TH DATED 7-6-2007 BUT THE SAME HAD BEEN ISSUED ON 26-0 6-2007. 10. THE CERTIFICATE ISSUED BY THE EXECUTIVE ENGINEE R DID NOT MENTION ABOUT ANY ELECTRICITY GENERATED. 5 2.3 IN VIEW OF THE ABOVE FACTS THAT COMMISSIONING O F WIND MILLS IS NOT ESTABLISHED ON 29-03-2007 THE AO REQUIRED THE ASSE SSEE TO FILE FURTHER INFORMATIONS AND SUCH FURTHER INFORMATIONS REQUIRED BY THE AO ARE MENTIONED AT PAGES 7 AND8 OF THE ASSESSMENT ORDER. THE ASSESSEE FILED THE REPLY VIDE LETTER DATED 21-12-2009. THE AO REFERRED TO THE FOLLOWING FACTS FOR HOLDING THAT WIND MILLS WAS NOT COMMISSIONED DU RING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION 1. THE COMPANY RECEIVED ITS FIRST CHEQUE ON ACCOUNT OF SALE OF ELECTRICITY FROM JAIPUR DISCOM ON 29 TH SEPT. 2007. 2. THE INSURANCE COVER NOTE HAD BEEN ISSUED BY M/S. ORIENTAL INSURANCE COMPANY ON 5-06-2007. THIS CONCL USIVELY PROVED THAT INSTALLATION OF THE WIND MILLS WAS COMP LETED BY THAT DATE. 2.4 THE ABOVE REFERRED OBSERVATIONS WERE COMMUNICAT ED TO THE ASSESSEE. THE ASSESSEE FILED THE COPY OF LETTER DATED 17 TH FEB. 207 ISSUED BY RRVPNL REGARDING INTERCONNECTION OF 1.2 MW WIND FARM BY T HE ASSESSEE . THE ASSESSEE ALSO FILED THE JOINT INSPECTION OF METERS ON 29-03-07 . HOWEVER THE AO WAS NOT SATISFIED WITH THE EVIDENCE FILED BY THE ASSESSEE TO ESTABLISH THAT THE WIND MILLS WAS COMMISSIONED IN THE PREVIOUS YEA R RELEVANT TO 6 ASSESSMENT YEAR UNDER CONSIDERATION AND ACCORDINGLY THE AO HAS NOT ALLOWED THE DEPRECIATION. 2.5 THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MAD E BY THE AO AFTER OBSERVING AS UNDER:- IT IS OBSERVED THAT THE MAIN ISSUE INVOLVED IN T HIS GROUNDS OF APPEAL IS WHETHER THE APPELLANT HAD INST ALLED AND PUT TO USE THE TWO WIND MILLS ON 29.03.2007 OR NOT. IN THIS REGARD I HAVE CAREFULLY GONE THROUGH THE OBSERVATIONS OF THE LD. AO IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS A ND DETAILS/DOCUMENTS FILED BY THE LD. AR. ON PERUSAL O F THE SAME I FIND THAT THERE IS SUBSTANCE IN THE ARGUMENTS OF TH E LD. AR WHICH ARE SUPPORTED BY THE DETAILS/DOCUMENTS WHICH WERE FURNISHED DURING THE APPELLATE PROCEEDING AS WELL AS DURING THE ASSESSMENT PROCEEDING AND WHICH ARE ON RECORD. IN T HIS RESPECT IT IS OBSERVED THAT THE APPELLANT HAS FURNISHED A C OMMISSIONING CERTIFICATE ISSUED BY THE EXECUTIVE ENGINEER-II(C&M )/TCC-IV RRVPNL BARMER DT. 30.03.2007( WHICH IS INDEPENDEN T THIRD PARTY)WHEREIN IT IS CERTIFIED THAT THE APPELLANT CO MPANY HAD INSTALLED THE TWO WIND MILLS (600 KW WIND ELECTRIC GENERATORS) AT LOCATIONS NO. 26&27 AT POHARA- BARA MSAR SITE IN JAISALMER DISTRICT WHICH WERE SUCCESSFULLY COMM ISSIONED ON 29.03.2007. FURTHER IT IS NOTED THAT THE APPELLANT HAS PRODUCED EVIDENCE OF GENERATION OF 8095 UNITS OF ELECTRICITY DURING THE MONTH OF MARCH 2007 FROM THOSE WIND MILLS AND ALSO THE EVIDENCE OF THE SALE OF THE ELECTRICITY AMOUNTING TO 7285 UNITS 7 (AFTER 10% DEDUCTION ON ACCOUNT OF WHEELING)TO M/S JAIPUR DISCOM FOR RS. 24 115/- WHICH IS DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO THE PART OF 25 TH ANNUAL REPORT(FOR F.Y. 2006-07) OF THE APPELLANT COMPANY WHICH IS PUBLIC SECTOR ENTERPRISES. IN THIS CONNECTION IT IS ALSO NOTED THAT THE LD. AO ALSO MADE AN INDEPENDENT INQUIRY FROM TH E CHIEF ENGINEER(COMMERCIAL) JAIPUR VIDYUT VITRAN NIGAM LT D. WHO VIDE HIS LETTER DT. 29.12.2009 WHICH IS ON RECORD CONFIRMED TO THE LD. AO THAT THE WIND MILLS OF THE APPELLANT HA D BEEN COMMISSIONED ON 29.03.2007. THEREFORE ON THESE FACT S IT IS TO BE HELD THAT THE APPELLANT IS ABLE TO ESTABLISH THA T THE TWO WIND MILLS HAD BEEN INSTALLED ON 29.03.2007 AND ALSO GEN ERATED ELECTRICITY THEREAFTER DURING THE MONTH OF MARCH 20 07 AND THEREFORE THE SAME WERE COMMISSIONED AND PUT TO US E DURING THE F.Y. 2006-07 RELEVANT TO THE A.Y. UNDER CONSIDE RATION 2.6 DURING THE COURSE OF PROCEEDINGS BEFORE US THE LD. DR REFERRED TO THE FIRST INVOICE RAISED BY THE ASSESSEE IN RESPECT OF SALE OF ELECTRICITY. THE INVOICE HAS BEEN MADE IN THE SUCCEEDING PREVIOUS YE AR. THE PAYMENT HAS ALSO BEEN RECEIVED IN THE SUCCEEDING PREVIOUS YEAR. OUR ATTENTION WAS DRAWN TOWARDS INSURANCE COVER NOTE. THE INSURANCE COVER N OTE CAN BE ISSUED WHEN THE WIND MILLS WERE COMMISSIONED. 2.7 THE LD. AR HAS FILED THE WRITTEN SUBMISSION. TH E RELEVANT PARAGRAPHS FROM THE WRITTEN SUBMISSION ARE AS UNDER. 8 AS VENDOR HAD ALREADY STARTED HIS JOB DUE TO DEAD LINE FOR COMPLETION OF THE PROJECT WAS BEFORE 31 ST MARCH 2007 THEREFORE VENDOR INVITED FOR INSPECTION VIDE HIS LE TTER DATED 10.01.2007 AND REPRESENTATIVE OF REIL ALONG WITH REPRESENTATIVE OF M/S VESTAS VENDOR CONDUCT THE INSPECTION ON 25.01.2007. TILL THAT DATE RIICO SHARE OF RS. 44 9 LAC WAS NOT RELEASED THEREFORE COMPANY HAS RELEASED PAYMEN T OF RS. 71 LAC ONLY. AND AS WE HAVE ALREADY STATED THAT BEFORE EXECUTING THE AGREEMENT OF WIND POWER PLANT SOURCE OF FINANCE WAS VERY WELL KNOWN TO THE VENDOR I.E. M/S VESTAS RRB LTD A ND WAS ALSO ASSURED THAT THERE SHALL BE NO PROBLEM IN THE PAYMENT. LOOKING TO THE GOOD CREDIT WORTHINESS AND GOVERNMEN T COMPANY SUPPLIER STARTED THEIR JOB WITHOUT RECEIVI NG MOBILIZATION ADVANCE TIMELY. IF ALL PAYMENT WAS NOT MADE IT MEANS NOT THAT THE WORK HAS NOT COMMENCED AND THE I NSPECTION REPORT DT. 25.01.2007(PB 65) IS INCORRECT WHEN ALL THE DETAILS WERE MINUTELY MENTIONED IN THIS JOINT INSPECTION R EPORT WHICH WAS MADE BY SR. PERSONS OF BOTH THE COMPANY IF THE AO WAS HAVING ANY DOUBT HE SHOULD HAVE REBUT THIS REPORT W ITH THE HELP OF ANY COGENT MATERIAL INSTEAD OF MAKING RUMOR OBS ERVATION. AS MACHINE WAS COMMISSIONED ON 29.03.2007 AND CERTIFICATE OF COMMENCEMENT WAS ISSUED ON MARCH 30 2007 BY EXECUTIVE ENGINEER RRVPNL BARMER(PB21) WHICH IS A CONCLUSIVE EVIDENCE OF INSTALLATION OF MACHINE. AFT ER RECEIVING THIS CERTIFICATE M/S VESTAS RAISED INVOICE ON 31.03 .2007 9 BEFORE CLOSING OF THE FINANCIAL YEAR. AND IT IS FOR THE BUSINESSMEN WHEN THE BILL IS TO BE RAISED FOR ITS B USINESS CONVENIENCE THE AO SHOULD NOT MAKE DRAWN ANY ADVERS E INFERENCE FROM THERETO. IN THE NORMAL BUSINESS PRACTICE AGREEMENTS ARE MA DE FOR TO AVOID FUTURE DISPUTES AND A CLEAR UNDERSTAND ING OF WORK OF SCOPE. HOWEVER SOME TIMES IT IS NOT PRACTICAL A ND POSSIBLE TO FOLLOW EACH AND EVERY WORDS. AS REIL HAS NOT PAI D MOBILIZATION ADVANCE TIMELY IT DOESNT MEAN THAT VE NDOR WILL START HIS WORK ONLY AFTER RECEIPT OF THE ADVANCE AM OUNT. AS WORK WAS STARTED IMMEDIATELY AFTER THE SIGNING OF C ONTRACT AGREEMENT W.E.F 27.09.2006 FROM THE DATE OF INTENT LETTER SO THERE WAS NO DIFFICULTY TO INSTALL THE MACHINE ON 2 9.03.2007. JAIPUR DISCOM RECEIVED ELECTRICITY FROM COMMON DELIVERY POINT HOWEVER EACH MACHINE HAVE THEIR SE PARATE READING. THE DAY WISE DETAIL OF PRODUCTION OF EACH MACHINE IS ALSO AVAILABLE AND COMPANY HAS ALSO RECEIVED PAYMEN T FOR ALL THE ELECTRICITY GENERATED FROM DISCOM. MONTHLY GENERATION REPORT FOR THE MONTH OF MARCH 2 007 SHOW GENERATION OF 1.2 MW WIND POWER PLANT OF THE COMPANY. AS MACHINES WERE STARTED ON 29.03.2007 IN THE INIT IAL PERIOD MACHINES FIND DIFFICULTY TO RUN ON FULL CAPA CITY. 10 HOWEVER FROM NEXT MONTHS MACHINES PERFORMANCE WERE IMPROVING. DUE TO NON-FINALIZATION OF INVOICING PATTERN THER E WAS DELAY IN INITIAL INVOICES HOWEVER COMPANY HAS ACC RUED WIND POWER SALE AS ITS INCOME IN THE BALANCE SHEET OF 20 06-2007 AND COMPANY HAS RECEIVED ALL THE PAYMENTS OF ITS BILLIN G FROM DISCOM. AS PER INCOME TAX ACT FOR CLAIMING DEPRECIATION MACHINE SHOULD BE READY TO PUT TO USE. AS CERTIFICA TE OF EXECUTIVE ENGINEER RRVPNL IS CLEARLY SHOWS THAT M ACHINES WERE COMMISSIONED ON 29.03.2007 ALSO THE AO HIM SE LF GOT VERIFIED THE FACTS FROM CHIEF ENGINEER(COMMERCIAL) (PB 19-20) AND MONTHLY GENERATION REPORT IS ALSO SHOWING THAT PRODUCTION WAS STARTED. IN THIS REGARD IT IS SUBMITTED THAT IN OUR AGR EEMENT IT WAS DUTY OF M/S VESTAS VENDOR TO GET MACHINES INS URED IN THE NAME OF REIL JAIPUR. THE DELAY IN INSURANCE IS NOT DEFAULT OF REIL AND IT IS NOT NECESSARY FOR CLAIMING THE DE PRECIATION THAT MACHINE SHOULD BE INSURED FIRST AND ALSO IN LA W NO WHERE IT HAS BEEN PROVIDED THAT THE MACHINERY SHALL BE DEEM ED COMMENCED ONLY AFTER INSURED. THE BASE MADE BY THE AO IS ABSOLUTELY BASELESS AND FAR FROM THE UNDERSTANDING . FURTHER THE WIND MILLS HAS BEEN INSURED FIRSTLY IN THE NAME OF M/S VESTAS RRB LTD. AT 16.45 ON 05.06.2007(PB67-68) THEREAFTE R THE SAME HAS BEEN ENDORSED IN THE NAME OF THE ASSESSEE(PB69- 70). IF WIND MILLS HAS NOT BEEN INSURED AND THERE WOULD BE ANY LOSS ON 11 ACCOUNT OF ANY MIS HAPPENING FOR THAT M/S VETAS RRB LTD SHALL BE RESPONSIBLE NOT ASSESSEEE. A) COMMISSIONING CERTIFICATE DATED 30.03.2007 ISSUED B Y EXECUTIVE ENGINEER II(C&M)/TCC-IV RRVPNL ANNEXED AT (PB 21) IN WHICH IT HAS BEEN CLEARLY MENTIONED THAT M/S REIL (ASSESSEE) HAVE INSTALLED TWO VESTAS RRB INDI A LTD 600 KW WIND ELECTRIC GENERATOR (TOTALING TO 1.2 MW) AT LOCATION NO. 26 AND 27 AT POHARA BARAMSAR SITE IN JAISALMER HAVE SUCCESSFULLY COMMISSIONED ON 29.03. 2007. THE ENERGY GENERATED FROM THIS SITE WIND FARM IS FE D INTO 33KV FEEDER WHICH IS RADIATING FROM 220 KV GSS AMARSAGAR. HERE IT IS NOT THE CASE OF THE AO THAT I T IS A BLIND CREATED AND AFTER THOUGHT DOCUMENT BECAUSE THIS CERTIFICATE PERTAINS TO MARCH 2007 AND THE CASE WAS SELECTED FOR SCRUTINY IN SEP. 2008. AND THE AO COULD NOT DIS PROVE THE SAME. B) COPY OF INVOICES OF M/S VESTAS DATED 31.03.2007 EVIDENCING COST OF WIND MILLS (5 29 00 000 + 27 20 000 + 23 80 000) TOTAL OF RS.5 80 00 000/-(PB71-73). DEPRECIATION CLAIMED @ 40% RS. 2 32 00 000 . ONLY DUE TO THAT THE INVOICE HAS BEEN MADE ON THE LAST DATE OF THE YEAR IT CAN NOT BE SAID THAT THE WIND MILLS HAS NOT BEEN COMMISSIONED. C) COPY OF CONTRACT AGREEMENT DATED 16.11.2006 BETWEEN APPELLANT AND VESTAS RRB INDIA LTD. EVIDENCING AWA RD OF 12 CONTRACT( PB 7-16) WHEREIN IN ART-2(PB9) IT HAS BE EN CLEARLY MENTIONED THAT THE EFFECTIVE DATE OF THE CO NTRACT SHALL BE THE DATE OF ISSUING LETTER OF INTENT FIRST CO MMUNICATION OF ACCEPTANCE OF BID (I.E. 28.09.2006 LETTER DT. 27 .09.2007) AND IN ART.-3 IT HAS BEEN MENTIONED THAT THE COMPLE TION TIME PERIOD OF THE 1.2 MW PROJECT SHALL BE 26TH JAN. 200 7 I.E. FOUR MONTH FROM THE EFFECTIVE DATE. AND IF IT IS C LEARLY MENTIONED IN THE AGREEMENT THAN THE AO HOW CAN ASSU MED THAT THE CONTRACT HAS STARED FROM 01.03.2007 FROM T HE RECEIPT OF MOBILIZATION ADVANCE. THE AO NO WHERE STATE THAT THE ANY CONTENTS OF THE AGREEMENT ARE WRONG OR INCORRECT. D) COPY OF JOINT INSPECTION REPORT OF MATERIAL DATED 2 5.01.2007 INSPECTION OF MATERIAL AND WORK DONE AND WORK IN P ROGRESS DONE BY REPRESENTATIVE OF APPELLANT AND VESTAS RRB INDIA LIMITED (PB 65-66). AND IF IT SO THEN THE AO CAN H OW ASSUMED THAT THE CONTRACT HAS STARED FROM 01.03.200 7 FROM THE RECEIPT OF MOBILIZATION ADVANCE WHEN IT IS CONT RARY FROM THE REAL FATS AVAILABLE ON RECORD WHEN THE SAME HAS NOT BEEN REBUTTED. E) COPY OF EXTENSION LETTER DATED 09.03.2007 ISSUED BY RAJASTHAN RENEWABLE ENERGY CORPORATION LTD FOR EXTE NDING TIME PERIOD OF COMPLETION OF PROJECT ON OR BEFORE 31.03.2007(PB62). F) COPY OF JOINT INSPECTION REPORT DATED 29.03.2007 OF WIND POWER PLANT IN RESPECT OF CHECK METERING SYSTEM ISS UED BY 13 RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LIMITED PROT ECTION WING CERTIFIED BY JDVNL JODHPUR RRVPNL BARMER RRVPNL BALOTRA AND REPRESENTATIVE OF M/S VESTAS ( PB17- 18). HERE IT IS NOT THE CASE OF THE AO THAT IT IS A BLIND CREATED AND AFTER THOUGHT DOCUMENT BECAUSE THIS CERTIFICATE PERTAINS TO MARCH 2007 AND THE CASE WAS SELECTED FO R SCRUTINY IN SEP. 2008. FURTHER WHEN THE VARIOUS SR. OFFICERS OF THE STATE ELECTRICITY HAS CERTIFIED AND GIVEN T HE JOINT INSPECTION REPORT IN WHICH EVEN ALL THE MINOR DETA ILS IS MENTIONED. AND IF IT IS CLEARLY MENTIONED AND PROVE D BY THE ASSESSEE THAN THE AO HOW CAN ASSUMED THAT THE WIND MILLS HAS NOT BEEN COMMISSIONED IN 29 TH MARCH 2007 AND HE HAS FAILED TO DISPROVE THE SAME. G) COPY OF MONTHLY GENERATION REPORT FOR THE MONTH OF MAR. 2007 DULY SIGNED BY AEN JVVNL JAISALMER AEN 132 KVGSS RRVPNL JAISALMER AND REPRESENTATIVE OF VESTAS SHOWING TOTAL METER READING IN TERM OF BREA KUP OF ENERGY (KWH) AS EXPORT IMPORT NET EXPORT FOR THE MONTH OF MARCH 2007 (PB63). H) DAY WISE DETAILS OF PRODUCTION OF EACH MACHINE FORM 29.03.2007 TO 30.04.2007 RECEIVED FROM VESTAS RRB I NDIA LIMITED (PB61). FURTHER IT IS NOTED THAT THE ASSESS EE HAS PRODUCED EVIDENCE OF GENERATION OF 8095 UNITS OF EL ECTRICITY DURING THE MONTH OF MARCH 2007 FROM THOSE WIND MIL LS AND ALSO THE EVIDENCE OF THE SALE OF THE ELECTRICITY A MOUNTING TO 14 7285 UNITS (AFTER 10% DEDUCTION ON ACCOUNT OF WHEEL ING) TO M/S JAIPUR DISCOM FOR RS. 24 115/- WHICH IS DULY R EFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO T HE PART OF 25 TH ANNUAL REPORT(FOR F.Y. 2006-07)(PB 51)OF THE ASSES SEE COMPANY WHICH IS PUBLIC SECTOR ENTERPRISES. AND IN COME HAS BEEN SHOWN. I) COPY OF LEDGER OF M/S VESTAS RRB INDIA LIMITED EVIDENCING PAYMENT TO SUPPLIER TOWARDS WIND MILLS. J) FURTHER IT IS VERY IMPORTANT TO NOTE THAT THE AO HI M SELF MADE THE INQUIRY FROM THE CHIEF ENGINEER (COMMERCIA L) JVVNL BY HIS LETTER DT. 24.12.2009 REGARDING THE COMMISSIONING OF THE WIND MILLS IN RESPONSE THER E A LETTER DT.29.12.2009(PB19-20) FURNISHED BY SHRI N.M. SAR EEN CHIEF ENGINEER(COMMERCIAL) JVVNL JAIPUR EVIDENCING THE FACT THAT WIND POWER PLANTS IN QUESTION WERE COMMIS SIONED ON 29.03.2007 WHICH IS CORROBORATED BY RECORDS OF INSTALLATION OF METER AND ALSO GENERATION DATA AS VERIFIED FOR THE MONTH OF MARCH 2007. AND IT IS A VERY FULL PROO F COLLECTED BY THE AO IT SELF OF EVIDENCING OF COMMIS SIONING OF WIND MILLS. HENCE THERE IS NO MORE REMAIN IN THE HANDS OF THE ASSESSEE TO PROVE FURTHER WHEN THE AO HIMSELF G OT PROVED. K) FURTHER IN ORDER TO SUBSTANTIATE THE FACT OF INSTAL LATION COMMISSIONING AND REVENUE RECOGNITION OF WIND PO WER GENERATION BY THE ASSESSEE WE SUBMIT TO YOUR HONO UR THE 15 SIGNIFICANT FACTS APPEARING IN THE AUDITED PUBLISHE D BALANCE SHEET AS AT MARCH 31 2007 ( A.Y. 2007-2008 UNDER APPEAL )(PB 22-60) PAGE 07 CHAIRMAN STATEMENT (AN IAS OFFICER) (PB30) YOUR COMPANY HAS SUCCESSFULLY STARTED OPERATION OF ITS OWN 1.2 MW WIND POWER PROJECT AT JAISALMER ( RAJASTHAN ) PAGE 10 DIRECTORS REPORT PARA 02 PERFORMANCE OF THE COMPANY (PB31) IN THE YEAR COMPANY HAS SUCCESSFULLY INSTALLED AND COMMISSIONED ITS OWN 1.2 MW WIND POWER PROJECT AT JAISALMER RAJASTHAN. PAGE 19 SCHEDULE 04 FIXED ASSETS (PB 42) 07. WIND POWER ENERGY : ADDITION DURING THE YEAR. R S. 5 80 00 000/- AND DEPRECIATION (SLM) FOR THE CURREN T YEAR AT RS. 25 170/- (ON PRO RATA BASIS). PAGE 21 SCHEDULE 07 SALES & JOB WORK RECEIPTS ( PB 44) SALES RS. 67 15 80 310 AND SEGMENT WISE DETAIL ON P AGE 28 UNDER HEAD SALES WIND POWER GENERATION KWH. QUANT ITY 7 285 KWH AND VALUE RS. 24 115/- PAGE 27-28 BUSINESS SEGMENT (PB 50-51) SEGMENT REVENUE WIND POWER ENERGY TOTAL REVENUE 0.2 4 LACS. 2.8 THE LD. AR HAS RELIED UPON THE FOLLOWING CASE L AWS. CIT VS. GEO TECH CONSTRUCTION CORPORATION (2000) 24 4 ITR 452 /112 TAXMAN 373 (KER). 16 WHITTLE ANDERSON LTD VS. CIT (1971) 79 ITR 613 (BOM) CAPITAL BUS SERVICE (P) LTD. VS. CIT (1980) 123 ITR 404 (DELHI) CIT VS. VISHWANATH BHASKAR SATHE (1937) 05 ITR 621 (BOM). HYDEL CONSTRUCTIONS LTD VS. CIT (2005) 146 TAXMAN 8 0 (DELHI) CIT VS. NATIONAL PEROXIDE LTD. (2003) SOT 321 (MUM BAI) CIT VS. ASHIMA SYNTEX LTD. (2001) 251 ITR 133 (GUJR AT) CIT VS. UNION CARBIDE (I) LTD. (2002) 124 TAXMAN 85 9 (CAL) CIT V/S VINDHYAL DISTILLERIES (P) LTD. 272 ITR 583( MP) AUROFOOD LTD. VS. CIT (2005) 4 SOT 346 (CHENNAI). 2.9 WE HAVE HEARD BOTH THE PARTIES. THE COMMISSIONI NG CERTIFICATE ISSUED BY THE EXECUTIVE ENGINEER IS FROM RPVNL BARMER IN WHICH IT HAS BEEN MENTIONED THAT THAT TWO WIND ELECTRIC GENERATORS HA VE SUCCESSFULLY BEEN COMMISSIONED ON 29 TH MARCH 2007. THERE IS A JOINT INSPECTION REPORT OF WIND POWER PLANT BY EXECUTIVE ENGINEER RRVPNL BAR MER AND REPRESENTATIVE OF M/S. VESTAS RRB INDIA LTD. AS PER LETTER OF INTENT M/S. VESTAS RRB INDIA LTD. WAS RESPONSIBLE FOR INSURANCE CHARGES. THE AO HAS RAISED CERTAIN DOUBTS THAT COMMISSIONING WAS NOT DO NE BEFORE 31-03-2007. HOWEVER THE ISSUE CANNOT BE DECIDED ON DOUBTS. THE AO HAS NOT COLLECTED 17 ANY EVIDENCE TO SUGGEST THAT ERECTION OF WIND MILL WAS NOT DONE BEFORE 31- 03-2007. THE AO IS OF THE OPINION THAT MOBILIZATION ADVANCE WAS MADE ON 1-3-2007 AND HENCE CIVIL WORK WOULD HAVE BEEN DONE AFTER 01-03-2007 AND WITHIN ONE MONTH IT WAS NOT POSSIBLE TO ERECT THE W IND MILL. THE AO COULD HAVE VERIFIED THE ACCOUNTS OF THE CONTRACTOR. THE L D. AR HAS RELIED UPON CERTIFICATE AND INSPECTION REPORTS OF THE OFFICERS OF RVVPNL AND RECL. IF THE AO WAS HAVING DOUBTS HE SHOULD HAVE EXAMINED S UCH OFFICERS OR COULD HAVE ASKED THE ASSESSEE TO PRODUCE THE PERSONS WHO HAVE ISSUED CERTIFICATES. IT IS A CASE WHERE ONE HAS TO EVALUATE EVIDENCES VI S A VIS THE DOUBTS IN THE MIND OF AO. EVIDENCES MUST PREVAIL OVER DOUBTS UNLE SS DOUBTS ARE VERIFIED AND EVIDENCES IN SUPPORT OF DOUBTS ARE GATHERED. HE NCE WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ALLOW D EPRECIATION. 2.10 THE DEPRECIATION IS ALLOWABLE IN CASE THE ASSE T IS USED FOR TRIAL RUN OR KEPT READY FOR USE. RELIANCE IS PLACED ON THE DECIS ION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PANACEA BIOTECH LTD. 324 ITR 311. IT IS THEREFORE CLEAR THE LD. CIT(A) WAS JUSTIFIED IN DI RECTING THE AO ALLOW DEPRECIATION. 18 3. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08-0 7-2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 08/07/2011 MISHRA COPY TO: 1. THE ACIT CIRCLE- 7 JAIPUR 2. M/S. RAJASTHAN ELECTRONICS & INSTRUMENTS LTD. JAIPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO.1319/JP/10) SR. P.S. ITAT: JAIPUR