M/s. Atlast Exports Enterprises, Karur v. DCIT, Trichy

ITA 1948/CHNY/2009 | 2005-2006
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 194821714 RSA 2009
Assessee PAN AAAFA4788R
Bench Chennai
Appeal Number ITA 1948/CHNY/2009
Duration Of Justice 1 year(s) 2 month(s) 27 day(s)
Appellant M/s. Atlast Exports Enterprises, Karur
Respondent DCIT, Trichy
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 25-03-2011
Date Of Final Hearing 16-03-2011
Next Hearing Date 16-03-2011
Assessment Year 2005-2006
Appeal Filed On 29-12-2009
Judgment Text
AND IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI HARI OM MARATHA J.M. AND SHRI ABRAHAM P. GEORGE AM .. I.T.A. NO. 1948/MDS/2009 ASSESSMENT YEAR 2005-06 M/S ATLAS EXPORTS ENTERPRISES NO. 29-J PUGALUR ROAD KARUR 639 001 PAN : AAAFA 4788 R VS. THE DY. C.I.T - II TRICHY (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SAROJ KUMAR PARIDA DEPARTMENT BY : SHRI K.E.B RENGARAJAN O R D E R PER ABRAHAM P. GEORGE AM IN THIS APPEAL FILED BY THE ASSESSEE ITS GRIEVANC E IS THAT THE LD. CIT(A) SUSTAINED THE DISALLOWANCE TO THE EXTENT OF 1% OF EXPENDITURE ON WEAVING PACKING AND TAILORING CHARG ES. ITS SECOND GRIEVANCE IS THAT THE LD. CIT(A) RESTRICTED THE DEP RECIATION CLAIMED PAGE 2 OF 10 I.T.A. NO. 1948/MDS/2009 ON WIND MILL AND ALLOWED SUCH CLAIM ON COST OF EREC TION CHARGES ELECTRICAL AND CIVIL WORKS AT THE RATE APPLICABLE T O ELECTRICAL FITTINGS ONLY. 2. SHORT FACTS APROPOS IN RELATION TO THE FIRST GRI EVANCE ARE THAT ASSESSING OFFICER HAD DISALLOWED 2% OF EXPENSES CLA IMED FOR WEAVING PACKING AND TAILORING CHARGES. ACCORDING TO HIM THIS CLAIM WAS SUPPORTED ONLY BY SELF MADE VOUCHERS IN WHICH RATE AND QUANTITY OF WORK DONE WAS NOT CLEARLY MENTIONED. I N ITS APPEAL BEFORE THE LD. CIT(A) IT WAS ARGUED BY THE ASSESSE E THAT ALL THE PAYMENTS WERE SUPPORTED BY VOUCHERS. LD. CIT(A) RE DUCED THE DISALLOWANCE TO 1% OF THE CLAIM. WE DO NOT FIND AN Y REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) SINCE VO UCHERS PRODUCED BY ASSESSEE HAD MINOR DEFECTS THEREIN AND HENCE THE LD. CIT(A) HAD RIGHTLY REDUCED THE DISALLOWANCE TO 1% FROM 2% MADE BY THE ASSESSING OFFICER. GROUND NOS. 2 AND 3 THEREFORE STAND DISMISSED. 3. SECOND GRIEVANCE IS WITH REGARD TO RESTRICTION O F DEPRECIATION ON COST OF ERECTION CHARGES ELECTRICAL AND CIVIL W ORKS RELATING TO THE WINDMILL. PAGE 3 OF 10 I.T.A. NO. 1948/MDS/2009 4. THE LD. A.R. CONTENDED THAT THE LD. CIT(A) HAD W RONGLY CONFIRMED THE TREATMENT OF THE ASSESSING OFFICER IN THIS REGARD WITHOUT APPRECIATING THAT WINDMILL HAD TO BE CONSID ERED AS A WHOLE. HE FURTHER RELIED ON A TRIBUNAL ORDER DATED 9.7.201 0 IN ITA NOS. 564 TO 567/MDS/2010 WHEREIN A SIMILAR CLAIM OF CERTAIN ASSESSEES HAVE BEEN ALLOWED. COPY OF THE ORDER HAS BEEN FILED IN SUPPORT OF HIS CONTENTION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. IN ITS ORDER DATED 9.7.2010 IN ITA NOS. 564 TO 567/ MDS/2010 IT WAS HELD BY THE TRIBUNAL AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS. VIS--VIS WITH THE ARGUMENT OF THE LEARNED D.R. THAT ONLY SUCH ITEMS WHI CH ARE ESSENTIAL FOR SETTING UP OF A WINDMILL COULD BE CON SIDERED PART THEREOF THERE CANNOT BE ANY DISPUTE. HOWEVER IN NONE OF THE RELEVANT ASSESSMENT ORDERS THE A.O. HAD GIV EN ANY FINDING THAT CLAIM OF CIVIL WORK AND ELECTRICAL FIT TINGS WERE NOT PART OF THE WINDMILL. THOUGH INITIALLY THE A.O . HAS TAKEN A STAND THAT CIVIL WORK AND ELECTRICAL FITTINGS DID NOT FORM PART OF WINDMILL LATER BASED ON ASSESSEES REPLY HIS PAGE 4 OF 10 I.T.A. NO. 1948/MDS/2009 CONCLUSION AS A PART WAS THAT ELECTRICAL FITTINGS A ND EQUIPMENTS THOUGH ATTACHED TO THE WINDMILL COULD NOT BE CONSIDERED AS ITS PART WARRANTING HIGHER RATE OF DE PRECIATION. IN OTHER WORDS THE A.O. HAS ACCEPTED THE POSITION THAT CIVIL WORK AND ELECTRICAL EQUIPMENTS WERE FOR THE INSTALLA TION OF WINDMILL. THIS BEING SO IN OUR OPINION SUCH EXPEN SES COULD NOT BE CONSIDERED AS ITEMS WHICH WERE NOT NECESSARY FOR INSTALLATION OF THE WINDMILL. 7. WITH REGARD TO THE CLAIM OF ENHANCED DEPRECIATIO N FOR CIVIL AND ELECTRICAL FITTINGS FOR WINDMILLS IN OUR OPINION THE DECISION IN THE CASE OF M/S ASIAN HANDLOOM REFERRED TO ABOVE IS CLEARLY IN FAVOUR OF ASSESSEE. THIS WAS FURTHER A FFIRMED BY A SUBSEQUENT DECISION OF A COORDINATE BENCH IN THE CA SE OF M/S BRITISH WEAVING COMPANY V. DCIT IN I.T.A. NO.511/MDS/2009 DATED 12 TH MARCH 2010. PARAS 2 TO 6 OF THIS ORDER ARE REPRODUCED FOR THE SAKE OF BREVITY:- 2 AS CLEAR FROM THE GROUNDS THE ISSUES CONCERNS DEPRECIATION ON WIND MILLS. ASSESSEE HAD CLAIMED DEPRECIATION AVAILABLE AT HIGHER RATE FOR WIND MILL ON PAGE 5 OF 10 I.T.A. NO. 1948/MDS/2009 THE CIVIL WORK AS WELL AS ELECTRICAL FILLINGS. ASS ESSING OFFICER WAS OF THE OPINION THAT FOR THE WIND MILL SUPPLIED BY NEG MION NO BREAK UP OF COST WAS AVAIL ABLE FROM THEIR INVOICE. ACCORDING TO HIM ON ELECTRICA L FITTINGS DEPRECIATION COULD BE ALLOWED ONLY AT 7.5%. VALUE OF ELECTRICAL FITTING WAS ESTIMATED AT RS.40 L AKHS. RESULT WAS THAT THERE WAS A DISALLOWANCE OF RS.5 LAK H ON DEPRECIATION. ASSESSEES APPEAL BEFORE THE CIT(A) W AS UNSUCCESSFUL. 3. NOW BEFORE US THE LD. AR RELYING ON A CO-ORDINA TE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF M/S. ASIAN HANDLOOM VS. DCIT (ITA NO.2291/MDS/2008 DT.20.11.09 ) ARGUED THAT THE DISALLOWANCE ON DEPRECIATION WAS UNCALLED FOR. PER CONTRA THE LD. DR RELYING ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE C ASE OF NESTLE INDIA LTD. VS. DCIT 111 TTJ 498 SUBMITTED THAT IF FUNCTIONAL TEST WAS APPLIED ELECTRICAL INSTALLATION COULD NOT BE TREATED ON PAR WITH A WINDMILL FOR GRANTING HIGH DEPRECIATION. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. TREATMENT OF CLAIM OF DEPRECIATION ON A WINDMILL INSTALLATION HAS BEEN DEALT WITH AT PARA 12 OF THE ORDER OF THIS CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASIAN PAGE 6 OF 10 I.T.A. NO. 1948/MDS/2009 HANDLOOM VS. DCIT (SUPRA) AND THIS IS REPRODUCED HEREUNDER: 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 OF SAW MILL GRINDING CONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL AS INSTALL ED 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 CALLED 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 STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. PAGE 7 OF 10 I.T.A. NO. 1948/MDS/2009 SPECIALIZED FOUNDATION AND SPECIALIZED AREA SPECIFICALLY EAR-MARKED TO FACILITATE A FLOW OF WIN D WITHOUT HINDRANCE AND SPECIALIZED ELECTRICAL FITTINGS AND HIGH TENSION LINES ARE ALL BASIC 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 A RE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH WIND 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 CONCLUSION 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 WAS A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECHNICAL REQUIREMENT IT WOULD QUALIFY TO BE TREATED AS A PLANT. IN OUR OPINION THE EXPENSES RELATING TO THE LAND AND FOUNDATION SPECIALLY PAGE 8 OF 10 I.T.A. NO. 1948/MDS/2009 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. SIMILARLY IN THE C ASE OF CIT V. HERDILIA CHEMICALS (216 ITR 742) HONBLE JURISDICTIONAL HIGH COURT HELD THAT HUGE LAND MEASURING 360 ACRES TAKEN ON EASE FOR THE PURPOSE OF ERECTION OF PLANT AND MACHINERY WHERE THE ENTIRE FACTORY WAS TO BE CONSTRUCTED IN THIS LAND AND EXPENSES INCURRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND FOR THE PURPOSE OF LEVELING THE LAND FORMED A PART OF THE COST OF THE PLANT. I F WE LOOK AT APPENDIX I TO THE INCOME-TAX RULES PRESCRIBING THE RATES OF DEPRECIATION IT CAN BE SE EN THAT LEGISLATURE 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 IMPAIRMENT 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 ENERGY SOURCES OR PREVENTION OF POLLUTION. IF A VERY LIMITED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES IT WOULD DEFEAT THE VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE IN OUR OPINION ASSESSEES CLAIM FOR PAGE 9 OF 10 I.T.A. NO. 1948/MDS/2009 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. AS FOR THE DECISION OF DELHI BENCH IN NESTLE IN DIA LTD.S CASE (SUPRA) RELIED ON BY THE LD. DR IT WAS REGARDING A CLAIM OF DEPRECIATION ON UPS ATTACHED T O A COMPUTER AND HAS NO RELEVANCE WHATSOEVER ON FACTS HERE. 6. WE THEREFORE HAVE NO HESITATION TO QUASH THE DISALLOWANCE OF DEPRECIATION MADE. SUCH DISALLOWANCE STANDS DELETED. 8. HENCE WE HAVE NO HESITATION TO HOLD THAT THE ASS ESSEES CONCERNED WERE ELIGIBLE FOR DEPRECIATION ON WINDMIL LS INCLUDING CIVIL WORK AND ELECTRICAL FITTINGS. THE A .O. IS DIRECTED TO ALLOW DEPRECIATION ACCORDINGLY. 6. THE FACT-SITUATION IS VERY SAME FOR THE ASSESSEE HERE ALSO. THEREFORE WE FIND NO HESITATION TO HOLD THAT ASSES SEE WAS ELIGIBLE PAGE 10 OF 10 I.T.A. NO. 1948/MDS/2009 FOR DEPRECIATION ON WINDMILLS INCLUDING CIVIL WORK AND ELECTRICAL FITTINGS. ORDERS OF THE AUTHORITIES BELOW ARE SET A SIDE. GROUNDS 4 AND 5 OF THE ASSESSEE ARE ALLOWED. ASSESSING OFFICE R IS DIRECTED TO ALLOW DEPRECIATION ACCORDINGLY. 7. IN THE RESULT APPEAL OF THE ASSESSEE STANDS PAR TLY ALLOWED. ORDER PRONOUNCED ON 25 TH MARCH 2011. SD/- SD/- (HARI OM MARATHA ) ( ABRAHAM P.GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 25 TH MARCH 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE