M/s. Shri Ram Gum & Chemicals, JODHPUR v. ACIT, JODHPUR

ITA 499/JODH/2009 | 2006-2007
Pronouncement Date: 30-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 49923314 RSA 2009
Assessee PAN AACFS7767E
Bench Jodhpur
Appeal Number ITA 499/JODH/2009
Duration Of Justice 2 year(s) 2 month(s) 28 day(s)
Appellant M/s. Shri Ram Gum & Chemicals, JODHPUR
Respondent ACIT, JODHPUR
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-11-2011
Date Of Final Hearing 29-11-2011
Next Hearing Date 29-11-2011
Assessment Year 2006-2007
Appeal Filed On 01-09-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NOS.499/JU/2009 ASSESSMENT YEAR : 2006-07 PAN: AACFS 7767 E M/S. SHRI RAM GUM & CHEMICALS VS. THE ACIT C-79 MIA BASNI-II CIRCLE- 1 JODHPUR JODHPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDER JAIN DEPARTMENT BY: SHRI G.R. KOKANI DATE OF HEARING: 29-11-2011 DATE OF PRONOUNCEMENT: 30.11.2011. ORDER PER N.L. KALRA AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A) JODHPUR DATED 21-07-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE GROUNDS OF APPEAL NO. 1 AND 2 OF THE ASSESS EE ARE AS UNDER:- (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE LD.CIT(A) GROSSLY ERRED IN UPHOLDING THE CONTENTION OF THE AO THAT EARTH WORK AND FOUNDATION FOR ENERCON MAKE WINE TURBINE CONVERTOR 800 KW TYPE E-48 INCLUDING APPROACH AND INTERNAL ROADS 11/22/33KV INTERNAL / EXTERNAL LINES INCLUDING DP STRUCTURES POLES AT WINDFARM SIT E ARE NOT COVERED BY ITEM NO. III (8) (XIII) (1) OF APPENDIX I UNDER RULE 5 OF INCOME TAX RULES 1962 BEING WIND MILLS AND ANY SPECIALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS AND RESTRICTING THE DEPRECIATION TO 10% OF WDV BY TREAT ING THE SAME AS BUILDING PARTICULARLY WHEN SUCH EXPENDITURE ARE INCURRED SPECIFICALLY TO ENABLE THE WINDMILL TO PER FORM ITS BASIC FUNCTION WHICH IS GENERATION OF POWER AND THE CAPITAL EXPENDITURE SO INCURRED IS ELIGIBLE FOR DEPRECIATIO N @ 80%. 2 (2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD.CIT(A) GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE OF DEPRECIATION OF RS. 18 20 000/- BY RESTRICTING THE DEPRECIATION RATE TO 10% OF WDV ON THE CAPITAL EXPENDITURE OF RS . 26 00 000/- AS AGAINST THE DEPRECIATION ALLOWANCE O F RS. 20 80 000/- CLAIMED BY THE ASSESSEE. 2.2 BEFORE US THE ISSUES STAND COVERED BY THE ORDE RS OF ITAT JODHPUR BENCH AS WELL AS ITAT JAIPUR BENCH. THE ITAT JODHPUR BENCH HAS HE LD THAT SO FAR AS THE EXPENDITURE ON FOUNDATION IS CONCERNED THE ASSESSEE IS ENTITLE D TO HIGHER DEPRECIATION. HOWEVER IR CIVIL WORK THE MATTER WAS RESTORED BACK ON THE FIL E OF THE AO. IT WILL BE USEFUL TO REPRODUCE FOLLOWING PARAGRAPHS FROM THE ORDER OF T HE TRIBUNAL IN ITA NO. 195/JU/2010 DATED 11-02-2011. 12. THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% O N FOUNDATION AS WELL AS OTHER CIVIL WORKS. BOTH THE A O AND THE LD.CIT(A) DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THA T THEY ARE NOT INTEGRAL PART OF THE WIND MILL. THE DEPRECIATION IN RESPECT OF FOUNDATION IS CONCERNED THE FOUNDATION FOR THE PURPOSE OF THE WIN D MILL IS DIFFERENT FROM THE OTHER CIVIL WORKS. WIND MILL IS A HEAVY MA CHINE AND A SPECIALLY DESIGNED FOUNDATION IS REQUIED THEREFORE THE AO H AS NOT JUSTIFIED IN COMPARING THE FOUNDATION OF THE WIND MILL FROM OTHE R CIVIL WORKS IN THE CASE OF CIT VS HERDILLIA CHEMICALS LTD. 216 ITR 742 (BOM) WHEREIN THE HON'BLE HIGH COURT OF MUMBAI HAS HELD THE EXPENDITU RE INCURRED ON FOUNDATION FIXING THE PLANT AND MACHINERY WOULD FOR M PART OF THE COST OF PLANT AND MACHINERY AND THE ASSESSEE WOULD BE ENTI TLED TO DEPRECIATION AT THE SAME RATE AS APPLICABLE TO THAT PLANT AND MACHI NERY. IN THE CASE OF ACIT VS MADRAS CEMENTS LTD. 110 IT 281 (MAD.) HA S HELD THAT THE FOUNDATION WORK DONE FOR FIXING MACHINERY IS TO BE TREATED AS PART OF THE PLANT AND MACHINERY. IN THE CASE OF CIT VS R.G. ISP AT LTD. 123 CTR (RAJ.) WHERE THE JURISDCTIONAL HIGH COURT CATEGORICALLY H ELD THAT THE MASSIVE REINFORCED CONCRETE STRUCTURE ESPECIALLY DESIGNED TO TAKE UP LOADS 3 CONSTITUTED PLANT WITHIN THE MEANING OF SECTION 4 3(3) OF THE INCOME TAX ACT 1961 13. WE THEREFORE TAKING INTO CONSIDERATION THE FAC TS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE A BOVE CASE LAWS WE CAME TO CONCLUSION THAT THE FOUNDATION OF THE WINDM ILL IS AMOUNTING TO PART AND PARCEL OF THE WIND MILL AND IT IS PLANT AN D MACHINERY AND ACCORDINGLY THE ASSESSEE IS ELIGIBLE FOR HIGHER RAT E OF DEPRECIATION WHICH WAS CLAIMED. AS FAR AS CIVIL WORK IS CONCERNED WE FIND THAT IT IS NOT AN INTEGRAL PART OF THE WINDMILL AND HE IS NOT ELIGIBL E FOR HIGHER DEPRECIATION. 14. IN VIEW OF THE ABOVE OBSERVATIONS WE SET ASIDE THE ORDER PASSED BY THE LD.CIT(A) AND REMIT THE ISSUE MATTER BACK TO THE FILE OF THE AO AND DIRECT THE AO TO ALLOW HIGHER DEPRECIATION C LAIM OF THE ASSESSEE IN RESPECT OF FOUNDATION OF THE WINDMILL. IN SO FAR A S OTHER ALLIED WORKS ARE CONCERNED NORMAL RATE HAS TO BE APPLIED AND THIS GR OUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE S. 2.3 THE JAIPUR BENCH VIDE ITS ORDER IN ITA NO. 745/ JP/07 AND 731/JP/07 DATED 18-07- 2008 IN THE CASE OF M/S. VIJAY INDUSTRIES VS ITO HE LD THAT DEPRECIATION IS TO BE ALLOWED O THE ROOM ALSO. IT WILL BE USEFUL TO REPRODUCE PARA 6 OF ITAT JAIPUR ORDER AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE PROVISIONS OF ALLOWING DEPRECIATION ON TH E WIND MILL IS GOVERNED BY APPENDIX I PARA (XIII) (1) WHICH READS AS UNDER: - (XIII) RENEWABLE ENERGY DEVICES BEING (A) TO (K) .. (L) WIND MILLS AND ANY SPECIALLY DESIGNED DEVICES WHICH RUN ON WIND MILLS 80% IT IS EVIDENT FROM THE AFOREMENTIONED PROVISIONS TH AT THE DEPRECIATION @ 80% HAS TO BE CHARGED ON THE COMPLET E WIND MILL. THEREFORE THE LD. CIT(A) IS NOT JUSTIFIED IN SEGRE GATING THE COST OF THE CONSTRUCTION OF THE ROOM FROM THE SAID WIND MILL. T HE SAID CONSTRUCTION OF 4 THE ROOM AS ARGUED HAS BEEN SPECIALLY DESIGNED FO R THE PURPOSE OF THE WIND MILL AND THEREFORE THE LD. CIT(A) IS DIRECTED TO ALLOW THE DEPRECIATION AS PER THE RULES APPLICABLE ON THE WIN D MILLS. THUS GROUND NO. 6 OF THE ASSESSEE IS ALLOWED. 2.4 WE THEREFORE HOLD THAT THE DEPRECIATION WILL B E ALLOWED ON THE FOUNDATION OF WINDMILL AS WELL AS FOR THE CONSTRUCTION OF THE ROO M. IN RESPECT OF OTHER CIVIL WORK ITAT JODHPUR BENCH VIDE ORDER DATED 11-02-2011 (ITA NO. 195/JU/2010) HAS RESTORED THE ISSUE IN THE CASE OF DELHI RAJASTHAN TRANSPORT CO. LTD. 3.1 THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED CONFIRMING THE LEVY OF INTEREST CHARGED BY THE AO U /S 234D AND WITHDRAWING INTEREST U/S 244A OF THE INCOME TAX ACT. WE HAVE HEARD BOTH THE PARTIES. THE CHARGING OF IN TEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE. 3.0 IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.1 1.2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 30 /11/2011 MISHRA COPY TO: 1. M/S. SHRI RAM GUM & CHEMICALS JODHPUR 2. THE ACIT CIRCLE- 1 JODHPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 499/JU/09) A.R.. ITAT: JODHPUR 5