Dr.Punithavathy Kannan, Karur v. DCIT, Trichy

ITA 565/CHNY/2010 | 2006-2007
Pronouncement Date: 09-07-2010 | Result: Allowed

Appeal Details

RSA Number 56521714 RSA 2010
Assessee PAN AABFM1014B
Bench Chennai
Appeal Number ITA 565/CHNY/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant Dr.Punithavathy Kannan, Karur
Respondent DCIT, Trichy
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 09-07-2010
Assessment Year 2006-2007
Appeal Filed On 26-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH -- D CHENNAI (BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER) ..... (1) I.T.A. NO.564 / MDS/10 ASSESSMENT YEAR : 2006-07 (2) I.T.A. NO.565/MDS/10 ASSESSMENT YEAR : 2006-07 (3) I.T.A. NO.566/MDS/10 ASSESSMENT YEAR : 2006-07 (4) I.T.A. NO.567/MDS/10 ASSESSMENT YEAR : 2006-07 (1) M/S MALLOW INTERNATIONAL SF 535 SEMMADAI SALEM PASS ROAD KARUR. PAN : AABFM1014B (2) DR. PUNITHAVATHY KANNAN K.P. HOSPITAL NO.96 KOVAI ROAD KARUR. PAN : AAFPK9325D (3) LATE SHRI R. KANNAN L/H DR. PUNITHAVATHY KANNAN K.P. HOSPITAL NO.96 KOVAI ROAD KARUR. PAN : AAEPK1919K (4) SHRI B. MURUGESH 5/184-I SRI RAGAVENDRA NAGAR MADURAI BYE PASS ROAD KARUR. PAN : AAHPM8327R (APPELLANTS) V. THE DY. COMMISSIONER OF INCOME TAX CIRCLE II TRICHY. (RESPONDENT) APPELLANTS BY : SHRI SAROJ KUMAR PARIDA RESPONDENT BY : SMT. P.N. KAMALA DEVI O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN ALL THESE FOUR APPEALS THE COMMON GRIEVANCE TA KEN BY THE ASSESSEES IS THAT THE CIT(A) RESTRICTED THEIR CLAIM OF DEPRECIAT ION ON WINDMILLS. I.T.A. NOS. 564 TO 567/MDS/10 2 2. ACCORDING TO THE ASSESSEES THE EXPENDITURE CIVI L AND ELECTRICAL WORKS WERE FOR SETTING UP OF A WINDMILL AND SUCH EXPENDIT URE FORMED PART OF THE ERECTION COST OF WINDMILL AND DEPRECIATION WAS REQUIRED TO B E ALLOWED ON THE ENTIRE COST INCLUDING SUCH CIVIL AND ELECTRICAL WORKS. AS PER THE ASSESSEES WINDMILL PURCHASE AND INSTALLATION WAS A TURNKEY PROJECT AND THERE COULD NOT BE ANY SEGREGATION OF THE EXPENSES UNDER DIFFERENT HEADS. 3. SHORT FACTS APROPOS ARE THAT ALL THE ASSESSEES H AD INCURRED EXPENSES FOR CIVIL AND ELECTRICAL FITTINGS FOR SETTING UP WINDM ILLS. THE A.O. DISALLOWED SUCH CLAIM TO THE EXTENT IT CONSISTED OF COST OF CIVIL W ORK AND ELECTRICAL FITTINGS. ACCORDING TO THE A.O. COST OF CIVIL WORK AND ELECT RICAL FITTINGS WERE ELIGIBLE FOR ONLY 10% DEPRECIATION. THE CIT (APPEALS) ALSO WAS OF THE OPINION THAT CIVIL AND ELECTRICAL FITTINGS CCOULD NOT BE CONSIDERED AS PAR T OF THE WINDMILL AND DEPRECIATION WHICH WAS ALLOWABLE TO WINDMILL COULD NOT BE ALLOWED TO SUCH CIVIL AND ELECTRICAL WORKS. 4. NOW BEFORE US THE LEARNED A.R. RELYING ON A CO ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF M/S ASIAN HANDLOOM V. DCIT (I.T.A. NO.2291/MDS/2008 DATED 20.11.09) SUBMITTED THAT SUC H DISALLOWANCE WAS NOT CALLED FOR. ACCORDING TO HIM THE ELECTRICAL AND C IVIL WORKS WERE ALL A PART OF WINDMILL AND INTEGRAL FOR SETTING UP OF THE WINDMI LL. THEREFORE IN HIS OPINION HIGHER RATE OF DEPRECIATION WHICH WAS AVAILABLE TO WINDMILL WOULD BE AVAILABLE ALSO FOR SUCH ELECTRICAL AND CIVIL WORKS AS WELL. 5. PER CONTRA THE LEARNED D.R. SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. ACCORDING TO HER ITEMS WHICH WERE NOT ESSENTIAL C OULD NOT BE TREATED ON PAR WITH A WINDMILL FOR GRANTING HIGHER DEPRECIATION. I.T.A. NOS. 564 TO 567/MDS/10 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS. VIS--VIS WITH THE ARGUMENT OF THE LEARNED D.R. THAT ONLY SUCH ITEMS WHICH ARE ESSENTI AL FOR SETTING UP OF A WINDMILL COULD BE CONSIDERED PART THEREOF THERE CANNOT BE ANY DISPUTE. HOWEVER IN NONE OF THE RELEVANT ASSESSMENT ORDERS THE A.O. HA D GIVEN ANY FINDING THAT CLAIM OF CIVIL WORK AND ELECTRICAL FITTINGS WERE NO T PART OF THE WINDMILL. THOUGH INITIALLY THE A.O. HAS TAKEN A STAND THAT CIVIL WOR K AND ELECTRICAL FITTINGS DID NOT FORM PART OF WINDMILL LATER BASED ON ASSESSEES RE PLY HIS CONCLUSION AS A PART WAS THAT ELECTRICAL FITTINGS AND EQUIPMENTS THOUGH ATTACHED TO THE WINDMILL COULD NOT BE CONSIDERED AS ITS PART WARRANTING HIGHER RAT E OF DEPRECIATION. IN OTHER WORDS THE A.O. HAS ACCEPTED THE POSITION THAT CIVI L WORK AND ELECTRICAL EQUIPMENTS WERE FOR THE INSTALLATION OF WINDMILL. THIS BEING SO IN OUR OPINION SUCH EXPENSES COULD NOT BE CONSIDERED AS ITEMS WHIC H 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 DECISIO N IN THE CASE OF M/S ASIAN HANDLOOM REFERRED TO ABOVE IS CLEARLY IN FAVOUR OF ASSESSEE. THIS WAS FURTHER AFFIRMED BY A SUBSEQUENT DECISION OF A COORDINATE B ENCH IN THE CASE OF M/S BRITISH WEAVING COMPANY V. DCIT IN I.T.A. NO.511/MD S/2009 DATED 12 TH MARCH 2010. PARAS 2 TO 6 OF THIS ORDER ARE REPRODUCED FO R THE SAKE OF BREVITY:- 2 AS CLEAR FROM THE GROUNDS THE ISSUES CONCERNS DE PRECIATION ON WIND MILLS. ASSESSEE HAD CLAIMED DEPRECIATION A VAILABLE AT HIGHER RATE FOR WIND MILL ON THE CIVIL WORK AS WELL AS EL ECTRICAL FILLINGS. ASSESSING OFFICER WAS OF THE OPINION THAT FOR THE W IND MILL SUPPLIED BY NEG MION NO BREAK UP OF COST WAS AVAILABLE FROM TH EIR INVOICE. ACCORDING TO HIM ON ELECTRICAL FITTINGS DEPRECIAT ION COULD BE ALLOWED ONLY AT 7.5%. VALUE OF ELECTRICAL FITTING WAS ESTI MATED AT RS.40 LAKHS. RESULT WAS THAT THERE WAS A DISALLOWANCE OF RS.5 LA KH ON DEPRECIATION. ASSESSEES APPEAL BEFORE THE CIT(A) WAS UNSUCCESSFU L. I.T.A. NOS. 564 TO 567/MDS/10 4 3. NOW BEFORE US THE LD. AR RELYING ON A CO-ORDIN ATE 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 DISAL LOWANCE ON DEPRECIATION WAS UNCALLED FOR. PER CONTRA THE LD. DR RELYING ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. VS. DCIT 111 TTJ 498 SUBMITTED THAT IF FUN CTIONAL TEST WAS APPLIED ELECTRICAL INSTALLATION COULD NOT BE TREAT ED 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 DE ALT WITH AT PARA 12 OF THE ORDER OF THIS CO-ORDINATE BENCH OF THIS TRIBUNA L IN THE CASE OF ASIAN HANDLOOM VS. DCIT (SUPRA) AND THIS IS REPRODUCED HE REUNDER. 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 C ONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL AS INSTALLED BY THE ASSESSEE WHICH IS OF SUZLON CORPO RATION WOULD CONSIST OF A SPECIALIZED FOUNDATION ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONN ECTED 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 SER VES AS A SIGNIFICANT SOURCE OF ELECTRICAL ENERGY. BEING A N ON- CONVENTIONAL SOURCE OF ENERGY WITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY WORLD OVER WINDMILLS HAV E BEEN GIVEN SPECIAL STATUS IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THAT FOR A WINDMILL TO BE SUSTAINABLE I T HAS TO BE ERECTED IN A PLACE WHERE SUSTAINABLE WIND FLOW I S AVAILABLE WITH A LAND SUITABLE TO A FOUNDATION ON W HICH A STRUCTURE STRONG ENOUGH TO WITHSTAND A POWERFUL THR UST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AN D SPECIALIZED AREA SPECIFICALLY EAR-MARKED TO FACILIT ATE A FLOW OF WIND WITHOUT HINDRANCE AND SPECIALIZED ELECTRIC AL FITTINGS AND HIGH TENSION LINES ARE ALL BASIC REQUI REMENTS FOR A WIND MILL PLANT. NONE OF THESE REQUIREMENTS INCLU DING THE PREMISES CAN BE SEEN DETACHED FROM WHAT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE ESSENTIA L. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH WIND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALL Y DEMARCATED APPURTENANT THERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUILDING WHICH IS ADJUNCT I.T.A. NOS. 564 TO 567/MDS/10 5 TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS . ON THE OTHER HAND THESE CAN BE DEEMED ONLY A PART OF A WIN DMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCL USION 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 PLANN ED AND CONSTRUCTED AS TO SERVE THE ASSESSEES SPECIAL TECH NICAL REQUIREMENT IT WOULD QUALIFY TO BE TREATED AS A PL ANT. 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. SIMILARLY IN THE CASE OF CIT V. HERDILIA CHEMICALS (216 ITR 742) HONBLE JURISDICTIONAL HIGH COURT HELD THAT HUGE LAND MEASU RING 360 ACRES TAKEN ON EASE FOR THE PURPOSE OF ERECTION OF PLANT AND MACHINERY WHERE THE ENTIRE FACTORY WAS TO BE CONSTR UCTED IN THIS LAND AND EXPENSES INCURRED FOR THE FOUNDATION MEANT FOR FIXING THE MACHINERY AND FOR THE PURPOSE OF LEV ELING THE LAND FORMED A PART OF THE COST OF THE PLANT. IF WE LOOK AT APPENDIX I TO THE INCOME-TAX RULES PRESCRIBING THE RATES OF DEPRECIATION IT CAN BE SEEN THAT LEGISLATURE HAS G IVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI-POLLUTION D EVICES ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARE NTLY THESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OF F-SETTING THE IMPAIRMENT IN VALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE SUCH ENTREPRENEUAL VENTURES W HICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF RENEWAB LE ENERGY SOURCES OR PREVENTION OF POLLUTION. IF A VERY LIMI TED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES IT WOULD DEFEAT THE VERY PURPOSE FOR WHI CH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE IN OUR OPINION ASSESSEES CLAIM FOR DEPRECIATION SHOULD N OT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFI CER. THEREFORE DISALLOWANCE OF RS. 1 17 00 000/- 13 LA KHS 23 51 576/- AND RS. 5 73 824/- ON ACCOUNT OF DEPREC IATION 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 I.T.A. NOS. 564 TO 567/MDS/10 6 DEPRECIATION ON UPS ATTACHED TO 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 DELE TED. 8. HENCE WE HAVE NO HESITATION TO HOLD THAT THE ASS ESSEES CONCERNED WERE ELIGIBLE FOR DEPRECIATION ON WINDMILLS INCLUDING CI VIL WORK AND ELECTRICAL FITTINGS. THE A.O. IS DIRECTED TO ALLOW DEPRECIATION ACCORDIN GLY. 9. IN THE RESULT THE APPEALS STAND ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 09-07-201 0. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P . GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 9TH JULY 2010. NBR COPY TO: (1) APPELLANTS (2) RESPONDENT (3) CIT(A) (4) CIT (5) D.R. (6) GUARD FILE