Income Tax Appellate Tribunal - Delhi
Wharton Engineers & Developers (P) ... vs Department Of Income Tax on 30 March, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'I' NEW DELHI
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND
SHRI B.K. HALDAR, ACCOUNTANT MEMBER
I.T.A No. 3038/Del/10
Asstt. Year 2007-08
ITO Vs. Wharton Engineers &
Developers (P) Ltd.
Ward-18(3), Room No. 248,
C-15, Qutab Instt. Area,
C.R. Building,
New Delhi.
New Delhi.
AAACW0629C
(Appellant) (Respondent)
Appellant by: Shri A.K. Monga, Sr. DR
Respondent by: Shri Anil Kr. Chopra, CA Shri V.K. Garg
ORDER
PER DIVA SINGH, JM:
This is an appeal filed by the department against the order dated 30th March, 2010 of CIT XXI, New Delhi pertaining to 2007-08 asttt. Year on the following grounds :-
1. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in ignoring the findings of the Assessing Officer that the machine was not put to use in the concerned financial year.
2. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in ignoring the misleading claim about the genuineness of the agreement dated 21.3.2007 made by the assessee company.
2. The relevant facts as discussed in the asstt. order are that the assessee has returned an income of Rs. 84,54,283.74. Assessee has earned the same from business receipts termed by it as shipping commission fee. The AO further observes that apart from the existing business of ship brokering, the assessee claimed to have set up and commenced the business of Power Generation from Wind Energy and installed and commissioned a Windmill for the generation of power in the 2 ITA No. 3038/Del/10 Asstt. year 2007-08 state of Tamilnadu. The assessee claimed depreciation of Rs. 43,00,000/- in respect of the said windmill. The Assessing Officer (AO) disallowed the appellant's claim of depreciation.
3. Aggrieved by this, the assessee went in appeal before the CIT(A) on the following grounds :
1. That the Learned Assessing Officer (Ld. AO) has erred on facts and in law in assessing the appellant on total income at Rs.
1,27,54,283/- rather than at returned income of Rs. 84,54,283/- as computed by the appellant.
2. That the Ld. AO has erred on facts and in law in disallowing depreciation of Rs. 43,00,000/-.
4. The action of the AO was assailed by way of written submissions which are reproduced in page 5 to 14. A perusal of the same shows that it was contended that the AO has rejected the claim holding that the agreements between the assessee and the Tamilnadu Electricity Board (TNEB) was finalized on 21.3.2007. Accordingly the AO entertained doubts that the formalities of erection and commissioning could not have been completed in a short period. In the context of the finding of the AO, it was submitted before the CIT(A) that the following documents which had been filed before the AO in the course of the asstt. proceeding were again relied upon so as to contend that the claim has been wrongly rejected :
(i) Para 1 of the Letter dated 24th August, 2009 by the appellant to AO at page 1 of PB
(ii) A copy of invoice No. PWPL/58/06-07 Dated 28.2.07 of Pioneer Wincon Pvt. Ltd. ("the Contractor") for purchase of wind operated electricity generator at page 4 of PB,
(iii) Copy of Bank Statement of Indian Overseas Bank showing payments to contractors on various dates at pages 5 to 6 of PB,
(iv) A copy of letter dated 11/12/2009 to the AO at pages 7 to 8 of PB,
(v) A copy of letter no. SE/UEDC/UDT/AO/R/HTS/AS/JA4/F.WF HTSC.
No. 1389 dated 24.4.2007 from Superintending Engineers, Udumalpet Elect Distn circle, TSEB, addressed to the company and certifying that one 250KW capacity wind electric generator of M/s. Wharton Engineers & Developers Pvt. Ltd. has been commissioned satisfactorily on 21st March 2007 and showing electricity generation of 508 unit upto 31st March, 2007 at page 9 of PB.
3 ITA No. 3038/Del/10Asstt. year 2007-08
(vi) Statement showing the energy generation by the wind mill for the period 21st March 2007 to 7th April 2007 issued by Accounts Officer, TSEB, Udumalpet Elect Distn circle at page 10 of PB,
(vii) Copy of ledger accounts of the wind electricity generation income for the period 1st April 2006 to 31st March 2007 in the books of the appellant at page 11 of PB,
(viii) Copy of agreement dated 21st March, 2007 for sale and supply of power executed between the appellant and Tamilnadu Electricity Board at pages 12 to 20 of PB,
(ix) Copy of letter dated 21.12.2009 to the AO at pages 21 of PB,
(x) Copy of purchase order No. P250/29 dated 17.2.07 raised by the Appellant on the contractor M/s Pioneer Wincon Pvt. Ltd. for purchase, installation and commissioning of Windmill at pages 22 to 25 of PB,
(xi) Copy of letter dated 24/12/2009 to the AO at pages 26 to 28 of PB,
(xii) Copy of letter Dated 03.03.2007 from Member (Generation), TSEB addressed to the assessee regarding proposal for installation of Windmill by the Contractor and subsequently transferred in the name of M/s. Wharton Engineers and Developers Pvt. Ltd. at pages 29-32 of PB.
(xiii) Copy of sale deed for land at 295/7(D) North of Marudhar Village, Tamilnadu registered in the name of the appellant vide sale deed dated 26th Feb,, 2007 at pages 33 to 50 of PB,
(xiv) Copy of test report No. 053533 dated 21st March, 2007 by Udumalpet Electricity Distribution Circle, Udumalpet, TSEB duly certifying that installation has been inspected and tested on 21st March, 2007 wherein date of commencement of supply has been stated to be 21.3.2007 by Assistant Executive Engineer, TSEB, Kundadam at pages 51 to 54 of PB.
(xv) Copy of letter No. EDE. 1190/CEIG/D5/2007-1 dated 13.3.2007 by Chief Electric Inspector, Electric Inspectorate, addressed to the assessee and copies marked to Supt. Engineer, TSEB, Udumalpet Electricity Distribution Circle, Senior Electric Inspector Coimbatore and Electricity Inspector, Erode, regarding approval of commissioning of electric installation inspected on 12-3-07 alongwith relevant annexures at pages 55 to 57 of PB, (xvi) Copy of letter No. EDE.1190/CEIG/D5/2007-2 dated 13.3.2007 addressed to the assessee and copies to The Senior Electrical Inspector, Coimbatore and the Electrical Inspector, Erode regarding acceptance and attestation of manufacturer's test certificate of HB equipments alongwith copies of manufacturer's test certificate dated 20.11.2006 of transformers at pages 58 to 59 of PB, (xvii) Copy of receipt No. 297852 dated 20.3.07 issued by Tamilnadu Electricity Board for receipt of Rs. 71,900/- towards the O and M charges at page 60 of PB, (xviii) Copy of receipt No. 297850 dated 20.3.07 issued by Tamilnadu Electricity Board for receipt of Rs. 28,200/- towards the Est. & Supervision Charges at page 60 of PB, 4 ITA No. 3038/Del/10 Asstt. year 2007-08 (xix) Copy of receipt No. 297851 dated 20.3.07 issued by Tamilnadu Electricity Board for receipt of Rs. 2700/- towards the Est. & Supervision Charges at page 61 of PB.
4.1. On the basis of these documents, it was stated that the AO has ignored the documents which included those documents which were issued by the officials of the Tamilnadu State Electricity Board to substantiate that the installation and user of machinery had been done on 21st March, 2007. It was also contended that as a part of its industrial policy, the Govt. of India offers various concessions / incentives to industries engaged in generation of wind electricity to encourage power generation. It was also submitted that there are vendors who supplied windmill alongwith related components and install them on a turnkey basis. For this purpose, attention was invited to purchase order dated 17th February, 2007 issued by the assessee to the vendor enclosed at pages 22 to 25 of the paper book. Thereby requiring the vendor to perform following services as a part of its mandate:-
(1) Supply, installation and commissioning of windmill, (2) Civil foundation and construction of control room, identification of appropriate land subject to consent of appellant and registration of land in the name of appellant, (3) Preparation of drawings and documents and getting approval for the project by CEIG/TNEB & other authorities, (4) Obtaining No Objection Certificate from TNEB and obtaining safety and commissioning certificate from the appropriate authorities, (5) Providing stock of spares to ensure trouble free running of the machine for optimum energy generation, (6) Insurance cover and site security of the machine upto the date of commissioning, (7) Operation and maintenance of the machine free of cost for one year from the date of commissioning and providing OMM manual to the appellant .
4.2. Thus, it was contended as a part of total contract the vendor was required to supply commission and install windmill including transportation & insurance of components up to site, identification of land 5 ITA No. 3038/Del/10 Asstt. year 2007-08 for commissioning of windmill and its registration in the name of appellant.
4.3. The process it was stated was started by the appellant on 17th February, 2007 itself when it issued P.O. on vendor. The land was identified and registered in the name of the company vide the Sale Deed dated 26th February, 2007 placed at pages 33 to 50 of PB. Vide the letter dated 3rd March, 2007 from member (generation) Tamilnadu Electricity Board, Chennai approval was accorded for name transfer from M/s Pioneer to M/s Wharton i.e. appellant in respect of the proposal submitted for installation of Windmill (pages 29 to 32 of PB.). It was stated that Electric installations and transformer were inspected on 12th March, 2007 and approval was granted to commission the inspected electric installation by Chief Electric Inspector to Govt. Thiru. Vi. Ka Industrial Estate, Guindy, Chennai. The said documents it was stated are placed at pages 55 to 59 of PB. Thus on 12th March, 2007 transformers and electric installations were verified at site by the Chief Electric Inspector.
4.4 It was further pointed out that on 21st March, 2007 the Appellant entered into a contract with Tamilnadu State Electricity Board, the format of which is standardized as it is used for such type of contracts for windmill generation from private parties which is placed at pages 12 to 20 of PB. It was pointed out that the said contract specifically mentions that the company desires to erect a windmill. It was submitted that this has been referred to by the Ld. AO in his assessment order and entire case is built around this single line, ignoring the plethora of evidences filed with the Ld. AO which are from various officers of Tamilnadu State Electricity Board including various test reports, NOCs and invoice generated. This contract formalizes tariff terms for payment by TSEB in respect of electricity generated by the assessee. It was submitted that this was the final contract and there can be no dispute that prior to it, the assessee 6 ITA No. 3038/Del/10 Asstt. year 2007-08 acquired the wind mill and was interacting with TSEB from well before 21.03.2007.
4.5. Attention was also invited to letter dated 24.4.2007 from Superintending Engineer, Udumalpet Elect Distn. Circle, Udumalpet showing electric generation of 508 units upto 31st March 2007 and statement showing energy generation issued by accounts officer electricity distribution system Udumalpet Elect Distn. Circle, Udumalpet showing total energy generation of 728 unit for the period 21st March, 2007 to 7th April, 2007 and amount billable for that placed at pages 9 to 10 of PB. In both the documents, it was submitted the import and export of electricity from / to Tamilnadu State Electricity Board had been clearly shown which was one of the query of the assessing officer. It was submitted that as per the mercantile system of accounting the assessee duly recognized revenue of Rs. 1422/- in its Books of Account which relates to period 21.3.2007 to 31.3.2007.
4.6. It was further submitted that payment of Rs. 1,07,45,512/- was made after deducting TDS of Rs. 4,488/- from gross amount of Rs. 1,07,50,000/- due to the vendor as per terms of PO. It was pointed that the payments were made on various dates given hereunder during the financial year 2006-07 relevant to assessment year 2007-08 :-
Date of payment Cheque No Amount paid
17/2/2007 232237 53,75,000/-
27/2/2007 232245 43,00,000/-
23/3/2007 232249 5,38,000/-
30/3/2007 232255 1,95,512/-
30/3/2007 232256 3,37,000/-
Total 1,07,45,512/-
7 ITA No. 3038/Del/10
Asstt. year 2007-08
4.7. Observation of the AO were assailed wherein it is held by him that no prudent businessman would blindly entrust work of such magnitude involving crores of rupees without any checks and balance. It was contended that the said observation is based on non appreciation of the facts of the case. It was submitted that it is customary in turnkey contracts to award complete work to a nodal agency / contractor who is responsible for supply, storage, in transit insurance and safekeeping of the machineries, spares and erection and commissioning of plants and taking NOCs from appropriate Government Agency. This happens it was pointed out in Government contracts too. Accordingly it was stated that It is incorrect to say that no checks and balances have been observed as payments are made as per contractual stipulations on completion of stage of work. Evidence of checks and balances it was submitted can be seen from the registration of land in the name of appellant, various NOCs obtained and finally generation of electricity from windmill and revenue recognition in the accounts. In any case the commercial terms settled at arm's length evidenced by the record it was stated cannot be doubted on mere suspicion or conjecture by the Learned AO.
4.8. It was further submitted that the addition, is made based on suspicion, surmises and conjectures and is completely unwarranted, unmerited and not based on any cogent material. It was agreed that there is no evidence or substantive material to prove that wind mill was not installed. It was agreed that It is a settled proposition that no addition can be made purely on suspicion, surmises and conjectures, reliance was placed on the following case laws :
1. 272 ITR 0091 (Del.) - Vinay Kumar Modi v. Commissioner of Income Tax
2. ACIT Vs. Santogen Textil Mills Ltd. - 147 Taxman 54 (Mumbai)
3. 289 ITR 303 (Gau) CIT V. Bihariji Construction (India) Ltd.8 ITA No. 3038/Del/10
Asstt. year 2007-08
4. Lajwanti Sial & Others Vs CIT 30 ITR 228 (Nagpur Bench) 4.9. It was further contended that the assessee's books are audited, vouched verifiable and hence no adverse inference in this case can be drawn. Transactions, in this case it was submitted are through account payee cheques, which shows bonafide and authenticity of the assessee's claim. It was also pointed out that the transactions are at arm's length with completely unrelated third party including TSEB, a Government department. It was argued that adverse inference in these facts was not correct. In the circumstances if the AO still had any doubt in this matter, then he should have raised further specific queries which had not been done.
4.10. The contention was put forth the that it is settled proposition that apparent is real unless proved otherwise and onus of proving that apparent is not real is on him who claims so. In the present case, It was submitted the onus has not been discharged by the AO. Reliance was placed on 87 ITR 349 (SC) CIT v. Daulatram Rawatmull in this context.
4.11.. Based on the above arguments it was contended that it is clearly established that windmill was not only installed on 21st March 2007 but also started generating electricity on 21.3.2007. The company recognized revenue for electricity generation from 21.3.2007. Accordingly, the depreciation on the above windmill was correctly claimed and has to be allowed.
5. Considering the detailed written submissions the CIT(A) summed them up as under :-
"There is much evidence and material to prove that the windmill purchased, installed and put to use. Income was generated from the windmill.
The AO's averment's have been rebutted with documents, material and explanations 9 ITA No. 3038/Del/10 Asstt. year 2007-08 There is no evidence or substantive material to prove that windmill was not installed.
The assessee's book are audited, vouched, verifiable and hence no adverse inference in this case can be drawn.
Transactions are through account payee cheques which show its bonafide and authenticity.
Transactions are at arms length price, with unrelated third party including Govt. Department and as such any adverse inference drawn is completely unlawful, unmerited and strange.
Additions cannot be made merely on surmises and conjecture.
Apparent is real unless proved otherwise. Onus is on the person who claims that apparent is not real.
Depreciation on business assets cannot be denied on filmsy ground.
5.1. Accordingly considering the facts and the arguments he concluded as under :-
I have gone through the assessment order, written submissions along with paper book containing the supporting evidences/documents and also the case law relied upon by the AR. From perusal of the same it can be concluded as under :
1. Purchase, installation and commissioning of the windmill on which depreciation has been claimed by the appellant is duly evidenced by the purchase orders, invoices, certificates and confirmation from independent parties including Tamilnadu, State Electricity Board. The chronological flow of events has been reasonably explained by the appellant and is borne out by the totality of facts, circumstances and documents on records
2. The agreement for sale of electricity and the actual sale of electricity during the year is with Tamilnadu State Electricity Board and not with any private party. Further, generation and sale of electricity to Tamilnadu State Eelectricity Board during the year is evidenced by the energy generation statement issued by the Tamilnadu State Electricity Board.
3. The most clinching evidence in this regard is the letter No. SE/UESC/UDT/AO/R/HTS/AS/IA4/F.WF HTSC. No. 1389, issued by Tamil Nadu Electricity Board to the appellant company, which clearly shows that 10 ITA No. 3038/Del/10 Asstt. year 2007-08 the number of generated units as on 31.3.2007 is 508 units. Thus, in view of such a clinching evidence that too from the State Electricity Board, a Govt. Body, which was filed before him, it is seen that the AO has failed to make any reference to the same and rebut it. Rather the AO has based his case on assumptions, surmises and conjectures. Equally important are other evidences filed by the appellant before the AO, which the latter has ignored or overlooked totally in his assessment order. At page 10 of the Paper Book is a statement showing the energy generated by the Wind Mil for the period 21.3.2007 to 7.4.2007, issued by the Accounts Officer (Revenue) Tamil Nadu Electricity Board, Udamatpet, Electric Distribution Centre. The appellant had also filed a letter before the AO issued by Member (Generation), Tamil Nadu Electricity Board dated 3.3.2007, where it is very clear that the application of M/s. Pioneer Wincon (P) Ltd., Chennai for installation of the Wind Mill has been transferred to the name of the appellant company. From the perusal of this letter, it becomes very clear that the proposal of Pioneer Wincon (P) Ltd. was forwarded to Tamil Nadu Eelctricty Board on 26.10.2006 i.e. the work in respect of installation of the Wind Mill had started much before 21.3.2007, the date on which the agreement was signed between the appellant company and Tamil Nadu Electricity Board, and harped so much by the AO in the assessment order by implying that how is it possible that the Wind Mill can be erected and put to use by 31.3.2007 when the appellant company had expressed its desire to erect and commission the said Wind Mill on 21.3.2007 itself. In fact from the letter it becomes clear that Pioneer. Wincon Pvt. Ltd. had made an application for installation of Wind Mill on 18.9.2006. The AO also failed to take note of the sale deed of land at 295/7 (D) North of Marudhar Village, Dharampuram Taluk, Erode District, Tamil Nadu, registered in the name of the appellant vide Sale Deed dated 26.2.2007. The AO also chose to ignore the bank statement of Indian Overseas Bank, showing payments to contractors on various dates as also the copy of the Test Report No. 053533 dated 21.3.2007 issued by Tamil Nadu Electricity Board, Udumalpet Electricity Distribution Circle, Udumalpet, wherein, the date of commencement of supply has been stated to be 21.3.2007 by Assistant Executive Engineer, Tamil Nadu Electricity Board, Kundadam.
4. There is no basis or material or evidence brought on record by the AO to support his contention that the Windmill was not put to use during the year.
AO cannot presume that the Windmill was not actually used for the purpose of appellant's business during the year under consideration. There is no whisper in the assessment order as to the ingenuinness of any of the evidences filed before the AO.
5. It is cardinal principle of law that the onus to prove that the apparent is not the real is on the party who claims it to be so. This year so held by Supreme Court in the decision of CIT vs. Daulat Ram Rawatmull 87 ITR
349. Also is cardinal principle of law that no addition / disallowance can be 11 ITA No. 3038/Del/10 Asstt. year 2007-08 made on mere suspicion and conjectures. This was so held, interalia, by jurisdictional Delhi High Court in the decision of Vinay Kumar Modi Vs. CIT 272 ITR 0091
6. Thus, in view of the above discussions, I am of the opinion that the Windmill was commissioned during the year and the appellant has rightly claimed depreciation thereon during this year. Accordingly, the disallowance of depreciation of Rs. 43,00,000/- on Windmill made by the AO in the assessment order is deleted.
6. Aggrieved by this the department is in appeal before the Tribunal. The Ld. DR relying upon the assessment order contended that the findings of the Assessing Officer that the machine could not be put to use has been ignored and the CIT(A) has erred in ignoring the misleading claim about the genuineness of the agreement dated 21.3.2007. The department has especially come on these grounds before the Tribunal. Heavy reliance was placed upon the assessment order wherein it was stated these facts are discussed at length from para 2 onwards.
For ready reference we reproduce the relevant finding on which the department is heavily relying upon. They are as under :-
The assessee has earned from business receipts termed by it as shipping commission fee. In addition to the existing business of ship brokering during the year, the assessee claimed to have started a new business of Wind Electricity Generation. The Wind Electricity Generation business is the new line of business for which the assessee has claimed to have installed a wind mill in the State of Tamilnadu at SF No. 295/7 (P) (North), Marudhur Village, Dharampuram Taluk, Erode District. The assessee has claimed that the wind mill became operational during the year and the electricity generated therefrom was worth Rs. 1,422/-. The assessee has claimed depreciation of Rs. 43 lakhs in respect of the windmill. For the purpose of allowance of depreciation, ownership of the asset as well as its actual utilization for the purpose of business is necessary. In this case, it could not prima facie be concluded from the facts and circumstances of the case that the windmill has been utilized for the purpose of business during the year. The Authorized Representative was asked vide notesheet entry dated 15.12.2009 to submit the following details and evidences :12 ITA No. 3038/Del/10
Asstt. year 2007-08
a) Evidence of installation of the windmill
b) Evidence of the transportation of the windmill components to the site from the place where they were procured
c) Evidence of their storage before assembling
d) Evidence of assembling of the components
e) Evidence in support of allotment of the land on which the windmill was set up
f) Certified copies of documents relating to approval by the TNEB of the plans and drawings of the project.
g) The no objection certificates relating to safety measures as provided for in the agreement with TNEB
h) Copies of documents in support of provision by the assessee company of two separate meters for the export of power and import of power as provided for in the agreement with TNEB.
i) Certified copies of safety certificates issued by the Chief Electrical Inspector of the Govt. of Tamilnadu as provided for in the agreement.
j) Certified copies of documents in support of the assessee company making available to the TNEB the safety certificates issued by the Chief Electrical Inspector as provided for in the agreement
k) Certified copies in support of the provision of TOD facility in the meter at the assessee company's cost as provided for in the agreement.
l) Source of payment made to M/s. Pioneer Wincon Pvt. Ltd. in connection with the setting up of the windmill since there were immediate deposits in the bank a./c of the assessee prior to the payments without which the payment would not have been possible.
m) Explanation as to how all the formalities discussed above were claimed to have been completed so quickly on the day of the agreement itself viz.13 ITA No. 3038/Del/10
Asstt. year 2007-08
21..3.2007 and the electricity production was started and supplied to the TNEB that very day when the agreement says that company has expressed its desire to erect and commission the said windmill. It is clearly implied in the agreement that the company could erect and commission the windmill after completing the above formalities besides some other lesser formalities. If the claims of the assessee company are true then it seems to have created a record of sorts by erecting and commissioning the windmill within so short span of time after expressing its desire in the agreement to erect and commission the said windmill.
The above formalities, were all supposed to be completed after the agreement was finalised on 21.3.2007 between the assessee the TNEB. In its letter dated 24.12.2009, the assessee has submitted some details and explanations and has claimed that many of the formalities listed above had been completed prior to the agreement executed with the TNEB on 21.3.2007. These contentions of the assessee are strange and unacceptable since the agreement says that company has expressed its desire to erect and commission the said windmill and the formalities listed were to be completed. Moreover why would the assessee complete formalities connected with the setting up of the windmill even before the TNEB gave its sanction through the agreement to the assessee to erect the windmill. Even if the assessee did complete such formalities before the sanction the same would not have any legal sanctity because the agreement says that the assessee has expressed its desire to erect the windmill and then lists the formalities that have to be completed before commissioning of the windmill.
Regarding the evidence of actual installation, assembling, transportation of components, the assessee has broadly replied in its letter dated 24.12.2009 that all these were the responsibility of the contractors who installed the windmill. The contention of the assessee also appears strange and unacceptable since no prudent businessman would blindly entrust a work of such magnitude involving crores of Rupees to a contractor without exercising any checks and controls. The assessee has provided for a sum of Rs. 1,422/- in its books of accounts as income for the year from electricity generation. However, no copy of any electronic printout from the two electronic meters have been furnished.
From the above facts, it is apparent that the assessee has not been able to prove that the windmill had actually been used for the 14 ITA No. 3038/Del/10 Asstt. year 2007-08 purpose of its business during the year under consideration. The maneuvers of the assessee to create a false picture that there is actual use of the windmill for business purpose during the year is clearly apparent. In the subsequent years, there is use but during the year under consideration there is definitely no such use. Hence, the depreciation claimed of Rs. 43 lakhs is being disallowed in computing the taxable income of the assessee. Since it is apparent that there is deliberate concealment of income by furnishing of inaccurate particulars thereof initiation of penalty proceedings u/s 271(1)(c)is called for.
Addition Rs. 43,00,000/-
7. The Ld. AR heavily relying upon the impugned order submitted that the claim of the assessee has been disallowed by the AO purely on suspicions conjectures and surmises. It was his submission that all the necessary documents were available before the AO. However he chose to ignore all of them and rejected the claim of the assessee purely misconstruing the standardised wordings normally used in Government contracts namely that "the companies has expressed its desire to erect and commission" the plant taking note of the fact that the agreement between the assessee and Tamil Nadu State Electricity Board was dated 21.3.2007. It was submitted that simply on account of these wordings the AO has rejected the claim on the belief that since as per the agreement desire to erect and commission was dated 21.3.2007 as such the said plant it was concluded was not erected and commissioned upto 31.3.2007. It was his argument that all the activity largely stood performed much before the signing of the said agreement and the erection and commission was already in the process.
7.1 Addressing the background it was submitted that as part of the Industrial Policy of the Government of India, the Govt. offers various concessions / incentives to industries engaged in generation of the wind electricity to encourage power generation. Ld. AR stated that there are vendors who supplied windmill along with related components and install them on a turnkey basis. Accordingly inviting attention to paper book pages 22 to 25 it was his submission that the assessee entered into a 15 ITA No. 3038/Del/10 Asstt. year 2007-08 purchase order with M/s Pioneer Wincon Pvt. Ltd. pursuant to this agreement M/s. Pioneer Wincon Pvt. Ltd. purchased land which is registered in the name of the assessee and is evidences at pages 33 to 50 of the paper book which shows that by sale deed dated 26th February, 2007 land was registered in the name of the assessee. In the facts of the present case it was his submission the electrical installation and the transformer were commission on 12.3.2007. Attention was invited to paper book page 55 which it was stated is the report of the Chief Electrical Inspector wherein approval was accorded to commission the electrical installation inspected on 12.3.2007.
7.2 It was clarified that the paper book filed is identical to what was filed before the CIT(A). As such the numbering is the same. On the basis of these facts it was submitted that the assessee entered into contract with Tamil Nadu State Electricity Board , the format of which is standaridized as it is normally used for such type of contracts for windmill generation from private parties placed pages on 12 to 20. In regard to the query put pertaining to transportation and installation it was his submission that these tasks were performed by M/s. Pioneer Wincon Pvt. Ltd. and the assessee was releasing payment only on the performance of each stage. It was stated that the necessary bills and invoices were available. However the same were not available at the time of hearing and it was stated that they would be filed subsequently and the hearing can take place dehorse these as sufficient evidences are available. It was submitted that the transactions are at arm's length . It was also submitted that transaction is with an outside agency i.e. Tamil Nadu Electticy Board which clearly shows that on 31.3.2007 508 units of electricity were generated. It was pointed out that application of M/s. Pioneer Wincon Pvt. Ltd., Chennai for installation of the windmill has been transferred in the name of the assessee company and the CIT(A) has taken cognigence of this fact while allowing the claim of the assessee. It was submitted that 16 ITA No. 3038/Del/10 Asstt. year 2007-08 proposal of M/s. Pioneer Wincon Pvt. Ltd. was forwarded to Tamil Nadu Electricity Board on 26.10.2006. As such the suspicion harboured by the AO that the installation of the windmill started on 21.3.2007 is misplaced on facts. As such heavy reliance was placed upon the impugned order. Reliance was also placed on CIT v. Ballabgarh Refractories Ltd. reported in 144 Taxman 781 (Delhi) .
8. We have heard the rival submissions and perused the material available on record.
8.1 The short issue which falls for our consideration is whether the CIT(A) was right in allowing the claim of depreciation disallowed by the AO. The Ld. AR has contended that the AO has merely gone by standardised wordings in government contract and has ignored the evidence of officials of TNEB which evidence was of an outside agency.
8.2 In order to consider the same it is necessary first to consider how the claim of the assessee has been disallowed by the assessing officer.
8.2.1 The AO it is seen required the assessee to submit details and evidences addressed in points mentioned in serial nos. a) to m) numbering 13 in all.
8.2.2. A perusal of these would show from the reproduction in the earlier part of this order that as per points set out in a) to d) he sought evidences for installation by way of the evidences of transportation of the components from the place of procurement to the site, evidence of storage and assembly etc..
8.2.3 In serial No. e) he seeks evidence of allotment of land where windmill was set up.
8.2.4. In point f) he sought as evidence certified copies of documents relating to approval by the TNEB of the plans and drawings of the project.
17 ITA No. 3038/Del/10Asstt. year 2007-08 8.2.5 In point g) and (i) he seeks, as evidence certified copies of No Objection Certificate relating to safety measures as per agreement with TNEB and Safety Certificates issued by the Chief Electrical Inspector of the Govt. of Tamil Nadu as required in the agreement .
8.2.6 He further sought vide points h) & (k) evidences in regard to provision for separate meters and TOD facility etc. in the meter of the assessee company.
8.2.7 By point (j) he wanted evidences that safety certificates were made available to TNEB by the Chief Electrical Inspector.
8.2.8 In (l) he wanted source of payment made to M/s. Pioneer Wincon Pvt. Ltd. as he had noticed that prior to the issuance of cheques these were immediate deposit.
8.2.9. In m) AO has required an explanation as to how pursuant to agreement dated 21.3.2007 the assessee created a "record of sorts" by erecting and commissioning, the windmill within so short span of time.
8.3 The CIT(A) it is seen has taken cognizance of the fact that all formalities were done by M/s. Pioneer Wincon Pvt. Ltd. and it is the same agreement which was transferred in assessee's name. Report of Chief Electrical Inspector at page 55 granting approval to commission the electrical installation inspected on 12.3.2007 was also relied upon. The transactions being through cheques was also taken into consideration to hold amongst others that "there there is no whisper in the assessment order as to the ingenuineness of any of the evidences filed before the AO." As such reliance placed upon the date of agreement with TNEB namely 21.3.2007 was taken to be not relevant on which the AO was considered to have"
harped on". Statement showing generation of 508 units was taken to be read alongwith all the above as sufficient evidence that the asset had been used in the business.18 ITA No. 3038/Del/10
Asstt. year 2007-08 8.4. In the facts of the present case it is seen that the confusion may have occurred in view of the fact that the assessee instead of entering into a contract with TNEB directly expressing its desire to erect and commission the windmill and thereafter awarding the contract for erection and commissioning on its behalf to an expert in the field on a turnkey basis namely Pioneer Wincon PVt. Ltd. has with the permission of TNEB got the contract transferred in its favour which presumably stood awarded to M/s Pioneer Wincom Pvt. Ltd. In the said background the claim has been set forth that all that is necessary to be done for installing and commissioning was already under way by M/s. Pioneer Wincom Pvt. Ltd. . The process which M/s. Pioneer Wincom was undergoing for installing and commissioning in discharging of its responsibility pursuant to its contract with TNEB, subsequent to the transfer of the said contract in assessee's favour, the process of erecting and commissioning continued though now on behalf of the assessee. The reports showing approval was granted on 12.3.2007 by letter dated 7.4.2007 and test report showing generation of 508 electricity units is relied upon in supports.
8.5. The fact that midway projects can be sold / transferred to some other party perse can not lead to any adverse conclusions however when juxtaposed with specific queries on the time taken for erecting and commissioning the windmill electrical Generators then all necessary facts and evidences must be available. It is seen that the assessee in the present proceedings in its paper book running into 60 pages alongwith written submissions running from page 62 to 76 has not cared to place before us the relevant document namely application letter dated 18.9.2006 of M/s. Pioneer Wincon Pvt. Ltd. for installation of windmill to the Tamilnadu State Electricity Board. Similarly neither the factum of forwarding the said proposal of M/s. Pioneer Wincon Pvt. Ltd. to Tamilnadu State Electricity Board stated on 26.10.2006 is also not placed before us.19 ITA No. 3038/Del/10
Asstt. year 2007-08 Thus the documents which address the time taken are necessary documents which need to be taken into consideration.
8.6 It is further seen that the land stood registered as per the document of transfer in assessee's favour dated 26.2.2007 though is available in the regional language and its translation is not available on record. Even if the evidence is authentic and unassailable even then the necessary evidences of transportation installation storage till the land was available etc. which has especially been questioned by the AO needs to be addressed. Reliance has been placed by the Ld. AR on 144 Taxman 781 (Delhi). The applicability of the judgment wherein the revenue failed to prove collusion on transfer of asset from a holding company to the subsidiary company in the case of CIT vs. Bollabgarh Refractories Ltd. can only be considered when facts are available.
8.7. It is seen that no report of any expert has been placed to show that in the land whose ownership was acquired on 26.2.2007 the windmill electric generator could be set up before a specific date in March, 2007. namely 12.3.2007. Not being experts in the line and taking note of the fact that AO has all along questioned this fact the evidence in regard to installation , transportation, storage etc. has not been referred to by the CIT(A). The assessee would have been well advised to lead evidence to show that the activity of installing and commissioning windmill electrical generator at the specific period could be done in the specific time duly supported by documents evidencing purchase payments, movement /transportation storage, installing and commissioning . None of these facts despite a specific query of the AO are available on record nor have they been addressed by the CIT(A). Despite a specific query in the course of hearing in regard thereto Ld. AR merely replied that relevant invoices and evidences shall be filed. Right till the date of dictation and disposal of the appeal the same were neither placed before the Bench nor have they been discussed in the impugned order.
20 ITA No. 3038/Del/10Asstt. year 2007-08 8.8. In the aforementioned peculiar facts and circumstances set out above we are of the view that it would be appropriate to restore the issue back to the file of the AO to consider the same afresh. Apart from what has been observed above the AO in the light of the initial enquiry may consider the explanations / evidences in regard to the other issues on which enquiry was made namely safety certifications of other regulatory agencies which have not been addressed till date. The factum of cheque transactions in the light of the serial No. l) may be addressed. The applicability of the judgment of the jurisdictional High Court in regard to collusion can arise only when full facts are available as Ld. AR has relied upon the said judgment in the case of Ballabhgarh Refractories 114 Taxman 781 (Delhi.) the AO accordingly to consider the same before concluding the issue..
8.9. Accordingly for the reasons given hereinabove the impugned order is set aside and the issue is restored back to the AO. The AO shall pass a speaking order in accordance with law. Needless to say that the assessee shall be afforded a reasonable opportunity of being heard. The assessee shall be at liberty to file any fresh evidence it thinks fit in support of its claim and the AO shall take that these into consideration before deciding the issue.
In the result the appeal of the revenue is allowed for statistical purpose.
Order pronounced in the open court on 30.8.2011.
Sd/- sd/-
[B.K. HALDAR] [DIVA SINGH]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 30.8.2011
Veena
21 ITA No. 3038/Del/10
Asstt. year 2007-08
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order,
Deputy Registrar, ITAT