Income Tax Appellate Tribunal - Pune
Western Precicast Pvt. Ltd.,, Sangli vs Department Of Income Tax on 22 January, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "A", PUNE
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER
AND SHRI G.S. PANNU, ACCOUNTANT MEMBER
ITA No.2524/PN/2012
(Assessment Year : 2009-10)
Asstt. Commissioner of Income Tax,
Circle-2, Sangli. .... Appellant
Vs.
M/s. Western Precicast Pvt. Ltd.,
Gat No.170, Kupwad Road Savali,
Tal- Miraj, Dist.- Sangli.
PAN : AAACW3853C .... Respondent
Department by : Smt. M. S. Verma (CIT)
Assessee by : Shri N. P. Machawe
Date of hearing : 22-01-2014
Date of pronouncement : 22-01-2014
ORDER
PER G. S. PANNU, AM
This appeal by the Revenue is directed against an order of the Commissioner of Income Tax (Appeals), Kolhapur dated 12.10.2012 which, in turn, has arisen from an order dated 16.03.2011 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short "the Act"), pertaining to the assessment year 2009-10.
2. In this appeal, the Revenue has raised the following Grounds of Appeal :-
"1. On the facts and in the circumstances of the case the Commissioner of Income-tax (Appeals) erred in holding that the cost of new wind mill will include alongwith the cost of the wind turbine generator, the components for generation of electric supply and electrical items and components of RE device and tubular towers for the purpose of allowing depreciation at special rate as these items are not wind mill or specially designed devices, which run on the wind mill.
2. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) erred in holding that labour work related to installation of wind turbine generator was required to be included in the cost of the wind mill for allowance of depreciation at special rate when the 2 ITA No.2524/PN/2012 A.Y. 2009-10 said expense was required to be spread over in the proportion of cost of civil work, cost of wind mill and cost of plant & machinery and the depreciation was to be allowed at applicable rates.
3. On the facts and circumstances of the case and in law the CIT(Appeals) erred in applying the decision of the ITAT, Pune Bench in the case of Poonawala Finvest and Agro Pvt. Ltd. (118 TTJ 68) as the decision is distinguishable on facts and does not considered the rate schedule of depreciation u/s. 32C which provides for depreciation @ 80% only on wind mills and devices specially designed to run on wind mills.
4. On the facts and circumstances of the case and in law the CIT(Appeals) erred in allowing depreciation @ 80% on proportionate cost in Processing charges as the same does not form part of cost of windmill or any specially designed device to run on windmill."
3. In brief, the relevant facts of the case are summarized as follows. The assessee is a company incorporated under the provisions of the Companies Act, 1956 and is inter-alia engaged in the business of manufacturing of iron, steel and alloy steel castings including generation of electricity through windmill. The only issue in this appeal relates to the depreciation on the windmill. The first leg of the issue is with regard to the depreciation claimed on the WDV of windmill purchased and installed during the assessment year 2006-07. In the assessment years 2007-08 and 2008-09, the Assessing Officer disallowed a portion of the depreciation allowable on windmill @ 80% on the ground that certain elements on the cost, which were related to civil works and electrical items, were entitled to depreciation @ 10% to 15% respectively and only the cost relatable to the machinery of windmill as such, was eligible for depreciation @ 80%. This position was continued by the Assessing Officer during the year under consideration. Similar is the position with regard to the cost of new windmill of Rs.8,32,21,374/- installed during the year under consideration. In this manner, the depreciation claimed in the return of income of Rs.6,86,23,735/- was reduced to Rs.5,95,18,185/- thereby resulting in a disallowance of Rs.91,05,550/-.
4. Assessee carried the matter before the CIT(A), who has allowed part relief to the assessee by following his own order in the assessee's own case for assessment year 2007-08. In the assessment year 2007-08, the CIT(A) 3 ITA No.2524/PN/2012 A.Y. 2009-10 allowed relief to the assessee on such components of the cost of windmill as were held to be eligible for higher rate of depreciation at 80% in terms of the decision of the Pune Bench of the Tribunal in the case of Poonawala Finvest & Agro Pvt. Ltd. vs. ACIT, 118 TTJ 68.
5. Presently, before us, it was a common point between the parties that the order of the CIT(A) for assessment year 2007-08 allowing part relief to the assessee was carried in appeal before the Tribunal in ITA No.890/PN/2011 which has since been disposed-off vide order dated 31.12.2012. In terms of the said order, the appeal of the Revenue has been dismissed and the decision of the CIT(A) has been affirmed. The facts and circumstances of the dispute in the year under consideration are identical to those Grounds raised by the Revenue in assessment year 2007-08 (supra). In this background, it was a common point between the parties that the present appeal of the Revenue is liable to the adjudicated in the light of the decision of the Tribunal dated 31.12.2012 (supra).
6. On this point we may reproduce the relevant portion of the order of the Tribunal dated 31.12.2012 for assessment year 2007-08 (supra) :-
"7. We have carefully considered the rival submissions. In order to appreciate the dispute, the following break-up of expenses on account of erection and commission of windmill i.e. windmill installed in the preceding assessment year 2006-07 would be necessary as contained in para 2.5 of order of the CIT(A):-
S.No. Date Nature of work Expenditure
-Rs.
1. 30-3-2006 Towards supply and installation of 30,93,500/-
HT electrical Yard with VCB,
outdoor type CT & PT and HT
Transmission Line from Windmill to
Grid interconnection point
including HT metering for 1.25 MW
WINDMILL AT LOCATION No.
K437 at above site address.
2. 30-3-2006 Labour charges towards final 1,10,200/-
testing and commissioning for 1.25
MW windmill at Loc No. K437.
3. 30-3-2006 Towards labour charges for work 14,32,600/-
executed, for erection and
installation of windmill consisting
of : Unloading and safe keeping of
material, Assembly, erection and
4 ITA No.2524/PN/2012
A.Y. 2009-10
installation of windmill tower and
wind turbine generator for 1.25
MW windmill at Location No K-437
at above site address.
4. 4-3-2006 Processing fees 2,58,970/-
5. 31-12-2005 MEDA processing and application 6,28,750/-
fees
6. 31-3-2006 Contribution towards common 37,50,000/-
power evacuation infrastructure
facility
8. In respect of above six components of cost of windmill claimed by the assessee, the Assessing Officer allowed depreciation at 15% and not at 80% as claimed by the assessee. The CIT(A) however, considered the items of costs at No. 1 to 5 qualifying for higher rate of depreciation being integral part of windmill. In so far as item no. 1 is concerned, the cost of Rs.30,93,500/- is towards supply of electrical items of the windmill itself. The CIT(A) has observed that such cost in the installation of windmill has been found by the Tribunal in the case of Poonawala Finvest and Agro Pvt. Ltd. (supra) as an integral part of the windmill cost and therefore, found to be eligible for depreciation equivalent to that of the windmill. No decision to the contrary has been brought to our notice and therefore, following the precedent in the case of Poonawala Finvest and Agro Pvt. Ltd. (supra), we do not find any infirmity in the action of the CIT(A) which we hereby affirm.
9. To the similar effect is the nature of cost enumerated in items no. 2 and 3 relating to labour charges for erection and installation of windmill. Such expenditure forms integral part of cost of the windmill and therefore, there is no mistake on the part of the CIT(A) to have considered such expenditure as eligible for depreciation at 80%.
10. In so far as the cost towards processing fee and MEDA application fee of Rs. 2,58,970/- and Rs. 6,28,750/- respectively in items no. 4 and 5 are concerned, the CIT(A) apportioned such cost towards wind turbine and other eligible assets on one hand and of civil costs incurred, on the other hand. 60% of such cost have been apportioned towards wind turbine, etc., and have been held to be eligible for higher rate of depreciation at 80% and on the balance, the CIT(A) allowed depreciation as worked out by the Assessing Officer. In our view, the aforesaid apportionment made by the CIT(A) is fair and proper and does not require interference.
11. In so far as item No. 6 regarding cost towards common power evacuation is concerned, there is no grievance of the Revenue as the action of the Assessing Officer on components and cost has been upheld. In this manner, we find no reason to interfere with the relief allowed by the CIT(A) with respect to depreciation on the cost of erection and commissioning of windmill in relation to windmill no. 1. Similar relief has been worked out by the CIT(A) with respect to windmill no. 2 which has been installed during the year under consideration. In the light of aforesaid discussion, the order of the CIT(A) is affirmed.
12. In the result, the appeal of the Revenue is dismissed."
7. Since the facts and circumstances in the instant year stand on similar footing, following the precedent in the assessee's own case for assessment year 2007-08, the present order of the CIT(A) is hereby affirmed and the Revenue has to fail on the aforestated Grounds of Appeal. 5 ITA No.2524/PN/2012
A.Y. 2009-10
8. In the result, the appeal of the Revenue is dismissed.
Above decision was announced in the open Court in the presence of both the parties at the conclusion of the hearing on 22nd January, 2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (G. S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated : 22 nd January, 2014
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A), Kolhapur;
4) The CIT, Kolhapur;
5) The DR, "A" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune