Income Tax Appellate Tribunal - Pune
Everready Investments P. Ltd.,, vs Assessee on 28 November, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "B", PUNE
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER
AND SHRI G.S. PANNU, ACCOUNTANT MEMBER
ITA Nos. 609 to 614/PN/2013
(Assessment Years : 2003-04 to 2008-09)
Asst. Commissioner of Income Tax,
(Central Circle), Kolhapur .... Appellant
Vs.
M/s. Everready Investment Pvt. Ltd.,
Flat No.22, A/P Royal Accord,
Plot No. 17, Opp. Lokhandwala,
Andheri (W), Mumbai - 400 053.
PAN : AAACE3436B .... Respondent
C.O. Nos. 80 to 85/PN/2013
(Arising out of ITA Nos.609 to 614/PN/2013)
(Assessment Years : 2003-04 to 2008-09)
M/s. Everready Investment Pvt. Ltd.,
Flat No.22, A/P Royal Accord,
Plot No. 17, Opp. Lokhandwala,
Andheri (W), Mumbai - 400 053.
PAN : AAACE3436B .... Cross Objector
Vs.
Dy. Commissioner of Income Tax,
(Central Circle), Kolhapur .... Appellant in the Appeal
Department by : Mr. A. K. Modi
Assessee by : Mr. Mahendra Mehta
Date of hearing : 28-11-2013
Date of pronouncement : 29-11-2013
ORDER
PER G. S. PANNU, AM
The captioned appeals of the Revenue and Cross-objections preferred by the assessee relating to assessment years 2003-04 to 2008-09 involve certain common issue and therefore they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
2 ITA Nos. 609 to 614/PN/2013
C.O. Nos. 80 to 85/PN/2013
2. All the appeals of the Revenue and the cross-objections of the assessee arise from a consolidated order of the CIT(A) dated 18.12.2012 for the captioned assessment years which, in-turn, has arisen from assessment orders passed by the Assessing Officer u/s 143(3) r.w.s. 153C of the Income Tax Act, 1961 (in short "the Act") for each of the assessment years. The sum and substance of the dispute in the captioned proceedings relates to the depreciation on the cost of Windmill. The Assessing Officer noticed that during the assessment year 2003-04, assessee had installed a Windmill costing of Rs.4,65,00,000/-. On the entire cost of windmill, depreciation was claimed @ 80% on all assets excluding land. It was further noticed that the cost of Windmill at Rs.4,65,00,000/- included an amount of Rs.20,00,000/- towards cost of civil works, etc. in terms of Invoice dated 28.01.2003 issued by the Suzlon Developers Private Limited. As per the Assessing Officer, depreciation on the cost of civil work, etc. was not eligible for the higher rate of depreciation of 80% since depreciation @ 80% was allowable only in respect of the cost of Windmill. Accordingly, depreciation on the cost of civil work amounting to Rs.20,00,000/- was allowed @ 10% and for the balance it was allowed @ 80%, as claimed by the assessee. For assessment year 2003-04 this resulted in reduction of the depreciation claim by Rs.7,00,000/-. Similarly, the depreciation on the Windmill was recomputed for each of the subsequent assessment years which are before us by considering the cost of civil work to be eligible for the depreciation @ 10% and the balance of cost of Windmill @ 80%.
3. In appeal before the CIT(A), assessee challenged the partial denial of depreciation. The CIT(A) has allowed partial relief whereby he has upheld the proposition that the cost of foundation of Windmill is liable for depreciation @ 80%. After discussing his proposition in paras 20 and 21 he has enclosed Annexure- A to his order containing the revised working of the depreciation. In terms of the said Annexure, out of the total cost of civil works, etc. amounting 3 ITA Nos. 609 to 614/PN/2013 C.O. Nos. 80 to 85/PN/2013 to Rs.20,00,000/-, 40% is attributed to the cost of foundation of Windmill so as to be eligible for depreciation @ 80% and the balance 60% of the cost of civil work, etc. is held to be eligible for the depreciation @ 10%, being buildings/roads. Against the aforesaid decision of the CIT(A), Revenue as well as assessee are in appeal before us.
4. The Revenue has contested the partial relief allowed by the CIT(A) whereas the assessee by way of cross-objection No.3 has contested that the entire civil cost of Rs.20,00,000/- be considered as an integral part of the cost of Windmill by applying the 'functional test' and thus be allowed depreciation at the higher rate.
5. In this background, we have considered the rival submissions. It was a convergence of opinion between the assessee and the learned CIT(DR) that so far as the cost of foundation of Windmill is concerned, the same is liable to be considered as an integral part of the cost of Windmill having regard to the decision of the Pune Bench of the Tribunal in the case of Aminity Developers & Builders vide ITA no. 1505/PN/2011 dated 12.12.2012 and also in terms of the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Cooper Foundary Pvt. Ltd. vide Income Tax Appeal No. 1326 of 2010 dated 14.06.2011. The Tribunal in the case of Aminity Developers & Builders (supra) by applying the 'functional test' held that the cost incurred on the foundation of the Windmill is to be considered as an integral part of the cost of Windmill erection and is thus eligible for the depreciation @ 80%, prescribed for Windmill. The Hon'ble Bombay High Court in the case of Cooper Foundary Pvt. Ltd. (supra) has also upheld the proposition that cement, concrete foundation is to be included in the cost of Windmill, while granting depreciation @ 80% on the Windmill. Therefore, on the basis of the aforesaid, in-principle the plea of the assessee is liable to be upheld.
4 ITA Nos. 609 to 614/PN/2013
C.O. Nos. 80 to 85/PN/2013
6. So, however it is pertinent to observe that the cost of civil works, etc. amounting to Rs.20,00,000/- incurred by the assessee cannot be said to be entirely towards the cost of civil work foundation for the Windmill. The learned counsel has referred to the copy of Invoice raised by Suzlon Developers Private Limited for the cost of civil work, etc. amounting to Rs.20,00,000/- which shows that it is a composite bill for foundation of Windmill, Plinth for Transformer, Windmill Control Room, Site Development and Internal Road Development, etc.. It is in this context, on being unable to decipher the exact cost of the civil foundation work for Windmill/Transformer, the learned CIT(A) has apportioned the cost between the buildings/roads and Windmill in the ratio of 60:40. The learned counsel vehemently pointed out that though separate costs were not enumerated by Suzlon Developers Private Limited who had undertaken the execution of work, yet the items of civil work on account of buildings/roads was minimal and therefore apportionment made by the CIT(A) was unjustified. The learned counsel further pointed out that the major costs are in relation to the construction of civil foundation for the Windmill/other equipment required for power generation and is liable to be considered as a part of 'Windmill' for the purposes of grant of depreciation @ 80%.
7. Considering the entirety of circumstances, and also the plea raised before us, in our considered opinion it would meet the ends of justice if 60% of cost of civil work is apportioned to civil work involved in the erection of foundation of Windmill/other power equipment and 40% be apportioned towards other civil works which shall be eligible for the lower rate of depreciation. The cost of civil work apportioned towards the erection of foundation for Windmill shall be eligible for depreciation @ 80% and the balance of the cost shall be eligible for depreciation @ 10%, as allowed by the Assessing Officer. The order of the CIT(A) is therefore set-aside and the Assessing Officer is directed to re-compute the allowance of depreciation accordingly.
5 ITA Nos. 609 to 614/PN/2013
C.O. Nos. 80 to 85/PN/2013
8. Thus, in so far as the appeal of the Revenue is concerned, the same is dismissed and the Ground of Appeal No. 3 in the Cross-objection of the assessee is partly allowed.
9. In so far as the following Grounds of cross-objection No. 1 and 2 are concerned, "1. The learned CIT(Appeals) erred in facts and circumstances of the case and in law by holding that notice under section 153C was correctly issued and hence not treating the assessment made under section 143(3) r.w.s. 153C as void abinitio. Hence it is prayed that notice issued under section 153C be held as bad in law and hence the assessment made under section 143(3) r.w.s. 153C be treated as null and void abinition.
2. Without prejudice to Ground No. 1 the addition made by learned Assessing Officer by disallowing claim of depreciation @ 80% on civil work when such disallowance is not made on the basis of any material seized during the course of search and hence addition made under section 153C be deleted as the addition made on this account is beyond the scope of sec. 153A."
they have not been pressed at the time of hearing and accordingly dismissed as withdrawn.
10. Accordingly, the Cross-objection is partly allowed.
11. The aforesaid decision shall apply to all the captioned appeals of the Revenue and Cross-objections of the assessee.
12. Resultantly, whereas the appeals of the Revenue are dismissed, the Cross-objections of the assessee are partly allowed.
Order pronounced in the open Court on 29 th November, 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (G. S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated : 29 th November, 2013
Sujeet
6 ITA Nos. 609 to 614/PN/2013
C.O. Nos. 80 to 85/PN/2013
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, "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune