Income Tax Appellate Tribunal - Pune
Shah Lulla Estate Developers,, Sangli vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri I.C. Sudhir Judicial Member
and Shri G.S. Pannu Accountant Member
ITA No. 653/PN/2010
(Asstt. Year : 2006-07 )
Shah Lulla Estate Developers ... Appellant
Amrai Road,
Sangli
PAN : Not available
v.
DCIT, Circle 2, Sangli ... Respondent
Appellant by : Shri. Nikhil Pathak
Respondent by : Ms. Neera Malhotra
Date of Hearing : 23/01/12
Date of Pronouncement : -3-12
ORDER
Per I.C. Sudhir, JM
The first appellate order has been questioned by the assessee in the following grounds :
"1. The learned Commissioner of Income Tax (Appeals) (CIT (Appeals)) erred on facts and in law in restricting the depreciation in respect of cost to the extent of Rs. 30.00 Lakhs covered by the two invoices of Rs.15.00 Lakhs each to 10% on the ground that the entire amount of Rs. 30 Lakhs was paid for development of approach roads and internal roads.
2. The learned CIT(Appeals) having recorded the facts that "Second invoice is for Rs.15,00,000/- towards erection and commissioning of W.T.C. alongwith transformer on which service tax @ 10 % is levied. Another invoice for Rs.15,00,000/- is for earth work and foundation for W.T.C. including construction of approach road and internal roads, supply of D.P. structural poles, etc."
wrongly proceeded on the footing that the amount of Rs.30.00 Lakhs was spent only for development of approach roads and internal roads. The conclusion of the CIT (Appeals) 2 ITA . No.653//PN/2010 Shah Lulla Estate Developes.
A.Y. 2006-07 Page of 7 is contrary to the facts recorded by him in the appeal order itself.
Without prejudice to the above
3. The learned CIT (Appeals) at the most ought to have allocated part of cost of Rs. 15.00 Lakhs out of the third invoice towards construction of approach roads and internal roads when it is clear from the description of the invoice that the entire amount of Rs. 15.00 Lakhs does not represent the cost of approach roads and internal roads.
4. The learned CIT(Appeals) erred in denying depreciation at 80% in respect of 2nd invoice of Rs.15,00,000/- which is for the erection and commissioning of W.T.C. alongwith transformer by holding the same as representing cost of development of approach roads and internal roads.
5. The learned CIT(Appeals) failed to appreciate that there is no control room constructed in the case of Appellant and therefore the decision in the case of Poonawala Finevest & Agro Pvt. Ltd. vs. ACIT (118 TTJ 68) is not applicable in the Appellant's case.
6. The Learned CIT (Appeals) ought to have allowed the depreciation at 80% on the said amount of Rs. 30 Lakhs covered by the two invoices under reference.
7. The Assessing Officer be directed to allow depreciation @ 80% on the said amount of Rs. 30.00 Lakhs."
2. The relevant facts are that during the previous year relevant to the A.Y. under consideration, the assessee acquired, installed and commissioned wind turbine unit for generation of power and claimed depreciation at the rate of 80% of the cost thereof. The details of total 3 ITA . No.653//PN/2010 Shah Lulla Estate Developes.
A.Y. 2006-07 Page of 7 cost of acquisition and installation of the wind turbine unit furnished are as under :
"
Sr. Particulars Amount Annexure
No. (Rs.) Ref
(i) Wind Turbine Unit
(Invoice No.9101506359 3,40,00,000 A
Dtd. 28-12-2005 from
ENORCON (INDIA) LTD.)
(ii) Erection and Commissioning
Charges (Invoice No.9101506535
Dtd. 17-02-2005 15,00,000 B
( iii) Civil Construction of Windmill
Foundation (Invoice No.
9101506534 15,00,000
Dtd. 17-02-2005 from
ENORCON (INDIA) LTD.) __________
3,70,00,000
(iv) Infrastructure Development
Charges 16,90,000
TOTAL 3,86,80,000"
The A.O. allowed claimed depreciation at the rate of 80% only on the cost of Rs. 340 Lakhs incurred on wind turbine and held that all other expenses incurred on foundation, erection and installation are different from the wind turbine unit and thus they are not entitled for depreciation at the rate of 80%. He allowed depreciation on those expenses at the rate of 15% as applicable for other general machinery. In other words, the A.O denied depreciation at higher rate of 80% in respect of Rs. 30 lakhs i.e. cost of erection and commissioning (Rs. 15,00,000/-) and cost of foundation, civil work and installation (Rs. 15,00,000/-). These expenses have been shown hereinabove at Srl. Nos. (ii) and (iii) in the 4 ITA . No.653//PN/2010 Shah Lulla Estate Developes.
A.Y. 2006-07 Page of 7 details. The A.O. allowed depreciation at the rate of 10% on foundation and civil work. Ld. CIT(A) has upheld the same.
3. Before the Tribunal, the Ld. A.R. referred the copies of relevant bills made available at page Nos. 5 to 7 of the paper book filed on behalf of the assessee. The Ld. A.R. submitted that as per Sec. 32(1) deduction on account of depreciation is to be allowed at a prescribed % on the actual cost of asset put to use during the year. Section 43(1) defines "actual cost" as "the actual cost of assets to the assessee reduced by that portion of the cost thereof if any as has been met directly or indirectly by any other person or authority." He submitted that in the absence of an exhaustive definition, the expression "actual cost" has to be understood in accordance with the generally accepted accounting principles. He submitted further that as per Appendix I of I.T. Rules 1962, item III (8)(XIII)(1), the depreciation at accelerated rate of 80% is allowable in respect of renewable devices being wind mills and specifically designed devices which run on wind mills. He placed reliance on the following decisions :
1) Habib Hussain Vs. CIT (1963), 48 ITR 859 (Bom )
2) Periyar and Parrekillii Rubber Vs. CIT,(1999), 181 ITR 396 (Ker.)
3) CIT Vs. Tata Mills Ltd. (1979), 118 ITR 496 (Bom)
4) CIT Vs. Cooper Foundary Pvt. Ltd. , ITA No. 1326 of 2010, Order dated 14th June 2011 of Hon'ble High Court of Bombay (Copy supplied).
5) Poonawala Finwest & Agro (P) Ltd. Vs. ACIT (2008), 12 DTR 211 (Pune).5 ITA . No.653//PN/2010
Shah Lulla Estate Developes.
A.Y. 2006-07 Page of 7
4. The Ld. D.R. on the other hand tried to justify the orders of the authorities below and submitted that the assessee failed to furnish the details of expenditure on which depreciation at the rate of 80% was claimed. He submitted that expenses are not specified.
5. Considering the above submissions, we find that in its recent decision in the case of CIT Vs. Cooper Foundary Pvt. Ltd. (Supra), the Hon'ble jurisdictional High Court has been pleased to approve the decision of the Tribunal holding that RCC Foundation forms integral part of the wind mills, hence entitled for the depreciation at the rate of 80% on the cost incurred on the said RCC foundation. The Tribunal has decided the issue in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs. Herdilla Chemicals Ltd. (1995) 216 ITR 742 (Bom). The Tribunal therein has recorded the relevant facts that the windmill was required to be installed on special foundation of Reinforced Cement Concrete and that the said Reinforced Cement Concrete formed the integral part of the wind mill. The Pune Bench of the Tribunal in the case of Poonawala Finwest & Agro (P) Ltd. Vs. ACIT (Supra) on the basis of functional test has come to the conclusion that the transformer upto D.P. Structure is gadget for transmission of power generated by wind mill upto sub-station of MSEB at site, and is integral part of the wind mill eligible for higher percentage of depreciation, whereas claim of assessee on higher percentage of depreciation failed on civil work of control room, cite development and internal roads adjunct to a wind mill in absence of demonstration of the assessee that they were especially designed so as to facilitate power generation in the wind mill or distribution thereof. We thus fund that the issues raised in the present appeal are fully covered by these two decisions of Hon'ble Bombay High Court and Pune bench of the Tribunal. In the case of CIT Vs. Cooper Foundary Pvt. Ltd. (Supra), it appears that 6 ITA . No.653//PN/2010 Shah Lulla Estate Developes.
A.Y. 2006-07 Page of 7 the assessee was able to demonstrate before the Tribunal that wind mill was erected on the required special foundation of reinforced cement concrete, hence it was held that the said reinforced cement concrete formed the integral part of the wind mill. Under these circumstances, we set aside the matter regarding the claimed depreciation on the expenses incurred on the items other than wind turbine unit to decide the same in view of the above cited 2 decisions of Hon'ble Bombay High Court in the case of CIT Vs. Cooper Foundary Pvt. Ltd. (Supra) and of Pune Bench of the Tribunal in the case of Poonawala Finwest and Agro Pvt. Ltd.(Supra) so far as depreciation claimed on construction of the foundation on which wind mill was erected and in view of the decision of the Pune Bench of the Tribunal in the case of Poonawala Finwest and Agro Pvt. Ltd. Vs. ACIT (Supra) in relation to the expenses incurred on other items, after affording opportunity of being heard to the assessee to furnish details of the expenditure in support. The grounds are thus allowed for statistical purposes.
6. In result, appeal is allowed for statistical purposes.
The order is pronounced in the open Court on 19th March 2012.
Sd/- Sd/-
(G.S. PANNU) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 19th March, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
7 ITA . No.653//PN/2010
Shah Lulla Estate Developes.
A.Y. 2006-07
Page of 7
3. The CIT - I/II, Kolhapur / CIT (Central ), Pune
4. The CIT(A)- I, Kolhapur
5. The D.R. "B" Bench, Pune
6. Guard File /-True Copy-/ By order Senior Private Secretary Income Tax Appellate Tribunal Pune