Income Tax Appellate Tribunal - Pune
Topaz Investments P. Ltd, Kolhapur vs Department Of Income Tax on 11 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri G.S.Pannu, Accountant Member
and Shri R.S. Padvekar, Judicial Member
ITA Nos. 2285 to 2289 and 2291/PN/2012
(Asst.Years : 2003-04 to 2007-08 and 2009-10)
ACIT, Central Circle,
Kolhapur .. Appellant
Vs.
Topaz Investments Pvt. Ltd.,
Plot No.438, A/P. Chipri,
Jaysingpur, Dist : Kolhapur .. Respondent
PAN No.AAACT6999C
C.O Nos.94 to 99/PN/2013
(Asst. Years : 2003-04 to 2007-08 and 2009-10)
Topaz Investments Pvt. Ltd.,
Plot No.438, A/P. Chipri,
Jaysingpur, Dist : Kolhapur .. Cross Objector
PAN No.AAACT6999C
Vs.
ACIT, Central Circle, Kolhapur .. Appellant in the
appeal
ITA No.2299/PN/2012
(Asst. Year : 2008-09)
Topaz Investments Pvt. Ltd.,
Plot No.438, A/P. Chipri,
Tal : Shirol,Dist : Kolhapur .. Appellant
PAN No.AAACT6999C
Vs.
DCIT, Central Circle, Kolhapur .. Respondent
Assessee by : Shri Mahendra Mehta
Revenue by : Shri A.K. Modi
Date of Hearing : 11-12-2013
Date of Pronouncement : 30-12-2013
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ORDER
PER G.S. PANNU, AM :
The captioned appeals are for assessment years 2003-04 to 2009-10 relating to the same assessee and involve certain common issues. Therefore, they have been heard together and a consolidated order is being passed for the sake of convenience and brevity.
2. In the appeals preferred by the Revenue and the respective Cross- Objections of the assessee, an issue which is common, relates to the allowance of depreciation on the cost of wind mill. The aforesaid issue is the solitary issue in the appeals of the Revenue for assessment years 2003- 04 to 2007-08 and for 2009-10 as well as in the respective Cross-objections of the assessee by way of Ground No.2 and by way of Ground No.1 in assessee's appeal for assessment year 2008-09. All the appeals of the Revenue and the Cross-objections/appeal of the assessee are directed against a consolidated order of the CIT(A) Kolhapur dated 21-09-2012, which inturn has arisen from the respective orders passed by the Assessing Officer u/s.143(3) r.w.s.153A(1)(b) of the Act.
3. The substantive dispute relates to the allowance of depreciation on the component of cost of civil works in the total cost of windmill, and it was a common point between the parties that a similar dispute was a subject matter of consideration by the Pune Bench of the Tribunal vide its order in ITA No.609 to 614/PN/2013 & others dated 29-11-2013 in the case of M/s. Everready Investment Pvt. Ltd., a concern belonging to the assessee group. 3
4. Before we proceed to adjudicate the specific cross grievances in each of the assessment years, the broad contours of the dispute can be summarised as follows. In the course of assessment proceedings, it was noticed by the Assessing Officer that assessee had claimed depreciation @80% on the entire cost of windmill, except the cost of land. As per the Assessing Officer, the component of the cost of civil work contained in the total cost of windmill was not eligible for depreciation @80%. Therefore, he allowed depreciation @10% on the cost of civil works, viz., buildings, civil foundation, roads etc. and for the balance depreciation was allowed @80%. The CIT(A) has allowed partial relief in as much, according to him, the cost of civil foundation for the windmill was eligible for depreciation @80% and for balance items of civil works he upheld the stand of the Assessing Officer of allowing depreciation @10%. Further, in cases where the cost of civil foundation could not be identified out of the total cost of civil work, the CIT(A) directed that 40% of the total civil works cost be attributed to the cost of civil foundation of wind mill so as to be eligible for depreciation @80% and the balance 60% of the cost of Civil works was held liable for depreciation @10% being buildings, roads etc. It is against such decision of the CIT(A) that Revenue as well as the assessee are before us by way of the captioned proceedings.
5. In the case of M/s. Everready Investments Pvt. Ltd. (Supra) it has been held by the Tribunal that the cost of Civil foundation for windmills is eligible for depreciation @80% following the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. Cooper Foundary Pvt. Ltd. vide ITA No.1326 of 2010 dated 14-06-2011 as well as the decision of the Pune 4 Bench of the Tribunal in the case of Aminity Developers & Builders vide ITA No.1505/PN/2011 dated 12-12-2012. Therefore, in principle, the action of the CIT(A) in allowing depreciation @80% on the cost of construction of foundation for wind mill is hereby affirmed.
6. With this background, we may now take up the specific dispute in each of the assessment years. In assessment year 2003-04, assessee acquired and installed eight windmills (two at Katnataka & six at Rajasthan) costing Rs.23,60,00,000/-. The total cost of two windmills in Karnataka was Rs.6,20,00,000/- which included the cost of Civil work of Rs.20,00,000/- and for the six wind mills at Rajasthan total cost was Rs.17,40,00,000/- inclusive of the cost of Civil work of Rs.1,20,00,000/-. On the component of the cost of Civil work, Assessing Officer allowed depreciation @10% whereas the CIT(A) held that 40% of such cost was attributable to the Civil foundation for windmill eligible for depreciation @80% and for the balance cost the action of the Assessing Officer in allowing the depreciation @10% was affirmed. The Revenue as well as the Assessee are in appeal before us.
7. At the time of hearing, our attention was invited to page 5 of the Paper Book wherein is placed an invoice dated 28-09-02 raised by the supplier of wind mills installed at Karnataka, i.e. Enercon India Ltd. amounting to Rs.20,00,000/-. A perusal of the said invoice reveals that it has two limbs. The first limb is of Rs.12,00,000/- which refers to Civil work, including Foundation for wind mill, etc. The second limb is of Rs.8,00,000/- which refers to Erection and Commissioning charges for the wind mill. The entire invoice amount of Rs.20,00,000/- has been taken as 5 cost of civil work. In our view, the cost incurred for Erection and Commissioning charges for the windmill cannot be treated as a part of cost of Civil work and instead it is eligible for depreciation @80%, following the decision of the Pune Bench of the Tribunal in the case of DCIT Vs. Western Precicast Pvt. Ltd. vide ITA No.890/PN/2011 dated 31-12-2012. Thus, the cost of Erection and Commissioning charges amounting to Rs.8,00,000/- is to be considered as an integral cost of windmill, which is eligible for depreciation @80%. Further, with regard to the balance invoice cost of Rs.12,00,000/- which is a composite cost of civil work for the entire windmill inclusive of the cost of foundation of windmill, following the decision in the case of M/s. Everready Investments Pvt. Ltd. (Supra) 60% thereof is treated as attributable to the cost of Civil foundation for wind mill, which shall be eligible for allowance of depreciation @80%, whereas for the balance 40% of the cost, depreciation be allowed @10% treating them to be cost of buildings, roads etc. Thus, the order of the CIT(A) is modified to the above extent.
8. Now, with regard to the six windmills installed at Rajasthan, Rs.1,20,00,000/- has been considered as cost of civil works, etc. on the basis of an Invoice dated 31-03-2003 issued by M/s. ENERCON (INDIA) LTD. a copy of which has been placed in the Paper Book at Page 7. It is a composite invoice raised by the supplier for civil work inclusive of Foundation as well Erection and Commissioning charges of Wind Turbine Convertor, etc. Ostensibly, the entire cost cannot be taken as cost of civil works since it includes erection and commissioning charges. In the absence of any break-up of the expenditure, it would be in fitness of things (being guided by the ratio of Erection/Commissioning charges, vis-a-vis civil work 6 cost stated by same supplier in respect of Karnataka windmills) that 40% of the total invoice of Rs.1,20,00,000/-, being an amount of Rs.48,00,000/- is taken as cost of Erection & Commissioning charges, eligible for depreciation @80%. The balance cost of Rs.72,00,000/- is taken as cost of civil works, and following our decision in earlier paragraph, 60% thereof, i.e. Rs.43,20,000/- is taken as cost of civil foundation for windmill eligible for depreciation @80%, and the balance cost of Rs.28,80,000/- is allowed depreciation @10% treating it to be cost of buildings, other civil work, etc.
9. For the assessment year 2003-04, there is no other dispute in relation to the allowance of depreciation on windmill. Accordingly, the order of the CIT(A) is set-aside and the Assessing Officer is directed to recompute the depreciation on windmill in the aforesaid light.
10. Thus, in so far as assessment year 2003-04 is concerned, the appeal of the Revenue is dismissed and Ground No.2 in the Cross Objection of the assessee is partly allowed.
11. In the appeal of the Revenue and Ground No.2 in the Cross Objection of the assessee for assessment years 2004-05 and 2005-06, the only dispute relates to the depreciation on the written down value (i.e.WDV) of the wind mills which were installed in assessment year 2003- 04 and accordingly the Assessing Officer is directed to re-compute the depreciation allowable in terms of our directions in the earlier paragraphs in relation to assessment year 2003-04. Accordingly, the appeals of the Revenue for assessment year 2004-05 and 2005-06 are dismissed and Ground No.2 in the respective Cross-objections of the assessee are partly allowed.
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12. Now, we may take up the Revenue's appeal and the Ground No.2 of Cross-objections of the assessee for the assessment year 2006-07. In so far as the dispute relates to the allowance of depreciation on the component of cost of civil work in the cost of windmill, it is similar to that decided by us in the earlier paras for assessment year 2003-04 and the Assessing Officer is directed to recompute the allowance of depreciation accordingly. Apart from this, the assessee is aggrieved with the stand of the CIT(A) on the allowance of depreciation on the cost of (i) infrastructure charges of Rs.37,50,000/-; (ii) MEDA processing fee - Rs.6,28,750/-; (iii) High Tension Transmission Line - Rs.30,93,500/-; (iv) Labour charges for installation - Rs.14,32,600/-; and (v) Labour charges for testing - Rs.1,10,200/- included in the total cost of the windmill. The claim of the assessee is that it should be allowed depreciation on aforesaid costs @80% as the same are an integral part of the cost of setting-up of the windmill. At Pages 11,12 and 13 of the Paper Book are copies of invoices raised by the supplier of the wind mill, i.e. Suzlon Infrastructure Ltd. dated 30-03- 2006 and 31-03-2006 amounting to Rs.30,93,500/-, Rs.14,32,600/- and Rs.1,10,200/- respectively. These costs are in the nature of supply and installation of High Tension transmission lines, labour charges for erection and installation of wind mill; and, labour charges for testing, commissioning of the windmill etc. In our view, such costs are liable to be treated as an integral part of the cost of setting-up of the windmill and is eligible for allowance of depreciation @80% following the decision in the case of Western Precicast (Supra). At the time of hearing, it was also pointed out by the Ld. Counsel that the Assessing Officer has himself 8 allowed depreciation @80% on such costs in the assessee's case for assessment year 2003-04. Therefore, we deem it fit and proper to direct the Assessing Officer to recompute depreciation accordingly.
13. Another component of dispute is with regard to the cost of MEDA Processing Fee of Rs.6,28,750/- incurred. On this aspect the assessee is eligible for the depreciation @80% following the decision of the Pune Bench of the Tribunal in the case of Poonavala Finvest & Agro Pvt. Ltd. Vs. ACIT vide ITA No.188/PN/2006 dated 26-06-2008. Similarly with regard to the cost of Rs.37,50,000/- being contribution towards common Power evacuation infrastructure facility, the same is entitled for the higher rate of depreciation @80% being an integral part of wind mill following the decision of the Tribunal in the case of Poonavala Finvest & Agro Pvt. Ltd. (Supra) and also the decision of the Chandigarh Bench of the Tribunal in the case of ACIT Vs. Rakesh Gupta vide ITA No.822/Ahd./2012 dated 17- 06-2013 reported in 36 taxmann.com 546. Therefore, the Assessing Officer is directed to re-compute the depreciation accordingly.
14. With regard to the component of civil work cost identified by the CIT(A) as cost of civil foundation for allowing depreciation @80%, the same is modified in line with the decision of the Pune Bench in the case of Everready Investment Pvt. Ltd. (Supra), a group concern of the assessee, and which has been followed by us in the assessee's case for assessment year 2003-04 in earlier paras. The Assessing Officer is directed to recompute the depreciation accordingly.
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15. In the result, the Revenue's appeal for assessment year 2006-07 is dismissed and Ground No.2 of the Cross-objection of the assessee is partly allowed.
16. For assessment year 2007-08, in the Revenue's appeal and Ground No.2 in the Cross-objection of the assessee, the issues raised are similar to those considered by us in appeals/Cross-objection for assessment years 2003-04 and 2006-07 in the earlier paragraphs. The Assessing Officer is directed to recompute the depreciation accordingly. The appeal of the Revenue is dismissed and Ground No.2 in the Cross-objection is partly allowed.
17. Now, we may take up Revenue's appeal and Ground No.2 of assessee's Cross objection for assessment year 2009-10. In this year, assessee has not acquired or installed any new windmill and the claim of depreciation was with respect to the WDV of the windmills installed in past years considered by us in earlier paragraphs. Therefore, our decision in the earlier years shall be followed by the Assessing Officer in assessment year 2009-10 to re-compute the amount of depreciation allowable on the cost of wind mill in this year too. Thus, the appeal of the Revenue is dismissed and Ground No.2 of assessee's Cross-objection is partly-allowed.
18. Thus, in so far as the appeals of the Revenue for assessment years 2003-04 to 2007-08 and 2009-10 are concerned, the same are dismissed.
19. In the Cross Objections filed by the assessee for assessment years 2003-04 to 2007-08 and 2009-10, a common issue has been raised by way of Ground No.1, which reads as under :
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"1. The Ld.CIT(A) erred in facts and circumstances of the case and in law in holding that all items of addition have to be separately considered before it can be held that a particular issue falls within the scope of section 153A or not. It be held that the impugned additions made are beyond the scope and provisions of Section 153A as they are not based on any seized/incriminating material found during the course of search".
The aforesaid Ground has not been pressed at the time of hearing and is accordingly dismissed as withdrawn.
20. Accordingly, the Cross Objections of the assessee for assessment years 2003-04 to 2007-08 and 2009-10 are partly allowed.
21. Now, the only appeal left for determination is the appeal of the assessee for assessment year 2008-09, being ITA No.2299/PN/2012 which is also directed against the order of the CIT(A) dated 21-09-2012 and which inturn has arisen from the order passed by the Assessing Officer u/s.143(3) r.w.s. 153A(1)(b) of the Act dated 28-12-2010.
22. The first issue in this appeal is with regard to the depreciation on the cost of wind mill which is similar to what has been adjudicated by us in the earlier paragraphs. Therefore, following our decision in the other assessment years, this Ground is also disposed of accordingly and the Assessing Officer is directed to re-compute the depreciation following our decision in the aforesaid paragraphs. Thus, on this Ground the assessee partly succeeds.
23. The last and substantive Ground raised by the assessee is with regard to the action of the CIT(A) in sustaining an addition of Rs.2,69,68,308/- made by the Assessing Officer invoking section 69C of the Act on account of unexplained expenditure in acquisition of land.
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24. In brief, the relevant facts are that during the course of a search in the case of one Ghatge Patil Automobiles Ltd. (hereinafter referred to as GPAL) it was noticed that GPAL had sold a plot of land situated at Kolhapur to the assessee company. The relevant sale deed showed a sale consideration of Rs.4,11,00,000/- whereas as per the document seized in the case of GPAL the consideration for the plot was shown at Rs.6,80,68,308/-. The assessee was confronted with the seized document and was asked to explain the difference. Not being satisfied with the explanation furnished by the assessee, Assessing Officer concluded that the said differential amount was nothing but unaccounted funds of the assessee paid for acquiring the plot over and above the stated sale consideration and therefore he made an addition of Rs.2,69,88,308/- to the total income of the assessee by invoking section 69C of the Act. The CIT(A) has also sustained the addition, against which the assessee is in appeal before us.
25. Before us, the Ld. Counsel for the assessee pointed out that there was no material found with the assessee company to show that any consideration was paid by it over and above the amount recorded in the sale deed. The Ld. Counsel further pointed out that merely because a document has been found in the case of a seller, it cannot ispo-facto mean that assessee has paid any amount over and above the stated consideration, and that the addition has been wrongly sustained by the CIT(A).
26. At the time of hearing. it was a common point between the parties that the Assessing Officer in the case of the assessee as also GPAL is same; and, in the hands of GPAL also a similar addition on account of receipt of 12 unaccounted consideration for sale of a plot to assessee has been made on the basis of the material seized in the course of search on GPAL. In this view of the matter, it is quite clear that the veracity and efficacy of the seized document in the case of GPAL has formed the basis of the impugned addition in the hands of the assessee and therefore the ultimate adjudication in the case of GPAL would be determinative of the issue in the case of assessee too. Ostensibly, the impugned addition in the hands of the assessee, being purchaser of land, is a mirror reflection of what is ultimately concluded in the case of GPAL qua the document found from GPAL, which as per the Revenue reveals transaction of unaccounted money. Since the document has been seized from GPAL and addition has been made in the case of GPAL, the authenticity or otherwise of the document is liable to be first adjudicated in the case of GPAL. Moreover, as per the Ld. Counsel for the assessee, the addition made by the Assessing Officer in the case of GPAL is still persisting, not having been altered by any higher authority, though pending in appeal. Therefore, it was put to the parties in the course of hearing that the matter deserves to be set-aside to the file of the Assessing Officer with directions that the impugned addition shall be dependent on what is ultimately held in the case of GPAL on this issue. The aforesaid matrix has not been opposed by the parties and accordingly the matter is restored to the file of the Assessing Office to effectuate the above. Thus, on this aspect the assessee has to fail.
27. Thus, for statistical purposes the appeal of the assessee for assessment year 2008-09 is partly allowed.
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28. In the result, the captioned appeals and Cross-objections are accordingly disposed off.
Pronounced in the Open court on 30th December, 2013.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 30th December, 2013
Satish
Copy of the order is forwarded to :
1. The Assessee
2. The Department
3. The CIT(A), Kolhapur
4. The CIT, Kolhapur
5. D.R. "B" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune