Income Tax Appellate Tribunal - Jaipur
Hardeep Singh Sethi, Jaipur vs Dcit, Jaipur on 11 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 891/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2012-13
D.C.I.T., cuke Sh. Hardeep Singh Sethi,
Circle - 7, Vs. Prop. M/s Pinkcity Enterprises,
Jaipur. C - 358, Pradhan Marg,
Malviya Nagar, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABXPS 4077 R
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT)
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s Assessee by : Shri P.C. Parwal (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 05/01/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 11/01/2017
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the revenue against the order of CIT(Appeals)-III, Jaipur dated 27/07/2016 for the assessment year 2012-13, wherein the revenue has taken sole ground of appeal, which is as under:-
"On the facts and in the circumstances of the case, the CIT(A) has erred in holding that civil works, foundation works are integral part of wind mills and thereby allowing depreciation @ 80% on the same."
2 ITA 891/JP/2016_ Shri Hardeep Singh Sethi
2. Briefly stated facts of the case are that the assessee has claimed depreciation on three windmills @ 80% considering all the plant, machinery & civil construction work in the same block of windmill. As per provisions of Section 32 of the Income Tax Act, 1961 (in short the Act) read with the Rule 5 of the Income Tax Rules, 1962 (in short the Rules), depreciation @ 80% is allowable for energy devices only and not on building foundation and other accessories connected with windmill. As per the definition as given in Income Tax Rules of renewable of energy devices, there is no intention to include foundation work, platform for windmill, supply of electrical items, civil work etc. in the above block of assets. Based on that, the Assessing Officer restricted the depreciation on civil work @ 10% and on electric installation @ 15% as against 80% claimed by the assessee in respect of all the three windmills. An excess depreciation amounting to Rs.31,27,792/- was disallowed and added back to the total income of the assessee.
3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A). During the course of appellate proceedings, the ld. A.R. submitted that though the civil construction is in the nature of foundation and allied work but 3 ITA 891/JP/2016_ Shri Hardeep Singh Sethi without which the tower of the wind power plant can't be installed. Whether a civil structure is a part of the plant or part of the building is to be examined with reference to the functional test of such structure. If without such structure the plant can't function, the cost of structure is part of the plant. Similarly erection and installation of electric items are part & parcel of the windmill and without these items windmill can't run. In present case also without the expenditure on civil construction incurred by way of foundation of the plant, internal lines and the allied work, the plant could not function and therefore the expenditure incurred on all these items is a part of wind plant entitled for depreciation @ 80%.
3.1. The ld. CIT(A) found force in the argument of the ld. A.R. that civil construction as well as electric installation are part of the windmill and without it the windmill can't be run. The ld. CIT(A) further relied on the decision of ITAT Jaipur Bench in case of ACIT vs. Deepak Vegpro Private Limited and the decision of Hon'ble Rajasthan High Court in case of CIT(A) vs. K.K. Enterprises 108 DTR 109 (Raj.) and allowed the depreciation @ 80% on the civil construction as well as electric installation. Against the said order, the department is in appeal before us.
4 ITA 891/JP/2016_ Shri Hardeep Singh Sethi 3.2. The ld. DR submitted that as per Income Tax Rules Appendix- 1(iii)(8)(xiii), the depreciation is allowed on renewable energy devices being windmills and any specially designed devices which run on windmills and not to other civil and electric items. The ld. DR accordingly submitted that the findings of the ld. CIT(A) are erroneous and can't be sustained.
3.3. The ld. A.R. reiterated the submissions as made before the ld. CIT(A) and submitted that the matter is squarely covered by the decision of the Hon'ble Rajasthan High Court in case of CIT vs. K.K. Enterprises (supra).
3.4. In CIT vs. M/s K.K. Enterprises, the issue before the Hon'ble Rajasthan High Court was whether the assessee was entitled to claim depreciation on the cost incurred in civil work and foundation, electrical items, component and installation and common power evacuation while installing windmills. The Hon'ble Rajasthan High Court following the decision of Hon'ble Gujarat High Court in case of CIT(A) vs. Parry Engineering and Electrical Pvt. Ltd. allowed the depreciation on such items @ 80%. The operative part of the ruling is contained at Paras - 6 & 7 of its order which is reproduced as under:
5 ITA 891/JP/2016_ Shri Hardeep Singh Sethi "6. The issue involved in these appeals has been considered by the Hon'ble Gujarat High Court in Tax Appeal No.604/2012, decided on 29.1.2013, in Commissioner of Income Tax, Ahmedabad-III v. Parry Engineering and Electronics Pvt.
Ltd. In the case aforesaid Hon'ble Gujarat High Court held that "Windmill would require scientifically designed machinery in order to harness the wind energy to the maximum potential. Such device has to be fitted and mounted on a civil construction, equipped with electric fittings in order to transmit the electricity so generated. Such civil structure and electric fittings, therefore, it can be well imagined, would be highly specialized. Thus, such civil construction and electric fitting would have no use other than for the purpose of functioning of the windmill. On the other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plant. As already noted, the legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devices including windmill and any specially designed device, which runs on windmill. The civil structure and the electric fitting, equipments are part and parcel of the windmill and cannot be separated from the same. The assessee claim for higher depreciation on such investment was, therefore, rightly allowed.
6 ITA 891/JP/2016_ Shri Hardeep Singh Sethi
7. We are in absolute agreement with the reasoning given by Hon'ble the Gujarat High Court. We accept the same and for the same reasons these appeals are dismissed."
4. We have heard the rival contentions of both the parties and perused the material available on record. The matter is squarely covered by the decision of Hon'ble Rajasthan High Court in case of K.K. Enterprises (supra). No contrary ruling has been cited at the bar. In light of above, we do not see any reason to interfere with the finding of the ld. CIT(A) and the same is hereby confirmed and the assessee held eligible to claim depreciation on civil work and electrical installation @ 80%.
5. In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 11/01/2017.
Sd/- Sd/-
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(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 11/01/2017.
*Sanjeev.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The D.C.I.T., Circle-7, Jaipur.
2. izR;FkhZ@ The Respondent- Sh. Hardeep Singh Sethi, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A) 7 ITA 891/JP/2016_ Shri Hardeep Singh Sethi
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 891/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar