Commissioner of Income Tax-I, Ludhiana v. M/s Eastman Impex
[Citation -2014-LL-1218-1]

Citation 2014-LL-1218-1
Appellant Name Commissioner of Income Tax-I, Ludhiana
Respondent Name M/s Eastman Impex
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 18/12/2014
Judgment View Judgment
Keyword Tags civil construction • higher depreciation • higher rate of depreciation • plant and machinery • power generation • wind mill
Bot Summary: Rajive Bhalla, J. By way of this order, we shall dispose of ITA No. 350 of 2013 , ITA No. 349 of 2013, ITA No. 98 of 2014, ITA No. 99 of 2014 and ITA No. 167 of 2014 pertaining to differently worded substantial questions of law but relating to the same questions. Of substation, which is the property of GEDA. In that case, learned counsel submitted, the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Birla Jute Manufacturing Ltd., reported in 182 ITR 497 is clearly applicable: Learned counsel submitted, the same view has been taken by the Hon'ble Bombay High Court in the case of CIT vs. Excel Industries Ltd., reported in 122 ITR 995. Since the machinery had no independent functioning, we are of the view that the decision of the Hon'ble Calcutta High Court in the case of Birla Jute Manufacturing; Ltd. is clearly applicable. In the case of Excel Industries Ltd., the Hon'ble Bombay High Court held : payment made for overhead service line, which remained the property of Electricity Board, is allowable as revenue expenditure: On facts, in the instant case of the assessee, the payment to GEDA is to be allowed in the light of this decision of the jurisdictional High Court. For assessment year 2009-10 in ITA No. 820/Chd/2012 the facts are identical as in ITA No. 819/CHD/2012 for the assessment year 2008-09 our findings given in the former part of this order shall apply mutatis mutandis. The issue involved in these appeals has been considered by the Hon'ble Gujarat High Court in Tax Appeal No. 604 of 2012, decided on 29th Jan., 2013, in CIT Vs. Parry Engineering Electronics Ltd. In the case aforesaid, Hon'ble Gujarat High Court held that Windmill would require a scientifically designed machinery in order to harness the wind energy to the maximum potential. A perusal of the aforesaid judgment reveals that the Rajasthan High Court placed reliance upon a judgment of the Gujarat High Court in Tax Appeal No. 604 of 2012, decided on 29.01.2013 titled as CIT Vs. Parry Engineering Electronics Ltd. We have perused the opinion recorded by the Rajasthan High Court and find no reason to record an opinion to the contrary.


ITA No. 350 of 2013 1 IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 350 of 2013. Date of Decision : 18.12.2014. Commissioner of Income Tax-I, Ludhiana ...Appellant Versus M/s Eastman Impex ...Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE B.S. WALIA Present: Mr. Rajesh Katoch, Advocate for appellant. Ms. Prerna, Advocate and Mr. S.K. Mukhi, Advocate for respondent. *** Rajive Bhalla, J. By way of this order, we shall dispose of ITA No. 350 of 2013 (Commissioner of Income Tax-I, Ludhiana Vs. M/s Eastman Impex), ITA No. 349 of 2013 (Commissioner of Income Tax-I, Ludhiana Vs. M/s Eastman Impex), ITA No. 98 of 2014 (Commissioner of Income Tax-I, Ludhiana Vs. M/s Eastman International), ITA No. 99 of 2014 (Commissioner of Income Tax-I, Ludhiana Vs. M/s Eastman International) and ITA No. 167 of 2014 (Commissioner of Income Tax-I, Ludhiana Vs. M/s Maxwell Inc.) pertaining to differently worded substantial questions of law but relating to same questions. substantial questions of law framed in ITA No. 350 of 2013 are as follows :- i) Whether on facts and circumstances of case, Hon'ble ITAT was justified in law, in upholding order of Ld. CIT(A) wherein disallowance of higher depreciation @ 80% on account of expenditure on installation of electrical line for power transmission and metering treated as not part of wind mill by A.O., was deleted by CIT(A)., KANCHAN ii) Whether on facts and circumstances of case 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 2 and in law, Hon'ble ITAT was right in treating Power evacuation infrastructure as part of wind mill and as Renewable Energy Device whereas AO has brought on record sufficient material to prove that same was in fact not Renewable Energy Device. iii) Whether on facts and circumstances of case and in law, Hon'ble ITAT was right in treating electrical lines for power transmission and metering as part of Renewable Energy Device eligible for depreciation @ 80% whereas A.O. has brought on record sufficient material to prove that transmission and distribution network was actually Plant and Machinery which is eligible only for normal rates of depreciation @ 15%. It is by no stretch of imagination part of power generation Wind Mill Device. It's only function is transmission of generated power to common grid. Counsel for revenue submits that by treating power of evacuation infrastructure as part of wind mill renewable energy device, Tribunal has ignored material collected and referred to by Assessing Officer which clearly proves that power evacuation infrastructure like electricity lines etc. are not part of wind mill and, therefore, should invite depreciation @15%. Counsel for revenue further submits that though it is true that if power transmission lines etc. are part of renewable energy device they as eligible to depreciation @ 80% but there is no evidence on record that transmission and distribution network etc. are integral part of wind mill. Tribunal has erred in granting depreciation @ 80%. Counsel for assessee, however, submits that power of evacuation infrastructure like electric lines etc. are specifically dedicated to wind mill and cannot be used for any other purpose. power evacuation infrastructure being integral and necessary for wind mill to transmit electricity are integral to renewable energy device and, therefore, depreciation @ 80% has been rightly allowed by Income Tax Appellate Tribunal as well as by CIT(A). Counsel for assessee relies upon judgment of Rajasthan High Court in KANCHAN Commissioner of Income Tax Enterprises, Vs. K.K. Enterprises (2014) 108 DTR 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 3 109, Judgments 109 and judgment of Income Tax Appellate Tribunal, Bombay Bench in Trumac Engineering Co. Pvt. Ltd., Mumbai Vs. Mumbai. Income Tax Officer, Ward 2(3)(3), Mumbai We have heard counsel for parties, perused entire paper book including orders passed by Assessing Officer, CIT(A) and ITAT (B), Chandigarh. dispute that has given rise to these substantial questions of law is nature of power evacuation infrastructure attached to wind mill, renewable energy device and whether this infrastructure would be eligible for depreciation @ 80% or 15%. Assessing Officer after laboured attempt to separate renewable energy devices, in case wind mill for power evacuation infrastructure referred to nature of renewable energy, wind mills etc. and held that power evacuation infrastructure is not integral part of renewable energy devices and, therefore, proceeded to hold that depreciation shall be calculated at 15%. CIT(A) set-aside this order and by holding that power evacuation infrastructure is integral part of renewable energy devices and allowed depreciation @ 80%. ITAT has considered matter in its entirety and after placing reliance upon judgment of ITAT, Mumbai Bench, affirmed order passed by CIT(A) by holding as follows :- 10. We have considered submissions of both parties and gone through material available on record. In present case it is noticed that facts of present case are similar to facts involved in case of Trumac Engineering Co. Pvt. Ltd. Mumbai Vs. ITO (supra) wherein vide order dated 27.6.2008 relevant finding given by ITAT, Mumbai Bench "I" in para 21 to 24 read as under: "21. Coming to next item, i.e. disallowance of depreciation of Rs. 42,50,000/_ in respect of KANCHAN 2015.01.06 16:04 contribution made to GEDA, Id. counsel reiterated I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 4 submissions made before revenue authorities and submitted that power generated from wind mill farm at Navadra/Bhogat site is delivered to substation of GEDA through HT lines. This power in turn is transferred to GEDA for further transmission. For this purpose, connection of grid at substation is required. contribution information available. In fact, subsequently, assessee received confirmation, as stated in preceding Para, from GEDA, for fixing contribution of Rs.35,60,862.75 out of Rs.42,50, 000/- for formation of substation and balance, it was intimated, will be utilized towards running and maintenance of substation . 22. In alternate, learned counsel submitted that payment made to GEDA atleast to be treated as revenue expenditure. If revenue treats this as not something owned by assessee (substation), then it naturally follows that assessee contributed above amount for creation. of substation, which is property of GEDA. In that case, learned counsel submitted, decision of Hon'ble Calcutta High Court in case of CIT vs. Birla Jute Manufacturing Ltd., reported in 182 ITR 497 (Cal) is clearly applicable: Learned counsel submitted, same view has been taken by Hon'ble Bombay High Court in case of CIT vs. Excel Industries Ltd., reported in 122 ITR 995 (Bom). 23. Learned DR, on other hand, submitted that assessee is now improving method of transaction by installing new machineries, without which also windmill will continue to operate. This cannot be treated as integral part of windmill as such. This has independent standing. Assessee's windmill worked even without these machineries. As such Id. D.R. for revenue submitted that orders of revenue authorities may be upheld. 24. Considering rival submissions, we are of view that assessee's appeal is to be allowed on KANCHAN merit. Firstly, it is to be seen that these macineries 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 5 had no independent functioning as such. Merely because it improves working system or controlling/ monitoring system, it cannot be treated as independent machinery and not part of integrated machinery. submission of learned counsel is that if machinery installed at first stage of installing windmill itself, claim of assessee: would have been allowed, Merely because for some reason or other it was subsequently installed, does not mean that it is not part of machinery as such. Since machinery had no independent functioning, we are of view that decision of Hon'ble Calcutta High Court in case of Birla Jute Manufacturing; Ltd. (supra) is clearly applicable. In case of Excel Industries Ltd. (supra), Hon'ble Bombay High Court held : payment made for overhead service line, which remained property of Electricity Board, is allowable as revenue expenditure: On facts, in instant case of assessee, payment to GEDA is to be allowed in light of this decision of jurisdictional High Court. Hence, appeal by assessee with regard to Ground No.1, 2, 3 and 4 are allowed." Since facts of present case are similar to facts involved in aforesaid referred to case of Trumac Engineering Co. Pvt. Ltd. Mumbai Vs. ITO (supra), so, respectfully following aforesaid referred to decisions dated 27.6.2008 of ITAT, Mumbai Bench 'I', we do not see any valid ground to interfere with findings of Ld. IT (A). 11. For assessment year 2009-10 in ITA No. 820/Chd/2012 facts are identical as in ITA No. 819/CHD/2012 for assessment year 2008-09, therefore, our findings given in former part of this order shall apply mutatis mutandis. To specific query whether revenue has filed appeal against order passed by ITAT, Mumbai Bench, counsel for revenue fairly states that revenue has not filed appeal. Apart KANCHAN from aforesaid, similar controversy came up before High Court 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 6 of Rajasthan in Commissioner of Income Tax Vs. K.K. Enterprises. After considering matter in its entirety, it was held as follows :- 5. We do not find any merit in argument advanced. issue involved in these appeals has been considered by Hon'ble Gujarat High Court in Tax Appeal No. 604 of 2012, decided on 29th Jan., 2013, in CIT Vs. Parry Engineering & Electronics (P) Ltd. In case aforesaid, Hon'ble Gujarat High Court held that Windmill would require scientifically designed machinery in order to harness wind energy to maximum potential. Such device has to be fitted and mounted on civil construction, equipped with electric fittings in order to transmit 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 purpose of functioning of windmill. On other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, installation of windmill and civil structure and electric fittings are so closely interconnected and linked as to form common plant. As already noted, legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devices including windmill and any specially designed devise, which runs on windmill. civil structure and electric fitting, equipments are part and parcel of windmill and cannot be separated from same. assessees claim for higher depreciation no such investment was, therefore, rightly allowed. perusal of aforesaid judgment reveals that Rajasthan High Court placed reliance upon judgment of Gujarat High Court in Tax Appeal No. 604 of 2012, decided on 29.01.2013 titled as CIT Vs. Parry Engineering & Electronics (P) Ltd. We have perused opinion recorded by Rajasthan High Court and find no reason to record opinion to contrary. wind mill, which is admittedly source of renewable energy, cannot KANCHAN 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh ITA No. 350 of 2013 7 possibly function without power evacuation infrastructure and, therefore, to hold that it is not integral to wind mill would be travestying of facts and justice. It would be necessary to clarify that we are not dealing with ordinary device, where transmission lines and electricity generation devices are involved but wind mill, which obviously cannot supply electricity without power evacuation infrastructure as integral to its very functioning and user. Consequently, we answer questions of law against revenue and dismiss appeals accordingly. (RAJIVE BHALLA) JUDGE (B.S. WALIA) JUDGE December 18, 2014. kanchan KANCHAN 2015.01.06 16:04 I attest to accuracy and authenticity of this document Chandigarh Commissioner of Income Tax-I, Ludhiana v. M/s Eastman Impex
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