9.itxa.1609.2016.db.doc dik IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. INCOME TAX APPEAL NO. 1609 OF 2016 Pr. CIT-2 Kolhapur Appellant vs M/s RDS Construction Co. Respondent. Mr N.N.Singh for Appellant. CORAM : AKIL KURESHI & B.P.COLABAWALLA, JJ. FEBRUARY 13, 2019. P.C. : This appeal is filed by Revenue challenging Judgment of Income Tax Appellate Tribunal. following questions are presented for our consideration (a) Whether on facts and in circumstances of case and in law, Tribunal was justified in holding that AO has not power to reassess income u/s 153A even in case of completed assessment u/s 143(3) of I.T.Act, 1961? (b) Whether on facts and in circumstances of case and in law, ITAT was right in deleting additions made by AO u/s 41(1) on a/c of bogus claim of expenses in name of labour contractors/ sub- contractors which are outstanding for number of years ? (c) Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing depreciation @ 80 % on civil construction, electrical and other non-integral installations? (d) Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing depreciation @ 80 % on civil work on which depreciation was allowable @ 10 % and since civil works are not specially designed devices, same are not entitle for higher rate of depreciation? (e) Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing higher rate of depreciation on electrical Pg 1 of 5 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:39:30 ::: 9.itxa.1609.2016.db.doc and other installations without appreciating fact that electrical items are not part of electricity generating appartus but are part of electricity selling apparatus and these constitute block 'Plant and Machinery' on which depreciation is allowable @ 15 %? (f) Whether on facts and in circumstances of case and in law, Tribunal was justified in treating compensation received from Suzlon Energy Ltd. On a/c of revenue loss as capital receipts? 2 Question Nos.(a) and (b) came up for consideration in Income Tax Appeal No.1753 of 2016 concerning very same respondent assessee. Revenue's appeal was dismissed making following observations. 2 This appeal is filed by revenue challenging Judgment of Income Tax Appellate Tribunal. following questions are presented for our consideration. (A) Whether on facts and in circumstances of case and in law, Tribunal was justified in holding that AO has not power to reassess income u/s 153A even in case of completed assessment u/s 143(3) of I.T.Act, 1961 ? (B) Whether on facts and in circumstances of case and in law, ITAT was right in deleting additions made by AO u/s 41(1) on a/c of bogus claim of expenses in name of labour contractors / sub-contractors which are outstanding for number of years? 3 Question No.1 is fairly covered by Judgment of Division Bench of this Court in case of Commissioner of Income Tax Vs. Continental Warehousing Corporation Ltd. reported in 372 ITR 645. It was held that in proceedings under Section 153(3) of Income Tax Act, 1961 ("IT Act" for short), finalized assessment or reassessment shall not abate, and only undisclosed income and undisclosed assets detected during search could not be brought to tax. In that view of matter no question of law arise in this respect. 4 Question No.2 came up for consideration on similar situation. question was rejected by making following observations - Pg 2 of 5 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:39:30 ::: 9.itxa.1609.2016.db.doc 6. Insofar as question no.(i) is concerned, same arises out of additions made by Assessing Officer under Section 41(1) of Income Tax Act, 1961 ( Act for short) on account of bogus claim of liability. Tribunal while giving relief to assessee, referred to decision of Supreme Court and other decisions holding that merely because period of 3 years expired from arising of liability would not automatically mean that liability has ceased. We do not find any error in view of Tribunal. 3 Question Nos.(c)(d) and (e) came up for consideration in Income Tax Appeal No.60 of 2017 concerning same assessee for A.Y. 2008-09. By separate order passed today, Revenue's appeal is dismissed making following observations This appeal is filed by Revenue challenging Judgment of Income Tax Appellate Tribunal. following questions are presented for our consideration (A)Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing depreciation @ 80 % on civil construction, electrical and other non-integral installations? (B) Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing depreciation @ 80 % on civil work on which depreciation was allowable @ 10 % and since civil works are not specially designed devices, same are not entitle for higher rate of depreciation? (C) Whether on facts and in circumstances of case and in law, Hon'ble ITAT erred in allowing higher rate of depreciation on electrical and other installations without appreciating fact that electrical items are not part of electricity generating apparatus but are part of electricity selling apparatus and these constitute block Plant and Machinery on which depreciation is allowable @ 15 %? 2 Learned counsel for Revenue brought to our notice order dated 30 st January, 2019 in Income Tax Appeal No.1769 of 2016 in which all these question as produced above, came up for consideration. While disposing of Revenue's appeals, following observations were made 7. Question Nos. (ii), (iii) and (iv) relate to Revenue's objection to assessee claiming higher rate of depreciation on civil construction, electric and other installations by assessee in process of erecting and installing windmill. Revenue argues that expenditure in such activities cannot be Pg 3 of 5 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:39:30 ::: 9.itxa.1609.2016.db.doc seen as part of installation of windmill and, therefore, depreciation prescribed for same would not be available to assessee. We notice that similar question had come up for consideration before this Court in Income Tax Appeal No. 1326 of 2010, wherein appeal was dismissed by order dated 14th June, 2017 making following observations:- 2. Tribunal has recorded finding of fact that windmill was erected in desert area of Rajasthan which required special foundation of reinforced cement concrete and that said reinforced cement concrete formed integral part of windmill. Tribunal has also followed decision of this Court in case of Commissioner of Income Tax Vs. Herdilla Chemicals Ltd. recorded in (1995) 216 I.T.R. 742 (Bom) in allowing claim of assessee. In our opinion, finding recorded by Tribunal that RCC foundation forms integral part of windmill is finding of fact and no question of law arises from same. Hence, appeal is dismissed with no order as to costs 8. In result, these additional questions are not entertained. 4 next question argued before us was question (f) and it arise in following manner- respondent - assessee had received sum of Rs.40 Lacs by way of compensation from one M/s Suzlon Energy Ltd. on account of delay caused in completion of wind power project to be installed at Dhalgaon (Maharashtra) for assessee. A.O. was of opinion that receipt was revenue in nature, and therefore, taxable in hands of assessee. Tribunal while reversing decision of A.O. in CIT(A), in impugned Judgment held that receipt was capital in nature. reliance was placed on decision of Supreme Court in case of Commissioner of Income Tax Vs. Saurashtra Cement Ltd. reported in (2010) 325 ITR 422(SC). It was case in which assessee had received liquidated damages Pg 4 of 5 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:39:30 ::: 9.itxa.1609.2016.db.doc on account of delay in supplying additional cement plant. agreement contained condition that in event of delay in delivery of machinery assessee would be compensated at agreed rate. question arose whether such payment by way of liquidated damages would in nature of capital receipt or revenue receipt. Supreme Court held that receipt in question was capital in nature. 6 In present case also similar situation has arisen. assessee had placed order for installation of plant. supplier M/s Suzlon Energy Ltd. could not fulfill commitments within time frame envisaged in agreement. Such agreement provided for compensation in case of delay. payment was in terms of such agreement. Effectively, this payback from supplier would reduce assessee's cost of acquisition of plant and machinery. receipt was clearly capital in nature. No question of law arises. In result Income Tax Appeal is dismissed. No order as to costs. (B.P.COLABAWALLA, J.) (AKIL KURESHI, J.) Pg 5 of 5 ::: Uploaded on - 20/02/2019 ::: Downloaded on - 21/02/2019 09:39:30 ::: Pr. CIT-2, Kolhapur v. RDS Construction Co