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2013 (6) TMI 691
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....L account u/s 36(1)(iii), on the reasoning that the assessee has given an advance of Rs. 8.89 crores interest free to his son Shri Aman Singhal but at the same has paid interest on funds borrowed for the business. As per the assessee interest-free advance is out of his own capital which has no nexus with the borrowed funds. He has stated that the borrowed fund has been used in the share trading business with reference to the decision of P&H High Court rendered in the case of CIT v. Abhishek Industries Ltd. [2006] 286 ITR 1 (Punj. & Har.), in which their Lordship have observed that entire money in a business represents a common kitty, therefore, the argument either that the interest-free advance to his son is out of his own capital or that it has got no nexus with the borrowed funds would not help the case of the assessee. Accordingly, he has disallowed the interest at the notional rate of 12% p.a. amounting to Rs. 28,55,131/-. However, the ld. CIT(A), by accepting the contention that the later decisions of the Hon'ble P&H High Court in the case of CIT v. Mark Auto Industries Ltd. [2011] 201 Taxman 137/12 taxmann.com 259 in which it was held that in case no nexus between the bor....
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....found it correct, but according to him this claim cannot be entertained in view of the ratio of the judgment of Hon'ble Apex Court rendered in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323. 4.1 The ld. CIT(A) has found that the ratio of Goetz IndiaLtd. (supra) would not apply to the facts of this case. After relying on the decision of Hon'ble jurisdictional High Court in the case of CIT v. Ramco International [2009] 180 Taxman 584(Punj. & Har.) wherein it has been held that any claim made by the assessee even during the course of assessment proceedings by way of application is allowable since filing of audit report along with the return of income is not mandatory but is only directory, he has reduced this disallowance to Rs. 4,41,272/-. 4.2 After hearing both sides we have found that this ground is wrongly framed. The ld. CIT(A) has not deleted the entire disallowance of Rs. 5,02,628/- as has been pleaded in Ground No. (2), but he has sustained it at Rs. 4,41,272/-, instead, as has been claimed in the revised working by the assessee. Accordingly, we don't find any merit in this ground as well. The decision of Goetz India bounds the AO only, and, otherw....
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.... is issued when the Windmill actually generates power unit and such power unit reaches the main grid through the help of PEF (power evacuation facility) and transmission lines. Thus, without PEF and transmission lines, the Windmill cannot be said to be commissioned. We wish to draw your kind attention to the judgment of the Hon'ble Delhi High Court in the case of CIT v. Mahanagar Telephone Nigam Ltd. as reported in 254 ITR 627wherein it has been held that the underground cables for telecommunication network form the link between the telephone exchanges and as such forms part of the apparatus of the plant of the assessee engaged in providing the telecommunication network and therefore, the extra shift allowance was allowed on underground cables. It is also submitted for your consideration that power evacuation facility is a specific expenditure relevant for the Windmill and does not result in creating any independent asset and therefore, part and parcel of the Windmill project. Similarly, the transmission line and metering cannot be viewed de-hors the "Windmill because without transmission line the basic function of Windmill for which it is set up will not be performed. Ev....
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....e Wind Mill project. So without the Power Evacuation Facility, power generated at the wind mill cannot be transmitted to the main electric grids as required by the State Government/power transmitting agencies. 2. It is further a fact that it is almost impractical for each customer to set up and own their private PEF since that would create lot of congestion and traffic of transmission cables near Srid point and therefore, Electricity Board will not accept applications from customers in this regard. Thus, the cost of PEF is recovered by Suzlon on proportionate basis from the Wind Mill owners who are using the PEF. It is also a fact that the payment made towards the PEF is non refundable. 3. Thus, under the above said facts and circumstances of the case and considering the provisions of section 32 of the Act, it is submitted that the PEF is an integral constituent of the Wind power project and the cost incurred for this PEF is a part of cost of the Wind Mill project and accordingly eligible for 80% depreciation. The expenditure incurred on PEF is inextricably linked with the bringing into existence of the Wind Mill without which the Wind Mill could not be commissioned and as su....
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....fferent sources of energy like coal, nuclear power, hydel power, wind energy etc. These sources of power are further classified into renewable and non-renewable/energy sources. A wind mill is one such device which is used to generate electricity by converting the energy of wind into rotational motion, and is therefore, a renewable energy device, 2. Power transmission facility: Power transmission refers to bulk transfer of electric energy from generating power plant to sub-station located near population centres. The network used for transmitting power is called the power transmission facility. 3. Power distribution network is the local network of distribution of electricity between high voltage sub-station and the final customers. (d) What is power evacuation infrastructure facility ? 'Power Evacuation Infrastructure Facilities:- are basically a part of the power transmission network. Power projects normally develop as a cluster. The power evacuation scheme consists of the following infrastructure facilities: 1. Feeders for evacuation of power from the wind projects. 2. Extra high tension sub-station for grouping the total wind power and stepping it up to a....
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....to time. They are as follows: 1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment; vide Lord Sands in Commissioners of Inland Revenue v. Granite City Steamship Company. In City of London Contract Corporation v. Styles Bow en, L. J., observed as to the capital expenditure as follows: 'You do not use it "for the purpose of your concern, which means, for the purpose of carrying on your concern, but you use it to acquire the concern.' 2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade: vide Viscount Cave, L.C, in Atherton v. British Insulated and Helsby Cables Ltd. If what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. Thus, if labour saving machinery was acquired, the cost of ....
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....the assessee owns the wind mill and generates electricity, he would be using the power evacuation infrastructure facility for transmission of electricity. As and when the assessee chooses to sell the wind mill, the subsequent buyer would also have to buy the rights to use the power evacuation infrastructure. Therefore, though the assessee is not the owner of the power evacuation infrastructure, the expenditure incurred by the assessee to acquire rights to use the power evacuation infrastructure is a capital expenditure. This stand of the revenue has been upheld by the Hon'ble Supreme Court in the case of Travancore Cochin Chemicals Ltd. v. CIT 106 ITR 900, where the Apex Court has held that laying of a new road and paying money to the Govt. of Kerala for the same is of capital in nature. Without prejudices to the above, even if in subsequent appellate proceedings, the assessee claims that it is the owner of the power evacuation infrastructure, the power evacuation infrastructure is only related to the transmission of electricity. As has been mentioned above, the Income-tax Rules, 1962, provide for special rates of depreciation only for renewable energy devices being wi....
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....nd 'mills parts Rs. 5,64,44,000 Tubular Tower Rs. 1,35,20,000 Total Rs. 7,39,20,000 Cost of power transmission & metering facilities = Rs. 16,21,776 Proportion of cost of power evacuation = Rs. 16,21,776 Rs.7,55,24,776 (Rs. 7,39,03,000 + Rs. 16,21,776) = 0.022% Civil work relatable to power transmission and metering Rs.5770527x0.022 Rs. 1,26,952 KREDL processing fees for the project relatable to power transmission and metering Rs. 100000x0.022 Rs.2,200 Labour expenses relatable to power transmission and metering Rs.2 191020x0.022 Rs.48,203 Labour expenses of testing and commissioning relatable to power transmission and metering Rs. 112360x0.022 Rs.2,472 In view of the discussion held above, expenditure pertaining to power transmission and metering facilities amounting to Rs. 18,01,603/- is held to be normal plant and machinery eligible for depreciation @ 15%. Therefore, the value of the block of wind mill is accordingly decreased by Rs. 18,01,603/-. Therefore, the value of the block of wind mill eligible depreciation @ 80% is her....
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....pression "owner" used in s. 32 has been considered by taking into account all its phrases and aspects, The owner need not necessarily be a lawful owner entitled to pass on the title of the property to another. It could be seen from the order of the first appellate authority the CIT(A) that it is the case of assessee before him that though the buses were not in their names and permits were also not in their names they were the beneficial owners. In order to establish the beneficial ownership of the estate the assessee has furnished the documents relating to the loans obtained by the assessees for the purchase of the buses which are in the names of others, the repayment of the loans were made out of the collections from the buses, the road tax, insurance, etc., were paid by the assessee; the assessee has obtained undertaking from the persons in whose names the vehicles and permits are there for plying the buses in the name of KAS Transports; the entire collections from the buses is shown in their income and expenditure account; and the entire expenditure pertaining to the buses including drivers' salary, diesel, spares, R.T.O. tax, interest on the loans and other expenses were me....
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....t @ 80% which has been allowed by ld. CIT(A). He further argued that the expenditure of Rs. 39,00,000/- incurred towards acquiring rights to use this Power Evacuation Infrastructure facility is a capital expenditure and not a revenue expenditure. He has further argued that power transmission and distribution net work is a plant and machinery which is eligible for depreciation @ 15% and @ 80% as has been allowed by ld. CIT(A). 5.4 Per contra ld. A.R. has reiterated all reasons given before AO and ld. CIT(A) apart from relying on the finding of Ld. CIT(A). 5.5 After cogitating the entire evidence available on record in the light of the obtaining facts of the case, the paper books, et. Al, vis a vis the oral and written submissions of the parties we have found no error in the impugned finding of Ld. CIT(A). We have tried and understood that the Income-tax Rules provide for allowance of depreciation at the rate of 80% on 'renewable energy devices' like windmills and any other specially designed devices, which run on wind mills. The assessee has installed a 'wind farm project' and has included it in the windmill block eligible for depreciation @80%. A windmill is a....
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....be stored an transported like liquid or gas energy of other kinds. Without the combination of the above these systems the idea of wind mill will not became viable. Without the system No. (ii) and (iii) the wind mill cannot, even, be commissioned. To put in simple words without system No. ii & iii the generation of electricity is not even possible. We cannot store electricity; we cannot simply go on generating it in the air and let it waste them' no purpose would be served and without distribution i.e., taking it to the doors of the consumer again it is all waste. Therefore, the expenditure incurred towards systems (i), (ii) and (iii), have to be clubbed and cannot be separated. Likewise, the power evacuation infrastructure facilities are a part of power transmission network. This facility consists of the following : (1) Feeders for evacuation of power from the wind projects. (2) Extra high tension substation for grouping the total wind power and stepping it upto a higher voltage level. (3) Line for inter facing the above facilities to a transmission/distribution network. The assessee has to contribute for using the power evacuation facilities which are normally owne....
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.... not in their names and permits were also not in their names they were the beneficial owners. In order to establish the beneficial ownership of the estate the assessee has furnished the documents relating to the loans obtained by the assessees for the purchase of the buses which are in the name of others, the repayment of the loans were made out of the collections from the buses, the road tax, insurance, etc., were paid by the assessee; the assessee has obtained undertaking from the persons in whose names the vehicles and permits are there for plying the buses in the name of KAS Transports; the entire collections from the buses is shown in their income and expenditure account; and the entire expenditure pertaining to the buses including drivers' salary, diesel, spares, R.T.O. tax, interest on the loans and other expenses were met by the assessee. The assessee has also shown in the balance sheet the buses under dispute as assets of KAS. Transports, which is a proprietary concern of the assessee. Thus, the assessee has made available all the documents relating to the business and also established before the authorities that she is a beneficial owner, though her name has not been ....