TaxTMI 
TaxTMI 
2013 (1) TMI 778
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...., and hence the addition may be cancelled. 2. Although the depreciation on the wind mills was allowed for the year 2001-02 relevant to A.Y. 2002-03 & F.Y. 2005-06 relevant to A.Y. 2006-07 and second half year in A.Y. 2006-07 @ 80% and no facts and circumstances had changed, the claim of depreciation @ 80% is wrongly rejected by the Hon'ble Commissioner of Income Tax (Appeals) and depreciation lesser than 80% is allowed on that machinery for A.Y. 2007-08, hence the addition may be cancelled. 3. Hon'ble Commissioner of Income Tax (Appeals) erred in treating civil construction expenses for bringing Windmills into existence as "building" and in not allowing depreciation on it at the rate of 80% like Windmill. Hence, the related expenses are treated as cost of Wind mill. 4. In the view of facts & circumstances, the Hon'ble Commissioner of Income Tax (Appeals) erred in bifurcating the cost of Wind mill and treating cost of Rs. 2134884 (Wind mill III), Rs. 576903 (Wind mill I&II) and Rs. 1870890 (Wind mill IV) as building and hence the same should be treated as cost of Wind mill. 5. In the view of facts & circumstances, the Hon'ble Commissioner of Income Tax (A....
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....iture incurred on the cost of wind turbine i.e. Rs. 2,76,94,000/-, expenditure on foundation and civil work Rs. 54,13,245/- and erection and commissioning work of Rs. 12,39,800/- which were worked out in ratio at 80.63%, 15.76% and 3.61% of total cost. The A.O. worked out and apportioned the total cost of the wind mills even in the respective WDV brought forward from the previous years in the same ratio. The A.O. therefore proceeded to work out the depreciation which was allegedly claimed excess by the assessee on the WDV of the civil work and WDV on erection and commissioning work. The A.O. finally restricted the depreciation on the civil work to 10% of the WDV in respect of the wind mills installed in the preceding years and WDV brought forward in the block in the A.Y. 2007-08 as well as cost incurred in the A.Y. 2007-08 which were part of the block of this year. In sum and substance, in the opinion of the A.O., the cost incurred on the foundation, erection and commissioning of the wind mill cannot be equated with the wind mill turbine and depreciation is to be worked out treating this work as a separate block of assets i.e. 80% on the turbine, 10% on foundation & civil work and ....
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....d commissioning. We find that issue is squarely covered in the favour of the assessee by the decision of the Tribunal in the case of M/s. Western Precicast Pvt. Ltd., Sangli (supra), the operative part of the finding of the Tribunal in the said case are as under: "7. We have carefully considered the rival submissions. In order to appreciate the dispute, the following break-up of expenses on account of erection and commission of windmill I i.e. windmill installed in the preceding assessment year 2006-07 would be necessary as contained in para 2.5 of order of the CIT(A):- S. No. Date Nature of work Expenditure - Rs. 1. 30-03-2006 Towards supply and installation of HT electrical Yard with VCB, outdoor type CT & PT and HT Transmission Line from Windmill to Grid interconnection point including HT metering for 1.25 MW WINDMILL AT LOCATION No. K437 at above site address. 30,93,500/- 2. 30-03-2006 Labour charges towards final testing and commissioning for 1.25 MW windmill at Loc No. K437. 1,10,200/- 3. 30-03-2006 Towards labour charges for work executed, for erection and installation of windmill consisting of : Unloading and safe keeping of material, Assembly,....
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....y allowed. 7. Now we take up the revenue's appeal for the A.Y. 2007-08 being Incometax Act, 1961 No.891/PN/2011. The revenue has taken the following effective grounds 1 to 4:- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in classifying Components & Accessories of Renewable Devices (1/3rd of the total cost), Electrical items, components of renewable energy project device/wind mill, in respect of wind farm project device/wind mill, in respect of wind farm project consisting of one WTG 0.60 MW wind mill at location No.GP-31, Installation (with material) of electrical line for power transmission and metering in respect of wind farm project consisting of one WTG for your 0.60 MW wind mill at location wind mill when these items are not wind mill or specifically designed devices which run on wind mills and as such said items would not classify for depreciation @ 80% as per the depreciation schedule. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred observing that labour work related to installation of one wind turbine generator for Rs. 10,55,056/- was required to be included in the cost of wind turbine generator fo....
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....epreciation on the wind mills was allowed for the year 2001-02 relevant to A.Y. 2002-03 & F.Y. 2005-06 relevant to A.Y. 2006-07 and second half year in A.Y. 2006-07 @ 80% and no facts and circumstances had changed, the rejection claim of depreciation @ 80% is wrongly confirmed and depreciation lesser than 80% is allowed on that machinery for A.Y. 2007-08, hence the addition of Rs. 4786556/- may be cancelled. 10. While completing the assessment for the A.Y. 2008-09, A.O. disallowed the depreciation on the wind mills to the extent of Rs. 4786556/- for the same reason which are given in the A.Y. 2007-08 i.e. treating the cost on the foundation of the wind mill and cost of erection and commissioning are not integral part of the wind mill as such and accordingly, restricted the depreciation at 10% on the cost of the foundation/civil work and at 15% on the cost of the erection and commissioning. We have already decided this issue in assessee's own case in the A.Y. 2007-08. We therefore, following our reasons in the said order allow the grounds taken by the assessee to extent of cost/WDV of foundation & cost/WDV of erection & commissioning of wind mill. But uphold action of A.O. to rest....
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.... before us, revealed from the orders of the authorities below are as under. The assessee company had installed three wind mills at a three different locations and each wind mill is treated as a separate "Wind Mill undertaking". The assessee had claimed the deduction u/s 80IA(2) of the Act of Rs. 52,45,355/- in the respect of Satara wind mill undertaking, although there was loss in the Tamil Nadu wind mill and Gudhe-Panchgani wind mill. The assessee stated before the A.O. that each wind mill is an independent and separate undertaking and books of accounts are also maintained and audited separately. The assessee had been setting off the loss of depreciation from different wind mill undertakings against the income of the foundry division i.e. other business. The assessee also pleaded that although there appear to be profit from a wind mill undertaking in earlier year (if only the income of any previous year completed), since the depreciation loss of the earlier year of that wind mill undertaking is deemed to be carried forward, assuming no set off against foundry income as if it is the only source of income, there was no positive income from that wind mill undertaking from that initia....
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....otal income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years." (2) The deduction specified in sub-s. (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [or develops (***) a special economic zone referred to in cl. (iii) of sub-s. (4)] or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines or lays and begins to operate a cross-- country natural gas distribution network : Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in cl. (a) or cl. (b ) or cl. (c) of the Explanation to cl. (i) of sub-s. (4), the provisions of this sub-section shall have effect as if for the words 'fifteen years',....
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....se) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation.................. Provided............... Provided ...... (iv) an undertaking which,- (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2011; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2011: Provided that the deduction under this section to an undertak....
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.... as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel 28[or the business of repairs to ocean-going vessels or other powered craft] to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel 29[or the business of repairs to ocean-going vessels or other powered craft] were the only source of income of the assessee during the previous years relevant to the initial assessment year....
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....Business? 22. Thus it is clear that profit of the eligible business has to be computed in the manner provided in sub-section (5) of Section 80IA. 'The manner of computation is explained in the case of Commissioner of Income-tax v. Accel Transmatic Systems Ltd [2010] 230 CTR 206 (KER.) as under: We disapprove the pattern of computation made by the assessee by deducting from the profits of the eligible industrial unit the claim amount and then returning the balance to constitute gross total in the computation of total income. In fact, the procedure to be followed for the purpose of granting deduction under section 80-IA is to first compute the profits and gains of the eligible unit and then to determine the eligible deduction therefrom in terms of section 80-IA(5) of the Act. Thereafter, in the computation of total income under the provisions of the Act, the eligible deduction has to be reduced and if the total income computed is less than the eligible amount, deduction has to be limited to such amount. Since there has been variations in the total income computed by virtue of disallowances and later orders of the higher authorities allowing it, we direct the officer to r....
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..... Section 80I(5) unambiguously lays down that the profits and gains of an eligible business to which the provisions of sub-s. (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section, be computed as if such eligible business is the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year upto and including the assessment year for which the determination is to be made. Thus, there is a deviation between the provisions of sections 80I and 80IA. While section 80I speaks about grant of deduction @ 20% of profits and gains of an industrial undertaking engaged in eligible business if such profits and gains of the industrial undertaking was included in the gross total income, section 80IA(1) speaks about grant of deduction of 100% of profits and gains of eligible business, provided the undertaking or the enterprise carries on the specified business or businesses subject to the conditionalities laid down in that behalf. It would appear therefore, that read with the decision given in Synco case (supra) sections 80IA(1), 80IA(4) and 80IA(5) would render only the profi....
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....including Depreciation) 68,86,506 1,10,31,807 Net Profit (68,63,472) (67,72,279) ., Depreciation (Adjusted) (1,37,32,881) (1,63,89,452) Income WTGS (IT Act) (1,37,32,881) (3,01,22,333) 27. Now let us assume a situation where the Tamil Nadu and Gudhe-Panchgani windmills were not commissioned in the year ending on 31/03/2006 and 31/03/2007 but were commissioned in the year on 31/03/2009. In such a scenario, the Satara windmill would be the only revenue and profit generating centre of the enterprise engaged in the business of generation of electricity. The appellant 'would be entitled to compute and claim the deduction allowable under sub-section (1) for the previous year relevant to assessment year 2008-09. Now if the Tamil Nadu and Gudhe- Panchgani windmills were commissioned in the previous year relevant to assessment year 2009-10. then there would be no profits available for making the claim of deduction in respect of profits generated by the Satara windmill for which deduction has already been given because in the initial years the losses generated by the Tamil Nadu and Gudhe-Panchgani windmills would set off the income or profits ....