AI Drafter 
TaxTMI 
TaxTMI 
2013 (1) TMI 778
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....18,12,337 (55,07,891 - 36,95,554) on wind mills, 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 ....
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....able. On the basis of the details given by the assessee in the respect of expenditure 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 separ....
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.... the nature of the said expenditure i.e. the foundation & civil work and erection and 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 exe....
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....eciation at 80%on the cost of foundation as well as cost incurred on erection and commissioning of the wind mill. Accordingly, grounds taken by the assessee are partly 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 C....
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....n on account of disallowance of depreciation of Rs. 4786556/- on the wind mills. The addition is illegal, bad in law and without jurisdiction 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 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 the....
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....e clear mandate of sub section (1) of Sec 80IA of IT Act to compute allowable deduction on the basis of profit of the eligible business and not individual units of eligible business. 12. The relevant facts pertaining to the issue 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 ear....
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....d by an undertaking or an enterprise from any business referred to in sub-s. (such business being hereinafter referred to as the eligible business), there shall, accordance with and subject to the provisions of this section, be allowed, in computing the total 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....
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....t day of April, 1995 : Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) 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....
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....y used for any purpose; (iii) it manufactures or produces20 any article20 or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of 21[ten] years next following the 31st day of March, 1981, or such further period 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,....
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....reference to are clearly stated. Clause (iv) of Subsection (4) refers to two businesses, the profits of which become eligible for deduction. The Act has not clearly stated that the deduction is allowable with reference to profits of individual unit of the undertaking engaged in either of the two businesses. This implies that whether the deduction has to be computed of the business as a whole or has to be computed separately for every unit of the undertaking involved in eligible 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 un....
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....rately. Section 80- I(1) lays down that where the gross total income of the assessee includes any profits derived from the priority undertaking/unit/division, then in computing the total income of the assessee, a deduction from such profits of an amount equal to 20 per cent has to be made. It was therefore imperative to compute the deduction on standalone basis because deduction was available a specified percentage of the profits and gains derived from an industrial undertaking which was included in the gross total income. 25. 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 un....
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.... (3,63,60,251) (2,58,56,157) (82,25,561) 52,45,355 [II] Tamil Nadu Wind Mill Financial year ending 31/03/2006 31/03/2007 31/03/2008 Revenue 5,08,985 12,34,862 72,62,755 Expenses (including Depreciation) 1,07,69,788 184,05,700 2,19,40,537 Net Profit (1,02,60,803) (1,71,70,838) (1,46,77,782) Depreciation (Adjusted) (3,75,61,688) (2,12,90,113) (1,53,48,601) Income WTGS (IT Act) (3,75,61,688) (5,88,51,802) (7,42,00,403) [III] Gudhe-Panchagani Wind Mill Financial year ending 31/03/2007 31/03/2008 Revenue 23,034 42,59,528 Expenses (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 wo....
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.... of the Ld. CIT(A), the Revenue is in appeal before us. We have heard the rival submissions of the parties and perused the record. Admittedly, the assessee is power general through the wind mills at 3 different locations i.e. in Tamilnadu, Panchgani and Satara. The wind mills are commissioned and erected in different assessment years as noted by the authorities below. Assessee is maintaining separate books of accounts in respect of 3 wind mills and working out the profit or losses. Though the first wind mill was erected and commissioned in the A.Y. 2002-03, there were consistent losses up to the A.Y. 2007-08 and assessee did not opt for claiming the deduction u/s 80IA(2) of the Act. So far as A.Y. 2008-09 is concerned, assessee opted for claiming the deduction u/s 80IA(2) treating the said assessment year (A.Y.) as an initial assessment year as there was the profit in Satara wind mill but losses in the Tamil Nadu wind mill and Panchgani wind mill. If we look at the scheme of the section 80IA(2), it speaks about the "undertaking" or "enterprise" and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results ....