AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1140
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....arts (as evidenced by their Delivery Notes and Lorry Receipts) since 19.2.2010 (PB ps. 123-136), as per the commissioning certificate dated 31.3.2010, issued by AP Central Power Distribution Corporation Ltd. (PB pg. 32). The Windmill, it is contended, was put to trial run and commercial production is not necessary - which though came to be in the following year. In the view of the Revenue, however, the assessee's claim is not valid. The Windmill cannot be said to have been put to use in-as-much as no electricity had been produced. The authorization for conducting trial run and commissioning of Windmill, is itself dated 30.3.2010 (PB pg. 33), and it is inconceivable that the entire processes leading to the commissioning of the Windmill stand completed by 31.3.2010, i.e., in one-day. The assessee's claim stands allowed in appeal on the basis that the trial run/production would also be construed as having put the machinery to use for the purpose of business. 3. We have heard the parties, and perused the material on record. Discussion 3.1 The question before us is if the assessee is eligible for it's claim of depreciation allowance on the new Windmill acquired by it. Section 32(1),....
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....r use at any moment. They were surely deployed in business, and their being put to actual use being a contingency over which they had no control and, further, which could arise at any time. In fact, the identity of the machines which were idle and which worked would keep changing from time to time, and, was not relevant; the purport of the arrangement being to keep some machines (productive capacity) in surplus, as a standby, so that the production did not suffer on account of a breakdown in any of the working machines (operating capacity). How could then, one may ask, a difference be made, for the machine 'used' vis-à-vis that 'not used', all of which formed part of a pool, made available, some of which were to necessarily remain idle at any given time, albeit liable to be used at any time. In CIT vs. G. N. Agrawal [1996] 217 ITR 250 (Bom), again, the trucks under repair during the relevant year were already part of the assessee's business (operational) assets, having been put to use earlier, as also in the subsequent year. Their being thus under repair during the relevant year was considered by the Hon'ble Court as of no moment. Surely, the capital assets already deployed....
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....e the functions for which it was set up. And that the operations for establishment of the unit cannot be equated with the establishment or the setting up of the unit itself. The said processes are preparatory in nature. In its words: 'A unit cannot be said to have been set up unless it is ready to discharge the function for which it is being set up. It is only when the unit has been put into such a shape that it can start functioning as a business or a manufacturing organisation that it can be said that the unit has been set up.' Operations for the establishment of a unit, from the very nature of that expression used in the proviso to section 5(1)(xxi), can only signify steps that have to be taken to establish the unit. The word "set up" in the principal clause to section 5(1)(xxi) is equivalent to the word "established", but operations for establishment cannot be equated with the establishment of the unit itself or its setting up. The applicability of the proviso has, therefore, to be decided by finding out when the company commenced operations for establishment of the unit, which operations must be antecedent to the actual date on which the unit is held to have been set up for ....
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....on and set up, such systems are tested to affirm whether the machines are working in unison without over loading, electrical surges or other glitches. It is only thereafter that it can be said to be commissioned or operational. A fit trial run is thus a testing phase before which a plant can be declared as fit and ready for use, i.e., commissioned. No wonder, all the expenditure up to this stage stands to be capitalized as cost of the project (also refer: Challapalli Sugars Ltd. vs. CIT [1975] 98 ITR 167 (SC)). How, then, can a plant or machinery be regarded as being capable of being used, much less actually used, even if passively, prior thereto? 3.4 The facts in Industrial Solvents & Chemicals Pvt. Ltd. (supra) are relevant. The issue that arose in that case was as to when the business, plant and machinery could be said to be ready to use for the manufacture of industrial solvents and ether. The Hon'ble Court, after examining the facts of the case found that the installation of the machinery (which was completed by end of December, 1960 or January, 1961) was not sufficient, and that it could be said to be ready for production and the business, accordingly, ready to be commenced ....
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....ate, S.V. Road, Dahisar (East) Mumbai - 400068 LR.NO: DEE/O/NDL/TECHL/F.NO /D.NO. 593-6 Dated: 31-03-2010 COMMISSIONING CERTIFICATE This is to certify that 01 No x 800 KW (0.8 MW) Enercon make Wind Energy Converter of M/s. G Shoe Export, near Kondameedipalli village in Kolimigundla mandal, Kurnool district, Andhra Pradesh, has been erected and interconnected to APTRANSCO grid on 31-03-2010. From the date of interconnection, the machines are under trial run until the company declares commercial operation date. Sd/- Divisional Engineer (Operations) APCPDCL, Nandyal The same is preceded by a temporary authorization dated 30/3/2010 (PB page 33). The same is by the Chief Electrical Inspector and, in its operative part, reads as under: 'This authorisation issued is purely temporary and is valid upto 29.4.2010. This authorisation is issued for conducting trial run of the equipment and commissioning of the WindMill. You should submit the Compliance report for the defects pointed out during the inspection and communicated to you separately on or before that date and get it regularised under Rule 47 'A' and Rule 63(2) of Indian Electricity Rules, 1956. Under Rules 30(3),....
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.... of electricity, the assessee's case, based on trial production, is without any factual basis. The same, i.e., trial production, has rather to lead to the commissioning, i.e., a ready to use state, of which there is, again, nothing to suggest, much less prove. The same is, as explained with reference to the decisions by the Hon'ble jurisdictional High Court, to further lead to a passive user, whereupon only, in the facts as of facts and circumstances of the case, could it be regarded as an actual user, so as to satisfy the statutory mandate of 'used', which is required to be met. The assessee has even as much as not given the date of commissioning of the plant/windmill and/or the regularization of its connection (with the Grid) or authorization. A ready to use (or commissioned) state, it is clear, would require approval from the concerned Electricity Board/Regulatory Authority in-as-much as electricity is to be, through connection with the grid, delivered for commercial consumption. Conclusion 4. In our clear view, therefore, the assessee's claim for depreciation is without basis, both on facts and in law. We have, after visiting the law, explained by the Hon'ble Apex Court and ....
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.... stand thus allowed. 5. The second issue arising in the instant case is the assessment of short-term capital gain (STCG) on the sale of the old Windmill; the said sale (at Rs. 322.84 lacs) resulting in a surplus in-as-much as the written down value (WDV) of the relevant block was Rs. 9.48 lacs. No capital gain, however, was disclosed as before the yearend another windmill, falling in the same block, came to be acquired by the assessee at a cost of Rs. 431 lacs. It is the year-end figure (of the block) that is relevant. In the AO's view, which though did not find favour with the ld. CIT(A), the value of the block had to be considered as on the date of sale of the old Windmill, resulting in a surplus or gain on that date. The acquisition of the new Windmill was a only a subsequent event. 6. We have heard the parties, and perused the material on record. We are principally in agreement with the first appellate authority that it is the status of the block, positive or negative - STCG resulting in the latter case, as at the end of the year, which is to be seen in-as-much as the depreciation is to be computed only at the year-end, and on the value of the block thereat (refer s. 43(6)). ....
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....y definition, is a group of assets for which the same rate of depreciation is provided per the Income-tax Rules, 1962 ('the Rules' hereinafter) (s. 2(11)). This is apparent from the clear language of section 32(1) (refer paragraph 3 of this order) inas- much as only assets - tangible or intangible, owned and used, would stand to form part of any particular block of assets. Rule 5(1) of the Rules, reading as under, further clarifies this aspect as only those block of assets, as used for the purpose of business at any time during the year, are eligible for depreciation thereon u/s. 32(1) r/w s. 43(6) of the Act: 'Depreciation. 5. (1) Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub- section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year.' The fore-going is the only harmonious interpretation on a conjoint reading of the different provisions noted above. Not so....
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....eive, which the words 'accrue' or 'arise' signify, arose in India in-as-much as the supply (purchase) orders were executed in India. Reliance stands placed by him on the decision by the Authority for Advance Rulings (AAR) dated 22.2.2012 in SKF Boilers and Driers Pvt. Ltd. [2012] 343 ITR 385, reproducing there-from, and which in turn also drawn on its decision in Rajive Malhotra, In re (AAR No. 671 of 2005, reported at [2006] 284 ITR 564 (AAR)). The ld. CIT(A) allowed the assessee's claim on the basis that the payment under reference is covered by the CBDT Circular No. 786 dated 7.2.2000, and that its withdrawal per Circular No. 7 of 2009 (dated 22.10.2009) could not be given a retrospective effect. Reliance for this proposition is placed on number of decisions by the tribunal, as in the case of CIT (Dy.) vs. Sanjiv Gupta [2011] 135 TTJ 641 (Luck). 8. We have heard the parties, and perused the material on record. As explained in CIT vs. R. D. Aggarwal & Co. [1965] 56 ITR 20 (SC), which stands referred to in CIT vs. Toshoku Ltd. [1980] 125 ITR 525 (SC), and continues to govern the field, business connection involves the relationship between the business carried on by a non-residen....
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.... so that no part of it can be said to be taxable in India, as clarified by the Apex Court in Toshoku Ltd. (supra). The reliance by the Revenue on the decision in Rajive Malhotra (supra) is misplaced. In the facts of that case, the commission was in respect of participation in a show in India, which was facilitated by the agent by booking orders by non-resident Exhibitors. The sales in the instant case, on the supply of goods in pursuance to the purchase order booked by the agents, and for which therefore commission is allowed to them, takes place outside India. The decision in the case of GE India Technology Centre (P) Ltd. vs. CIT [2010] 327 ITR 456 (SC) would, accordingly, clearly apply in the facts of the case, so that the provisions of section 195 of the Act and, consequently, of section 40(a)(i), are inapplicable. We decide accordingly, and the assessee succeeds. 9. The next [(v) and (vi)] grounds of the Revenue's appeal relates to the disallowance of the claim for damaged goods (at Rs. 15,98,677/-). The basis of the disallowance is the assessee's inability to prove the same. The claim was firstly without details as to the consignment or the defects. The goods claimed to be d....
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.... ld. CIT(A). 11. We have heard the parties, and perused the material on record. We agree that the candid declaration before us materially alters the nature of the assessee's claim, so that the Revenue's stance would also be required to be revised. It is unfortunate that the assessee comes out with the facts at a much later stage and not before the Revenue, particularly before the assessing authority. Be that as it may, the same, in view thereof, is to be regarded as a trade discount allowed by the assessee to its foreign buyers. Under the circumstances, we only consider it proper that the matter is restored to the file of the A.O. to examine the assessee's claim - which is to be looked at from a businessman's point of view, in light of the facts admitted before us, and who shall decide the same in accordance with the law, be it u/s. 37(1) or u/s. 36(1)(vi), issuing definite findings of fact. We decide accordingly. 12. Gds. (vii) and (viii) are general in nature, warranting no adjudication. 13. In the result, the Revenue's appeal is partly allowed. Assessee's Appeal (in ITA No. 5736/Mum/2014) 14. Vide Gd. 1 of its appeal, the assessee claims depreciation at 80%, i.e., the rate....