GAUTAMKUMAR & CO,MUMBAI vs. DCIT 16(1)(3), MUMBAI
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Income Tax Appellate Tribunal, ‘G‘ BENCH
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in ITA No. 1279/Mum/2010 for A.Y.2006-07 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-27, Mumbai in appeal No.CIT(A)27/DC 16(3)/196/09-10 dated 11/01/2010 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 17/12/2008 by the ld. Dy. Commissioner of Income Tax 16(3), Mumbai (hereinafter referred to as ld. AO).
2 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd. 2. The ld. AR informed that assessee firm i.e. Gautam Kumar & Co. had been converted into a limited company and accordingly, the present name of the assessee is Tanaaya Gems & Jewellery Exports Ltd. Hence, the order is passed in the name of this company.
Though the assessee has raised several grounds, the only effective ground to be decided is with regard to disallowance of depreciation on windmill.
We have heard rival submissions and perused the materials available on record. The ld. AO observed that assessee is engaged in the business of manufacturing and export of diamonds and studded jewellery and generation of power. The return of income for the A.Y. 2006-07 was filed by the assessee on 27/10/2006 declaring total income of Rs.1,06,99,790/- The assessee has claimed depreciation on its windmill project amounting to Rs.2,51,33,166/- in the return of income. A survey u/s.133A of the Act was conducted on 01/10/2007. During the course of survey, the Managing partner Shri Gautam Mehta of the erstwhile assessee firm in reply to question No.15 offered to withdraw the claim of depreciation on windmill. The assessee firm entered into an agreement with M/s. Suzlon Energy Ltd for setting up a Windmill Turbine Generator (WTG) plant at Nandurbar, Dhule for generation of electricity from wind energy. The assessee submitted that the said plant was commissioned on 31/03/2006 and accordingly, would be entitled for claiming depreciation at the eligible rates in A.Y.2006-07. The assessee also submitted the agreements entered by the assessee with M/s. Suzlon Energy and Maharashtra State Electricity Development Corporation Ltd. (MSEDCL). The said documents were also produced by the assessee during the course of survey before the survey team. The survey team on perusal of the said agreements observed that the windmill was not commissioned and put to use during
3 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd. the F.Y.2005-06 relevant to A.Y.2006-07 and further gained strength from the fact of assessee firm entering into agreement with MSEDCL on 27/04/2006 which falls in A.Y.2007-08. The agreement entered by the assessee with MSEDCL dated 27/04/2006 is a power purchase agreement. The assessee pleaded before the survey team that it had earned income of Rs.42/- from sale of wind power and the said sum has been duly credited in the profit and loss account of the assessee and offered to tax. Accordingly, the assessee would be entitled for claiming depreciation and the said windmill at the eligible rates. However, in order to purchase peace and to avoid protracted litigation, the Managing Partner had agreed to withdraw the claim of depreciation of Rs.2,51,33,166/- in A.Y.2006-07 before the survey team. Later the assessee had filed affidavit dated 15/09/2008 wherein the declaration made in the survey was retracted. This retraction statement was considered by the ld. AO as an afterthought. The ld. AO applied the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd. vs. CIT reported in 284 ITR 323 and stated that assessee in order to avail any benefit could do only by way of filing a valid return. Accordingly, he ignored the affidavit filed by the assessee and proceeded to disallow the depreciation of Rs.2,51,33,166/- in the assessment.
4.1. Before the ld. CIT(A), the assessee gave detailed written submissions together with various case laws reiterating its submissions with specific reference to various agreements entered into with Suzlon Energy Ltd, copies of delivery challans and invoices from Suzlon Energy Ltd, letter from Suzlon Energy Ltd. regarding commencement of windmill together with copy of sale bill from Gautam Kumar and Co. raised to MSEDCL in March 2006 for sale of wind power to MSEDCL.
4 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd. 4.2. The ld. CIT(A) however, did not heed to these contentions of the assessee and held that the windmill had not been commissioned and put to use during the year under consideration. The ld. CIT(A) even disbelieved the sale of wind power made by the assessee to MSEDCL in view of the fact that the power purchase agreement itself was entered only on 27/04/2006 and hence, it could not have been possible for the assessee to effect sale of power in March 2006 itself to MSEDCL. The ld.CIT(A) also observed that entire payment for machinery has been made by the assessee in February itself and for installing such a huge windmill, installation and commissioning would take substantial time and the same could not have been completed in March 2006. The ld. CIT(A) also observed that the assessee having accepted for withdrawal of depreciation in survey statement proceeded to claim the depreciation in the return and since no revised return was filed, in view of the decision of Goetze India Ltd, the action of ld. AO was upheld by him.
4.3. At the outset, we find that the return of income was filed by the assessee for A.Y.2006-07 on 27/10/2006. In this return itself, the assessee had duly claimed the depreciation on windmill of Rs.2,51,33,166/-. A survey u/s.133A of the Act was conducted only on 01/10/2007. A statement was given during the course of survey which was later retracted by the assessee. Hence, there is no question of filing any revised return for claiming any depreciation, as the said deprecation was already claimed in the return filed by the assessee on 27/10/2006. Accordingly, there is no question of applicability of decision of the Hon’ble Supreme Court in the case of Goetze India in the facts and circumstances of the instant case. Hence, the entire observations made by both ld. AO and ld. CIT(A) in this regard are dismissed.
5 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd. 4.4. One of the main reasoning given by the ld. CIT(A) for disallowing the depreciation on windmill is that, though the payments were made by the assessee in February itself, the commissioning of windmill would take substantial time and that the same could not have been completed in March 2006. We find from the purchase invoice raised by Suzlon Energy Ltd. on the assessee for supply of windmill, the said invoice is dated 28/03/2006. By this time, as admitted by the ld. CIT(A), the assessee had already made full payments for the purchase cost to M/s. Suzlon Energy Ltd. The assessee had already purchased the land where the said windmill is installed way back on 22/06/2005 itself. The copy of the purchase deed is enclosed in pages 105-117 of the paper book. As admitted by the ld. CIT(A), the entire payments for purchase of machinery has already been made by the assessee way back in February 2006 itself, on perusal of the details of the said payments which are enclosed in pages 118-121 of the paper book, we find that the said payments included amounts paid for purchase of land, processing charges, amounts paid for civil, electrical work for commissioning windmill project, amounts paid towards civil work foundation, control room, transformer, fencing , amounts paid towards power evaluation infrastructure facilities together with what is paid for purchase of windmill. The delivery challans for supply of windmill together with all its spare parts and accessories are enclosed from pages 122-147 of the paper book. These delivery challans are dated 08/03/2006, 13/03/2006, 18/03/2006, 20/03/2006, 23/03/2006, 25/03/2006 and 28/03/2006. We also find that Maharashtra Energy Development Agency (Government of Maharashtra Undertaking) had given clearance for installation of windmill in the changed location on 23/03/2006. Clearance for commissioning of the said windmill was further given vide another communication dated 24/03/2006 by Maharashtra Energy Development Agency. In the said letter dated 24/03/2006, it has been categorically stated that infrastructure clearance has already been given to the
6 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd. assessee for 1.25 MW capacity wind firm project at Nandurbar district and that the said wind mill had already obtained grid connectivity permission from MSEDCL vide letter dated 22/08/2005, clearance for commissioning was accorded to the assessee company accordingly. The evidences in this regard are enclosed in pages 2-3 of the second paper book filed by the assessee. It is a fact that assessee had indeed generated wind power in March 2006 itself and had generated income of Rs.42/- on sale of wind power thereon from MSEDCL. In all the communications of MSEDCL, the date of commissioning of windmill has been clearly mentioned as 31/03/2006. No person would make any payment without getting the services from the other party. In the instant case, the MSEDCL would not have made any payment to the assessee unless it had actually received electricity from assessee. It is not in dispute that assessee had received Rs.42/- as sale of wind power and offered to tax as business income during the year under consideration. This fact though disbelieved by the ld. CIT(A), was not sought to be converted into income from other sources by the Revenue. In other words, Rs.42/- offered by the assessee as business income has been accepted by the Revenue as ‘business income’. Hence, it would be unfair on the part of the Revenue to say that the said income of Rs.42/- has not been generated from sale of wind power and that the wind mill had not been commissioned before March 2006. Considering the fact that income on sale of wind power which has been accepted as such by the Revenue, the Revenue would not be justified in disallowing the depreciation claimed on the said windmill at the eligible rates. Hence, we direct the ld. AO to grant depreciation on windmill in the facts and circumstances of the instant case for A.Y.2006- 07. Accordingly, the grounds raised by the assessee are allowed.
7 ITA No. 1279/Mum/2010 M/s. Tanaaya Gems & Jewellery Exports Ltd.
In the result, appeal of the assessee is allowed.
Order pronounced on 31/01/2023 by way of proper mentioning in the notice board.
Sd/- Sd/- (AMIT SHUKLA) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 31/01/2023 KARUNA, sr.ps
Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy//
BY ORDER,
(Asstt. Registrar) ITAT, Mumbai
