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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH
Per Rajesh Kumar, Accountant Member:
The above titled cross appeals one by the assessee and the other by the Revenue have been preferred against the order dated 01.02.2019 of the Commissioner of Income Tax (Appeals)
First we take up and the grounds taken by the assessee are reproduced as under:- “1. On the facts and circumstances of the case and in law, Ld CIT(A) erred in confirming the disallowance of the depreciation on helicopter to the extent 25% of total depreciation of Rs. 2,26,64,020/- i.e. Rs. 56,66,005/- by merely stating that the use of helicopter for non-business purpose by the director of the appellant cannot be ruled out. Disallowance made without appreciating the submissions of the appellant, is bad in law and needs to be cancelled. 2. On the facts and circumstances of the case and in law, Ld CIT(A) erred in confirming the disallowance of the expenses in connection with helicopter to the extent 25% of total expenditure of Rs. 10,06,057/- i.e. Rs. 2,51,5147- by merely stating that the use of helicopter for non-business purpose by the director of the appellant cannot be ruled out. Disallowance made without appreciating the submissions of the appellant, is bad in law and needs to be cancelled.
The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.”
3. The issue raised in 1st ground of appeal is against the confirmation of disallowance of depreciation by Ld. CIT(A) as made by the AO towards depreciation on helicopter of Rs.56,66,005/- on the ground of non business use of the helicopter. In the ground no. 2 the assessee assailed the order of ld. CIT(A) challenging the partial confirmation of expenses on maintenance of helicopter of Rs.2,51,514/-.
The facts in brief are that the assessee is in the business of construction, development and real estate. During the year the assessee filed the return of income on 30.11.2013 declaring a loss of Rs.18,16,11,737/- which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny under CASS and statutory notices were duly issued and served upon the assessee. During the year the assessee purchased a helicopter in co-ownership with other
3 M/s. Real Gold Developers parties. The assessee’s share in the ownership of helicopter was 25% and accordingly the assessee claimed depreciation on the same and also claimed maintenance expenses of the said helicopter. The AO called upon the assessee to justify the claim of depreciation and expenses on maintenance of helicopter. The assessee submitted before the AO that it had claimed depreciation of Rs.2,26,64,020/- and maintenance expenses of Rs.10,06,057/- to the extent of its share, in the profit & loss account and also produced the log book which contained the name of the travellers, hours of travel, purpose of travel etc. in order to justify the allowability of depreciation and expenditure debited in the profit & loss account. The assessee also submitted before the AO that the helicopter is being used for business purposes only. However, the submissions of the assessee did not find favour with the AO and he rejected the claim of the assessee on the ground that assessee has not shown any income from the real estate business in the profit & loss account and consequently it is not eligible for depreciation and maintenance expenses on the helicopter thereby adding Rs.2,26,64,020/- towards depreciation and Rs.1,43,29,665/- towards maintenance expenses of the helicopter in the assessment framed under section 143(3) dated 30.03.2016.
In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee. So far as the maintenance expenditure of the helicopter is concerned, the Ld. CIT(A) recorded a finding of fact that the amount disallowed by the AO of Rs.1,43,29,665/- is factually incorrect and has in fact been capitalized in the cost of the helicopter while correct amount claimed by the assessee in respect of maintenance expenses in 4 M/s. Real Gold Developers the profit & loss account is Rs.10,06,057/-. Similarly, as regards the depreciation the Ld. CIT(A) noted that helicopter was used for business purpose and the assessee derived income by way of receipt of compensation of TDR purchase on 16.03.2012 from M/s. Pilot Construction Pvt. Ltd., however came to the conclusion that use of personal use can not be ruled out and consequently restricted the disallowance to 25% of the total depreciation and maintenance expenses which come to Rs.56,66,005/- and Rs. 2,51,514/- respectively.
The Ld. A.R. submitted before us that the helicopter was acquired on co-ownership basis as per the terms of MOU dated 24.02.2011a copy of which is filed at page no. 57 of the paper book. The Ld. A.R. submitted that there has been a change in the co-ownership and as a result the MOU was amended on 23.12.2010 a copy of which is filed at page No.65 of the paper book. As per the clauses of MOU, helicopter was to be used only for business purposes. The Ld. A.R. submitted that the assessee has maintained the log book which contains the details of flying hours of helicopter, date, place and purpose of travel, name of the person travelling and duration of travel etc. The Ld. A.R. submitted that the helicopter was solely used for the purpose of business and it has booked expenditure of helicopter based on the number of hours it has been used by the assessee the details whereof are filed at page No.54 of the paper book. The Ld. A.R. submitted that the authorities below have not doubted the genuineness of the expenditure and even the facts furnished before the authorities below in the form of log book, MOUs and details contained therein. The Ld. A.R. also submitted that the finding of the AO that there is no income from the business of 5 M/s. Real Gold Developers the real estate is also factually incorrect as the Ld. CIT(A) has recorded a finding to this effect. In any case, the Ld. Counsel submitted that non earning of income can not be a ground for disallowance of expenditure incurred for the purpose of business. The Ld. A.R. submitted that Ld. CIT(A) has disallowed 25% of the expenditure debited in the profit & loss account merely on the ground that non business use of helicopter can not be ruled out. The Ld. A.R. submitted that assessee has furnished complete details of use of helicopter which showed that usage of helicopter for business purpose and the onus is on the department to prove that same is used for non business purpose more so when genuineness of the business expenditure and facts contained in the log book were accepted. The Ld. A.R. relied on the decision of Hon’ble Gujarat High Court in the case of Sayaji Iron and Engineering Co. vs. CIT (2002) 253 ITR 749 and submitted that the disallowance as sustained by Ld. CIT(A) may kindly be deleted.
The Ld. D.R., on the other hand, relied heavily on the order of AO and submitted that even Ld. CIT(A) has wrongly allowed the partial relief to the assessee and prayed that the relief allowed by Ld. CIT(A) may kindly be reversed and order of AO may be kindly restored as the Revenue as challenged in ground No.2 & 3 of its appeal the partial allowance of relief by Ld. CIT(A).
After hearing both the parties and perusing the material on record, we find that in this case the assessee has produced before the authorities below the copies of MOU and amended MOU after change in co-ownership and clauses therein that the 6 M/s. Real Gold Developers helicopter shall be used for business purpose only. The assessee has also furnished log book containing the details of the travel place, date of travel, person travelling and purpose of travel and also the expenses have been claimed based on the number of hours, the helicopter was used by the assessee in its business. We find that the authorities below have not doubted the genuineness of the expenditure or the details as furnished by the assessee. Under these circumstances, we are not in a position to sustain the order of the ld CIT(A) and accordingly we modify the order of Ld. CIT(A) and direct the AO to allow the full amount of depreciation and maintenance expenditure as claimed by the assessee. Ground No.1 & 2 are allowed.
Accordingly, the appeal of the assessee is allowed. (Revenue’s appeal) 10. The issue raised in ground no. 1 by the revenue is against the order of ld CIT(A) deleting the addition of Rs.20,45,30,621/- as made by the AO on the ground that the project was still in progress and not reached finality.
11. The facts in brief are that during the course of assessment proceedings the AO observed that assessee has made addition to solar power equipment of Rs.51,13,26,553/- during the year and accordingly claimed depreciation thereon amounting to Rs.20,45,26,621/-. The other parties also invested in the solar power plants. According to the AO the addition to solar power equipment was shown under the head capital work in progress which showed that project was not complete and assessee is not eligible to claim depreciation. It was pleaded before the AO by the assessee that after purchase of solar power plant the was 7 M/s. Real Gold Developers leased out to M/s. Alfa Infraprop Pvt. Ltd. As a result the asset was put to use immediately upon leasing out and consequently the assessee is eligible to claim the depreciation thereon. However, the AO brushed aside the submissions of the assessee by holding that the assessee has derived income only by way of interest and dividend and not from real estate and therefore asset could not be treated as put to use by M/s. Alfa Infraprop Pvt. Ltd. and hence disallowed the claim of depreciation in the assessment framed.
In the appellate proceedings, the Ld. CIT(A) deleted the addition as made by the AO on account of depreciation of solar power plant by observing and holding that in the cases of other co-owner namely M/s. Aditya Medi Sales Ltd. and M/s. Sun Pharmaceuticals Pvt. Ltd. similar disallowance on account of depreciation as made by the AO in respect of solar power plant was deleted by the Ld. CIT(A) and accordingly allowed the appeal of the assessee.
The Ld. Counsel of the assessee at outset submitted that Ld. CIT(A) has deleted the disallowance of depreciation on solar power equipment on merits as well as on the ground that similar disallowance was deleted by the Ld. CIT(A) for A.Y. 2013-14 in the case of co-owners M/s. Aditya Medi Sales Ltd. The appeal filed by the revenue before the Tribunal, the order of ld. CIT(A) was upheld. However, the said disallowance of depreciation has not been challenged meaning thereby that department has accepted the order passed by Ld. CIT(A) in the case of M/s. Aditya Medi Sales Ltd. Similarly in the case of other co-owners M/s. Sun Pharmaceuticals Pvt. Ltd. and M/s. Unimed
8 M/s. Real Gold Developers Technologies Ltd., the tribunal through a common order dated 11.05.2020 for A.Y. 2013-14 upheld the order passed by the Ld. CIT(A) thereby upholding the deletion of depreciation on solar power equipment by holding that once the department has accepted the order passed by Ld. CIT(A) deleting the disallowance in the case of co-owner M/s. Aditya Medi Sales Ltd. the depreciation has to be allowed in the present case also. It was further held by the Tribunal that there was no finding that part of the asset owned by the assessee could be used for independent generation of power in phaced manner and therefore the findings in the case of other co-owners have to be followed.
The Ld. D.R. while relying heavily on the order of AO submitted that the assets acquired by the assessee under the head solar power plant were capitalized under the head work in progress meaning thereby that assets have not been put to use and therefore assessee is not entitled for any depreciation and therefore prayed that order of Ld. CIT(A) may be set aside on this issue and that of the AO may be restored.
After hearing both the parties and perusing the material on record, we find that the issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in the case of other co- owners M/s. Sun Pharmaceuticals Pvt. Ltd. and M/s. Unimed Technologies Ltd. vide order dated 11.05.2020 for A.Y. 2013-14 in dated 11.05.2020. The operative part is as under: “10. On due consideration of these facts, we are of the view that to some extent discrepancies pointed out by the AO and brought to our notice by the Id.CIT-DR do create a suspicion in our mind about the user of the assets for the purpose of 9 M/s. Real Gold Developers business by the present assessees, but simultaneously if it is to be looked in such a manner that MP Power Management Co. Ltd. an instrumentality of Madhya Pradesh State Government, has awarded a contract for establishment of 16 blocks of solar power plant, and such blocks were established, thereafter it as sold to Real Gold Developers LLP, and RGD LLP further sold these 16 blocks in part to five concerns including the present two assessees. It is to be appreciated that if this solar power plant of 16 blocks is an integrated power plant and part of the block purchased by present two assessees cannot work independently, then it is to be treated that the plant was established. Though there is no specific discussion on this point, and there is no conclusion, but we would like to take note of the fact that as far as purchase of these assets, its user for the purpose of business has not been denied by the AO himself in the subsequent year. He has allowed the depreciation to the assessee in the next assessment year. In the present year only dispute is year of admissibility of the depreciation. On account of some technical ground, if it is denied in this year, then it will be admissible in the next year, thus, considering stand of the Revenue in the case of Aditya Medisales Ltd. where such depreciation has been allowed and accepted, more so when no finding was recorded that the part of the assets owned by the assessees could be used independently for generation of power in a phased manner. We construe that blocks of panel owned by assessees be treated as integrated part of 16 blocks purchased and installed by AIPL and not to be treated separately. In other words, part of assets owned by these two assessees be treated as integrated part of total solar plant consisting of 16 blocks. If that be so, then installation of other blocks have been accepted by the department, and not challenged before the Tribunal. There is no disparity on the facts with regard to the blocks owned by the AMSL visa- vis of the assessee. We are of the view that there is no justification to interfere in the finding of the Id.CIT(A) in the cases of present two assessees also. Therefore, we do not find any merit in these two appeals; they are dismissed.
In the result, both the appeals of the Revenue are dismissed.”
In the same acquisition other companies M/s. Sun Pharmaceuticals Pvt. Ltd. and M/s. Unimed Technologies Ltd. also acquired the plant of 5.81 mega watts and 1.87 mega watts respectively in which assessee acquired 11.69 mega watts. Since the depreciation has been allowed to the co-owners by the Tribunal on the same facts, we are inclined to uphold the order of the Ld. CIT(A) by following the coordinate bench decision and consequently ground No.1 of the Revenue’s appeal is dismissed.
The issues raised in ground No.2 & 3 have already been adjudicated by us in the cross appeal of the assessee in ITA No. 1940/Mum/2019. Accordingly, the issues involved in ground no
Accordingly, the appeal of the Revenue is dismissed.
In the result, the appeal of the assessee is allowed and that of the Revenue is dismissed.
Order pronounced in the open court on 09.07.2021.