Eastman International, Ludhiana vs Department Of Income Tax

The DCI T Vs. M/s Eastman I nternational Circle I B-XXX-2185/6-203/1, Phase VII Ludhiana Focal Point Ludhiana PAN No. AAAFE3449D

(Appellant) (Respondent)

Appellant By : Sm t. Jyoti Kumari Respondent By : Sh. Ashwani Kumar

Date of hearing : 16/03/2015 Date of Pronouncement : 19/03/2015

ORDER

PER T.R.SOOD, A.M.

The appeal by the Revenue is directed against the order dated

08/10/2014 passed by the CI T(Appeals)-I , Ludhiana

2. In this appeal Revenue has raised the following grounds which

are as under :

i) " That the Ld. CIT(A) erred in law and on facts in deleting the disallowance of higher depreciation @ 80% on account of expenditure on installation of electrical line for power transmission and metering treated as not part of Wind Mill by the AO."

ii) "That the Ld. CIT(A) erred in law and on facts in not following the decision of Hon'ble Supreme Court in the case of Travancore Cochin Chemical Ltd., Vs. CIT 106 ITR 900 and allowing depreciation contribution for Power Evacuation Facility even though the assessee has no ownership of the asset, being only a contributor for availing the facility."

iii) "That the Ld. CIT(A) has erred in law and on facts in treating the power evacuation infrastructure as part of Wind Mill and as Renewable Energy Device whereas the AO has brought on record sufficient material to prove that same was in fact not a Renewable Energy Device and hence not eligible for depreciation @ 80%."

2 iv) That the order of the Ld. CIT(A) be set aside and that of the A.O. be restored.

3. After hearing both the parties we find that during the assessment

proceedings it was noticed that assessee has installed a Wind Mill. For

evacuation of the power, some contribution was made towards Power

Evacuation Infrastructure Facilities. On this contribution assessee claimed

depreciation @ 80% the depreciation which was disallowed on the basis that

assessee was not owner of this facility and in any case this facility is not in the

nature of renewable energy device. In this background Assessing officer

allowed depreciation only @ 15%.

4. On appeal, the Ld. CIT(A) was of the opinion that Power Evacuation

Infrastructure facilities is absolutely essential for the Wind Mill to generate

electricity to be practically available to the eventual customers. In other words,

without such facility the installation of Wind mill would be meaningless. He also

observed that Power Evacuation Infrastructure facilities by itself cannot be

described as Renewal Energy device, however, same along with association of

wind mill would determine the true character. Accordingly he allowed the

depreciation @ 80%.

5. Before us Ld. DR strongly supported the order of AO.

6. On the other hand Ld. Counsel for the assessee submitted that issue is

squarely covered by the decision of Tribunal for Assessment Year 2008-09 and

2009-10 in ITA Nos. 821 & 1127 /Chd/2012. This decision was further confirmed by

the Hon'ble Punjab & Haryana High Court.

7. After considering the rival submissions carefully we find that this issue was decided in asseessee's own case for the earlier year order vide para 7 which is as under :

3

"7 . After considering the rival submissions we find that identical issue came up for consideration of the Tribunal in case of ACIT V. Eastman Impex, Ludhiana, ITAs No. 819 & 820/Chd/2012 and the same has been adjournment vide para 10 whi ch is as under:

" 10. We have considered the submissions of both the parties and gone through the material available on record. In the present case it is noticed that the facts of the present case are similar to the facts involved in the case of Trumac Engineering Co. Pvt. Ltd. Mumbai Vs. ITO(supra) wherein vide order dated 27.06.2008 relevant finding given by the ITAT, Mumbai Bench "I" in para 21 to 24 read as under:

"21. Coming to the next item, i.e. disallowance of depreciation of Rs. 42,50,000/- in respect of contribution made to GEDA, ld. Counsel reiterated the submissions made before the revenue authorities and submitted that the power generated from the wind mill farm at Navadra / Bhogat site is delivered to the sub-station of GEDA through HT lines. This power in turn is transferred to GEDA for further transmission. For this purpose, connection of grid at substation is required. The contribution made to GEDA is towards setting up of centralized substation at Lamba, through which the electricity generated by the wind farm would be delivered to the grid. The claim was made on the basis of information available. In fact, subsequently, assessee received confirmation, as stated in the preceding Para, from GEDA, for fixing the contribution of Rs. 35,60,862.75 out of Rs. 42,50,000/- for formation of substation and the balance, it was intimated, will be utilized towards running and maintenance of substation.

22. In the alternate, learned counsel submitted that the payment made to GEDA at least to be treated as revenue expenditure. If the revenue treats this as not something owned by the assessee (substation), then it naturally follows that assessee contributed the above amount for creation of substation, which is the property of GEDA. In that case, learned counsel submitted, the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Birla Jute Manufacturing Ltd., reported in 182 ITR 497 (Cal) is clearly applicable; Learned counsel submitted, the same view has been taken by the Hon'ble Bombay High Court in the case of CIT vs. Excel Industries Ltd., reported in 122 ITR 995 (Bom).

23. Learned DR, on the other hand, submitted that the assessee is now improving the method of transaction by installing new machineries, without which also the windmill will continue to operate. This cannot be treated as an integral part of the windmill as such. This has independent standing. Assessee's windmill worked even without these machineries. As such ld. DR for the revenue submitted that the orders of the revenue authorities may be upheld.

24. Considering the rival submissions, we are of the view that the assessee's appeal is to be allowed on merit. Firstly, it is to be seen that these machineries had no independent functioning as such. Merely because it improves the working system or controlling / monitoring system, it cannot be treated as an independent machinery and not part of the integrated machinery. The submission of the learned counsel is that if the machinery installed at the first stage of installing the windmill itself, the claim of the asessee; would have been allowed, Merely because for some reason or other it was subsequently installed, does not mean that it is not a part of the machinery as such,. Since the machinery had no independent functioning, we are of the view that the decision of the Hon'ble Calcutta High Court in the case of Birla Jute Manufacturing; Ltd. (supra) is clearly applicable. In the case of Excel Industries Ltd. (supra), the Hon'ble Bombay High Court held; payment made for overhead service line, which remained the property of Electricity Board, is allowable as revenue expenditure; On facts, in the instant case of the assessee, the payment to GEDA is to be allowed in the light of this decision of the jurisdictional High Court. Hence, appeal by the assessee with regard to Ground No. 1,2,3 and 4 are allowed.' Since the facts of the present case are similar to the facts involved in the aforesaid referred to case of Trumac Engineering Co. Pvt. Ltd. Mumbai Vs. ITO (supra), so, respectfully following the aforesaid referred to decisions dated 4

27.06.2008 of ITAT, Mumbai Bench "I", we do not see any valid ground to interfere with the findings of the Ld. CIT(A)."

Further this order has been confirmed by the Hon'ble Punjab & Haryana

High Court in ITA No. 99 of 2014 vide order dated 18/12/2014. Therefore,

following the above order we decide this issue against the revenue.

8. In the result appeal of the Revenue is dismissed.

Order pronounced in the Open Court on 19/03/2015

Sd/- Sd/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 19/03/2015 AG

Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR