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2016 (5) TMI 789 - ITAT MUMBAI

2016 (5) TMI 789 - ITAT MUMBAI - TMI - Disallowance of depreciation in respect of Effluent Treatment Plant (E.T.P) - date of installation and put to use for the first time - Held that:- There is nothing on record which could positively establish the use of the ETP from 01.10.2005, as in the form of commissioning report; ETP power consumption (which is separately metered); consumption of chemicals for use in ETP, et. as. The EAR contains specific reference to the ETP records. The EAR is also sile .....

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e file of the A.O. The assessing authority, where not satisfied with the assessee’s explanation, or if the assessee itself concedes not to press this aspect, shall, in giving effect to this order, allow deprecation at 50% of the cost for the current and the following year in-as-much as we have confirmed it to be eligible for deprecation @ 100%. This, it would be appreciated, is even otherwise incumbent on him in-as-much as he has to, while allowing additional depreciation for the current and/or .....

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( CIT(A) for short) dated 17.3.2011, partly allowing the Assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2006-07 vide order dated 11.12.2008. 2.1 The issue in this appeal is the validity or otherwise in law of the assessee s claim for depreciation on what it calls an Effluent Treatment Plant (ETP), costing ₹ 29,13,344/-. While the Revenue considers it as an item of plant and machinery, allowing deprec .....

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olding the contention of the Assessing Officer by not allowing 100% depreciation on E.T.P. (Effluent Treatment Plant). 1.2 The CIT(A) is grossly erred in not considering the evidence filed before him and also erred in upholding the contention of the Assessing Officer that no evidence regarding expenditure incurred, equipment forming part of the ETP, cost incurred for assembling etc. were filed. 2.2 At the first appellate stage, the assessee sought to refurbish its said claim by furnishing a cert .....

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cer (A.O.), were admitted as additional evidence by the ld. CIT(A) under r.46A of the Rules. Copies of invoices of various bought out materials - ETP having been fabricated in-house, were also submitted, even as the assessee claimed of having submitted the same during the assessment proceedings itself. On merits, the A.O. vide his remand report dated 04.2.2011 to the ld. CIT(A), observed as follows: v. Without prejudice to the above, the submissions made by the assessee are examined. Even in the .....

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%. Hence, the claim is still unsubstantiated and, accordingly, disallowable. The ld. CIT(A), on a consideration of the materials before him, held as under: From the above report of the A.O. it may be noted that the assessee failed to furnish the evidence regarding expenditure incurred, equipments forming part of ETP, cost incurred on assembling, etc. even during the opportunity given in remand proceedings before A.O. This ETP as claimed by appellant is an in house developed ETP and not purchased .....

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that the assessee s claim (for depreciation on ETP) is unsubstantiated in-as-much as it has not been able to conclusively show that what was fabricated was an ETP, i.e., the assessee had not been able to adduce sufficient evidence to establish that an ETP was installed by it during the relevant previous year. In our view, in view of the bills for material and labour submitted (PB pgs. 46-76); the assessee s audited accounts, coupled with the certificate of the Chartered Engineer and the EAR (for .....

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of the date of installation and of being put to use for the first time by 30.9.2005 is not in dispute; the Revenue having itself allowed depreciation at the normal rate of depreciation, in full. We will visit this aspect of the matter later. The question, however, is: Even granting that an ETP was set up and put to use during the relevant year, would it qualify to be a Water Pollution Control (WPC) Equipment, i.e., in terms of the relevant clauses of Appendix I, which read as under, so as to be .....

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hanced rate. In other words, an ETP is without doubt a WPC equipment, set up to treat the fluid effluent and waste prior to its discharge from an industrial unit. The very fact that an environment audit was carried out in the present case, which bears abundant reference to the ETP (including its flow chart at Ann. 8 thereto), along with an examination of its various aspects as Water (per a separate section (C)); Quality of Effluent; Energy consumption of ETP; Analysis Reports, etc., establishes .....

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ubted by the Revenue. If that were the case, how we wonder could the Revenue disallow the assessee s claim in the first place? At the same time though, we are inclined to agree with the assessee s case. It has furnished all the materials it considered proper and relevant for the purpose. No further queries were raised, asking it to substantiate a particular aspect, by the Revenue. The assessee under the circumstances should not be put to the rigmarole of fresh proceedings before the A.O., who ha .....

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Coming back to the aspect of the date of the ETP being put to use for the first time, we find that despite having been allowed deprecation in full (at the normal rate), the following bills/vouchers indicate otherwise: a) Bill No. 17 of Civil Contractor (Diva Construction) dated 14.10.2005 after several work for boiler - ETP (PB pg. 46); b) Bill No. 481 dated 20.10.2005 of Shital Poly Plast for HDPE Pipe (in coil form) (PB pg. 58); c) Bill No. 495 dated 25.10.2005 of Shital Poly Plast for HDPE Pi .....

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truction) dated 04.3.2006 after several work for boiler - ETP (PB pgs. 49-50); The ld. AR, on being confronted therewith, would submit that these bills are for labour, which are raised much after the actual conduct of the work and, accordingly, are not indicative of when the work was actually completed. We are unable to agree. The bills are, firstly, also for materials. Again, a delay in raising bills is understandable only for a few days, stretching up to a week to ten days, while in the instan .....

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ing on record which could positively establish the use of the ETP from 01.10.2005, as in the form of commissioning report; ETP power consumption (which is separately metered); consumption of chemicals for use in ETP, et. as. The EAR contains specific reference to the ETP records. The EAR is also silent in this regard, being, as afore-noted, only for the period January 2007 onwards. We are, at the same time, conscious that there has been no verification qua this aspect of the matter by the Revenu .....

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