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2016 (11) TMI 1244 - ITAT PUNE

2016 (11) TMI 1244 - ITAT PUNE - TMI - Disallowance of depreciation on the cost of Wind Turbine - Held that:- We direct the Assessing Officer to grant depreciation @ 80% and thus decide the issue in favour of the assessee - Decided in favour of assessee - Addition on account of shortage - Held that:- The entire purchases of the fruits and vegetables are not exported but only the good quality of fruits which are acceptable to the customers are exported. It is also a fact that during the proce .....

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ssee are audited and no adverse comments on account of shortage has been made by the statutory auditors in their report or in the tax audit report. In view of the aforesaid facts, we are of the view that Assessing Officer was not justified in making an ad-hoc disallowance of shortage. We thus direct the deletion of disallowance.- Decided in favour of assessee - Cash payment for purchase of fruits - Held that:- It is an undisputed fact that the assessee has purchased fruits for which the paym .....

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merely because the cash payments have been made, no disallowance could be made. We are of the view that in the aforesaid facts and without bringing any material on record of the purchases being not verifiable, the Assessing Officer could not have resorted to make an ad-hoc disallowance. We therefore set-aside disallowance made by Assessing Officer - Decided in favour of assessee - Disallowance of loading and unloading charges - Held that:- We find that out of the total expenses ₹ 18.9 .....

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the order of Assessing Officer is called for. - Decided against assessee - Disallowance on account of expenditure being of personal in nature - Held that:- We find merit in the plea of the assessee. The company being juristic person, it is difficult to accept the basis for disallowance of the Revenue. A company is incapable of having any personal user of the facilities. The directors are separate from the company. Even assuming that facilities were occasionally used for personal purposes, i .....

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y the assessee is directed against the order of Commissioner of Income Tax (Appeals), Kolhapur dated 08.05.2013 for the assessment year 2009-10. 2. The relevant facts as culled out from the materials on record are as under :- 2.1 Assessee is a company stated to be engaged in the business of export of fresh fruits and vegetables. Assessee electronically filed its return of income for assessment year 2009-10 on 30.10.2009. Thereafter, assessee filed a revised return on 30.10.2009 declaring total i .....

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, assessee is now in appeal before us and has raised following grounds :- The following grounds of appeal are without prejudice to each other: 1. The learned Commissioner of Income Tax (Appeals) (I), Kolhapur erred in confirming the disallowance of depreciation of ₹ 16,21,886/- on the cost of foundation of a Wind Turbine and on the cost of installation and commissioning of the Wind Turbine without properly appreciating the explanation filed. 2. While confirming the disallowance of deprecia .....

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s & vegetables account without properly appreciating the submissions filed and without ever making an attempt to understand the very issue. 4. The learned CIT(A) erred in confirming the ad hoc addition of ₹ 5,00,000/- without properly appreciating the submissions filed and by conveniently ignoring the statutory position that the cash payment to agriculturists for purchase of agricultural commodities is covered by the Rule 6DD(e) of the I.T. Rules, 1962. 5. The learned CIT(A) erred in c .....

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assigned for confirming the disallowance of depreciation of ₹ 16,21,886/- and disallowance of ₹ 15,01,088/- on account of shortage in fruits & vegetable trading account and of the ad hoc addition of ₹ 5,00,000/- on account of cash purchases from agriculturists and of ₹ 75,000/- from out of loading & unloading charges and of ₹ 1,09,804/ - from out of vehicle repairs & maintenance, telephone and traveling expenses on account of alleged personal use are wro .....

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icer (AO) was of the view that the assessee was eligible for depreciation on the portion of civil work of windmill at 10% and on the portion of erection and commissioning of windmill, assessee was eligible for depreciation at 15% and not at 80% as claimed by assessee. The Assessing Officer thereafter worked out the excess depreciation at ₹ 16,21,886/- and disallowed the same. Aggrieved by the order of Assessing Officer, assessee carried the matter before ld. CIT(A), who upheld the order of .....

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n is covered in assessee s favour by the decision of Co-ordinate Bench of Tribunal in assessee s own case for assessment year 2008-09. He pointed to the relevant portion of the order of the Tribunal dated 31.03.2016 in ITA No.1293/PN/2013. He therefore submitted that since the facts of the case in the year under appeal are identical to that of earlier year, as has also been noted by the ld. CIT(A), the issue in the year needs to be decided in favour of the assessee by following the order of Co-o .....

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the Co-ordinate Bench of Tribunal, by relying on the order of Tribunal in the case of Shreem Electric Limited vs. JCIT in ITA No.2107/PN/2013, order dated 30.11.2015, decided the issue in favour of the assessee by holding as under :- 8. We have carefully considered the rival submissions. We find that the controversy in the present case is squarely covered by the recent decision of the Pune Bench of the Tribunal in the case of Shreem Electric Limited vs. JCIT in ITA No.2107/PN/2013, order dated .....

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windmills. It is the case of the assessee before the Assessing Officer as well as before the CIT(A) that entire expenditure together with cost of windmill is entitled to same rate of depreciation at 80% as the other expenditure incurred towards foundation & civil work and erection & commissioning work , etc. are integral part of windmills and are directly attributable to installation and operational functioning of wind turbine. Since the civil work and erection & commissioning expens .....

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d therefore cannot be treated differently. Therefore, impugned capital expenditure towards civil work & commissioning etc. also will qualify for the same rate of depreciation as applicable to wind turbine itself. The issue is no longer res-integra and is covered by the decision of Co-ordinate Bench of the Tribunal in the case of Poonawala Finvest & Agro (P.) Ltd. vs. ACIT, (2008) 118 TTJ 68 (Pune) wherein it has been clearly held that the capital expenditure incidental to the windmill ha .....

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ed disallowance of depreciation. 9. The issue being squarely covered in favour of the assessee the depreciation as claimed by the assessee deserves to be allowed. In the result, Ground Nos.1 & 2 are allowed. 6. Before us, Revenue has neither placed any material on record to demonstrate that foundation and civil work, erection and commissioning work does not form integral part of windmill nor has placed any material to demonstrate that the aforesaid order of the Co-ordinate Bench of Tribunal .....

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and the decision is as under :- Mr. Suresh Kumar urges only the following two questions of law for our consideration:- (1) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing depreciation @80% on the expenses incurred on Power Evacuation Infrastructure, Erection and Commissioning, Line Work and Electrical Fittings without appreciating that these works did not form part of the Windmill and are eligible for depreciation @15% being items of P .....

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declaring an income of ₹ 3.83 Crores, after taking into account depreciation claimed on Windmill. The Respondent-assessee had capitalized the cost of its Windmills @Rs.6.55 Crores and claimed depreciation thereon @80% i.e. ₹ 5.12 Crores. The Assessing Officer held that 80% of the depreciation is available on the basic components of the Windmill i.e. Wind Turbine Generator, Tubular Tower and Transformer. The other expenses which were capitalized as a part of the Windmill consisted of .....

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. Thus, the Assessing Officer disallowed the claim of ₹ 92.58/- lakhs and restricted the depreciation to only ₹ 4.20 Crores as against ₹ 5.12 Crores claimed by the Respondent-assessee. 4 ….. 5 ….. 6 ….. 7 Regarding Question (1) (a) We find both the CIT(A) as well as the Tribunal have recorded a finding of fact that the items listed at (a) to (d) in paragraph(3) above form an integral part of the Windmill. Thus, entitled to 80% depreciation being a part of a .....

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t in Eastman Impex(supra) also refers to the decision of the Mumbai Bench of the Tribunal in Trumac Engineering Co Pvt Ltd Mumbai v/s Income Tax Officer (Income Tax Appeal No. 555/Mum/2003 rendered on 27th June, 2008) wherein an identical issue has arisen and the assessee's claim therein for depreciation @100% (as in A. Y.1996-97) was allowed. Mr. Suresh Kumar for the Revenue very fairly states that no appeal has been filed by the Revenue from the decision of the Tribunal in Trumac Engineeri .....

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) which has been accepted by the Revenue and no distinguishing features are shown to us. Question No.(1) as framed does not give rise to any substantial question of law. Thus, not admitted. 8 Regarding Question (2) (a) It is agreed position between the parties that the issue raised herein stands concluded against the Revenue by the decision of this Court in Cooper Foundary Pvt Ltd(supra) i.e. the cost of civil foundation is to be allowed depreciation @80%. (b) In the above view, Question No.2 as .....

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ccount of shortage. 8.1 On perusing the tax audit report, the Assessing Officer noticed that the assessee had shown shortage of 1,01,678 Kgs. in respect of various fruits, the details of which are listed at page 3 of the assessment order. The assessee was asked as to show as to why the shortage claimed not be disallowed to which, assessee inter-alia submitted that assessee deals in fruits which are highly perishable in nature. It was submitted that assessee also exports vegetables. Due to the qu .....

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s. Due to the aforesaid factors, the damage takes place and the same has been claimed by assessee. The submission of the assessee was not found acceptable to the Assessing Officer as he was of the view that assessee had not furnished any documentary evidence to support its claim of loss. He therefore considered 50% of the shortage claimed by the assessee, as being not allowable and accordingly after considering the average purchase price, determined the value of disallowance at 50% of shortage a .....

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imed by the appellant. It was replied that the shortage was due to perishable nature of goods. The appellant exports fruits and vegetables which are highly perishable. Due to quarantine laws, there is strict check on all the shipments. Many times the appellant is compelled to remove some of the goods before the shipment in order to observe the quarantine laws. Such goods have to be compulsorily destroyed; particularly grapes are highly susceptible to damage. That is why the shortages had to be c .....

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undersigned, similar contentions were made by the appellant. It was stated that various factors cause more shortage in fruits having water contents. These are damaged due to evaporation of water contents, pre-harvest handling due to uneducated labour, postharvest damage due to handling while in transport, damage due to precooling stage etc. All these contentions are in general correct. But, to quantify the amount of loss, documentary evidence is necessary. The assessing officer has duly allowed .....

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ling water content of fruits and vegetables. He pointed to the various processes and submitted that assessee records the purchase of the grapes which are purchased at the farm but subsequently on grading the fruits many times the fruits which are not upto the mark or damaged, have to be considered as wastes and have to be destroyed. He further submitted that assessee has been following similar method of accounting of shortage in earlier years and subsequent years and the method of accounting has .....

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de by the assessee are incorrect. He further submitted that assessee has also maintained quantitative records of the goods and there is no qualification by the tax auditor. He therefore submitted that the entire addition needs to be deleted. The ld. DR, on the other hand, supported the order of the Assessing Officer and ld. CIT(A). 10. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to shortage. It is undisputed fact that th .....

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ported but only the good quality of fruits which are acceptable to the customers are exported. It is also a fact that during the process of collection of fruits and the final export, damages takes place and the fact that similar shortage and damages have been accepted by the Department in earlier years i.e. assessment years 2006-07 to 2008-09 in the assessment framed under section 143(3) of the Act is not in dispute. Before us, Revenue has not placed any material on record to demonstrate that th .....

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ground No.3 of assessee s appeal is allowed. 11. Ground No.4 is with respect to ad-hoc addition of ₹ 5,00,000/-. 11.1 During the course of assessment proceedings, Assessing Officer noticed that assessee had made payment in cash to crop growers. To verify the purchases, the assessee was asked to produce three major parties for verification. The assessee produced (i) Shri Ramesh Pandurang Bangale, (ii) Shri Sharad Vasudeo Haveli and (iii) Shri Vishnu Namdeo Nalawade. The Assessing Officer r .....

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ord in respect of sale of crops to the assessee. He accordingly made ad-hoc addition of ₹ 5,00,000/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A), who upheld the order of Assessing Officer by holding as under :- 7. The assessing officer has noticed that payments in cash have been made to crop growers of grapes, mangoes etc. To verify the purchases in cash, three of the crop growers were asked to be produced. Three persons viz. Ramesh Pandu .....

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t and lastly all of them contended that they are not maintaining any records for the sale made to the appellant. Since inspite of the above facts the appellant is making cash payments and there is no record of sale made by these sellers to the appellant company, the assessing officer came to the conclusion that these purchase transactions were not fully verifiable. Similar mode of operandi was noticed in respect of purchase of other crops also. In view of these discrepancies and to cover up the .....

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iod and the last period of the season, the rates are always higher whereas during the middle of the season they are lower due to situation in the market. 9. The above general contention is correct but there has to be documentary evidence in respect of bills and vouchers. Moreover, the disallowance is merely ₹ 5,00,000/- and that too has been made after having found that cash payment was made inspite of the various factors mentioned in the assessment order as per which payment by cheque or .....

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ments they have accepted the fact of sale of goods to the assessee and receipt of sale proceeds in cash. He submitted that only basis for disallowance by Assessing Officer was nonmaintenance of records by the sellers. He submitted that when the sellers of goods have accepted the sale of goods to the assessee and receipt of the sale proceeds, the mere fact of non-maintenance of records at the sellers end cannot be a ground for disallowing the expenses in the hands of the assessee. He further subm .....

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was called for. The ld. DR, on the other hand, supported the orders of lower authorities. 13. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the assessee has purchased fruits for which the payment was made in cash. We find that the sellers of goods have confirmed about the supply of goods to the assessee and the payments for sale being received by them in cash. The Assessing Officer has not brought out any instance of purchase transactions .....

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orted to make an ad-hoc disallowance. We therefore set-aside disallowance made by Assessing Officer. Thus, the ground No.4 of assessee s appeal is allowed. 14. Ground No.5 is with respect to ad-hoc disallowance of ₹ 75,000/-. 14.1 The Assessing Officer on perusing the Profit & Loss Account noticed that assessee had debited ₹ 18,95,356/- as loading and unloading charges. He further noticed that the vouchers for expenses that were presented by the assessee before Assessing Officer .....

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these were self-made vouchers. There were no full particulars in respect of these charges. In view of this, an amount of ₹ 75,000/- has been disallowed. Appellant has contested the disallowance. However, the same is rejected due to the reason that appellant has supported these expenses by self-made vouchers. 15. Aggrieved by the order of CIT(A), assessee is now in appeal before us. Before us, the ld. AR reiterated the submissions made before Assessing Officer and ld. CIT(A). The ld. DR, on .....

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ert the findings of Assessing Officer, we are of the view that the Assessing Officer was justified in disallowing ₹ 75,000/- and therefore we are of the view that no interference to the order of Assessing Officer is called for. Thus, the ground No.5 of assessee s appeal is dismissed. 17. Ground No.6 is with respect to disallowance on account of expenditure being of personal in nature. 17.1 During the course of assessment proceedings on perusing the Profit & Loss Account, Assessing Offi .....

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he aforesaid expenses to be a personal in nature and accordingly disallowed ₹ 1,09,804/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A), who upheld the order of Assessing Officer by holding as under :- 11. Appellant has claimed ₹ 10,98,046/- on account of vehicle repairs and maintenance, telephone expenses and travelling expenses out of which 10% of the same has been disallowed for personal use. The disallowance is hereby confirmed for .....

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Assessing Officer. He pointed to the relevant findings of Hon ble ITAT. He therefore submitted that since the facts of the case in the year under appeal are identical to that of earlier years, the addition be deleted. The ld. DR, on the other hand, did not controvert the submissions of ld. AR but however supported the order of lower authorities. 19. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to ad-hoc disallowance of exp .....

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