TMI Blog2013 (1) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... e I.T. Act, 1961. (b) That the Ld. CIT(A)-11, Ludhiana has failed to appreciate that the assessee has admitted that the investment of ₹ 4,75,00,000/- was to earn capital gain. As such this is for non- business purpose and the decision of the Hon'ble Punjab Haryana High Court in the case of M/s Abhishek Industries Ltd., is squarely applicable. 2. (a) That the Ld. C1T(A)-II, Ludhiana, on facts as well as in law has erred in deleting disallowance of ₹ 42,68,522/- out of total disallowance of ₹ 47,68,522/- made u/s 14A of I.T. Act, 1961 read with rule 8-D of I.T .Rules. (b) That the Ld. CIT (A)-I1, Ludhiana has failed to appreciate that the assessee had made investments which would generate exempted income and thus section 14A read with Rule 8D of the 1. T. Act, 1961 comes into play. 3. That the Ld. C1T(A)-11, Ludhiana, on facts as well as in law has erred in deleting disallowance of ₹ 110,04,200/- made an account of depreciation claimed on PEF and transmission lines used with wind Turbine Generator. 4. That the order of the CIT (A)-ll, Ludhiana be set aside and that of the A.O. be restored. 5., That the appellant craves leave to add or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showing the availability of funds on the dates when earlier investments and payment of ₹ 5 Lacs during the year was made. It has further been submitted thatt the Appellant's declared income during the year was a sum of ₹ 10,20,27,250/- in addition to the availability of cash in form of depreciation. On perusal of the record I find the contention of the appellant is correct and the made by the AO is here by deleted. 7. The Revenue is in appeal against the said deletion of addition of ₹ 56,98,192/- made under section 36(1)(iii) of the Act. The learned D.R. for the Revenue admitted that sum of ₹ 4.70 crores was invested during the preceding year and only ₹ 5 lacs was invested during the year under consideration. The claim of the learned D.R. for the Revenue is that the money was diverted for non business purposes and consequently the disallowance of interest attributable to such investment was to be made out of interest paid on borrowings raised by the assessee. Reliance was placed on the ratio laid down by the Hon'ble Punjab Haryana High Court in CIT Vs. Abhishek Industries [286 ITR 1 (P H)] and also in Munjal Sales Corporation Vs. CIT [29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sister concern. In view of the ratio laid down by the Hon'ble Supreme Court in the case of Munjal Sales Corporation Vs. CIT (supra) we find no merit in the pleadings of the learned D.R. for the Revenue placing reliance on the ratio laid down by the Hon'ble Punjab Haryana High Court, which have been reversed by the Hon'ble Supreme Court. 12. In the facts of the present case where loan of ₹ 5 lacs has been advanced during the year under consideration and the balance loan having been advanced in the earlier years, where no disallowance was made out of interest expenditure and the assessee having established the availability of the non interest bearing funds, we are in conformity with the order of the CIT (Appeals). The ground No.1 raised by the Revenue is thus dismissed. 13. The issue raised by the Revenue vide ground No.2 is against the disallowance of ₹ 42,68,522/- made under section 14A of the Act read with Rule 8D of the Income Tax Rules. The assessee vide Cross Objection is in appeal against the disallowance of ₹ 5 lacs under section 14A of the Act read with Rule 8D of the Income Tax Rules. Both the ground of appeal raised by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Rule 8D were applicable to the instant assessment year as held by the Hon'ble Bombay High Court in Godrej Boyce Mfg. Co. Ltd. Vs. DCIT Another [328 ITR 81 (Bom)] and it was fairly admitted by the learned D.R. for the Revenue that the assessee had disallowed sum of ₹ 13,95,065/- on account of direct expenses relatable to the earning of exempt income. The CIT (Appeals) further disallowed ₹ 5 lacs. 17. The learned A.R. for the assessee furnished detailed chart in respect of disallowance made under section 14A of the Act by the Assessing Officer and pointed out that the investment in the shares/mutual funds were out of own funds and no borrowed funds were utilized for making the said investment and hence no disallowance was warranted under Rule 8D(2)(ii) of the Act. Further in respect of disallowance made under Rule 8D(2)(iii) the learned A.R. for the assessee pointed out that the assessee had on its own disallowed sum of ₹ 13,95,065/- on account of the direct expenditure relatable to the earning of the exempt income and no further disallowance was warranted under Rule 8D(2)(iii) of the Income Tax Rules. The next plea of the learned A.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 9,34,266/- equal to % of the average of the value of investment and thus made a total disallowance 47,68,522/-. The appellant vide reply dated 17.11.2010 submitted that a sum 13,95,065/- has already been disallowed by the appellant on account of expenses incurred for earning the exempt income. The appellant before me has submitted that the total dividend income which was claimed exempt was a sum 22,57,454/- and long term capital gains of ₹ 93, 77,2 70 claimed exempt under section 10(38) and all the investments made during the year as per page 36 of paper book were made out of appellant's own resources and not out of any borrowings. The appellant has filed copies of the relevant bank entries to show that whenever any investment was made there was always a credit balance available in the bank accounts. It has further been submitted that the appellant had earned an interest income of ₹ 3,95,64,326/- from the market on the advances made by the appellant which is far more than the interest paid by the appellant. The appellant relied on the judgment of Mumbai High Court in the case of CIT vs. Reliance Utilities Power Ltd reported in (2009) 313 ITR 340 (Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of asset as appearing in the Balance Sheet of the assessee on the first day and the last date of the year at ₹ 137.72 crores and ₹ 146.68 crores respectively and determined the average at ₹ 142.20 crores and had computed the disallowance under Rule 8D(2)(ii) at ₹ 38,34,256/- and under Rule 8D(2)(iii) at ₹ 9,34,266/-. The learned A.R. for the assessee had furnished on record the audited set of Balance Sheet and has pointed out that the total value of asset taken by the Assessing Officer on the first day at ₹ 137.72 crores was incorrect as the current liabilities and the provision totaling ₹ 62.25 crores, once added back the total value of the assets would be ₹ 199.96 crores as on 31.3.2007. Similarly, the total value of asset taken by the Assessing Officer on the last date at ₹ 146.68 crores was net of the current liabilities and provision of ₹ 84.04 crores which once added would total to ₹ 230.72 crores which would be the value of the assets as on 31.3.2008. The average of the two would be ₹ 215.34 crores and applying the formula under Rule 8D(2) (ii) of the Income Tax Rules the disallowance works out to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation on Power Lines claimed @ 80%. discussed this issue in para 7, pages 10 to 20 of the order. Brief facts are given by the AO in his order and by the appellant in his written submissions. The brief facts are that the appellant has put up two windmills in Gujarat and the total expenditure of ₹ 18,00,72,824/- was incurred on the same which included a sum of ₹ 92.10 Lacs for Power Evacuation Facility and on processing charges, and ₹ 57,48,000/- on electrical transmission lines. The appellant claimed depreciation @ 80% on the total amount. The AO did not allow any depreciation on the amount incurred on Power Evacuation Facility and allowed 15% depreciation on electrical transmission lines holding that the expenditure relating to Power Evacuation Facility is a capital expenditure which can not be treated as part of the block of renewable energy devices being wind mill eligible for depreciation @ 80% and the assessee is not the owner of PEF thus no depreciation is allowable on the same. As regards electrical lines for power transmission, these are eligible only for normal rates of depreciation @ 15% and they are not part of power generation wind mill device. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant was not the owner of the same. There is sufficient evidence produced by the appellant on the ownership issue. I hold that PEF is part and parcel of the wind mill and the wind mill cannot run without PEF. The assessee has furnished details of payments and has categorically brought on record fact that he is part owner of PEF and hence has claimed proportionate depreciation on his part of ownership contribution only. The counsel's plea that even otherwise since the expenditure is for the purpose of running business, then alternatively he has been allowed the full of such expenses as revenue expenses wring the year. I have also carefully considered the copy of letter written by the Suzlon Ltd. to the appellant, the bill raised by the Suzlon Ltd. in favour of the appellant, various judgements on the issue cited by the assessee's counsel and after considering all these documents and submissions, it is clear that Power Evacuation Facility (PEF) is part of the wind mill because otherwise the running of wind mill would not have been possible and the same view has been taken as per judgement cited (Supra). As far as, the issue of ownership is concerned, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the rival contentions and perused the record. The issue arising vide present ground of appeal is in relation to allowability of depreciation on power evacuation infrastructure facility and also on the transmission lines. The plea of the assessee was that the said power evacuation infrastructure facility was part and parcel of the windmill, which could not run without the same. The assessee claimed to have made payments to Suzlon Energy Ltd. for becoming part owner of the said facility alongwith other persons who were utilizing the said facility. The assessee had claimed depreciation on the said part ownership as the facility was set up by Suzlon Energy Ltd. jointly for group of windmills, as it was not viable to set up independent power evacuation infrastructure facility for each and every individual owner of the windmill. It was also certified by Suzlon Energy Ltd. that the ownership of the said asset has been transferred to the assessee and no depreciation was claimed by them on the said power evacuation infrastructure facility. The confirmation from Suzlon Elergy Ltd. has been reproduced by the CIT (Appeals), copy of which is filed by the assessee during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsmission lines are part and parcel of the windmill and are entitled to depreciation @ 100%. The CIT (Appeals) while deciding the appeal of the present assessee before us referred to the decision in Trumac Engineering Co. Pvt. Ltd. Vs. Income Tax Officer (supra) and observed as under: The other judgment cited by the counsel is in the case of Trumac Engineering Company Pvt. Ltd vs. ITO of ITA No. 555/Mum/2003. The issue related to reopening u/s 147 and also to depreciation on the wind mill. As per as reopening was concerned it was decided against the assessee. The other issue were dealt on merits. The assessee had capitalized some of ₹ 42.50 Lakhs being the payment on account of contribution made to GEDA for creation of common sub-station for evacuation of power from wind farm. The AO held the claim of the assessee is not allowable as the payment is not made for creating an asset nor it is owned by the assessee. The assessee failed before the CIT(A) and hence the appeal before the Hon'ble Tribunal. The Tribunal examined the facts of the case in detail and held as under:- Considering the rival submissions, we are of the view that the assessee's appeal is o be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. 32. The Ahmedabad Bench of the Tribunal in ACIT(OSD) Vs. Parry Engineering Electronics P. Ltd. in ITA No.3317/Ahd/2011 with C.O.No.44/Ahd/2012 held as under : gly, this limited issue is restored to the file of the AO with the directions to verify the facts and in case the borrowed amount has been utilised for the purpose of purchase of the land, then to disallow the depreciation on the capitalized interest to that extent. We direct accordingly. 33. In the present facts and circumstances of the case where the assessee is part owner of power evacuation infrastructure facility, the assessee is entitled to claim depreciation on the said asset. Under the provisions of section 32 of the Act, depreciation is allowable on the asset whether owned wholly or partly by the assessee but the condition is that the same should be used for the purposes of business. In view of the ratio laid down by the Pune Bench of the Tribunal in Poonawala Finvest Agro P. Ltd. Vs. ACIT (supra), the Mumbai Bench of the Tribunal in Trumac Engineering Co. Pvt. Ltd. Vs. Income Tax Officer (supra) and the Ahamedabad Bench of the Tribunal in ACIT(OSD) Vs. Parry Engineering Electronics P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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