TMI Blog2015 (11) TMI 1752X X X X Extracts X X X X X X X X Extracts X X X X ..... iture which should be disallowed in accordance with the method prescribed, i.e. Rule 8D of the Income Tax Rules. Higher rate of Depreciation on power evacuation facility (PEF) and transmission lines used with wind turbine generator - Held that:- power evacuation infrastructure facility is part and parcel of the windmill though partly owned by the assessee on which the assessee is entitled to the claim of depreciation at the same rate on which depreciation was allowed on the windmill. - Decided in favor of assessee. - ITA No.931 /Chd/2013 , C.O.No.31/Chd/2013 Arising out of ITA No. 931/Chd/2013 , ITA No.687 /Chd/2014, C.O.No.35/Chd/2014 Arising out of ITA No. 687/Chd/2014 - - - Dated:- 27-11-2015 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER Assessee by : Shri Subhash Aggarwal Department by : Shri Vivek Mangia O R D E R PER RANO JAIN, A.M. : Both the appeals filed by the Revenue are directed against the separate orders of learned Commissioner of Income Tax (Appeals)-II, Ludhiana dated 25.7.2013 and 28.5.2014 for assessment years 2010-11 and 2011-12 respectively. The assessee has filed Cross Objections against the same. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld investment of ₹ 84,39,309/- in this account and further an addition of ₹ 1,02,56,336/- was made during the year. As regards the interest of old investment, it was submitted that in assessment year 2009-10, the same disallowance was made, which was deleted by the learned CIT (Appeals). Reliance was placed on the order of the Chandigarh Bench in the case of DCIT Vs. Samrat Forging in ITA No.975 of 2011 dated 24.5.2012. After considering the submissions of the assessee, the learned CIT (Appeals) mainly relying on the order of the CIT (Appeals) for assessment year 2009-10 deleted the disallowance. 5. Now the Department has come up in appeal before us. The learned D.R. relied on the order of the Assessing Officer, while the learned counsel for the assessee relied upon the order of the learned CIT (Appeals). Reiterating the submissions earlier made before the lower authorities, the learned counsel for the assessee further brought to our attention the order of the I.T.A.T., Chandigarh Bench in assessee s own case for assessment year 2009-10, whereby similar issue has arisen, which was deleted by the learned CIT (Appeals) and the action of the learned CIT (Appeals) was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest free loan of ₹ 5 lacs being advanced to 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. 10. We find that the issue before the Tribunal was in relation to the investment made in the purchase of the land and identical issue has been raised before us. Following the same parity of reasoning, we uphold the order of Commissioner of Income Tax (Appeals) in deleting the addition made under section 36(1)(iii) of the Act of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived, there is no positive interest which can be considered in making any disallowance. Secondly, it was prayed that interest on term loan of ₹ 2,12,92,379/- and interest on packing credit loan of ₹ 1,95,408/-, totaling to ₹ 2,14,87,787/- being directly relatable to earning taxable income has to be excluded for computation under Rule 8D of the income Tax Rules. Thirdly, it was stated that the assessee possessed sufficient owned funds to make investments, therefore, no disallowance is called for under section 14A of the Act read with Rule 8D of the Income Tax Rules. The learned CIT (Appeals), relying on his own order in assessee s own case for assessment year 2009-10, whereby referring to the order of I.T.A.T. in assessee s own case for assessment year 2008-09, same relief was granted to the assessee, accepts the second contention of the assessee, i.e. the interest paid which is directly relatable to earning the taxable income, viz interest on cash credit and packing credit, directed the Assessing Officer to exclude the same for computing disallowance under Rule 8D of the Income Tax Rules. However, he did not concur with the other two contentions of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earning the taxable income has to be excluded. The wording of Rule 8D (ii) of the Income Tax Rules is quite clear as it has been postulated in this provision that the interest relatable to investment in tax free funds is to be computed. Therefore, we do not find any need to interfere in the finding given by the learned CIT (Appeals). The ground of appeal raised by the Revenue is dismissed. 14. As regards the Cross Objection filed by the assessee, we have no hesitation in holding that for the purposes of computation under Rule 8D of the Income Tax Rules, the netting off the interest income out of interest expenditure is to be allowed to the assessee. This issue has been very aptly discussed by the I.T.A.T., Chandigarh Bench in the case of Shiv Parshad Aggarwal (supra) at para 9, which reads as under : 9. In the totality of the abovesaid facts and circumstances, where the assessee had incurred interest expenditure which is set-off against the interest income offered under the head income from other sources and where no interest expenditure is remaining to be set off, there is no merit in the orders of the authorities below in making the disallowance under section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of expenditure made by the Assessing Officer under section 14A of the Act read with Rule 8D of Income Tax Rules is not sustainable. Cross Objection filed by the assessee is allowed. 16. The ground N.3 raised by the Revenue is with regard to deletion of disallowance of ₹ 1,82,94,625/- made by the Assessing Officer on account of depreciation claimed on PEF and transmission lines used with wind turbine generator. 17. Briefly, the facts of the case are that the assessee had installed six wind turbine generators during the current assessment year on which depreciation @ 80% has been claimed. The Assessing Officer noted that the assessee has included electric line installation and power evacuation facility (in short PEF ) as a part of the total unit of wind turbine generators, on which depreciation @ 80% had been claimed. The Assessing Officer was of the view that the PEF and electric line installations were not eligible for depreciation @ 80%. He also noted that the PEF was not owned by the assessee but in fact, it had acquired rights to use the PEF by making a one time payment to RRB Energy and Suzlon company. Since the assessee had got an enduring benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 course of hearing, which reads as under: This has reference to your query seeking clarification with regards to costs borne by you on setting up of Power Evacuation Facility for the wind mill in the State of Gujarat. 1. The Power Evacuation Facility (PEF) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 assessee 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 claim of the assessee is to be allowed. Coming to the payment made to GEDA, we are of the view that the decision of the Hon'ble Calcutta High it in the case of Birla Jute Manufacturing Ltd (Supra) is clearly applicable. In case of Excel Industries Ltd (Supra), the Hon'ble Bombay High Court held; payment made for overhead service line, which remained the property of tricky Board is allowable as revenue expenditure. On facts, in the instant case tie 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 l,2,3,and 4 are allowed 31. The Pune Bench of the Tribunal in Poonawala Finvest Agro P. Ltd. Vs. ACIT (supra) held as under: I have gone through the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erify 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. (supra), we hold that the power evacuation infrastructure facility is part and parcel of the windmill though partly owned by the assessee on which the assessee is entitled to the claim of depreciation at the same rate on which depreciation was allowed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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