Question v. Question

dik IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. INCOME TAX APPEAL NO. 1609 OF 2016 Pr. CIT-2 Kolhapur vsM/s RDS Construction Co. ...Appellant ...Respondent. Mr N.N.Singh for the Appellant. ..... ..... CORAM : AKIL KURESHI & B.P.COLABAWALLA, JJ. FEBRUARY 13, 2019. P.C. : This appeal is filed by the Revenue challenging the Judgment of the Income Tax Appellate Tribunal. The following questions are presented for our consideration “(a) Whether on the facts and in the circumstances of the case and in law, theTribunal was justified in holding that AO has not power to reassess theincome u/s 153A even in the case of completed assessment u/s 143(3) ofthe I.T.Act, 1961?Tribunal was justified in holding that AO has not power to reassess theincome u/s 153A even in the case of completed assessment u/s 143(3) ofthe I.T.Act, 1961? (b)Whether on the facts and in the circumstances of the case and in law, theITAT was right in deleting the additions made by the AO u/s 41(1) on a/cof bogus claim of expenses in the name of labour contractors/ sub-contractors which are outstanding for a number of years ?ITAT was right in deleting the additions made by the AO u/s 41(1) on a/cof bogus claim of expenses in the name of labour contractors/ sub-contractors which are outstanding for a number of years ? (c)Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing depreciation @ 80 % on civilconstruction, electrical and other non-integral installations?Hon'ble ITAT erred in allowing depreciation @ 80 % on civilconstruction, electrical and other non-integral installations? (d)Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing depreciation @ 80 % on civil work onwhich depreciation was allowable @ 10 % and since civil works are notspecially designed devices, the same are not entitle for higher rate ofdepreciation?Hon'ble ITAT erred in allowing depreciation @ 80 % on civil work onwhich depreciation was allowable @ 10 % and since civil works are notspecially designed devices, the same are not entitle for higher rate ofdepreciation? (e)Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing higher rate of depreciation on electricalHon'ble ITAT erred in allowing higher rate of depreciation on electrical Pg 1 of 5 and other installations without appreciating the fact that electrical itemsare not part of electricity generating appartus but are part of electricityselling apparatus and these constitute the block 'Plant and Machinery' onwhich depreciation is allowable @ 15 %? (f)Whether on the facts and in the circumstances of the case and in law, theTribunal was justified in treating the compensation received from SuzlonEnergy Ltd. On a/c of revenue loss as capital receipts? 2Question Nos.(a) and (b) came up for consideration inIncome Tax Appeal No.1753 of 2016 concerning the very samerespondent assessee. The Revenue's appeal was dismissed making the following observations. 2This appeal is filed by the revenue challenging the Judgment of theIncome Tax Appellate Tribunal. The following questions are presented for ourconsideration. “(A) Whether on the facts and in the circumstances of the case and in law, theTribunal was justified in holding that AO has not power to reassess the incomeu/s 153A even in the case of completed assessment u/s 143(3) of the I.T.Act,1961 ? (B) Whether on the facts and in the circumstances of the case and in law, theITAT was right in deleting the additions made by the AO u/s 41(1) on a/c ofbogus claim of expenses in the name of labour contractors / sub-contractorswhich are outstanding for a number of years?” the following observations. 2This appeal is filed by the revenue challenging the Judgment of theIncome Tax Appellate Tribunal. The following questions are presented for ourconsideration. “(A) Whether on the facts and in the circumstances of the case and in law, theTribunal was justified in holding that AO has not power to reassess the incomeu/s 153A even in the case of completed assessment u/s 143(3) of the I.T.Act,1961 ? (B) Whether on the facts and in the circumstances of the case and in law, theITAT was right in deleting the additions made by the AO u/s 41(1) on a/c ofbogus claim of expenses in the name of labour contractors / sub-contractorswhich are outstanding for a number of years?” 3Question No.1 is fairly covered by the Judgment of Division Bench ofthis Court in the case of Commissioner of Income Tax Vs. ContinentalWarehousing Corporation Ltd. reported in 372 ITR 645. It was held thatin the proceedings under Section 153(3) of the Income Tax Act, 1961 ("ITAct" for short), finalized assessment or the reassessment shall not abate, andonly undisclosed income and undisclosed assets detected during the searchcould not be brought to tax. In that view of the matter no question of lawarise in this respect. 4Question No.2 came up for consideration on similar situation. Thequestion was rejected by making the following observations - Pg 2 of 5 “6. Insofar as question no.(i) is concerned, the same arises out of theadditions made by the Assessing Officer under Section 41(1) of the IncomeTax Act, 1961 (“the Act” for short) on account of bogus claim of liability.The Tribunal while giving relief to the assessee, referred to the decision ofthe Supreme Court and other decisions holding that merely because periodof 3 years expired from arising of the liability would not automatically meanthat the liability has ceased. We do not find any error in the view of theTribunal.” 3Question Nos.(c)(d) and (e) came up for consideration in Income Tax Appeal No.60 of 2017 concerning the same assessee forthe A.Y. 2008-09. By a separate order passed today, the Revenue'sappeal is dismissed making the following observations This appeal is filed by the Revenue challenging the Judgment of theIncome Tax Appellate Tribunal. The following questions are presented for ourconsideration “(A)Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing depreciation @ 80 % on civil construction,electrical and other non-integral installations?Hon'ble ITAT erred in allowing depreciation @ 80 % on civil construction,electrical and other non-integral installations? (B) Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing depreciation @ 80 % on civil work on whichdepreciation was allowable @ 10 % and since civil works are not speciallydesigned devices, the same are not entitle for higher rate of depreciation?Hon'ble ITAT erred in allowing depreciation @ 80 % on civil work on whichdepreciation was allowable @ 10 % and since civil works are not speciallydesigned devices, the same are not entitle for higher rate of depreciation? (C) Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing higher rate of depreciation on electrical andother installations without appreciating the fact that electrical items are notpart of electricity generating apparatus but are part of electricity sellingapparatus and these constitute the block “Plant and Machinery” on whichdepreciation is allowable @ 15 %?” Hon'ble ITAT erred in allowing higher rate of depreciation on electrical andother installations without appreciating the fact that electrical items are notpart of electricity generating apparatus but are part of electricity sellingapparatus and these constitute the block “Plant and Machinery” on whichdepreciation is allowable @ 15 %?” (C) Whether on the facts and in the circumstances of the case and in law, theHon'ble ITAT erred in allowing higher rate of depreciation on electrical andother installations without appreciating the fact that electrical items are notpart of electricity generating apparatus but are part of electricity sellingapparatus and these constitute the block “Plant and Machinery” on whichdepreciation is allowable @ 15 %?” Hon'ble ITAT erred in allowing higher rate of depreciation on electrical andother installations without appreciating the fact that electrical items are notpart of electricity generating apparatus but are part of electricity sellingapparatus and these constitute the block “Plant and Machinery” on whichdepreciation is allowable @ 15 %?” 2Learned counsel for the Revenue brought to our notice an order dated 30[st]January, 2019 in Income Tax Appeal No.1769 of 2016in which all these question asproduced above, came up for consideration. While disposing of the Revenue's appeals,following observations were made “7.Question Nos. (ii), (iii) and (iv) relate to the Revenue's objection to theassessee claiming higher rate of depreciation on the civil construction, electricand other installations by the assessee in the process of erecting and installingwindmill. The Revenue argues that the expenditure in such activities cannot be Pg 3 of 5 seen as a part of installation of windmill and, therefore, the depreciationprescribed for the same would not be available to the assessee. We notice thatthe similar question had come up for consideration before this Court in IncomeTax Appeal No. 1326 of 2010, wherein the appeal was dismissed by order dated14[th] June, 2017 making following observations:- “2.The Tribunal has recorded finding of fact that windmill waserected in the desert area of Rajasthan which required specialfoundation of reinforced cement concrete and that the saidreinforced cement concrete formed integral part of the windmill. TheTribunal has also followed the decision of this Court in the case ofCommissioner of Income Tax Vs. Herdilla Chemicals Ltd. recordedin (1995) 216 I.T.R. 742 (Bom) in allowing the claim of theassessee. In our opinion, the finding recorded by the Tribunal thatRCC foundation forms integral part of the windmill is a finding offact and no question of law arises from the same. Hence, the appealis dismissed with no order as to costs” 8.In the result, these additional questions are not entertained.” 4The next question argued before us was question (f) and itarise in the following manner- The respondent - assessee had received sum of Rs.40 Lacsby way of compensation from one M/s Suzlon Energy Ltd. on accountof delay caused in completion of wind power project to be installed atDhalgaon (Maharashtra) for the assessee. The A.O. was of the opinionthat the receipt was revenue in nature, and therefore, taxable in thehands of the assessee. The Tribunal while reversing the decision ofthe A.O. in CIT(A), in the impugned Judgment held that the receiptwas capital in nature. The reliance was placed on the decision of theSupreme Court in the case of the Commissioner of Income Tax Vs.Saurashtra Cement Ltd. reported in (2010)325 ITR 422(SC). Itwas the case in which the assessee had received liquidated damages Pg 4 of 5 9.itxa.1609.2016.db.docon account of delay in supplying the additionalcement plant. Theagreement contained a condition that in the event of delay in deliveryof machinery the assessee would be compensated at the agreed rate.The question arose whether such a payment by way of liquidateddamages would in the nature of capital receipt or revenue receipt.The Supreme Court held that the receipt in question was capital innature. Pg 4 of 5 9.itxa.1609.2016.db.docon account of delay in supplying the additionalcement plant. Theagreement contained a condition that in the event of delay in deliveryof machinery the assessee would be compensated at the agreed rate.The question arose whether such a payment by way of liquidateddamages would in the nature of capital receipt or revenue receipt.The Supreme Court held that the receipt in question was capital innature. 6In the present case also similar situation has arisen. Theassessee had placed order for installation of a plant. The supplier M/sSuzlon Energy Ltd. could not fulfill the commitments within the timeframe envisaged in the agreement. Such agreement provided forcompensation in case of delay. The payment was in terms of such anagreement. Effectively, this payback from the supplier would reducethe assessee's cost of acquisition of the plant and machinery. Thereceipt was clearly capital in nature. No question of law arises. In theresult Income Tax Appeal is dismissed. No order as to costs. (B.P.COLABAWALLA, J.) (AKIL KURESHI, J.) Pg 5 of 5