At, Income Tax Appellate Tribunal Chennai
By, THE HONOURABLE MR. B.R. BASKARAN
By, ACCOUNTANT MEMBER & THE HONOURABLE MR. VIKAS AWASTHY
By, JUDICIAL MEMBER
For the Appellant: S. Chandrasekaran, CA. For the Respondent: A.V. Sreekanth, Advocate.
Vikas Awasthy, Judicial Member
1. The appeal has been filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-II, Madurai dated August 18, 2014.
2. The assessee is a public limited company engaged in the business of manufacturing chlorate and generation of power through windmill. The assessee filed its return of income for the assessment year 2010-11 on September 27, 2010 admitting income of Rs. 2,58,83,550. Thereafter, the assessee filed revised return on October 12, 2010 declaring
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income of Rs. 2,44,57,950. The case of the assessee was selected for scrutiny and notice under section 143(2) was issued on August 30, 2011. During the course of scrutiny assessment, the Assessing Officer observed that the assessee had claimed expenditure under the head "repairs and maintenance" to the tune of Rs. 92,00,000 for replacing old windmill with the new one. The Assessing Officer held that the expenditure is capital in nature.
3. Aggrieved by the addition/disallowance made by the Assessing Officer vide order dated March 28, 2013, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) vide impugned order upheld the findings of the Assessing Officer. Now, the assessee has come in the second appeal against the findings of the Commissioner of Income-tax (Appeals).
4. Shri. S. Chandrasekaran, appearing on behalf of the assessee, submitted that the learned Commissioner of Income-tax (Appeals) erred in coming to the conclusion that the assessee had replaced existing windmill with the new windmill. One of the windmill installed by the assessee suffered huge damage caused by natural calamities. The assessee has only replaced the rotor blades and part of the stem of windmill. It is not the case where the entire windmill has been replaced with the new one. The learned authorised representative to support his submission placed reliance on the decision of the hon'ble Supreme Court of India in the case of CIT v. Saravana Spg. Mills (P.) Ltd. 293 ITR 201/163 Taxman 201 and the decision of the hon'ble Allahabad High Court in the case of CIT v. Renu Sagar Power Co. Ltd.  298 ITR 94/169 Taxman 175 .
5. On the other hand, Shri. A. V. Sreekanth, representing the Department, supported the order of the Commissioner of Income-tax (Appeals). The learned Departmental representative pointed out that in the grounds of appeal raised before the Commissioner of Income-tax (Appeals), the assessee had admitted the fact that the windmill of similar capacity was purchased and installed in place of totally damaged windmill. The learned Departmental representative further submitted that it is nowhere stated by the assessee that only certain parts of the windmill which were damaged were replaced.
6. We have heard the submissions made by the representatives of both sides and perused the orders of the authorities below. We have also examined the decision on which the learned authorised representative of the assessee has placed reliance. The contention of the learned authorised representative before us is that only damaged parts of windmill were replaced and not the whole windmill has been replaced with the new one.
7. We find that the authorities below have denied the relief claimed by the assessee on the ground that the assessee has replaced old windmill with the new one. As pointed out by the Departmental representative, in the grounds of appeal before the Commissioner of Income-tax (Appeals), the assessee has made following submissions.
"In your appellant's HTSC No. 2 there were two windmills each of 250 KW capacity. The 500KW windmills used to generate power for supply to the grid. In the above HTSC one No. 250 KW wind turbine (TCL2) was totally damaged due to natural calamity. Hence a similar capacity windmill was purchased and installed in the place of the totally damaged windmill."
8. It is not clear from the records before us whether the assessee has replaced only damaged parts of the existing windmill or has replaced entire old windmill with the new one. These facts have to be ascertained from books, purchase order, job sheet, etc. In case, the assessee has replaced only damaged parts of the windmill, without there being substantial change in original performance and generation capacity of windmill the expenditure is allowable as claimed by the assessee. We find that the judgment of the hon'ble Allahabad High Court in the case of Renu Sagar Power Co. Ltd. (supra) also supports the contentions of the learned authorised representative.
9. Needless to say that if it is case of replacing a new windmill in the place of old windmill, the expenditure would certainly be capital in nature. The file is remitted back to the Assessing Officer with a direction to decide the issue afresh after verifying the factual aspect. The Assessing Officer while deciding the issue de novo shall grant an opportunity of hearing to the assessee, in accordance with law.
10. The second issue in appeal with respect to treatment of insurance claim is not pressed by the learned authorised representative of the assessee. The same is dismissed as not pressed.
11. In the result, the appeal of the assessee is partly allowed for statistical purposes.