2006 (9) TMI 355 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to depreciation on windmills for the assessment years 1996-97 and 1997-98.
2. Verification of transportation, delivery, and installation of windmills.
3. Evidence of electricity generation to support the claim of windmill commissioning.

Detailed Analysis:

Issue 1: Entitlement to Depreciation on Windmills
The primary issue was whether the assessee was entitled to claim depreciation on windmills for the assessment years 1996-97 and 1997-98. The assessee claimed 100% depreciation on two windmills, asserting they were installed and commissioned before 31st March 1996. The Assessing Officer (AO) denied the claim, stating the assessee failed to prove the windmills were operational within the financial year 1995-96. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the claim, but the ITAT reversed this decision, siding with the AO.

Issue 2: Verification of Transportation, Delivery, and Installation of Windmills
The AO conducted a thorough investigation into the transportation and delivery of the windmills. The assessee provided delivery challans and consignment notes to support its claim. However, discrepancies were found between the assessee's copy and the transporter's (Savani Carrying Pvt. Ltd.) copy of the consignment note. The AO discovered that the goods were delivered to M/s. ABS Industries Ltd., not the assessee. The AO's findings were corroborated by direct communication with the transporter and NEPC Micon Ltd., the supplier. The ITAT concluded that the assessee failed to establish the transportation and delivery of the windmills to its premises, which was crucial for claiming depreciation.

Issue 3: Evidence of Electricity Generation
The assessee argued that the supply of electricity to the Gujarat State Electricity Board (GSEB) proved the windmills were operational. The AO rejected this, stating that the electricity generation was measured collectively for all windmills in the locality and apportioned among owners. The certificates provided by the Gujarat Energy Development Agency (GEDA) and other agencies were deemed insufficient to prove the individual generation of electricity by the assessee's windmills. The ITAT upheld the AO's reasoning, emphasizing the need for direct evidence of electricity generation from the specific windmills owned by the assessee.

Conclusion:
The ITAT concluded that the assessee failed to establish the transportation, delivery, installation, and commissioning of the windmills before 31st March 1996. Consequently, the claim for 100% depreciation was denied, and the AO's decision was restored. The appeals filed by the department were partly allowed.