2013 (1) TMI 733 - AT - Income Tax

Revision u/s 263 - CIR(A) directed ao to allow depreciation on windmill at 40 per cent on windmill - Held that - While completing the assessment under section 143(3) of the Act, the Assessing Officer has not discussed about the issue of depreciation of windmill, may be for the reason that he was satisfied that the assessee is eligible for depreciation and, therefore, since he has not disallowed any part of depreciation, there was no need for any discussion in the assessment order. Ledger account of the windmill in the books of the assessee we could see that the assessee has made initial payment of ₹ 13.50 lakhs to the supplier and the rest of the payments were made by the Indian Overseas Bank to the supplier directly from October 6, 2006 onwards. The TNEB has issued a letter dated September 30, 2006 stating that generation of power by the windmill has been effected on September 29, 2006. The Department has not disputed the certificate issued by the TNEB that the windmill effected supply on September 29, 2006. In the absence of any material placed before us by the Department to show that the assessee has not filed all these details before the Assessing Officer at the stage of completion of assessment under section 143(3) of the Act, it can be said that the Assessing Officer has examined all these documents and came to the conclusion that the windmill has been erected and commenced generation of power on September 29, 2006 and, therefore, the claim of the assessee is in accordance with the provisions of the Act. In the circumstances, it can be said that the Assessing Officer has taken one of the two views possible in allowing the claim for depreciation on windmill and in such circumstances, it cannot be said that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue as held by the hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT 2000 (2) TMI 10 - SUPREME Court . Thus revision order quashed - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of Commissioner under section 263 of the Income-tax Act.
2. Commencement of power generation by windmill and depreciation claim.
3. Assessment validity and compliance with legal provisions.

Issue 1: Jurisdiction of Commissioner under section 263 of the Income-tax Act:
The appeal involved a challenge against the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act for the assessment year 2007-08. The appellant contended that the order was wrong, illegal, and not in the interest of Revenue. The appellant argued that the assessment was not erroneous or prejudicial to Revenue, questioning the Commissioner's jurisdiction to interfere. The grounds raised by the appellant focused on the legality and factual basis of the Commissioner's order.

Issue 2: Commencement of power generation by windmill and depreciation claim:
The case revolved around the commencement of power generation by a windmill erected by the assessee and the subsequent depreciation claim. The Commissioner contended that the windmill began generating power after October 15, 2006, contrary to the assessee's claim of September 29, 2006. The dispute centered on the timing of power generation, loan sanction, and the subsequent depreciation allowance. The appellant argued that all necessary documentation and approvals were in place to support the claim that the windmill started operations by September 29, 2006, justifying the depreciation allowance at 80 percent.

Issue 3: Assessment validity and compliance with legal provisions:
The assessment validity and compliance with legal provisions were crucial aspects of the case. The appellant maintained that the Assessing Officer had thoroughly examined all relevant documents and approved the depreciation claim at 80 percent based on the windmill's operational status by September 29, 2006. The appellant cited legal precedents and emphasized that the Assessing Officer's decision was valid and not prejudicial to Revenue. The Tribunal analyzed the documentary evidence, including certificates and invoices, to ascertain the timing of power generation and upheld the Assessing Officer's decision, ruling that the order was neither erroneous nor against Revenue's interests.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner's order under section 263 of the Income-tax Act. The judgment highlighted the importance of documentary evidence, legal precedents, and compliance with legal provisions in determining the validity of assessments and depreciation claims. The decision underscored the Assessing Officer's discretion in evaluating claims and the need for substantial evidence to challenge assessment orders.