2014 (1) TMI 1704 - AT - Income Tax

Higher rate of depreciation on windmill - Held that - Cost is towards supply of electrical items of the windmill itself. The CIT(A) has observed that such cost in the installation of windmill has been found by the Tribunal in the case of Poonawala Finvest and Agro Pvt. Ltd. (supra) as an integral part of the windmill cost and therefore, found to be eligible for depreciation equivalent to that of the windmill. No decision to the contrary has been brought to our notice and therefore, following the precedent in the case of Poonawala Finvest and Agro Pvt. Ltd. (2008 (6) TMI 586 - ITAT PUNE ), we do not find any infirmity in the action of the CIT(A) which we hereby affirm. Cost relating to labour charges for erection and installation of windmill. Such expenditure forms integral part of cost of the windmill and therefore, there is no mistake on the part of the CIT(A) to have considered such expenditure as eligible for depreciation at 80%. Cost towards processing fee and MEDA application fee the CIT(A) apportioned such cost towards wind turbine and other eligible assets on one hand and of civil costs incurred, on the other hand. 60% of such cost have been apportioned towards wind turbine, etc., and have been held to be eligible for higher rate of depreciation at 80% and on the balance, the CIT(A) allowed depreciation as worked out by the Assessing Officer. In our view, the aforesaid apportionment made by the CIT(A) is fair and proper and does not require interference. Cost towards common power evacuation is concerned, there is no grievance of the Revenue as the action of the Assessing Officer on components and cost has been upheld. In this manner, we find no reason to interfere with the relief allowed by the CIT(A) with respect to depreciation on the cost of erection and commissioning of windmill in relation to windmill no. 1. Similar relief has been worked out by the CIT(A) with respect to windmill no. 2 which has been installed during the year under consideration. In the light of aforesaid discussion, the order of the CIT(A) is affirmed. - Decided against revenue

Summary

Issues:
Depreciation on windmill components and installation costs.

Analysis:
The appeal concerns the depreciation on windmills for the assessment year 2009-10. The Revenue raised grounds challenging the inclusion of various components in the cost of the windmill for depreciation purposes. The first issue was the inclusion of components like electrical items and tubular towers in the cost of the windmill for allowing depreciation at a special rate. The second issue involved the allocation of labor costs related to the installation of the wind turbine generator for depreciation at a special rate. The third and fourth issues pertained to the application of a specific depreciation rate and the allowance of depreciation on processing charges. The assessee, engaged in manufacturing and electricity generation, faced disallowances by the Assessing Officer, reducing the claimed depreciation. The CIT(A) partially upheld the assessee's claim based on a previous order for the assessment year 2007-08.

The Tribunal referred to the previous decision for the assessment year 2007-08, where the CIT(A) had allowed relief to the assessee, a decision affirmed by the Tribunal. The Tribunal analyzed the breakdown of expenses related to the windmill installation, considering various components like electrical yard installation, labor charges, processing fees, and application fees. The Tribunal upheld the CIT(A)'s decision on the eligibility of certain costs for higher depreciation rates, following the precedent set in previous cases. The Tribunal affirmed the CIT(A)'s apportionment of costs towards eligible assets and civil costs, allowing depreciation accordingly. The Tribunal found no reason to interfere with the relief granted by the CIT(A) regarding the depreciation on the windmill components and installation costs.

Given the similarity in facts and circumstances with the previous assessment year, the Tribunal affirmed the CIT(A)'s decision for the current assessment year. The appeal of the Revenue was dismissed based on the precedent and the reasoning provided in the previous decision. The Tribunal announced the decision in the presence of both parties at the conclusion of the hearing, dismissing the Revenue's appeal.