2011 (6) TMI 896 - AT - Income Tax

Summary

Issues involved: Disallowance of depreciation claimed on a wind mill due to it not being connected to the power grid despite trial production.

Facts: The assessee, engaged in exporting cotton fabrics, claimed depreciation on a wind mill. The Assessing Officer disallowed the depreciation as the wind mill was not connected to the power grid, relying on an agreement with the Tamil Nadu Electricity Board (TNEB) and a court decision. The Commissioner of Income Tax(A) upheld the disallowance citing lack of concrete proof.

Arguments: The assessee argued that it had complied with the TNEB requirements, remitted fees, and started producing power, thus being connected to the grid. The Assessing Officer's reliance on the agreement was challenged. The Department supported the lower authorities' decisions.

Judgment: The Tribunal found that the agreement alone did not prove the wind mill was not connected to the grid. The commissioning certificate from the Executive Engineer and the initial reading supported the assessee's claim. The Tribunal emphasized that electricity, as a product, remains the same whether from trial or commercial production. Rules on commercial production do not apply to electricity. The assessee was deemed eligible for depreciation, and the disallowance was overturned. The appeal of the assessee was allowed.

Outcome: The appeal of the assessee was allowed, and the disallowance of depreciation on the wind mill was deleted.