2014 (5) TMI 692 - AT - Income Tax

Rate of depreciation on electrical cables & fittings connected with windmill Held that - Specialized foundation and specialized area specifically earmarked to facilitate a flow of wind without hindrance, and specialized electrical fittings and high tension lines are all basic requirements for a wind mill plant - None of the requirements including the premises can be seen detached from what is called a wind mill since a wind mill to work these are essential all these are necessary inputs going into ultimate cost of wind mill thus, the electrical cables, fittings and other electrical works connected with windmill are single composite unit are eligible for depreciation at the rate of 80% - Decided against Revenue.

Summary

Issues: Appeal against orders of Commissioner of Income Tax regarding rate of depreciation on electrical cables & fittings connected with windmill for assessment years 2007-08 and 2008-09.

Analysis:
1. The Revenue appealed against the orders of the Commissioner of Income Tax (Appeals) regarding the rate of depreciation on electrical cables & fittings connected with a windmill for the assessment years 2007-08 and 2008-09.

2. The main contention raised by the Revenue was the rate of depreciation on electrical components connected to the windmill, arguing that these components should be eligible for depreciation at 10% instead of the claimed 80%.

3. The assessee, a company engaged in cotton yarn manufacturing with a windmill, claimed 80% depreciation on all windmill components, including electrical fittings and cables. The Assessing Officer disagreed and allowed only 10% depreciation on electrical components.

4. The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, citing a Tribunal decision in a similar case. The Revenue, unsatisfied, appealed to the Tribunal.

5. The department contended that electrical lines and fittings are distinct from the windmill and should be depreciated at 10%. The assessee argued that these components are integral to the windmill structure.

6. After considering arguments from both sides and reviewing previous Tribunal decisions, the Tribunal held that all components of a windmill should be considered a single unit. Citing precedents, the Tribunal determined that electrical cables, fittings, and other works connected to the windmill are part of a composite unit eligible for 80% depreciation.

7. The Tribunal found no error in the Commissioner of Income Tax (Appeals) decision and dismissed the Revenue's appeals as lacking merit.

8. The judgment was pronounced on May 8, 2014, in Chennai, upholding the assessee's claim for 80% depreciation on electrical components connected to the windmill.