2015 (10) TMI 1759 - AT - Income Tax

Depreciation on Wind Mills WEG - Held that - Whether the installed Wind Mill was new or old would not affect the claim of depreciation as per the provisions of the law. Further we find that the report of the DDIT, Unit-II Coimbatore is self speaking report wherein the Revenue authorities have made a detailed investigation in respect of the erection of Wind Mill Energy in the State of Tamil Nadu. We have no hesitation to hold that the assessee s claim for purchasing a Wind Mill, erecting the same and generating electricity are fully substantiated. Therefore, the assessee is entitled to the claim of depreciation as per the provisions of the law. - Decided in favour of assessee. Depreciation on the Wind Mill installed in the State of Karnataka - AO declined the claim as the land on which the Wind Mill has been erected cannot be owned by the assessee as it belongs to/or the land granted to weaker sections by the Government of Karnataka and Since the assessee does not owned the land, assessee cannot be considered as owner of the WEG - Held that - A perusal of the record shows that the said land has been taken on lease by M/s. Pioneer Windcon Pvt. Ltd., for a period of 30 years. We also find that The Karnataka Renewable Energy Development Ltd., has approved the power project and there is an agreement between the Department of Energy of Government of Karnataka and the assessee for the installation and supply of electricity to the Government. These facts conclusively established the claim of the assessee for depreciation merely because the assessee is not the owner of the land and the land is a leasehold land would not itself disentitled the assessee with the claim of depreciation. The Ld. CIT(A) has rightly allowed the claim of depreciation and therefore we decline to interfere. - Decided in favour of assessee. Addition u/s. 69C - unexplained expenditure - Held that - except for the admission of one of the Authorised Representative, there is no documentary evidence to suggest that the assessee has incurred cost outside the books of account. Merely on the basis of an unsubstantiated submission cannot lead to the addition u/s. 69C of the Act. The assessee has purchased the land for ₹ 58,500/- and therefore to this extent, the assessee is not entitled for the claim of depreciation. While deleting the addition of ₹ 2,41,500/-, we direct the AO to withdraw the depreciation on the amount of ₹ 58,500/- - Decided partly in favour of assessee. Claim of additional depreciation on the WEG denied - Held that - The claim of additional depreciation has been correctly denied because the provisions of Sec. 32(1)(iia) has been amended w.e.f. 1l.4.2013 by the Finance Act, 2012. - Decided against assessee

Summary

Issues Involved:
1. Depreciation on Wind Energy Generators (WEG)
2. Addition of unexplained expenditure under Section 69C
3. Claim of additional depreciation on WEG

Issue-wise Detailed Analysis:

1. Depreciation on Wind Energy Generators (WEG):

The primary issue in all the assessment years under appeal is the Revenue's grievance regarding the decision of the CIT(A) in allowing depreciation on Wind Mills (WEG). The facts are that the assessee, a trader in spices and oil seeds, is also in the business of generating and selling wind power energy. The assessee installed WEGs in Tamil Nadu and Karnataka during the relevant assessment years. The Assessing Officer (AO) denied the claim of depreciation on several grounds, including lack of agreement for erection and commissioning, inconsistency in the cost of land, absence of a break-up of individual machineries, and failure to prove that the installed windmill was new.

The CIT(A) directed the AO to allow the claim of depreciation after considering the remand report and further enquiries. The CIT(A) found that the assessee satisfied all conditions for claiming depreciation, including ownership, existence of machinery, and that the windmill was new. The tribunal upheld the CIT(A)'s decision, stating that the assessee's claim for purchasing, erecting, and generating electricity from the windmill was fully substantiated.

2. Addition of Unexplained Expenditure under Section 69C:

In the cross-objection, the issue relates to the addition of Rs. 2,41,500/- under Section 69C as unexplained expenditure. The AO made this addition based on the admission of one of the assessee's representatives, who stated that the assessee paid Rs. 3 lakhs for the cost of land, while the sale deed mentioned Rs. 58,500/-. The CIT(A) upheld the addition, but the tribunal found that there was no documentary evidence to support the claim that the assessee incurred costs outside the books of account. The tribunal deleted the addition of Rs. 2,41,500/- but directed the AO to withdraw depreciation on the amount of Rs. 58,500/-.

3. Claim of Additional Depreciation on WEG:

The assessee claimed additional depreciation on the WEG, arguing that it should be allowed for new machinery or plant acquired and installed after 31.3.2005, restricted to 10% of the total cost for machinery installed after 30.9.2006 but before 31.3.2007. The AO denied this claim based on the amendment to Section 32(1)(iia) effective from 1.4.2013. The tribunal upheld the AO's decision, noting that if the generation of electricity by windmill amounted to production of an article or thing, there would have been no need for the specific amendment.

Conclusion:

The tribunal dismissed the appeals filed by the Revenue and partly allowed the cross-objections filed by the assessee. The tribunal upheld the CIT(A)'s decision to allow depreciation on the WEGs and deleted the addition of unexplained expenditure under Section 69C, while denying the claim for additional depreciation on the WEG.