2018 (6) TMI 1544 - AT - Income Tax

Allowing of depreciation @80% for civil structures of the windmill - Held that - Considering the binding precedents on this limited issue of allowing higher depreciation on the civil works linked to the foundation work of the windmill we are of the opinion that the assessee is entitled to claim higher depreciation @80% on the civil structures of the windmill which is part and parcel of the windmill and which cannot be separated. Therefore the order of CIT(A) holding that the higher depreciation is applicable in windmill and also expenses incurred on civil structure is fair and reasonable and it does not call for any interference. Accordingly the ground raised by the Revenue is dismissed.

Summary

Issues Involved:
- Disallowance of depreciation on windmill civil structures
- Addition of income from house property

Issue 1: Disallowance of Depreciation on Windmill Civil Structures

The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The Assessing Officer disallowed the claim of depreciation on windmill civil structures, leading to an addition of a specific amount. The main contention was whether depreciation at the rate of 80% could be allowed on civil work related to windmills, as claimed by the assessee. The CIT(A) decided in favor of the assessee on this issue, relying on various judgments and legal positions. The CIT(A) emphasized that civil work and foundation necessary for the windmill should be considered integral parts, entitling them to higher depreciation rates. The CIT(A) referred to precedents and legal principles, including the decision of the Hon'ble Supreme Court in Challapalli Sugars Ltd. vs. CIT, to support the allowance of higher depreciation on civil structures linked to windmills. The CIT(A) concluded that the assessee was entitled to claim higher depreciation at 80% on the civil structures of the windmill, which are inseparable from the windmill itself. The Pune Bench of the Tribunal also supported this view, stating that civil construction and electrical work essential for windmills are not separable from the main asset, justifying the higher depreciation rate.

Issue 2: Addition of Income from House Property

The Assessing Officer made an addition to the income from house property based on the notional rent calculated for a property owned by the assessee. The assessee had declared house property income but did not offer any notional income. The AO, after rejecting the explanation provided by the assessee regarding nil rent received, calculated the notional income based on previous records. The CIT(A) sustained this addition made by the AO on account of income from the house property. The assessee did not appeal against this confirmation. The issue regarding the addition of income from the house property was not challenged further in the appeal.

In conclusion, the Appellate Tribunal upheld the decision of the CIT(A) in allowing higher depreciation on windmill civil structures, dismissing the Revenue's appeal. The Tribunal found that the civil structures were integral to the windmill operation, justifying the higher depreciation rate. The appeal of the Revenue was consequently dismissed, and the order was pronounced on June 20, 2018.