2015 (10) TMI 2742 - AT - Income Tax

Eligibility to claim higher rate of depreciation (80%) on the civil construction and electrical installations of windmill - whether the civil work forming the foundation of windmill and electrical installations are integral part of windmill and eligible for higher rate of depreciation @ 80%? - Held that - The issue raised in the present appeal is no more res integra. There are catina of decisions by various Hon ble High Courts and the co-ordinate Benches of Tribunal, wherein this issue has time and again been adjudicated. The Hon ble High Courts have been consistently holding that windmill civil structure foundation and electrical fittings are closely inter-connected and linked with each other making it a single composite unit. Therefore, on all the components of the windmill, whether it be concrete foundation or electrical fittings / installations, depreciation @ 80% has to be allowed. See COMMISSIONER OF INCOME TAX AHMEDABAD III VERSUS PARRY ENGINEERING AND ELECTRONICS P. LTD. 2014 (12) TMI 752 - GUJARAT HIGH COURT . Thus we hold that the assessee is eligible to claim depreciation @ 80% on electrical installations as well as civil construction concrete foundation of the windmill. - decided in favour of assessee.

Summary

Issues:
Claim for higher rate of depreciation on civil construction and electrical installations of windmill.

Analysis:
The appeal before the Tribunal was filed by the assessee challenging the order of the Commissioner of Income Tax (Appeals) regarding the eligibility to claim a higher rate of depreciation on civil construction and electrical installations of a windmill for the assessment year 2011-12. The Assessing Officer disallowed the depreciation claimed by the assessee on the windmill's civil construction and electrical fittings, restricting it to 10% instead of the claimed 80%. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the appeal before the Tribunal. The main argument was whether the civil work forming the foundation of the windmill and the electrical installations are integral parts eligible for higher depreciation. The assessee contended that the entire composite unit of the windmill, including the concrete foundation and electrical installations, should be eligible for higher depreciation. The Tribunal considered various decisions and held that the civil structure foundation and electrical fittings are closely interconnected, forming a single composite unit, thus making the assessee eligible for 80% depreciation on all components of the windmill.

The Tribunal referred to decisions by different High Courts and Tribunal Benches where it was consistently held that windmill civil structure foundation and electrical fittings are interconnected, making it a single composite unit. The Hon'ble Gujarat High Court emphasized that the civil structure and electric fittings are specialized and integral to the functioning of the windmill, hence justifying the higher rate of depreciation. Similarly, the Hon'ble Bombay High Court and other Tribunal Benches also supported including the cement foundation in the cost of the windmill for granting higher depreciation. Based on these precedents and the interconnected nature of the components, the Tribunal allowed the appeal of the assessee, setting aside the previous order and confirming the eligibility for 80% depreciation on both electrical installations and civil construction, including the concrete foundation of the windmill.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the claim for higher depreciation at 80% on both the electrical installations and civil construction components of the windmill. The decision was based on the interconnected nature of these components as established by previous judicial precedents, emphasizing their integral role in the functioning of the windmill.