2017 (5) TMI 1712 - AT - Income Tax

Depreciation on Windmills - put to use for a period more than 180 days or not? - @80% despite the windmills having been used for business purpose only after 30th September 2010 - HELD THAT - There is no doubt that electricity was generated by the windmills on itsconnection to the grid which admittedly happened on 17.07.2010. What is required u/s. 32 of the Act is that an asset should be put to use for claiming depreciation. There is no requirement that asset should be put to use for commercial production. Even otherwise in the case of electricity whether generated during trial period or generated after trial run the product remained very same. In the circumstances we are of the opinion that the CIT (Appeals) was justified in taking a view that the windmills were put to use for a period more than 180 days during the relevant previous year and allowing the full claim of depreciation. Electrical installation for the windmill and cost of civil works for windmill - whether considered as part of the cost of the windmill and allowed depreciation at the rates prescribed for windmill? - HELD THAT - When specified civil structures and specified electrical installation work are necessary for installation of a windmill in our opinion such items cannot be considered as independent pieces of machinery or plant or building. In these circumstances we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in allowing the claim of the assessee.

Summary

Issues:
1. Depreciation on windmills used for business purpose after a specific date.
2. Consideration of electrical installation and civil works as part of windmill cost for depreciation.

Issue 1: Depreciation on windmills used for business purpose after a specific date:

The Revenue appealed against the Commissioner of Income Tax (Appeals) orders directing the Assessing Officer to allow full depreciation on windmills despite commercial operation starting after 30th September, 2010. The Assessing Officer restricted depreciation to 50% due to windmills being used for less than 180 days. The Commissioner held that windmills were ready for use before 30th September, 2010, and thus eligible for full depreciation. The Departmental Representative argued that commercial production start date should determine depreciation eligibility. However, the Authorized Representative contended that the Act only required machinery to be put to use, not for commercial production. The Tribunal found that electricity was generated between the connection date and commercial operation, supporting the Commissioner's decision. The Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal on this issue.

Issue 2: Consideration of electrical installation and civil works as part of windmill cost for depreciation:

The Revenue contested the inclusion of electrical installation and civil works costs in windmill depreciation. The Departmental Representative argued that separate depreciation rates applied to these items, citing precedents. The Authorized Representative supported the Commissioner's decision, referencing a Co-ordinate Bench ruling. The Tribunal noted that specialized foundation and electrical fittings were essential for windmills, making them part of the windmill for depreciation purposes. Even if a different view existed, the Tribunal upheld the Commissioner's decision based on the Co-ordinate Bench ruling favoring the assessee. The Tribunal dismissed the Revenue's appeal on this issue, affirming the allowance of depreciation on electrical installation and civil works as part of windmill cost.

In conclusion, the Tribunal dismissed the Revenue's appeals on both issues, upholding the Commissioner's decisions regarding depreciation on windmills and the inclusion of electrical installation and civil works costs in windmill depreciation. The Tribunal's detailed analysis focused on the legal requirements for depreciation eligibility and the essential nature of specialized components for windmills, ensuring a comprehensive understanding of the judgment.