2016 (12) TMI 1088 - HC - Income Tax

Depreciation on activities undertaken in relation to the installation of windmill - Held that - All the components used for the structure of a windmill were entitled for higher depreciation and is a part of a integrated machinery. - Decided in favour of assessee Disallowance u/s 36(1)(iii) - loans and advances and advances have been given to these family concerns out of the sale of land - Held that - Any amount taken from the loan was diverted towards any non-business purpose and therefore the tribunal has rightly arrived at the conclusion that the claim for deduction made by the assessee for the sums given by it to one of its members from the proceeds which has been received from the sale of property were liable to be given allowance under section 36 (1)(iii) of the Income Tax Act. The matter is thus concluded on facts.- Decided in favour of assessee Allowance of expenses on earth filing and other miscellaneous expenses - Held that - The tribunal categorically records the finding of fact that the assessee genuinely incurred expenses on earth filling and other miscellaneous expenses for the purpose of business on the property that they had purchased from the Agra Development Authority. This question too is therefore concluded by facts and answered in favour of the assessee - Decided in favour of assessee

Summary

Issues:
1. Depreciation on windmill components
2. Utilization of funds for loans and advances
3. Deduction of expenses on earth filling and miscellaneous expenses

Depreciation on windmill components:
The case involved an income tax appeal regarding the allowance of depreciation on various components of windmills installed by the assessee. Initially, the Assessing Officer (A.O.) allowed 80% depreciation on certain key components directly related to power generation, while disallowing the same for other components. The Commissioner of Income Tax (CIT) partly upheld the A.O.'s decision. However, the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee, stating that all components were renewable energy devices and part of the windmill, thus eligible for 80% depreciation. The ITAT's decision was supported by precedents from the Gujarat and Rajasthan High Courts, emphasizing the integrated nature of windmill components. The High Court concurred with the ITAT's decision, ruling in favor of the assessee on this issue.

Utilization of funds for loans and advances:
The second issue pertained to the utilization of funds for loans and advances by the assessee. The A.O. noted that the assessee had taken a loan of ?9 crores and incurred business expenses of ?12 crores during the relevant assessment year. This led the A.O. to conclude that funds were not diverted for non-business purposes. The A.O.'s findings were crucial in establishing that the funds from loans were appropriately utilized for business activities. The High Court upheld the ITAT's decision, emphasizing that funds were not diverted for non-business purposes, thereby supporting the assessee's claim for deductions under the Income Tax Act.

Deduction of expenses on earth filling and miscellaneous expenses:
The final issue revolved around the deduction of expenses incurred by the assessee on earth filling and miscellaneous expenses related to purchased property. The tribunal found that the assessee genuinely incurred these expenses for business purposes on the property acquired from the Agra Development Authority. This factual determination led to the High Court ruling in favor of the assessee on this issue as well. The High Court's decision was based on the tribunal's factual findings, concluding that the expenses were legitimately incurred for business purposes.

In conclusion, the High Court upheld the ITAT's decision on all issues, ruling in favor of the assessee regarding depreciation on windmill components, utilization of funds for loans and advances, and deduction of expenses on earth filling and miscellaneous expenses. The appeal was disposed of with no costs awarded.