2020 (1) TMI 1157 - HC - Income Tax

Depreciation on wind mill - Windmill was put to use for more than 180 days - HELD THAT - With regard to the question as to whether the respondent is entitled to 100% depreciation allowance, even though windmill was put to use beyond 180 days, it is already covered by the Judgment in the case of B.Loganathan Vs.Income Tax Officer, Ward VIII (3), Chennai 2019 (3) TMI 1003 - MADRAS HIGH COURT -first question of law is answered against the Revenue. Whether the failure of the respondent to choose the Written Down Value entitling him 100% allowance will deny him the said allowance or he has to get 7.8% allowance alone as per the Straight Line Method of depreciation - the failure of the auditor cannot be put against the respondent - Moreover, the issue has already been covered by the Judgment of this Court in the case of Commissioner of Income-tax, Coimbatore Vs. Kikani Exports (P) Ltd 2019 (3) TMI 1003 - MADRAS HIGH COURT and hence, this is also answered against the Revenue.

Summary

Issues:
1. Disallowance of depreciation for windmills used for less than 180 days.
2. Claim of depreciation on civil and electrical components of windmill.

Analysis:
1. The appeal was filed against the Income Tax Appellate Tribunal's order dismissing the Revenue's appeal regarding the disallowance of depreciation for windmills used for less than 180 days. The assessing officer found that the windmills were used for less than 180 days and restricted the depreciation claim to 50%. However, the assessee argued that the windmills were connected to the grid for more than 180 days, hence entitled to full depreciation. The Commissioner of Income Tax (Appeals) supported the assessee's claim based on interconnection dates and Power Purchase Agreements. The High Court upheld the decision, citing a previous judgment in a similar case, allowing full depreciation even if the machine is ready for use or used for trial run without actual commercial production.

2. Regarding the claim of depreciation on civil and electrical components of the windmill, the CIT(A) relied on a decision of the Karnataka High Court and allowed higher depreciation at 80% for civil and electrical works as part of the windmill's cost. The Appellate Tribunal affirmed the CIT(A)'s decision, emphasizing that the windmills were put to use for more than 180 days during the relevant previous year, generating electricity upon connection to the grid. The Tribunal concluded that as per Section 32 of the Income Tax Act, the asset should be put to use for claiming depreciation, regardless of commercial production. The High Court dismissed the Revenue's appeal, citing precedents and upholding the Tribunal's decision on depreciation for civil and electrical components.

In conclusion, the High Court upheld the Tribunal's decision, allowing full depreciation for windmills used for more than 180 days and higher depreciation rates for civil and electrical components as part of the windmill's cost. The judgment emphasized the interpretation of relevant provisions of the Income Tax Act and previous legal precedents in determining depreciation claims for such assets.