2022 (6) TMI 743 - AT - Income Tax

Revision u/s 263 - windmills on which higher depreciation @80% was claimed by the assessee - depreciation on windmills installed on or before 31/03/2012 were entitled for higher depreciation @80% - HELD THAT - It is observed that the benefit of higher depreciation @80% was initially restricted to the windmills installed on or before 31st day of March-2012 as per the specific entry prevalent at the relevant time in Appendix-I to the Income Tax Rules, 1962. The said entry was subsequently amended to make windmills installed on or after the 1st day of April-2014 to be eligible for the benefit of higher depreciation @80%. A careful analysis of both these entries shows that the windmills installed during the period from 01/04/2012 to 31/03/2014 were not entitled for higher depreciation @80% as rightly contended by the Ld.counsel for the assessee and there is nothing to show that the effect or intention of the amendment made was to withdraw the benefit of higher depreciation @80% allowed to windmills installed on or before 31/03/2012 as sought to be contended by the Ld.DR. The windmills installed on or before 31/03/2012 continued to be eligible for the benefit of higher depreciation @80% even for AY 2013-14 and the subsequent years and there is nothing to show or even suggest the said benefit was withdrawn or discontinued from AY 2013-14 onwards. Since the windmills on which higher depreciation @80% was claimed by the assessee for the year under consideration had been undisputedly installed by the assessee on or before 31/03/2012, we are of the view that the assessee-company was entitled for higher depreciation @80% on the said windmills for the year under consideration and there being no error in the order of the Assessing Officer passed u/s.143(3) allowing depreciation at higher rate of 80% on the said windmills, the Ld. Pr.CIT is not justified to revise the same vide his impugned order passed u/s.263 of the Act. In view of that matter, we set aside the impugned order passed by the Ld. Pr.CIT u/s.263 of the Act and restore that of the Assessing Officer passed u/s.143(3) of the Act. Appeal of assessee allowed.

Summary

Issues Involved:
1. Legitimacy of the depreciation rate applied to windmills installed before April 1, 2014.
2. Correctness of the Assessing Officer's order under Section 143(3) of the Income Tax Act.
3. Validity of the Principal Commissioner of Income-tax's (Pr.CIT) revision order under Section 263 of the Income Tax Act.

Issue-wise Analysis:

1. Legitimacy of the Depreciation Rate Applied to Windmills Installed Before April 1, 2014:

The core issue is whether the depreciation rate of 80% claimed by the assessee on windmills installed before April 1, 2014, is valid. The Pr.CIT noted that according to CBDT Notifications No. 15/2012 and No. 43/2014, the depreciation rate for windmills installed before April 1, 2014, should be 15%, not 80%. The assessee argued that the windmills installed before March 31, 2012, were eligible for 80% depreciation and that the amendment did not retroactively alter this rate for those assets. The Tribunal agreed with the assessee, stating that the amendment did not intend to withdraw the higher depreciation benefit for windmills installed on or before March 31, 2012. Therefore, the assessee's claim of 80% depreciation was deemed legitimate.

2. Correctness of the Assessing Officer's Order Under Section 143(3) of the Income Tax Act:

The Pr.CIT found the Assessing Officer's order to be erroneous and prejudicial to the interests of the revenue due to the incorrect application of the depreciation rate. The Tribunal, however, found that the Assessing Officer correctly allowed the 80% depreciation as per the rules applicable to windmills installed before March 31, 2012. The Tribunal noted that the Assessing Officer's decision was consistent with the law and did not warrant revision.

3. Validity of the Principal Commissioner of Income-tax's (Pr.CIT) Revision Order Under Section 263 of the Income Tax Act:

The Pr.CIT issued a notice under Section 263, arguing that the Assessing Officer failed to apply the correct depreciation rate, leading to an erroneous and prejudicial order. The assessee contended that the assets in question were part of a "block of assets" and that the depreciation rate for these assets should remain consistent. The Tribunal found merit in the assessee's argument, emphasizing that the windmills, having been installed before March 31, 2012, were rightly eligible for 80% depreciation. The Tribunal concluded that the Pr.CIT's revision order was not justified as the original assessment order was neither erroneous nor prejudicial to the revenue.

Conclusion:

The Tribunal set aside the Pr.CIT's revision order under Section 263 and restored the Assessing Officer's original order under Section 143(3), thereby allowing the assessee's appeal. It was concluded that the depreciation rate of 80% for windmills installed on or before March 31, 2012, was correctly applied, and there was no error in the Assessing Officer's order. The appeal filed by the assessee was allowed, and the Tribunal pronounced the order on June 15, 2022, in Ahmedabad.