2015 (2) TMI 501 - HC - Income Tax

Entitlement for higher depreciation - civil work, copper wound transformers, electric items and electric lines - Held that - Civil construction and electric fittings, which have no use other than for the purpose of the functioning of the windmill would become closely interconnected and are part and parcel of the windmill and, therefore, liable for depreciation. See CIT AHMEDABAD III Versus PARRY ENGINEERING AND ELECTRONICS P. LTD. 2014 (12) TMI 752 - GUJARAT HIGH COURT ,Commissioner of Income Tax Vs. K.K. Enterprises 2015 (2) TMI 508 - RAJASTHAN HIGH COURT and Commissioner of Income Tax-I, Ludhiana Vs. M/s Eastman Impex 2015 (1) TMI 436 - PUNJAB & HARYANA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Depreciation on components of windmill project
2. Availability of interest-free funds for loans and advances
3. Addition made on estimated and ad hoc basis
4. Allowability of expenses on earth filling and miscellaneous expenses

Depreciation on components of windmill project:
The High Court addressed the issue of depreciation on various components of a windmill project for the assessment year 2008-09. The Assessing Officer had granted depreciation on certain items but disallowed it on civil work, copper wound transformers, electric items, and electric lines. However, the Tribunal allowed depreciation on these components, considering them as essential parts of renewable energy devices. The Tribunal emphasized that these items were integral to the functioning of the windmill project and could not be separated from it. Citing precedents from other High Courts, the Court affirmed that civil construction and electric fittings specific to windmills are eligible for higher depreciation rates. The Court upheld the Tribunal's decision, ruling in favor of the assessee and dismissing the department's appeal.

Availability of interest-free funds for loans and advances:
The Court noted that the Tribunal's decision for the assessment year 2007-08, regarding the availability of interest-free funds for loans and advances, had not been challenged by the department. In the interest of consistency between the parties, the Court found no substantial legal questions arising for consideration on this matter. Consequently, the Court did not delve further into this issue, maintaining the status quo based on the previous Tribunal decision.

Addition made on estimated and ad hoc basis:
Regarding the addition made on an estimated and ad hoc basis, the Court found that the controversy was already settled by a previous Tribunal decision for the assessment year 2007-08, which had not been contested by the department. Given the existing legal precedent and to ensure consistency between the parties, the Court did not identify any substantial legal questions requiring examination on this issue.

Allowability of expenses on earth filling and miscellaneous expenses:
The Court examined the issue of the allowability of expenses on earth filling and miscellaneous expenses for business purposes. Despite the Agra development authority's statement about the plain nature of the land during possession handover, the Tribunal had deemed these expenses as genuine and allowable deductions for business purposes. The Court concurred with the Tribunal's findings, emphasizing that the expenses were legitimately incurred for business activities. Consequently, the Court dismissed the appeal, answering the legal questions in favor of the assessee and against the department.