2016 (1) TMI 609 - AT - Income Tax

Rate of depreciation to be applied on WDV of windmill installed by the assessee - assessee had claimed depreciation @ 80% on WDV of windmill, which was installed on 29.03.2006 - Held that - Admittedly, such an asset was installed in earlier year, on which value of depreciation was claimed by the assessee, which in turn has been allowed by the Assessing Officer while completing assessment in the preceding year. The Assessing Officer is not empowered to disturb the WDV of an asset, which is the closing WDV of an asset of preceding year and re-calculate the depreciation in any manner, on the opening WDV of an asset.However, in the absence of any fresh evidence being brought on record by the Revenue authorities, the Assessing Officer cannot re-work the depreciation allowable on WDV of an asset. Thus, we hold that the Assessing Officer is not empowered to disturb the claim of depreciation on WDV of an asset, which was installed in the earlier years. We find no merit in the order of Assessing Officer in bifurcating the cost of windmill into cost of Wind Turbine, cost of erection and installation of windmills and civil construction work vis- -vis Wind Turbine No.1, which was installed in assessment year 2006-07. Windmill installed by the assessee in the year under appeal - As per the Assessing Officer, cost of Wind Turbine entitles the assessee to the depreciation @ 80%. However, the cost of electrical installation would attract depreciation @ 15% and the cost of civil construction would attract depreciation @ 10% - Held that - . The foundation work was an integral part of the machinery, since the machinery cannot function without foundation. In other words, even in cases where the assessee has incurred separate expenditures on the cost of foundation and installation of the machinery, then the same is to be considered as an integral part of cost of windmill, which in turn is entitled to higher rate of depreciation @ 80%. Similarly, various electrical items installed, which in turn ensures the functioning of windmill, forms part of windmill and is entitled to the depreciation @ 80%. Accordingly, we hold that the assessee is entitled to the claim of depreciation @ 80% on cost of windmill at ₹ 90 lakhs. - Decided in favour of assessee

Issues Involved:
1. Non-grant of depreciation on windmill.
2. Bifurcation of cost of windmill into different components.
3. Rate of depreciation applicable to various components of windmill.
4. Consistency in depreciation claims across different assessment years.

Detailed Analysis:

1. Non-grant of Depreciation on Windmill:
The assessee raised concerns regarding the non-grant of depreciation on windmills. The primary contention was that the depreciation on the windmill was allowed at 80% for the second half of the year in A.Y. 2006-07, and no changes in facts or circumstances warranted a different treatment for A.Y. 2007-08. The Tribunal held that the assessee is entitled to claim depreciation at 80% on the windmill for the subsequent years as well, adhering to the rule of consistency. The Assessing Officer (AO) was not authorized to disturb the Written Down Value (WDV) of an asset brought forward from the preceding year.

2. Bifurcation of Cost of Windmill into Different Components:
The AO bifurcated the cost of the windmill into different heads such as cost of the wind turbine, cost of erection and installation, and civil construction work. The Tribunal found no merit in this bifurcation, especially when the supplier had issued a consolidated invoice for the windmill without any break-up. The Tribunal emphasized that the foundation work, electrical installations, and other mechanical parts are integral to the windmill and should not be separated for depreciation purposes.

3. Rate of Depreciation Applicable to Various Components of Windmill:
The AO applied different rates of depreciation to different components of the windmill, such as 80% for the wind turbine, 15% for electrical installations, and 10% for civil construction. The Tribunal held that all parts, including the foundation and electrical installations, are integral to the windmill and should attract a uniform depreciation rate of 80%. The Tribunal directed that the assessee is entitled to claim depreciation at 80% on the entire cost of the windmill, including all its components.

4. Consistency in Depreciation Claims Across Different Assessment Years:
The Tribunal underscored the importance of consistency in depreciation claims across different assessment years. It ruled that the AO cannot re-compute the depreciation on the WDV of an asset that was allowed in the preceding year without any fresh evidence. The Tribunal upheld that the WDV of the windmill, as determined in the previous year, should not be disturbed in the subsequent year.

Separate Judgments Delivered:
The Tribunal delivered a consolidated order for the sake of convenience, addressing all the appeals relating to the same assessee together. The Tribunal allowed all the appeals of the assessee and dismissed the appeal of the Revenue.

Conclusion:
The Tribunal concluded that the assessee is entitled to claim depreciation at 80% on the entire cost of the windmill, including all its components, for the relevant assessment years. The AO is not empowered to disturb the WDV of an asset brought forward from the preceding year. The Tribunal emphasized the need for consistency in depreciation claims and rejected the bifurcation of the windmill's cost into different components for varying depreciation rates.

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