2018 (1) TMI 400 - HC - Income Tax

Disallowance of depreciation on the windmill at Village Nu despite - windmill having been installed only and not having started actual power generation - Held that - Tribunal correctly held that the certificate of AEN, AVVNL that the wind mills was put to use in the month of March, 2010 and it has generated electricity of 5.2 Kwh. Thus it shows that the assets of thw wind mill at NU Unit was put to use by the assessee for the purpose of business. Hence, the documents produced by the assessee from the AEN, AVVL and the details of the generation of electricity that wind mill at NU Unit was had generated the power on 31.03.2010 proves that wind mill at NU unit was put to use. Thus CIT(A) is not justified in confirming the disallowance of depreciation of ₹ 1,72,00,000/- which is directed to be deleted - Decided in favour of assessee

Summary

Issues:
1. Disallowance of depreciation on windmills
2. Interpretation of the term "put to use" for claiming depreciation

Analysis:
1. The appellant challenged the tribunal's decision allowing the assessee's appeal and dismissing the department's appeal regarding the disallowance of depreciation on windmills. The department raised substantial questions of law regarding the justification of deleting the depreciation disallowance on windmills at two different locations. The issue revolved around whether depreciation is allowable only when the windmill starts commercial power generation or when it is ready for power generation. The Assessing Officer contended that the assets were not put to use during the year, leading to the disallowance of depreciation.

2. The case involved windmills installed by the assessee without deducting TDS as required by the IT Act. The Assessing Officer treated the contract for windmills' supply, installation, operation, and maintenance as not merely a sale contract. The CIT(A) observed that one windmill did not generate electricity in April, indicating it was not ready for use in the previous year. In contrast, another windmill continuously generated electricity from the commissioning date, leading to the disallowance of depreciation on one windmill and sustaining it on the other.

3. The tribunal, considering the evidence provided by the assessee, found that the windmill in question was indeed put to use for business purposes. The documents from the AEN confirmed electricity generation from the windmill, contradicting the CIT(A)'s decision to disallow depreciation. Consequently, the tribunal allowed the assessee's appeal, concluding that no substantial question of law arose, and dismissed the appeal.

In conclusion, the judgment dealt with the disallowance of depreciation on windmills based on the interpretation of "put to use" for claiming depreciation. The tribunal's decision favored the assessee, emphasizing the evidence of electricity generation as proof of the windmill being put to use for business purposes.