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TMI Blog2014 (12) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it is necessary to examine the functional test of electrical equipment - It has to be seen whether it is an integral part of the windmill or not. Such finding of fact is absent in this regard - there is nothing on record to establish that on this touchstone of functional test, the electrical equipment are so designed that they can only be used as integral part of the windmill and it is not meant for any other use - It is also not established that the electrical works are designed in such a manner to facilitate power generation and distribution from windmill. The scientific reason is often discussed as the period of diminution for tangible assets - If the period of diminution or wear-tear is very fast, then higher rate of depreciation is granted - naturally the speed with which wind mills get discarded due to wear and tear, the electrical works do not get wear and tear so fast - on this basis, as well, it cannot be held that electrical works are not at par with the "windmill" as far as the period of diminution is concerned - sometimes to promote a particular activity the statute provides certain incentives in the shape of higher depreciation - the Appendix and the depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred in his finding that Electrical works including supply and installation of Electrical items and Development and other charges to KSEB are not part of renewable energy device and therefore, not entitled to higher rate of depreciation as claimed by the assessee. 3) The CIT(A) ought to have taken note of the fact that there are decisions to the effect that Windmill installation and accessories are peripherals of a Windmill or an integral part of Windmill, so much so, the assessee is entitled to the same rate of depreciation as that of Windmill. 4) At any rate, when there are divergent views, there is no harm in the Assessing officer adopting one possible view and in such an event, the order would not be prejudicial to the interests of revenue. Therefore, action u/s. 263 is bad in law. 6. The brief facts of the case are that the assessee, a firm engaged in the business of running a jewellery shop filed its return of income for the assessment year 2009-10 on 01-10-2013, declaring a total income of ₹ 6,62,11,090/-. The assessment was completed u/s. 143(3) on 25-11- 2011 arriving at a total income of ₹ 6,71,55,180/-. 7. On a verification of the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmill installed and as the construction of transmission line is not a part of the windmill, the deprecation claimed was against rules. 9. The CIT stated that the depreciation table was very specific and clear that depreciation @ 80% and expenses on electrical works and development charges are ineligible for depreciation as renewable energy devices and these electrical installations do not fall under items listed in either (1) or (m) of item 8, sub item (xiii). According to the CIT, the assessee relied on the decision of the Delhi High Court in the case of CIT vs. BSES Yamuna Powers Ltd. in I.T.A. No. 1267/2012 wherein it was held that computer accessories and peripherals could not be treated as separate from the computer and higher rate of depreciation had to be allowed for computer peripherals. However, the CIT was of the opinion that the said decision cannot be applied to the assessee as in that case, the computer peripherals and accessories such as printer, scanner, server, etc. cannot function independently without the aid of computer or computer software and as such they form an integral part of the system. In the case of the assessee, the transmission line from the windmil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT, in the absence of any discussion in the order, note on the file, it cannot be held that the Assessing officer had examined the issue, applied his mind and had allowed the said depreciation. The CIT held that the Assessing officer should have either in the order or in the file indicated the reasons for allowing the claim of higher depreciation and his failure to do so would attract the jurisdiction of sec. 263 by virtue of ratio expressed in the above mentioned decision. 13. The CIT further relied on the decision of the Supreme Court in the case of Malabar Industrial Co. vs. CIT (243 ITR 83) where in was held that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous . In the instant case, according to the CIT, there has been incorrect application of facts leading to incorrect application of law, i.e., higher depreciation has been allowed on an item which is not a renewable energy device. In view of the above, the CIT set aside the assessment order with regard to higher depreciation allowed on electrical works including supply and installation of electrical items and development and other charges to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the sec. 263 proceedings as typographical error. Being so, on this count, we do not find any infirmity in the order of the CIT. . 18. The second argument of the assessee s counsel is that electrical works is part of renewable energy devices and so, the assessee is entitled to higher rate of depreciation as claimed by the assessee. 19. On this issue, we noticed that in the assessment order, there is no discussion of whatsoever regarding this issue. The Assessing officer has absolutely closed his eyes and accepted the claim of the assessee as it is. It is incumbent upon the Assessing officer to cause necessary enquiry regarding the nature of assets and entitlement of depreciation. Being so, the CIT was justified in invoking the provisions of sec. 263 on account of lack of enquiry from the side of the Assessing officer. 20. Further, for granting higher rate of depreciation to the assessee, it is necessary to examine the functional test of electrical equipment. It has to be seen whether it is an integral part of the windmill or not. Such finding of fact is absent in this regard. In the present case, there is nothing on record to establish that on this touchstone of function ..... X X X X Extracts X X X X X X X X Extracts X X X X
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