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TMI Blog2008 (6) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... ant for the purpose of investment allowance. For interpreting the scheme of depreciation as prescribed u/s. 32 it is not necessary that we should adopt a judge-sense meaning, which is sometimes artificial and imprecise in application by giving a meaning altogether different from the statutory provisions. The scheme of s. 32 unequivocally leads to the conclusion that on one hand plant and on the other hand machinery are to be treated as separate for the purpose of allowance of depreciation. Moreover, how one can ignore the block of assets as prescribed in the table of rates for the purpose of allowance of depreciation in Appendix I of IT Rules. As per this Appendix Part A contains building in a separate head, furniture and fittings in another head and machinery and plant in a different head by prescribing different rates of depreciations. 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 than higher rate of depreciation is granted. Naturally the speed with which a machinery gets discarded due to wear and tear, the buildings do not get wear and tear so fast. On this basis, as well, we cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... transformer ₹ 75,000 The expenses of ₹ 75,000 incurred by the assessee for this work is civil in nature to protect the equipment from rain/wind etc. This will, therefore be treated as building only. The assessee in its reply submitted that the item relates to civil work for a control room. In the control room there are 'transformer' and other equipments by which the outside electricity is used to start the functioning of the windmill at the same time the output of the energy generated from the windmill and transferred to MSEB grids through this control room. Hence, it is contended that the control room is critical for the functioning of the windmill and thus it is also a 'plant' and forms part and parcel of the windmill. The contention of the assessee is not acceptable as the control room structure is not part of windmill but a part of building to protect the electrical machinery etc. and not entitled for 100 per cent depreciation. (iii) Labour cost for internal road development ₹ 75.000 On going through the bill for purchase of windmill, it is noticed that M/s Suzlon Developers (P) Ltd. has charged ₹ 75,000 for windmill as labour cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I am of the humble opinion that the action taken by the AO cannot be faulted as control room is a civil construction which gives protection to electrical installations. It is something like constructing a factory shed which gives protection to plant and machinery. The rate of depreciation for plant and machinery and the factory shed are different as prescribed in the Appendix to the IT Rules, 1962. The construction of the control room is not a specialized construction nor it can be said that it is a part and parcel of the plant and machinery. In the instant case, the civil construction has given rise to an ordinary room which is used as a control room where electrical installations are placed for protection. There is no specific design and the civil construction does'nt mingle with the plant and machinery. The assessment order on this issue is upheld. (3) Labour cost for internal road development : The AO has considered the labour cost for internal road development as building and accordingly the depreciation has been allowed as against the claim of the appellant that the same should be considered as windmill. It is the contention of the appellant that but for these roads, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure was incurred on the foundation for fixing the plant and machinery which was held as forming a part of the cost of the plant and machinery. The Hon'ble Court has held that the assessee would be entitled to depreciation thereon. Next, he has cited CIT vs. Karnataka Power Corporation (2000) 162 CTR (SC) 249: (2001) 247 ITR 268(SC) for the preposition that whether a building can be treated as a plant and in that respect the observation of the Hon'ble Court was that where it is found as a fact that a building has been so planned and constructed as to serve the assessee special technical requirements, it will qualify to be treated as a plant for the purpose of investment allowance. The learned Authorised Representative has mentioned that there was a finding by the fact-finding authority in that appeal, that the assessee's generating station building was so constructed as to be an integral part of its generating system, so held as a plant entitled to investment allowance. His next citation was CIT vs. Delhi Airport Service (2001) 170 CTR (Del) 534: (2002) 255 ITR 91(Del) wherein the air conditioner fixed in the bus was held as an integral part of the bus therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled for higher rate of depreciation but entitled for the rate of depreciation as particularly prescribed in the depreciation schedule of IT Rules. 7.1 It was explained during the course of hearing that M/s Suzlon Developers (P) Ltd. undertook the process of erection, commissioning and execution of windmill. The power so generated was agreed to be supplied to MSEB department. It was also explained that a wind turbine generator consists of rotor consisting of blade, the hub assembly, gear box, steel tower, foundation and grid assembly i.e. the transformer unit for delivering power to the grid network. The functioning of the windmill was first to generate the power and thereafter the transmission of electric power to MSEB. For this structure, the specified rules have been provided in IT Rules and as per Appendix I as applicable for asst. yr. 2002-03 under the head "Machinery and plant (iii) there is a sub-cl. (xiii) remarked as "Renewal energy devices being renewal energy windmills of any special design devices which run on windmills and the depreciation rate prescribed at 100 per cent. As far as this appeal is concerned there is no dispute upto this stage of claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated to be an adjunct to the carrying on of the business, that is to say, something added to another, or which is in a subordinate, auxiliary or dependent position. It was further observed by the Hon'ble Court as under : "Moreover, to differentiate between buildings for grant of additional depreciation by holding one to be a plant where the building is specially designed and constructed with some special features to attract customers and another where the building is not so constructed, but used for the same purpose, namely as a hotel or theatre, would be unreasonable." 11. The Court has also observed that the depreciation as a general principle represents the diminution in value of a capital when applied to the purpose of making profit or gain. The object is to get the true picture of the real income of the business. An inference was drawn that the legislature never intended to give such benefit of depreciation to a building which is usually more durable than machinery or plant. The Court has finally held as under : "The fact that the building in which a business is carried on is, by its construction particularly well-suited to the business, or indeed was sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The entire factory was stated to be constructed in the said large tract of land. To protect the property, which covered a wide area and also to isolate from the surrounding wilderness, the assessee erected fencing enclosing the property. The said decision was on the basis of certain findings on facts that the foundation was meant for fixing the machinery hence formed a part of the cost of plant and for that purpose levelling of the land was required so held that a distinction was difficult to segregate the expenditure. According to the Hon'ble Court, the issue was covered by few decisions as cited therein, so decided in favour of the assessee. The distinction is that the premises was very large area of land which required proper protection and the factory could not be installed without such levelling of land and internal roads therein. On the other hand, it is not so in the present case because no such factual finding is on record that the windmill could not have been run without such civil construction. Their usage and purpose is functionally independent of each other. 14. The next decision which was cited is Karnataka Power Corporation (supra). However, in this case the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the author and the effect of giving to them one or more other permissible meaning on the object to be achieved. Applying this test, we have to gather the meaning of the words such as 'plant and machinery'. For interpreting the scheme of depreciation as prescribed under s. 32 it is not necessary that we should adopt a judge-sense meaning, which is sometimes artificial and imprecise in application by giving a meaning altogether different from the statutory provisions. The scheme of s. 32 unequivocally leads to the conclusion that on one hand "plant" and on the other hand "machinery" are to be treated as separate for the purpose of allowance of depreciation. Moreover, how one can ignore the block of assets as prescribed in the table of rates for the purpose of allowance of depreciation in Appendix I of IT Rules. As per this Appendix Part 'A' contains building in a separate head, furniture and fittings in another head and machinery and plant in a different head by prescribing different rates of depreciations. The scientific reason is often discussed as the period of diminution for tangible assets. If the period of diminution or wear-tear is ver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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