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TMI Blog2016 (11) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... ork foundation, erection of HT Lines and Switchgear etc. are integral part of Windmill and it cannot be viewed separately from Plant & Machinery. Accordingly, we are in agreement with the arguments of the learned Counsel for the assessee that the civil work for foundation is integral part of the Plant & Machinery and it cannot be viewed separately from Plant & Machinery for which foundation is laid. Similarly, HT Lines and Switchgear etc. are also integral part of Windmill and hence, eligible for higher rate of depreciation i.e. rate applicable on Windmill. We direct the AO accordingly Addition of interest expenses disallowed - Held that:- We find that there is no dispute that the assessee had a Windmill installed in earlier year also and was producing power. Installation of Windmill in this year is only expansion of existing business and not a new business. It is also a fact that the loan taken from Shri V. R. Venketachalam of ₹ 5 Crores has been used for purchase of Windmill for expansion of business and hence, allowable as business expenditure u/s 36(1) (iii) of the Act. We are also of the view that the assessee has made payment to partners as per the Partnership Deed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .50 lacs is made in due course of business of generation of power from Windmill and is for the purpose of business and, therefore, allowable u/s 37 (1) of the Act. He also explained that the assessee was under bona fide belief that this payment resulted into an intangible asset eligible for depreciation but it was claimed as revenue expenditure u/s 37(1) of the Act. It was claimed that additional depreciation of Windmill has been claimed u/s 32(1) (iii) of the Act since electricity generation amounts to manufacturing of articles or things and all these facts are available in the records of the AO and it does not require any fresh investigation into the facts. According to the learned Counsel, the CIT (A) has not admitted the additional grounds raised by giving following findings in Para 9.1 to 9.4 as under:- 9.1 From the judgment of Supreme Court it is evident that an additional ground that has arisen after the appeal has been filed, should normally be admitted by the appellate authority unless adjudication of such additional ground requires fresh investigation into facts. Such ground may arise subsequent to filing of an appeal either by way of an amendment to the statute or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier for good reasons. In fact, no cogent or good reason has been shown why all these grounds could not be raised earlier. Hence the condition for admission of additional grounds as laid down by Supreme Court in Jute Corporation (supra), NTPC (supra) and Bombay High Court in case of Ahmedabad Electricity (supra) are not fulfilled in this case. Hence these additional grounds are not admitted . 4. After hearing the rival contentions, we find that the assessee has made claim of payment of ₹ 37.50 lacs in the course of business of generation of power from Windmill and claimed the same as business expenditure u/s 37(1) of the Act. We have gone through the assessment order and noticed that at page 2 of the assessment order in Para 4.1 the assessee has made a claim regarding payment in respect to infrastructure facility of common power evacuation of ₹ 37.50 lacs to Suzlon Energy Ltd. We find that these facts are very much available on record of the AO as well as the CIT (A). The only issue which is to be considered is as to whether these facts need verification and the issue is to be set aside to the file of the AO. Hence, we admit the additional grounds of appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line erection of assembly are integrated part of the Windmill and depreciation on these items is admissible at the rate applicable to Windmill. The assessee before the AO referred to Clause XIII of Appendix I of IT Rules and claimed that higher depreciation in case of Windmill is allowable due to high propensity of moving parts to wear tears. According to the AO same high propensity and wear and tear is not applicable to Foundation or Switchgear which is used for generation at evacuation of power etc. Accordingly, he disallowed higher disallowance and restricted the depreciation to normal rates. Aggrieved, the assessee preferred appeal before the CIT (A) who allowed depreciation at higher rate of Civil Work whereas he restricted the depreciation at normal rate of HT Lines and Switchgear etc. by observing in Para 4.4, 4.5 and 4.6 as under:- 4.4 In Para 13 of the order Hon ble ITAT has held that foundation of the Windmill is part and parcel of the Windmill and eligible for depreciation at higher rate. The ITAT has also held that civil work is not an integral part of Windmill and is not eligible for higher depreciation. Para 13 14 of the ITAT order reads as under: We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Counsel for the assessee filed copy of the judgment of the Hon ble Punjab Haryana High Court in the case of CIT-I, Ludhiana Vs M/s. Eastman Impex ITA No.350 of 2013 Order dated 18-12-2014 wherein exactly identical issue of higher depreciation on installation of electrical lines for transmission and metering of Windmill is treated as allowed by observing as under:- We have perused the opinion recorded by the Rajasthan High Court and find no reason to record an opinion to the contrary. A wind mill, which is admittedly a source of renewable energy, cannot possibly function without power evacuation infrastructure and, therefore, to hold that it is not integral to a wind mill would be travestying of facts and justice. It would be necessary to clarify that we are not dealing with an ordinary device, where transmission lines and electricity generation devices are involved but a wind mill, which obviously cannot supply electricity without power evacuation infrastructure as integral to its very functioning and user. Consequently, we answer question of law against the revenue and dismiss the appeals accordingly . Similar view was taken by the Hon ble Rajasthan High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry for which foundation is laid. Similarly, HT Lines and Switchgear etc. are also integral part of Windmill and hence, eligible for higher rate of depreciation i.e. rate applicable on Windmill. We direct the AO accordingly. This common issue in the assessee s appeal and that of the Revenue is decided in favour of the assessee. This issue of Revenue s appeal stands dismissed and that of the assessee stands allowed. 8. The next issue in the appeal of the assessee is against the order of the CIT (A) in not adjusting the opening WDV of Windmill block of assets for granting of correct depreciation for assessment year 2007-08. 9. At the outset, the learned Counsel for the assessee stated that he has instruction from the assessee not to press this issue. Hence, this issue is dismissed as not pressed. 10. The next issue of the appeal of the assessee is against the order of the CIT (A) confirming the addition of interest expenses disallowed by the AO at ₹ 19,84,507/-. 11. Brief facts leading to this issue are that the AO during the course of assessment proceedings disallowed interest of ₹ 19,84,507/- for the reason that the assessee has used the borrowed funds for pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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