TMI Blog2014 (4) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... schedule has categorically worded that "windmills and any specially designed devices which run on wind mills" are qualified for 100 per cent rate of depreciation - the generators are not specially designed devices and are not entitled for higher depreciation as claimed by the assessee – thus, the order of the CIT(A) set aside - Decided in favour of Revenue. Allowability of deduction u/s 80IA of the Act – Explanation 5 to section 32(1)(iii) of the Act not considered – Rule 18BBB not considered – Held that:- The decision in Asst. Commissioner of Income-tax, Central Circle-5, Hyderabad & Others Versus M/s lanco Infratech Ltd. [2012 (10) TMI 529 - ITAT HYDERABAD] followed - CIT(A) rightly held that the assessee is eligible for higher rate of depreciation for the AYs 2002-03 and 2003-04 on wind mill project and accordingly, no depreciation remains to be claimed from the AY 2004-05 - the profits from wind power projects as calculated by the assessee company for the purpose of deduction u/s 80IA of the Act are correct. The assessee had computed profits of the undertaking and has also filed certificate of the auditor in respect of the eligible undertaking - there was no infirmity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % depreciation on wind electric generators. The Assessing Officer was of the view that the wind electric generators are in nature of electrical equipments and depreciation is allowable at 25% only but not at 100% as claimed by the assessee. Accordingly, the Assessing Officer calculated the depreciation at 25% and added back the balance as excess depreciation claimed by the assessee. 6. Before the CIT(A), the assessee stated that the assessee company is having wind mill power project situated at Chitradurga, Karnataka which was conceived by M/s Encon Services Ltd., Chennai at a cost of Rs. 14,73,71,680/-. Further, it was stated that later, Encon Services Ltd., Chennai was amalgamated with the assessee company i.e. Lanco Infratech Ltd., Hyderabad, with effect from 01/04/2001 and the amalgamation was approved by the Hon ble High Court of Andhra Pradesh, vide its order dated 08/10/2002. It was submitted that the wind mill power project is eligible for higher ate of depreciation at 100% as per the provisions of the IT Act and that the aforesaid power project at Chitradurga, Karnataka, was commissioned on 30th March, 2002 and used for less than 180 days during the FY 2001-02. He, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. Thus this ground of appeal is allowed. 8. Aggrieved by the order of the CIT(A), the revenue is in appeal before us. 9. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below. The Assessing Officer was of the view that the wind electric generators are in the nature of electrical equipments and depreciation is allowable at 25% only but not at 100% as claimed by the assessee. On the other hand, the CIT(A) held that electric wind generators are eligible for higher rate of depreciation as the same are part of the wind power projects and the wind power projects cannot be operational without the wind electric generators. 10. It is observed that the emphasis for granting higher rate of depreciation as far as wind electric generators are concerned, the necessity is to examine the functional test of the said equipment. A categorical evidence has to be placed that the equipment is whether an integral part of wind mill power project. Such an evidence or finding is absent in this appeal. Even in the case of CIT vs. Abad Hotels India (P) Ltd. (2001) 251 ITR 204 (SC) the Hon ble Supreme Court has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wind mills get discarded due to wear and tear, the generator do not get wear and tear so fast. On this basis, as well, we cannot hold that generators are not at par with the windmill as far as the period of diminution is concerned. Moreover sometimes to promote a particular activity the statute provides certain incentives in the shape of higher depreciation. We have to keep in mind such an intention of the legislature as well. However no such intention has ever been expressed in the legislature to provide higher rate of depreciation in respect of generator surrounding the windmill. Rather the Appendix and the depreciation schedule has categorically worded that windmills and any specially designed devices which run on wind mills are qualified for 100 per cent rate of depreciation. Since the generators are not specially designed devices hence in our considered opinion, as per the discussion made herein above, are not entitled for higher depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years 2002-03 and 2003-04 and there is no block of asset remaining to claim any deduction from 2004-05 onwards. It was submitted that the assessee company had claimed deduction u/s 80IA of the IT Act in respect of the income derived from power generation from wind mill and the wind power unit is a separate unit held by the assessee and a separate balance sheet and profit and loss account was prepared for the purpose of arriving at the profit for the wind power unit held by the assessee. The assessee filed audit report required u/s 80IA(7) of the Act in Form No. 10CCB. He submitted that the wind power unit is a separate unit held by the assessee and a balance sheet is drawn up for the purpose. 16. After considering the submissions of the assessee the CIT(A) held as follows: 5.6 I have carefully gone through the assessment orders and submissions made by the appellant. In my view, as discussed in the aforesaid paras, the appellant is eligible for higher rate of depreciation for the AYs 2002-03 and 2003-04 on wind mill project and accordingly, no depreciation remains to be claimed from the AY 2004-05. Hence, the profits from wind power projects as calculated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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