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2014 (12) TMI 673 - AT - Income TaxValidity of revision order u/s 263 – Invocation of provisions for higher claim of depreciation on Windmill – Held that:- The CIT was of the opinion that excess depreciation was allowed to the assessee in respect of windmill which was accepted by the assessee during the sec. 263 proceedings as typographical error - on this count, there was no infirmity in the order of the CIT. Electrical works including supply and installation of Electrical items” and “Development and other charges to KSEB part of renewable energy device or not – assessee is entitled to higher rate of depreciation or not - Held that:- In the assessment order, there is no discussion of whatsoever regarding this issue – AO has absolutely closed his eyes and accepted the claim of the assessee as it is - It is incumbent upon the AO to cause necessary enquiry regarding the nature of assets and entitlement of depreciation - the CIT was justified in invoking the provisions of sec. 263 on account of lack of enquiry from the side of the AO. For granting higher rate of depreciation, 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 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 - if the electrical works are specially designed devices to suit the need of windmills, then only the assessee is entitled for higher rate of depreciation – thus, the matter is to be remitted back to the AO for fresh consideration – Decided partly in favor of assessee.
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