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TMI Blog2014 (2) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaring loss. The return was processed and a notice under Section 143 (2) of the Income-tax Act, 1961 (in short 'the Act') was issued and the assessment was finalised disallowing depreciation on machinery and plant used in manufacture of wind mills. (b) Aggrieved by such order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The First Appellate Authority dismissed the appeal confirming the order of the Assessing Officer. As against the same, the respondent-assessee preferred an appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal, by order dated 17.08.2005, dismissed the appeal filed by the assessee. Thereafter, the assessee filed a Miscellaneous Petition under Section 254(2) of the Act to recall the order passed in the main appeal on the ground that the Tribunal, while considering the issue regarding claim of depreciation, placed reliance on the decision of the Karnataka High Court in the case in C.I.T. vs. Amco Batteries Ltd., (1993) 203 ITR 614, and the said decision is not applicable to the facts of the assessee's case. The Tribunal allowed the Miscellaneous Petition and held that in the interest of justice, the order should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (as per the percentage mentioned in the Table) for both the Assessment Years 1995-96 and 1996-97 is concerned, inasmuch as the assets were not exclusively used for the purpose of manufacture of wind energy generators, but used for other engineering products also, the Tribunal erred in allowing 100% depreciation. 4.Mr.C.V.Rajan, learned counsel appearing for the respondent-assessee, by placing reliance on the decision of the Hon'ble Supreme Court in Honda Siel Power Products Ltd. vs. C.I.T., (2007) 295 ITR 466 (SC), submitted that the Hon'ble Supreme Court has pointed out that one of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on the mistake apparent from the record. Therefore, it is submitted that the Tribunal rightly exercised the power and set aside the earlier order and restored the appeal to be heard afresh. Further, as regards the merits, the learned counsel sought to sustain the order of the Tribunal by contending that there is no provision in the statute stating that the asset should be exclusively used for the purpose of manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake which was not done in the said case. 8.In the case on hand, the Tribunal, while considering the question of depreciation, in its earlier order dated 29.11.2001, pointed out that the machineries that were under consideration, viz., generator set, drilling, boring machines, boring machine for foundation work and lathe machine, etc., were apparently used by the assessee for various engineering work including the activity of manufacture of wind mills, electric generators and pumps. The depreciation table that is available along with the Act do not use the terms "exclusively used" and when there is no term "exclusively used", that is, the machinery and plant were exclusively used in the manufacture of wind mills, the Tribunal opined that the assessee's claim was reasonable. Nevertheless, the Tribunal, by placing reliance on the decision of the Karnataka High Court in the case of Amco Batteries Ltd., ( supra), observed that the assessee has claimed higher depreciation and the term "e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and perfectly justified. 11.Now, coming to the merits of the matter, as pointed out earlier, the Tribunal was initially satisfied that in the absence of the expression "exclusively used", the claim made by the assessee was reasonable. However, the Tribunal did not point out as to whether the assessee was entitled to the entire 100% depreciation as per the table annexed to the Act. In the final order dated 20.03.2008, the Tribunal pointed out that the total turnover of the assessee for the relevant Assessment Year was Rs.100.40 crores, out of which, a sum of Rs.67.98 crores directly relates to supply and manufacture of wind energy generators. Further, it was held that the other items also relate to sale of spares and execution of turnkey projects in various places, which cannot possibly involve use of machinery and therefore, recorded a factual finding that the machineries must have been used mainly for the purpose of manufacturing wind energy generators. Therefore, on such facts, the Tribunal held that the assessee was entitled to 100% depreciation as per the table annexed to the Act. 12.The above reasoning of the Tribunal, in our view, is justified in respect of the wind e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine, boring machine for foundation work, lathe machine, etc., it merely allowed the assessee's claim holding that for the purposes of grant of depreciation, exclusivity was not the test and thus, the entire claim was granted. 15.On the above aspect, we feel that some clarity is required as to the extent of depreciation that could be granted. Instead of remitting the matter back to the Tribunal, we feel it apt to consider the same herein. 16.Insofar as the depreciation claim is concerned, Section 32 of the Act states that such claim would be available to the assessee in respect of assets used for the purpose of business or profession and in the case of block of assets, such percentage on the written down value thereof as may be prescribed. Rule 5 of the Income-tax Rules states that the depreciation table gives different rates of percentage of depreciation to block of assets. Clause 10A deals with machineries relating to 'renewal energy devices', which reads as follows: Class of asset Depreciation allowance as percentage of - (i) actual cost in the case of ocean-going ships; (ii)written down value in the case of any other asset Remarks I.BUILDINGS - II.FURNITURE AND FITTINGS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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