TMI Blog2016 (1) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... erit in the order of Assessing Officer in bifurcating the cost of windmill into cost of Wind Turbine, cost of erection and installation of windmills and civil construction work vis-à-vis Wind Turbine No.1, which was installed in assessment year 2006-07. Windmill installed by the assessee in the year under appeal - As per the Assessing Officer, cost of Wind Turbine entitles the assessee to the depreciation @ 80%. However, the cost of electrical installation would attract depreciation @ 15% and the cost of civil construction would attract depreciation @ 10% - Held that:- . The foundation work was an integral part of the machinery, since the machinery cannot function without foundation. In other words, even in cases where the assessee has incurred separate expenditures on the cost of foundation and installation of the machinery, then the same is to be considered as an integral part of cost of windmill, which in turn is entitled to higher rate of depreciation @ 80%. Similarly, various electrical items installed, which in turn ensures the functioning of windmill, forms part of windmill and is entitled to the depreciation @ 80%. Accordingly, we hold that the assessee is entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon. Commissioner of Income Tax, (Appeals) has erred both on facts as well as in law in not deleting the addition on account of disallowance of depreciation of ₹ 8,95,265 (55,64,410 - (2114330+2554815) on wind mills, and hence the addition may be cancelled. 2) Although the depreciation on the Windmill was allowed for the second half year in A.Y.2006 -07 @ 80% and no facts and circumstances had changed, the claim of depreciation @ 80% is wrongly rejected by the Assessing Authority and depreciation lesser than 80% is allowed on that machinery for A.Y.2007-08, hence the addition may be cancelled. 3) In the view of facts circumstances, the Hon. Commissioner of Income Tax, (Appeals) erred in bifurcating the cost of Windmill and treating cost of ₹ 1917969 (Windmill I) and ₹ 467100 (Windmill II) as building and hence the same should be treated as cost of Windmill. 4) In the view of facts circumstances, the Hon. Commissioner of Income Tax, (Appeals) erred in treating power evacuation expenses of ₹ 37,50,000 (WDV 22,50,000) as normal machinery with depreciation rate @ 15% and not as a part of cost of Windmill. Hence, this expenses to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 32C which provides for depreciation @ 80% only on wind mills and devices specially designed to run on wind mills. 4. On the facts and in the circumstances of the case and in law, the CIT[A] erred in allowing depreciation @ 80% on proportionate cost in MEDA charges of ₹ 6,28,750/- as the same does not form part of cost of windmill or any specifically device to run on windmill. 7. Briefly, in the facts of the present case, the assessee was engaged in the business of manufacture of steel and alloy steel casting and was also generating electricity through windmill. During the assessment year 2006-07, the assessee had purchased a windmill for ₹ 6,15,95,636/- and since the said windmill was installed on 29.03.2006, the assessee claimed depreciation @ 80% for half year and the balance WDV was carried forward at ₹ 3,69,57,382/-, which was opening WDV for the instant assessment year under appeal. Further, the assessee had purchased one windmill of ₹ 90 lakhs from M/s. Southern Wind Farm Ltd., during the year under consideration and had put the same for use on 24.02.2007. The depreciation was charged @ 80% for half year. The Commissioning certificate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to the claim of depreciation @ 80% only on the cost of windmill, in respect of plant machinery, the assessee was entitled to depreciation @ 15% and foundation work which constituted major portion of the expenditure was to be considered under the block of building, on which depreciation was to be allowed @ 10%. The Assessing Officer thus, re-computed the depreciation to be allowed to the assessee in respect of Wind Turbine Generator No.1 purchased in assessment year 2006-07 and Wind Turbine Generator No.2 purchased in assessment year 2007-08. The Assessing Officer allowed depreciation of ₹ 2,46,05,486/- in respect of Wind Turbine Generator No.1 and in respect of Wind Turbine Generator No.2, the Assessing Officer allowed depre ciation of ₹ 29,96,010/- i.e. total of ₹ 2,76,01,496/- as against the claim of depreciation by the Assessing Officer at ₹ 3,31,65,906/-. The excess depreciation claimed by the assessee at ₹ 55,64,410/- was added back to the income of the assessee. 8. In appeal, the CIT(A) upheld the bifurcation of cost of windmill and the rate applied by the Assessing Officer. He further upheld the order of Assessing Officer in restricti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of rate of depreciation to be applied on WDV of windmill installed by the assessee in assessment year 2006-07. Admittedly, the first major windmill was installed by the assessee in the preceding year, in which the cost of windmill was ₹ 6.15 crores. The Assessing Officer in an order passed under section 143(3) of the Act, dated 24.03.2008, copy of which is placed at pages 15 and 16 of the Paper Book had allowed the claim of assessee after obtaining the evidence for major items of expenditure claimed and also addition to the fixed assets along with other details. Since the said windmill was installed on 29.03.2006, the assessee claimed depreciation @ 80% for half of the year, which was allowed in the hands of assessee. During the year under consideration i.e. in the next succeeding year, the assessee had claimed depreciation @ 80% on WDV of windmill, which was installed on 29.03.2006. The first issue which has to be addressed is whether while completing the assessment in succeeding year, is the Assessing Officer authorized or empowered to disturb the WDV of an asset, which is brought forward from the preceding year. Admittedly, such an asset was installed in earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate expenditures on the cost of foundation and installation of the machinery, then the same is to be considered as an integral part of cost of windmill, which in turn is entitled to higher rate of depreciation @ 80%. Similarly, various electrical items installed, which in turn ensures the functioning of windmill, forms part of windmill and is entitled to the depreciation @ 80%. Accordingly, we hold that the assessee is entitled to the claim of depreciation @ 80% on cost of windmill at ₹ 90 lakhs. The grounds of appeal raised by the assessee are thus, allowed. The grounds of appeal raised by the Revenue are thus, dismissed. 13. Now, coming to the appeal filed by the assessee in ITA No.1495/PN/2011 relating to assessment year 2008-09, in which issue raised is in respect of WDV of two windmills i.e. one purchased in assessment year 2006-07 and the other purchased in assessment year 2007-08. In line with our order in the paras hereinabove, we direct the Assessing Officer to compute the depreciation @ 80% on WDV of windmill, which in turn is closing WDV of the preceding year. The assessee admittedly, has not installed any other windmill in the instant year. The grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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