Gujarat High Court
Commissioner Of Income Tax Ahmedabad ... vs Parry Engineering And on 29 January, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
COMMISSIONER OF INCOME TAX AHMEDABAD III....Appellant(s)V/SPARRY ENGINEERING AND ELECTRONICS P. LTD....Opponent(s) O/TAXAP/604/2012 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 604 of 2012 ================================================================ COMMISSIONER OF INCOME TAX AHMEDABAD III....Appellant(s) Versus PARRY ENGINEERING AND ELECTRONICS P. LTD....Opponent(s) ================================================================ Appearance: MR.VARUN K.PATEL, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 29/01/2013 ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against a decision of the Income Tax Tribunal, Dated : 02.03.2012, raising following questions for our consideration;
(a) Whether, in the facts and circumstances of the case, the learned ITAT has erred in law confirming the order of the CIT(A) deleting the disallowance of excess claim of depreciation of Rs.21,19,322/- on Windmill?
(b) Whether, in the facts and circumstances of the case, the learned ITAT has erred in law in confirming the order of the CIT (A) deleting the disallowance of additional depreciation of Rs.35,66,299/- u/s. 32(1)(iia) of the Income Tax Act, 1961, on windmill?
2. (1) The first question pertains to the claim of the assessee for depreciation, at the rate of 80 per cent on installation of windmill for generation of electricity, such claim is arising out of Entry (xiii) of Appendix-I to the Income Tax Rules, 1962. Such entry pertains to renewable energy devises, which includes inter alia Windmills and any specially designed devise which run on windmills . Insofar as the main equipment of windmill is concerned, the department had no dispute about such claim being granted. The disputed items are as follows;
1Amount of interest on term loan for windmill, before installation Rs.2,52,752/-
2The amount of civil works, installation, labour and foundation work of windmill Rs.44,18,239/-
3The amount paid to GEDA for land application fee and reimbursement of power evacuation Rs.18,50,000/-
TOTAL RS. :
Rs.65,20,991/-
3. Insofar as the second item is concerned, CIT Appeals and the Tribunal, both held in favour of the assessee, relying on a decision of the Apex Court in the case of COMMISSIONER OF INCOME TAX VS. KARNATAKA POWER CORPORATION , reported in 247 ITR 268, wherein, the Apex Court in the context of investment allowance on plant and building, observed that whether building is a plant, is a question of fact. It was, further, observed that since authority had come to a finding of the fact that the assessee s generating station building was construed to be an integral part of its generating system, the building was a plant and was entitled to investment allowance. In particular, the CIT Appeals in its elaborate order, Dated : 31.10.2011, observed that the company had purchased the windmill from Suzlon Energy Limited with a condition that the said company will install the same and all the cost related to the installation would be borne by the assessee company. It was, further, observed that such windmill cannot be used until it is installed and for the installation of the same a specific civil structure is required. Necessary permission is required from the specific authority. Specific kind of electrification is required for the operation and maintenance of the windmill. The civil structure and the electrification created for the purpose of windmill are of no use, if the windmill is disposed of. Civil structure and the electric fittings would have to be dismantled.
4. This opinion of the appellate authority was confirmed by the Tribunal in the impugned judgment, in the following terms;
4. We have considered rival submissions and perused the orders of the AO and the CIT(A). The depreciation is allowable on renewable energy device which also includes windmill. The depreciation at the rate of 80% is allowable on the entire device which is capable of generating electricity using wind energy. There is no provision in the Act to bifurcate the device into several parts and allow depreciation thereon at different rates of depreciation. The foundation, civil and electrical works are necessary for the installation of the windmill and is clearly part and parcel of the windmill project on which depreciation at the rate of 80% is allowable.
5. We are of the opinion that the approach of both the authorities is perfectly justified. Windmill would require a scientifically designed machinery in order to harness the wind energy to the maximum potential. Such device has to be fitted and mounted on a civil construction, equipped with electric fittings in order to transmit the electricity so generated. Such civil structure and electric fittings, therefore, it can be well imagined, would be highly specialized. Thus, such civil construction and electric fitting would have no use other than for the purpose of functioning of the windmill. On the other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plant. As already noted, the legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devises including windmill and any specially designed devise, which runs on windmill. The civil structure and the electric fitting, equipments are part and parcel of the windmill and cannot be separated from the same. The assessee s claim for higher depreciation on such investment was, therefore, rightly allowed.
6. The remaining portion of question No.1 requires consideration.
7. Question No.2 pertains to the assessee's claim of additional depreciation at the rate of 20 per cent under Section 32(1)(iia) of the Act, on the same windmill. Revenue opposed such claim on the ground that the assessee cannot be stated to be engaged in the business of manufacturing or production of any article or thing. Such a question needs consideration.
8. This Tax Appeal is ADMITTED for considering the following question of law;
(1) Whether, in the facts and circumstances of the case, the Tribunal was right in law and in facts, confirming the order of the CIT Appeals, deleting the disallowance of the higher depreciation at the rate of 80 per cent, on the interest on term loan of Rs.2,52,752/- and payment of Rs.18,50,000/- to GEDA for land application fee and reimbursement of power evacuation.
Whether, in the facts and circumstances of the case, the ITAT was right in law and in confirming the order of the CIT Appeals, granting additional, depreciation at the rate of 20 per cent to the assessee, on the purchase and installment of the windmill under Sections 32(1)(iia) of the Act.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) UMESH Page 7 of 7