Db Income Tax Appeal v. M/Sk.k.enterprises, Udaipur

(1) DB Income Tax Appeal No.14/2013(Commissioner of Income Tax, Udaipur v. M/sK.K.Enterprises, Udaipur) (2) DB DB Income Tax Appeal No.53/2012(Commissioner of Income Tax, Udaipur v. M/s Miraj ProductPrivate Limited, Nathdwara, Rajsamand) Date of Order :: 18[th] July, 2014 HON'BLE MR.JUSTICE GOVIND MATHURHON'BLE MR.JUSTICE ATUL KUMAR JAIN Mr. K.K.Bissa, for the appellants. .... These two appeals preferred by the revenue arehaving a common question for our consideration in the termsthat “whether the assessees are rightly declared entitledby the ITAT and the CIT(A) to have depreciation as perAppendix-1 to the Income Tax Rules, 1962 for the costincurred in civil work and foundation, electrical items,components in installation and common power evacuationwhile installing windmills?” The Assessing Officer determined total income ofthe appellants by disallowing the depreciation for the costincurred in civil work, foundation, electrical components,installation and common power evacuation while installingwindmills by holding that the items aforesaid are notcovered within the term “windmills and specially designeddevises which run on windmills”. A challenge to the same was given by the assesseebefore the CIT(A), Udaipur and that came to be acceptedwith finding that all the items concerned are intergralpart of “windmill”. The civil work and foundation isnecessary for strong foundation and no windmill could beinstalled without having a strong foundation. As such,depreciation on investment for civil work and foundation atthe rate which the depreciation is allowed to windmill isapplicable for these items too. The electrical items,components and common power evacuation too are integralpart of a windmill as that could have not been operationalwithout these items. The revenue challenged the decision ofthe CIT(A) before the ITAT, Jodhpur but that came to bedismissed by the judgment impugned. The ITAT affirmed thefindings given by the CIT(A) by holding as under:- “Without doing the civil construction workincluding foundation work, it was not possible toinstall the windmill. Similarly, the electricitems, component and installation were necessaryfor the windmill, because in the absence of thesecomponents and electric items it was not possiblefor the windmill to produce electricity.Therefore, it was also the integral part of thewindmill.” Learned counsel for the revenue submits that asper Appendix-1(iii)(8)(xiii), the depreciation is allowedonly for windmills and in any specially designed deviseswhich run on windmills and not to the other attached items,thus, the findings arrived by the CIT(A) and ITAT, Jodhpurare erroneous. We do not find any merit in the argumentadvanced. “Without doing the civil construction workincluding foundation work, it was not possible toinstall the windmill. Similarly, the electricitems, component and installation were necessaryfor the windmill, because in the absence of thesecomponents and electric items it was not possiblefor the windmill to produce electricity.Therefore, it was also the integral part of thewindmill.” Learned counsel for the revenue submits that asper Appendix-1(iii)(8)(xiii), the depreciation is allowedonly for windmills and in any specially designed deviseswhich run on windmills and not to the other attached items,thus, the findings arrived by the CIT(A) and ITAT, Jodhpurare erroneous. We do not find any merit in the argumentadvanced. The issue involved in these appeals has beenconsidered by the Hon'ble Gujarat High Court in Tax AppealNo.604/2012, decided on 29.1.2013, in Commissioner ofIncome Tax, Ahmedabad-III v. Parry Engineering andElecronics Pvt. Ltd. In the case aforesaid Hon'ble GujaratHigh Court held that “Windmill would require ascientifically designed machinery in order to harness thewind energy to the maximum potential. Such device has to befitted and mounted on a civil construction, equipped withelectric fittings in order to transmit the electricity sogenerated. Such civil structure and electric fittings,therefore, it can be well imagined, would be highlyspecialized. Thus, such civil construction and electricfitting would have no use other than for the purpose offunctioning of the windmill. On the other hand, it can beeasily imagined that windmill cannot function withoutappropriate installation and electrification. In otherwords, the installation of windmill and the civil structureand the electric fittings are so closely interconnected andlinked as to form the common plant. As already noted, thelegislature has provided for higher rate of depreciation of80 per cent on renewable energy devises including windmilland any specially designed devise, which runs on windmill.The civil structure and the electric fitting, equipmentsare part and parcel of the windmill and cannot be separatedfrom the same. The assessees claim for higher depreciationon such investment was, therefore, rightly allowed.” We are in absolute agreement with the reasoningsgiven by Hon'ble the Gujarat High Court. We accept the sameand for the same reasons these appeals are dismissed. (ATUL KUMAR JAIN),J. (GOVIND MATHUR),J. kkm/ps