Depreciation allowed on wind energy device. Disallowance under section 14A.

The ITAT held that depreciation is allowable on the entire device capable of generating electricity using wind energy, including foundation, civil, and electrical works. The Revenue's appeal regarding depreciation and additional depreciation on these works was dismissed. However, the AO was directed to verify the utilization of borrowed amount for land purchase concerning depreciation on capitalized interest. The ITAT decided to restore the disallowance made under section 14A r.w.s. 8D without applicability for the assessment year 2007-2008 to the AO for fresh consideration, allowing the CO of the assessee for statistical purposes.

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Issues:
1. Disallowance of excess claim of depreciation on windmill.
2. Disallowance made under section 14A r.w.s. 8D without applicability.

Analysis:
1. The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of excess claim of depreciation on windmill. The Revenue contended that depreciation at the rate of 80% was allowable only on the device of windmill and not on the entire cost, including civil works and electrical installation. The Revenue argued that the interest capitalized needed verification by the AO. However, the assessee argued that depreciation on civil and electrical works was necessary for the windmill installation and should be allowed. The ITAT held that depreciation is allowable on the entire device capable of generating electricity using wind energy, including foundation, civil, and electrical works. The ITAT dismissed the Revenue's appeal regarding depreciation and additional depreciation on these works but directed the AO to verify the utilization of borrowed amount for land purchase concerning depreciation on capitalized interest.

2. The assessee's CO challenged the disallowance made under section 14A r.w.s. 8D without applicability for the assessment year 2007-2008. The CO argued that no interest-bearing funds were used for earning exempt income and cited legal precedents. The ITAT decided to restore this issue to the AO for fresh consideration in light of the legal position cited by the assessee and to provide a due opportunity for the assessee to be heard. Consequently, the Revenue's appeal was partly allowed for statistical purposes, and the CO of the assessee was allowed for statistical purposes.

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