Tribunal rules in favor of assessee on depreciation for Wind Energy Generators

The tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross-objections. It upheld the allowance of depreciation on Wind Energy Generators (WEG) and deleted the addition of unexplained expenditure under Section 69C. However, it denied the claim for additional depreciation on the WEG based on the relevant legal provisions.

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Issues Involved:
1. Depreciation on Wind Energy Generators (WEG)
2. Addition of unexplained expenditure under Section 69C
3. Claim of additional depreciation on WEG

Issue-wise Detailed Analysis:

1. Depreciation on Wind Energy Generators (WEG):

The primary issue in all the assessment years under appeal is the Revenue's grievance regarding the decision of the CIT(A) in allowing depreciation on Wind Mills (WEG). The facts are that the assessee, a trader in spices and oil seeds, is also in the business of generating and selling wind power energy. The assessee installed WEGs in Tamil Nadu and Karnataka during the relevant assessment years. The Assessing Officer (AO) denied the claim of depreciation on several grounds, including lack of agreement for erection and commissioning, inconsistency in the cost of land, absence of a break-up of individual machineries, and failure to prove that the installed windmill was new.

The CIT(A) directed the AO to allow the claim of depreciation after considering the remand report and further enquiries. The CIT(A) found that the assessee satisfied all conditions for claiming depreciation, including ownership, existence of machinery, and that the windmill was new. The tribunal upheld the CIT(A)'s decision, stating that the assessee's claim for purchasing, erecting, and generating electricity from the windmill was fully substantiated.

2. Addition of Unexplained Expenditure under Section 69C:

In the cross-objection, the issue relates to the addition of Rs. 2,41,500/- under Section 69C as unexplained expenditure. The AO made this addition based on the admission of one of the assessee's representatives, who stated that the assessee paid Rs. 3 lakhs for the cost of land, while the sale deed mentioned Rs. 58,500/-. The CIT(A) upheld the addition, but the tribunal found that there was no documentary evidence to support the claim that the assessee incurred costs outside the books of account. The tribunal deleted the addition of Rs. 2,41,500/- but directed the AO to withdraw depreciation on the amount of Rs. 58,500/-.

3. Claim of Additional Depreciation on WEG:

The assessee claimed additional depreciation on the WEG, arguing that it should be allowed for new machinery or plant acquired and installed after 31.3.2005, restricted to 10% of the total cost for machinery installed after 30.9.2006 but before 31.3.2007. The AO denied this claim based on the amendment to Section 32(1)(iia) effective from 1.4.2013. The tribunal upheld the AO's decision, noting that if the generation of electricity by windmill amounted to production of an article or thing, there would have been no need for the specific amendment.

Conclusion:

The tribunal dismissed the appeals filed by the Revenue and partly allowed the cross-objections filed by the assessee. The tribunal upheld the CIT(A)'s decision to allow depreciation on the WEGs and deleted the addition of unexplained expenditure under Section 69C, while denying the claim for additional depreciation on the WEG.

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