ITAT decision: Higher depreciation allowed on windmill civil work

The ITAT allowed the assessee's appeal for A.Y. 2012-13 regarding higher depreciation on civil foundation work as part of windmill cost. The ITAT partially allowed the appeal for A.Y. 2013-14 on the disallowance of additional depreciation on civil foundation work. However, the ITAT dismissed the Revenue's appeal for A.Y. 2013-14 on the disallowance of depreciation on the windmill. The decisions were influenced by the precedent established in CIT vs. K.K. Enterprises by the Hon'ble Rajasthan High Court, recognizing civil structures and electric fittings as essential components of windmills eligible for higher depreciation rates.

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Issues Involved:
1. Higher depreciation on civil foundation work as part of windmill cost.
2. Disallowance of additional depreciation on civil foundation work.
3. Set off of loss on shares as business loss.
4. Addition by invoking Section 14A.
5. Deletion of addition on account of disallowance of depreciation on windmill by Revenue.
6. Deletion of disallowance of additional depreciation on windmill by Revenue.

Issue-Wise Detailed Analysis:

1. Higher Depreciation on Civil Foundation Work as Part of Windmill Cost:
The assessee claimed higher depreciation on civil foundation work as part of the windmill cost. The CIT(A) restricted the depreciation, treating the civil foundation work as building at 5% and electrical installation at 15%. The assessee argued that these items should be eligible for the same rate of depreciation as the windmill. The ITAT upheld the findings of the CIT(A) that while electrical installation would be part of the windmill, the civil foundation work would form part of the building, allowing a depreciation rate of 10%. The ITAT followed the decision of the Hon'ble Rajasthan High Court in CIT vs. K.K. Enterprises, which held that civil structure and electric fittings are part and parcel of the windmill and thus eligible for higher depreciation. Consequently, this ground of appeal was allowed.

2. Disallowance of Additional Depreciation on Civil Foundation Work:
The AO allowed additional depreciation claimed by the assessee but due to different depreciation rates applied, a difference of Rs. 3,08,979/- was not allowed. The ITAT directed the AO to modify the quantum of additional depreciation in line with the decision on the rate of depreciation on the windmill. This ground of appeal was partly allowed.

3. Set Off of Loss on Shares as Business Loss:
The assessee claimed a short-term loss on the sale of shares as a business loss, which the AO treated as a short-term capital loss. The CIT(A) confirmed this, noting that the assessee initially admitted it as a capital loss. The ITAT upheld the CIT(A)'s decision, dismissing the ground of appeal, as the assessee failed to provide necessary details to prove it as a business loss.

4. Addition by Invoking Section 14A:
The AO made an addition of Rs. 68,559/- under Section 14A, which was confirmed by the CIT(A). The assessee argued that the investments were covered by share capital and reserves, and no new investments were made during the year. The ITAT directed the assessee to submit details of investments and own funds to the AO for verification, allowing this ground for statistical purposes.

5. Deletion of Addition on Account of Disallowance of Depreciation on Windmill by Revenue:
The Revenue appealed against the deletion of the addition of Rs. 22,94,27/- made by the AO on account of disallowance of depreciation on the windmill. The ITAT noted that the issue was covered by the decision in CIT vs. K.K. Enterprises, where it was held that civil structure and electric fittings are part and parcel of the windmill and eligible for higher depreciation. Thus, this ground of the Revenue was dismissed.

6. Deletion of Disallowance of Additional Depreciation on Windmill by Revenue:
The Revenue also appealed against the deletion of Rs. 35,16,590/- on account of additional depreciation on the windmill. The ITAT followed the same reasoning as in the previous issue, applying the decision in CIT vs. K.K. Enterprises, and dismissed this ground of the Revenue.

Conclusion:
The appeals of the assessee for A.Y. 2012-13 were partly allowed, for A.Y. 2013-14 were partly allowed for statistical purposes, and the appeal of the Revenue for A.Y. 2013-14 was dismissed. The ITAT's decisions were primarily based on the precedent set by the Hon'ble Rajasthan High Court in CIT vs. K.K. Enterprises, affirming that civil structures and electric fittings are integral to windmills and eligible for higher depreciation rates.

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