Tribunal rules for appellant on depreciation and interest income, overturning lower authorities' decisions.

The Tribunal ruled in favor of the appellant on both issues. Firstly, the disallowance of higher depreciation on civil engineering works for the solar power plant foundation was overturned, allowing the entire cost of the plant to be eligible for depreciation at the plant and machinery rate. Secondly, interest earned on fixed deposits during the preoperative period was considered a capital receipt linked to setting up the plant, leading to the deletion of the addition to the appellant's income. The appeal was allowed, and the lower authorities' decisions were set aside.

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Issues:
1. Disallowance of higher reduction of depreciation on the cost of civil engineering works for laying foundation of solar power panels.
2. Treatment of interest earned on fixed deposits during the preoperative period as income from other sources instead of reducing the cost of the plant.

Analysis:

Issue 1:
The appellant challenged the disallowance of higher reduction of depreciation on the cost of civil engineering works for laying the foundation of solar power panels. The AO allowed depreciation at a lower rate on the civil engineering works compared to the solar power plant. The appellant argued that the civil engineering works are essential for the installation of the solar power plant and should be considered part of the plant's cost. The appellant relied on precedents and contended that the entire cost of the solar power plant should be eligible for depreciation at the rate applicable to plant and machinery. The Tribunal agreed with the appellant, citing relevant case law and the interconnected nature of the civil works with the functioning of the solar plant. Consequently, the disallowance of depreciation was deleted in favor of the appellant.

Issue 2:
The second issue pertained to the treatment of interest earned on fixed deposits during the preoperative period. The AO considered this interest as income from other sources, leading to an addition to the appellant's income. The appellant argued that the fixed deposits were made to provide a bank guarantee for setting up the solar power plant, making the interest earned a capital receipt that should reduce the plant's cost. The Tribunal noted the direct link between the fixed deposits and the plant's establishment, following the decision of the Hon'ble Delhi High Court, and ruled in favor of the appellant. The interest on fixed deposits was deemed a capital receipt, and the addition made by the AO was deleted. The Tribunal allowed the appeal of the assessee based on this analysis.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, allowing the appeal and setting aside the lower authorities' decisions.

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