Tribunal upholds CIT(A)'s decision on assignment fee & depreciation for Wind Turbine Generators

The Tribunal upheld the CIT(A)'s decisions, dismissing the Revenue's appeal. The assignment fee was recognized in AY 2009-10, as the assignment agreement was conditional and completed in that year. Additionally, the assessee was granted 100% depreciation on the Wind Turbine Generators for AY 2008-09, as they were operational before September 30, 2007. The Tribunal's ruling was issued on September 17, 2021, in Chennai.

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Issues Involved:
1. Deletion of addition towards receipt of Assignment Fee.
2. Deletion of disallowance of depreciation on Wind Turbine Generators (WTGs).

Issue-wise Detailed Analysis:

1. Deletion of Addition towards Receipt of Assignment Fee:
The Revenue contested the deletion of the addition of Rs. 14,74,78,764/- made by the Assessing Officer (AO) towards the receipt of assignment fee, arguing that it should be assessed in the current assessment year (2008-09). The AO's stance was that as per the Escrow Agreement, the assessee had to provide a bank guarantee, which was done on 28.11.2007, thus making the receipt taxable in the current year. The AO also noted several withdrawals from the Escrow Account during FY 2007-08, indicating that the conditions of the Escrow Agreement had been fulfilled.

The assessee argued that the assignment agreement with M/s. HTMT Global Solutions Ltd. was conditional upon obtaining planning approval from the concerned authority, which was obtained in the financial year relevant to AY 2009-10. Consequently, the assignment fee was recognized in AY 2009-10. The CIT(A) supported this view, noting that the assignment agreement was completed only when the builder obtained the necessary planning approvals in FY 2008-09. The CIT(A) also observed that the tax rates for AY 2008-09 and 2009-10 were the same, and there was no revenue loss to the Department.

The Tribunal upheld the CIT(A)’s decision, agreeing that the assignment agreement was conditional and the conditions were fulfilled in FY 2008-09. The Tribunal noted that the AO had erred in concluding that the assignment was complete upon the provision of the bank guarantee. It was clarified that the withdrawal of funds from the Escrow Account did not imply the completion of the assignment. The Tribunal emphasized that the income was rightly recognized in AY 2009-10, and there was no loss to the Revenue due to the timing difference.

2. Deletion of Disallowance of Depreciation on Wind Turbine Generators (WTGs):
The Revenue challenged the deletion of the disallowance of depreciation on WTGs amounting to Rs. 2,29,54,319/-. The AO had allowed only 50% depreciation, arguing that the WTGs could not have been put to use for more than 180 days as they were commissioned towards the end of September 2007.

The assessee contended that all five WTGs were installed and commissioned before 30.09.2007, thus qualifying for 100% depreciation. The CIT(A) accepted the assessee’s evidence, including delivery notes, invoices, installation and commissioning certificates, and electricity readings, which confirmed that the WTGs were operational before 30.09.2007.

The Tribunal upheld the CIT(A)’s decision, noting that the evidences provided by the assessee, such as the commissioning certificates issued by the Superintending Engineer, Tirunelveli Electricity Distribution Circle, and the electricity readings, substantiated that the WTGs were installed and generating electricity before 30.09.2007. Thus, the assessee was entitled to 100% depreciation.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on both issues. The assignment fee was correctly recognized in AY 2009-10, and the assessee was entitled to 100% depreciation on the WTGs for AY 2008-09. The Tribunal's order was pronounced on 17th September 2021 at Chennai.

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