Court rules in favor of assessee on depreciation for wind energy generators & set off of losses

The Court ruled in favor of the assessee in a case where the Revenue challenged the eligibility for depreciation on wind energy generators (WEGs) and the set off of brought forward losses. The Court found that the transaction for WEGs did occur in March 2006 based on invoices and accounting records, supporting the assessee's eligibility for depreciation. Additionally, the Court held that the unit was a going concern as per the demerger scheme approved by the Court, allowing the assessee to benefit from the set off of brought forward losses. The Court dismissed the Revenue's appeal, affirming the assessee's eligibility on both issues.

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Issues:
1. Eligibility for depreciation on wind energy generators (WEGs) for the year ending 31.03.2006.
2. Eligibility for set off of brought forward losses under Section 72A.

Eligibility for Depreciation on WEGs:
The case involved the Revenue appealing against the eligibility of the assessee for depreciation on WEGs for the year ending 31.03.2006. The Revenue contended that the transaction did not occur in March as no documents were produced during the survey on 28.03.2006. However, the ITAT found that WIL had sold WEGs to IEL in March 2006, which was confirmed by invoices and accounting records. The assessee offered income from the WEGs for taxation during the same period. The Revenue argued that mere income offering does not prove the transaction date, but the ITAT found the transaction to have occurred in March 2006 based on records. The court agreed with the ITAT's findings, ruling in favor of the assessee on this issue.

Eligibility for Set Off of Brought Forward Losses:
Regarding the benefit of set off of brought forward losses under Section 72A, the Revenue contended that the unit was not a going concern as per sub-clause (vi) of Section 2(19AA), making the assessee ineligible. The ITAT, however, relied on the demerger scheme approved by the Court, stating that a running and profitable unit would not be demerged. The Revenue argued that sub-clause (vi) should not be interpreted to mean a running unit. The Court disagreed with the Revenue, holding that the unit's functionality and profitability determine demerger eligibility. Consequently, the second question was also decided in favor of the assessee.

In conclusion, the Court dismissed the Revenue's appeal, upholding the eligibility of the assessee for depreciation on WEGs and the set off of brought forward losses based on the findings and interpretations presented during the case.

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