Solar plant depreciation allowed from electricity generation date, not grid synchronization date

The Karnataka HC dismissed the Revenue's appeal regarding depreciation on a solar plant. The court held that the assessee was entitled to claim depreciation from 20.03.2013 (FY 2012-13) when electricity generation began, rather than from 20.04.2013 when grid synchronization occurred (FY 2013-14). The HC ruled that machinery put to bona fide use for business purposes, even if subsequently becoming defective, qualifies as "put to use" for depreciation purposes, citing precedent that installation with genuine business intent constitutes usage regardless of temporary operational issues.

---

---

Issues:
- Appeal challenging order allowing depreciation on solar plant
- Determining the date of putting the solar plant to use for depreciation claim

Analysis:
The appeal in question challenged an order allowing depreciation on a solar plant, specifically focusing on the date when the plant was put to use for claiming depreciation. The primary issue was whether the generation of electricity started in the financial year 2012-13 or only after synchronization with the grid in the financial year 2013-14.

The respondent's case highlighted that the solar plant was completed and approved by the Chief Electrical Inspector in March 2013, and electricity generation commenced in the same month. The respondent supplied power locally and raised invoices for the same before synchronization with the grid in April 2013. The Assessing Officer, however, contended that the plant was put to use only after synchronization with the grid.

The CIT (A) emphasized that the critical date for putting the plant to use is when it starts generating electricity, not when it synchronizes with the grid. The CIT (A) noted that the respondent had indeed generated power and supplied it, supported by invoices and certification from the Superintending Engineer, Operations. The CIT (A) found the Assessing Officer's approach contradictory and held that the plant was put to use during the relevant year, allowing the depreciation claim.

The ITAT upheld the CIT (A)'s findings, rejecting the appellant's reliance on a previous case as inapplicable to the current scenario. The ITAT affirmed that the respondent started generating power in March 2013, making the appeal by the appellant-Revenue baseless. Consequently, the appeal was dismissed in favor of the Assessee.

In conclusion, the judgment clarified that the pivotal factor for determining the date of putting a solar plant to use for depreciation purposes is the commencement of electricity generation. The detailed analysis by the CIT (A) and subsequent affirmation by the ITAT emphasized the actual utilization of the plant for business activities, supporting the Assessee's claim for depreciation.

---