TaxTMI 
TaxTMI 
2008 (6) TMI 586
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....ill' (entitled for depreciation @ 100 per cent) : Particulars of items of capitalization isolated while allowing depreciation on 'windmll'. Cost incurred (Rs.) Depreciation rate (as per AO) Depreciation granted (By AO) Depreciation claimed by appellant Disputed amount of depreciation (i) Cost of labour work for site development 75,000 10% $ 75,000 75,000 (Page 5 Para 3(1) of CIT(A)'s order and Page 3 para 8.1(i) of assessment order) (ii) Civil work control room 75,000 10% 7,500 75.000 67,500 (Page 5 Para 3(2) of CIT(A)'s order and Page 4 para 8.1(ii) of assessment order) (iii) Internal road development 75,000 10% 7,500 75,000 67,500 (Page 6 Para 3(3) of CIT(A)'s order and Page 4 para 8(iii) of assessment order) (iv) Transformer upto DP structure 7,00,000 25% 1,75,000 7,00,000 5,25,000 (Page 6 Para 3(4) of CIT(A)'s order and Page 4 para 8.1(iv) of assessment order) Total 9,25,000 $1,90,000 9,25,000 $7,35,000 $ (Though the learned AO held it to....
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....is not part of windmill but a part of building to protect the electrical machinery etc. and not entitled for 100 per cent depreciation. (iii) Labour cost for internal road development Rs. 75.000 On going through the bill for purchase of windmill, it is noticed that M/s Suzlon Developers (P) Ltd. has charged Rs. 75,000 for windmill as labour cost for internal wind mill. These expenses of Rs. 75,000 for a wind mill are incurred for road development. Therefore it will be treated as building. (iv) Transformer upto DP structure Rs. 7,00,000 On going through the bill, it is seen that the assessee has paid Rs. 7,00,000 for windmill to M/s Suzlon Developers (P) Ltd. for the purpose of supplying the electrical items like transformer upto DP structure, internal line upto metering. This expenditure is for transmission of electrical power generated after control room to sub-station of MSEB at site. The expenses of Rs. 7,00,000 is therefore for electrical item of general nature and will not qualify for depreciation @ 100 per cent." 3. Though he has also made a disallowance in respect of MEDA payment of Rs. 12,15,000, however, the first appellate authority has held the same as a revenue exp....
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....l road development : The AO has considered the labour cost for internal road development as building and accordingly the depreciation has been allowed as against the claim of the appellant that the same should be considered as windmill. It is the contention of the appellant that but for these roads, the erection and operation of the windmill would not have been possible. In my opinion, the stand taken by the appellant is not correct. The intention of the legislature is allow higher depreciation on the windmill and on the devices which run on windmill and not to all the incidental facilities. The internal road at the site is a facility which helps the appellant but does not mean that the facility becomes a component of the windmill. The action taken by the AO is upheld. (4) Transformer upto DP structure : It is the case of the appellant that the transformer is an integral part of the windmill. The appellant has submitted a sketch of the windmill and in the basic sketch the electrical transformer finds place and hence as per the appellant the same should be considered as component of the windmill. The AO has noted that the expenditure of Rs. 7 lakhs has been incurred on the acquisit....
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....o be an integral part of its generating system, so held as a plant entitled to investment allowance. His next citation was CIT vs. Delhi Airport Service (2001) 170 CTR (Del) 534: (2002) 255 ITR 91(Del) wherein the air conditioner fixed in the bus was held as an integral part of the bus therefore the depreciation on air conditioner was allowed at the rate applicable to the bus and not at the rate applicable to the air conditioning plant. An another decision of the respected co-ordinate Calcutta Bench, in the case of ITO vs. Samiran Majumdar (2006) 101 TTJ (Kol) 501: (2006) 280 ITR 74(Kol)(AT), has also been cited wherein the attachment with the computer i.e. printer and scanner were held as an integral part of the computer system. Hence entitled for higher rate of depreciation, he concluded. 6. On the other hand from the side of the Revenue, learned Departmental Representative Shri D.S. Kothari appeared and supported the orders of the Revenue authorities. He has argued that the site development expenses were for the purpose of clearing of the land to be used for erection of windmill. There was a construction of control room which was a civil construction to give protection to elect....
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....sub-cl. (xiii) remarked as "Renewal energy devices being renewal energy windmills of any special design devices which run on windmills and the depreciation rate prescribed at 100 per cent. As far as this appeal is concerned there is no dispute upto this stage of claim of depreciation on the cost of windmill as the depreciation at the rate of 100 per cent was allowed by the AO. The question before us is in respect of allied construction whether also entitled for 100 per cent or not. 8. Before we proceed to deal with the issue in hand, we may like to quote an observation of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd. vs. ITO (2000) 162 CTR (SC) 310: (2000) 245 ITR 538(SC) with the approval "A statute cannot always be construed with the dictionary in one hand and the statute in the other. Regard must also be had to the scheme, context and to the legislative history of the provision". 9. We may also like to mention that in the landmark decision of CIT vs. Anand Theatres (2000) 160 CTR (SC) 492: (2000) 244 ITR 192(SC), the Hon'ble Supreme Court has opined that there is a well established distinction in general terms, between the premises in which the busine....
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....ich is usually more durable than machinery or plant. The Court has finally held as under : "The fact that the building in which a business is carried on is, by its construction particularly well-suited to the business, or indeed was specially built for that business, does not make it plant. Its suitability is simply the reason why the business is carried on there. But it remains the place in which the business is carried on and is not something with which the business carried on, except in some rare cases where it plays an essential part in the operations which take place. Hotel premises are not considered to be an apparatus or tool for running the hotel business but are merely a shelter or home or setting in which business is carried on. The same would be the position with regard to a theatre in which cinema business is carried out. Therefore, even the functional test is not satisfied." 12. So the emphasis for granting higher rate of depreciation as far as civil construction work is concerned, the necessity is to examine the functional test of the said structure. A categorical evidence has to be placed that the structure is not a building but it is an integral part of plant and ....
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....could not have been run without such civil construction. Their usage and purpose is functionally independent of each other. 14. The next decision which was cited is Karnataka Power Corporation (supra). However, in this case the Hon'ble Supreme Court has given a clear observation that the question whether a building can be treated as a plant, basically is a question of fact and where it is found as fact that a building has been so planned and constructed as to serve the assessee special technical requirements, it will qualify to be treated as a plant for the purpose of investment allowance. Since in that case there was a finding by the fact-finding authority that the assessee's generating station building was so constructed as to be an integral part of its generating system, therefore, it was held as "plant". Therefore, in each case such type of question is basically a question of facts and where it was factually recorded that the building is so planned and constructed to serve a special technical requirement, then only can be treated as a plant. This is a point of differentiation in the present appeal because no such fact has been brought on record by the assessee that the....
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....different head by prescribing different rates of depreciations. The scientific reason is often discussed as the period of diminution for tangible assets. If the period of diminution or wear-tear is very fast than higher rate of depreciation is granted. Naturally the speed with which a machinery gets discarded due to wear and tear, the buildings do not get wear and tear so fast. On this basis, as well, we cannot hold that building of control room, internal roads etc. being civil construction work in nature are not at par with the "windmill" as far as the period of diminution is concerned. Moreover sometimes to promote a particular activity the statute provides certain incentives in the shape of higher depreciation. We have to keep in mind such an intention of the legislature as well. However no such intention has ever been expressed in the legislature to provide higher rate of depreciation in respect of structure surrounding the windmill. Rather the Appendix and the depreciation schedule has categorically worded that "windmills and any specially designed devices which run on wind mills" are qualified for 100 per cent rate of depreciation. Since the civil work of control room, the si....