TaxTMI 
TaxTMI 
2018 (5) TMI 430
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....eration, was engaged in the business of generating power and was also having income from capital market operations. The return of income was filed declaring a loss of Rs. 11,90,356/-. Subsequently, the case was selected for scrutiny assessment and during the course of assessment proceedings the Assessing Officer observed that during the year under consideration the assessee had made addition under fixed assets on account of purchase of two wind turbines amounting to Rs. 71,17,569/-. The AO also noticed that the assessee had claimed depreciation amounting to Rs. 28,47,027/- on these two wind turbines. The assessee was required to file necessary details with respect to the purchase of the two wind turbines. After perusal of the details and do....
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....g officer. Now, the assessee is before the Income Tax Appellate Tribunal and has challenged the action of the Ld. CIT (Appeals) in confirming the disallowance in respect of depreciation on wind turbines as well as disallowance under section 14A of the Act. 3. At the outset, Ld. authorised representative submitted that, on instructions of the client, ground No. 3 challenging confirmation of disallowance under section 14A was not being pressed due to smallness of amount. Accordingly, this ground is dismissed as not pressed. 3.1 The Ld. authorised representative submitted that the Ld. first appellate authority had erred on facts as well as in law in confirming the action of the assessing officer in disallowing the impugned amount of rupe....
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....n to copy of resolution passed by M/s JPT Securities Ltd in respect of sale of machinery as well as letter of possession dated 26/03/2008 through which the possession of the wind turbines was handed over to the assessee. Our attention was also drawn to the copy of Annual Report of M/s JPT Securities Ltd wherein the sale of machinery was duly reflected as deduction in the schedule of fixed assets. 3.3 The Ld. authorised representative further submitted that there was no requirement under section 32 of the Act that full consideration should have been paid for the purpose of claiming depreciation on an asset. The Ld. authorised representative argued that payment of the asset can be deferred or the asset can be purchased on installments but ....
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....rbines valued from M/s United Engineers which was on record. It was also submitted that the assessee had sold these wind turbines at a consideration which was more than the purchase price in the subsequent years to unrelated parties. Ld. authorised representative submitted that the low value of the wind turbines in the books of the seller was due to the seller claiming 80% depreciation on them in the very first year of purchase but this did not mean that the real value of the wind turbines had gone down because the useful life of wind turbines is usually about 25 years. It was also submitted that even the electricity boards enter into agreements for 20 years for generation of power. It was prayed that the disallowance of depreciation should....
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....ation and, therefore, the assessee company was not entitled to claim of depreciation. However, this view of the Department is legally unsustainable because there is no such requirement under section 32 of the Act that full consideration should have been paid for the purpose of claiming depreciation. It is settled law that payment of an asset can be deferred but the assessee will be entitled to claim depreciation. The Hon'ble Delhi High Court in the case of CIT versus Bhushan Steel and Strips Ltd reported in 390 ITR 485 (Delhi) has laid down the ratio that the intention of the legislature in enacting section 32 of the Act would be best fulfilled by allowing depreciation in respect of depreciation to the person in whom the dominion vests for ....
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....dings of the lower authorities that the transaction of purchase of wind turbines was a sham transaction as the receipts in the hands of the seller were not questioned by the Department and were accepted as such. It is further seen that depreciation on wind turbines has been allowed by the assessing officer in subsequent assessment years and, therefore, it cannot be held that the Department had treated the transactions as an altogether sham transaction. 5.3 The Department has also objected to the valuation of the wind turbines on the ground that the written down value in the books of the seller was much-much less than the value at which they were sold to the assessee company. However, this objection of the Department is met by the certifi....