TaxTMI 
TaxTMI 
2020 (3) TMI 630
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.... engineering work carried out for laying foundation of solar power panels and proportionate interest thereon, as cost of solar power plant and thereby curtailing the allowable depreciation on solar power plat by Rs. 1,16,103/-. 2. The ld. CIT(A) has further erred in law and on facts in sustaining application of 3.02% rate of depreciation on expenses aggregating Rs. 30,19,569/- incurred on civil engineering work and proportionate interest thereon (supra) without assigning specific head of asset item to these expenses. 3. The ld. CIT(A) has again erred in law and on facts in upholding the Assessing Officer's action of treating the interest earned on fixed deposits during preoperative period (i.e. prior to commencement of pro....
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....e solar power plant. The ld.AR further submitted that the civil engineering works is carried out specifically for installation of the solar power plant and it has no other purpose than generation of solar power. The ld.AR thus submitted that the cost of civil engineering works would be part of the cost of installation of solar power plant and therefore, eligible for depreciation as applicable on the solar power plant and not on building as applied by the AO. In support of his contentions, the ld.AR of the assessee relied on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs K.K. Enterprises [2014] 227 Taxman (Magz) 181 (Raj.). The ld.AR of the assessee submitted that Hon'ble Jurisdictional High Court has reitera....
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.... the same at the rate as applicable on building and consequently the disallowance of Rs. 70,508/- was made by the AO. The AO has not disputed the fact that soil leveling and other civil works carried out by the assessee is not required for installation of solar power panels. Therefore, the expenditure which is incurred by the assessee in the process of installation of solar panels is for the purpose of solar power plant. Thus the cost of said work cannot be separated from the installation of solar power plant and entire cost of solar power plant is eligible for depreciation as applicable for plant and machinery. The Hon'ble Jurisdictional High Court in the case of CIT vs K.K. Enterprises (supra) while upholding the order of this Tribuna....
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....m the same. The assessees claim for higher depreciation on such investment was, therefore, rightly allowed." Accordingly in view of the facts, circumstances of the case as well as the binding precedent of Hon'ble Jurisdictional High Court the case of CIT vs K.K. Enterprises (supra), we decide the issue in favour of the assessee and thereby the addition made by the AO on account of disallowance of depreciation is deleted. 3.1 The Ground No. 3 of the assessee is regarding the addition on account of interest on Fixed Deposits during pre-commencement period as income from other sources. 3.2 The AO noted that the assessee has made the provision of interest received on FDRs and transferred the same to plant and machinery and....
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....xplained that the assessee has to provide the bank guarantee to IREDA for setting up of solar power plant. The ld.AR further submitted that for the purpose of providing bank guarantee, the assessee company has to make fixed deposits with Indian Overseas Bank. Thus the fixed deposits were made to avail the bank guarantee to be provided to IREDA for getting license of solar power plant. Therefore, the ld.AR of the assessee contended that fixed deposits are inextricably linked with setting up of solar power plant. Thus the interest earned during pre-operative period would go to reduce the cost of project. Similar contentions were raised by the assessee before the ld. CIT(A) alongwith various decisions on this point. However, the ld. CIT(A) ....
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....n which has been raised by the learned counsel for the revenue. He submitted that the Tribunal in the impugned order made an observation in paragraph 8 of the impugned order which gives an impression that if funds were obtained through raising share capital as distinct from borrowed funds, then the question of interest derived on placing those funds in a fixed deposit amounting to 'income from other sources' would not arise. Such an impression ought not to be gathered from the Tribunal's decision because the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra) had clearly stated that whether the funds are raised by issue of shares and debentures or through borrowing would not make any difference to t....