SENTHIL ENERGY PVT LTD,COIMBATORE vs. ITO, CORP WARD -4, COIMBATORE

PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against the

order of the learned CIT(A)-1, Coimbatore dated 21.01.2019

and pertains to assessment year 2015-16.

2 ITA No.581/Chny/2019 b) The Hon’bIe Commissioner of Income tax (Appeals) failed to appreciate that the term ‘instaIled’ is different from acquired and installed and the condition prescribed in New Appendix is only ‘installed”.

In view of the above grounds and such other additional grounds as may be adduced at time of hearing, it is prayed before the Hon’ble Income Tax Appellate Tribunal to,

a) reverse the order of Hon’ble CIT(A) denying the benefit of higher depreciation on windmill installed prior to 0I.04.2012. b) give directions to the learned Assessing Officer to allow the depreciation on such windmill at the rate of 80%, and; c) pass such other consequential order as the Hon’bIe Income tax Appellate Tribunal may deem fit to render justice.”

engaged in the business of manufacturing power and energy

filed its return of income for the assessment year 2015-16 on 28.09.2015 declaring loss of `4,53,11,195/- under the normal provisions and book profit of `1,56,45,624/- u/s.115JB of the

Income Tax Act, 1961. During the year under consideration,

the assessee has purchased used windmills installed on or

before 31.03.2012 and claimed depreciation @ 80%, as per

pre-amended Appendix-I. During the course of assessment

proceedings, the Assessing Officer was of the opinion that

depreciation on windmills purchased and installed on or after

3 ITA No.581/Chny/2019

01.04.2012 are eligible for depreciation @ 15% but not 80% as

claimed by the assessee, accordingly, rejected excess depreciation claimed amounting to ` 4,41,26,837/- and added

back to the total income. The relevant findings of the Assessing

Officer are asunder:-

“4. Excess depreciation claimed on wind mills:-

On verification of the details, it is observed that depreciation on used wind mills purchased during the F.Y.2013-14 has been claimed at 80% . However, in view of Income-tax (Fourth Amendment) Rules, 2012 - Amendment in the Table of the New Appendix-I dated 30/03/2012, depreciation on wind mills installed after 01/04/2012 are eligible to depreciation @ 15% only. The assessee’s contention is that the second hand wind mill purchased during F.Y.2013-14, has been already installed and as such its claim of 80% is in order.

4.1 However, the intention of the legislation is that wind mills purchased after 31/03/2012 are eligible for 15% depreciation only. It does not distinguish between new purchase vis-à-vis second hand purchase i.e pre installed wind mills)

4.2 The assessee contended that the asset during the relevant period does not fall within the 15% Block of Plant & Machinery as it has purchased pre installed WTGs during F.Y.2013-14. However as per the provisions of the Act, there cannot be 80% block in respect of wind mills purchased during F.Y.2013-14, except those already existing in the books. As per the amendment in this regard, no fresh 80% block can he created just because the wind mills are ‘second-hand and pre-installed. So for the assessee, during the material year F.Y,2013-14, a fresh block @ 15% comes into existence, As such in the instant case, it is a new. block coming into existence.

4.3. Further the assessee’s contention is that only newly installed WTGs are covered by the notification is not tenable

ITA No.581/Chny/2019

because the intent of the legislature vide the said Notification is amply clear, The subsequent reversal of depreciation to 80% vide amendment wef. 01/04/2014 is of no consequence to this year under consideration because the relevant notifications are amendatory not clarificatory.

4.4 Also the assessee’s interpretation that second hand purchase (i.e) pre installed with mills are not covered by the Notification is not in consonance with the rules regarding interpretation of statues. By this interpretation, discrimination will be created between class of assesses, which is not the intention of any legislative enactment. i.e. assessees who have purchased pre-installed wind mills during the material year, will be eligible for 80% and those who purchase new Wind mills are eligible for lesser rate @ 15%. In fact, the second hand windmills are purchased at enhanced cost, though W.D.V. for the previous owner is far less figure due to accelerated depreciation. So, giving depreciation on such wind mills © 8o% because it is pre-installed is not in consonance with the legislative intent and there will he discrimination between same class of assessees’ i.e. assessees who have newly purchased and installed WTGs and assesses who have purchased second hand WTGs(not requiring installation as it is pre installed), In fact the legislative purpose will not be served by the latter category who continue to benefit from accelerated depreciation on those assets whose WDVs before the sale would be much less if depreciation is given at 80% even after the notification.

5.1 No exception can be taken to the proposition that fiscal statutes should be interpreted strictly and in cases of doubt, the benefit of construction must be given in favour of the assessee.

5 ITA No.581/Chny/2019

However this rule applies only to charging sections and not to machinery sections or to provisions which give relief to the tax payer. In Gursahai Saigal v. CIT [1963] 48 ITR (SC) , it has been held that the rule of strict construction applies primarily to charging provision in a taxing statute and has no application to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection and such machinery provisions have to be construed by the ordinary rules of construction. One important consideration in construing a machinery section is that it should be so construed as to effectuate the liability imposed by the charging section and to make the machinery workable.

5.3 In light of the above, depreciation at enhanced rate @80% on wind mills because it is ‘Pre-installed is not in consonance with the legislative intent vis-à-vis amendatory notification. Accordingly for this A.Y.2o15-16, the WDV. as on 31.03.2015 is reworked by adopting 15% depreciation for windmills.

6 ITA No.581/Chny/2019 7. The assessee has claimed depreciation at 80% as against 15% which is in the nature of furnishing inaccurate particulars of income, in view of the notification which clearly states that the WTGs during the material year are eligible for depreciation at 15%. As such penalty proceeding u/s.271(1)(c) is initiated separately.”

preferred an appeal before learned CIT(A). Before the learned

CIT(A), the assessee has submitted that windmill purchased

and installed on or before 31.3.2012 are eligible for 80% depreciation as per Notification No.15/2012 dated 30th March,

2012, where the CBDT has clarified that windmills and any

specially designed devices which run on windmill installed on

or before 31.3.2012 are eligible for 80% depreciation. The

learned CIT(A), after considering relevant submissions of the

assessee rejected the claim by holding that one of the basic

conditions for claim of depreciation on any asset is its

ownership. Since the assessee became owner of the asset only

after 31.3.2012, whether or not the asset is a new asset or used

asset, depreciation should be provided as per rate applicable

from the date the assessee became owner of the asset. Since

the assessee purchased asset on or after 01.04.2012, as per

7 ITA No.581/Chny/2019 amended provisions windmills are entitled for depreciation @

15%. Therefore, conclusion drawn by the Assessing Officer that

the assessee has made wrong claim of depreciation is correct

and her decision to rework the same adopting 15%

depreciation on windmill is in accordance with law and

accordingly, rejected the claim of the assessee and confirmed

disallowance of depreciation. Aggrieved by the learned CIT(A)

order, the assessee is in appeal before us.

learned CIT(A) has erred in concluding that second hand

windmill installed prior to 01.04.2012, but purchased by the

assessee during the financial year 2013-14 are eligible for only

15% depreciation without appreciating the fact that the word

used in Appendix-I is installation of windmills, but not

acquisition and installation. The AR further submitted that the

learned CIT(A) failed to appreciate that law does not

distinguish between first and subsequent owner for allowing

depreciation and what is relevant is whether asset is installed

on or before the specified date. If an asset is installed on or

before the specified date, then rate applicable for period when

8 ITA No.581/Chny/2019 asset was installed should be allowed irrespective of the fact

that asset is transferred to another person. In this case, the

assessee has purchased windmills which were purchased and

installed before 31.3.2012 hence, eligible for 80% depreciation

which is supported by notification issued by CBDT vide

Notification No.15/2012 dated 30.03.2012.

of the learned CIT(A), submitted that as per amended

provisions of Appendix-I Part ‘A’, rate of depreciation has been

changed from 80% to 15% on windmills acquired and installed

after 01.04.2012. Since the assessee has acquired windmills in

the financial year 2013-14, rate of depreciation applicable to

that period was 15% and hence, there is no error in the

findings of the Assessing Officer to restrict the depreciation to

15% instead of 80% claimed by the assessee.

available on record and gone through the orders of authorities

below. The rates for claiming depreciation under the Income

Tax Act for various block of assets is specified under Rule 5 of

Income Tax Rules,1962, read with New Appendix-I of the

9 ITA No.581/Chny/2019 Rules. As per said New Appendix-I, rate of depreciation for

windmill are specifically given in Part A, as per which windmills

and any specially designed devices which run on windmills are

eligible for depreciation @ 80%. This was further clarified by

CBDT vide its Notification No.15/2012 dated 30.03.2012, as

per which, windmills installed on or before 31.03.2012 are

eligible for 80% depreciation. The Assessing Officer has

disallowed depreciation claimed by the assessee on the

ground that windmills purchased and installed on or after

01.04.2012 are eligible for 15% depreciation, as per amended

Appendix-I of Rule 5 of Income Tax Rules,1962. According to

her, ownership is essential for claiming depreciation on any

asset and hence, if the assessee became owner after

01.04.2012, irrespective of the fact that any asset is installed on

or before 31.03.2012, depreciation shall be applicable as per

amended provisions of the Act. Therefore, she opined that rate

of depreciation applied by the assessee on windmills is

incorrect and hence, disallowed excess depreciation over and

above 15% claimed on windmills.

10 ITA No.581/Chny/2019 8. We have given our thoughtful consideration to the

reasons given by the Assessing Officer for disallowance of

depreciation over and above 15% on windmills and find no

merits, because the Act specifically states that windmills

installed on or before 31.03.2012 are eligible for depreciation

@ 80%. The said rule does not give emphasize for

purchase/acquisition of windmills, but only talks about

installation. When the Act itself talks about installation of

windmill, then acquisition of such asset is not material to

decide rate of depreciation. In this case, there is no dispute

with regard to the fact that windmills were installed on or before

31.03.2012. It is an admitted fact that the assessee has

purchased used windmills on ‘as is where is’ basis for the

financial year 2013-14. Therefore, once the windmills are

installed before 31.03.2012, then rate of depreciation is

applicable as per pre-amended Appendix-I of Rule 5 of Income

Tax Rules,1962. Further, as per said rule, rate of depreciation

on windmills which are acquired and installed on or before

31.03.2012 is at 80%. Therefore, we are of the considered

view that the Assessing Officer as well as learned CIT(A) erred

in coming to the conclusion that assessee became owner of

11 ITA No.581/Chny/2019 windmills only after 31.03.2012 and entitled for depreciation as

per amended rate, when the law is very clear about installation

of windmills and acquisition of asset is immaterial to claim

depreciation. In this case, since the windmill was acquired and

installed on or before 31.03.2012 and assessee has became

second owner and has not dismantled from one place and re-

erected in another place, the interpretation given by the

Assessing Officer and learned CIT(A) are contrary to the

provisions of Rule 5 of Income Tax Rules,1962. Hence, we set

aside the order of the learned CIT(A) and direct the Assessing

Officer to allow depreciation @ 80% on windmills as claimed by

the assessee.

Order pronounced in the open court on 28th April, 2021

Sd/- Sd/- (महावीर �संह) (जी. मंजुनाथ) (Mahavir Singh) (G. Manjunatha ) उपा�य�/ Vice-President लेखासद#य / Accountant Member चे%नई/Chennai, &दनांक/Dated 28th April, 2021 DS आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. *वभागीय ��त�न0ध/DR 6. गाड� फाईल/GF.