- (1.) THIS is the appeal of the department for the assessment year 2008 -09, which was admitted on the following substantial questions of law: - - "1. Whether the Hon'ble ITAT was legally correct in holding that all these components were renewable energy devices being part of the wind mill and specially designed devices and the assessee was entitled for higher depreciation on all the above items ignoring the facts that these components are installed at the end of the generator and such do not help in power generation by windmill. 2. Whether the Hon'ble ITAT was legally correct in holding that the assessee has sufficient funds available interest free to cover up the loans and advances and advances have been given to these family concerns out of the sale of land ignoring the facts that the money received from sale proceeds of land does not make the funds surplus till the liability in the form of term loan and unsecured loans, sundry creditors etc., are there. 3. Whether the Hon'ble ITAT was legally correct in holding that the addition made on the issue is estimated and ad hoc and cannot be sustained in law ignoring the provisions of section 14A, that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. 4. Whether the Hon'ble ITAT was legally correct in holding that the assessee genuinely incurred expenses on earth filing and other miscellaneous expenses for the purpose of business and they are allowable deductions ignoring the facts that the Agra development authority stated that the land was plain at the time of handing over the possession of the land."
(2.) HEARD Sri Shambhu Chopra, the learned counsel for the appellant and Sri Rahul Agarwal, the learned counsel for the assessee.
(3.) IT is an admitted position that the assessee is the owner of the windmill project and the same is being used for the purpose of business. The material placed before the authorities not only indicated that the assessee was the owner of the project but was also a producer of power, which was being generated and sold to the government company. The Assessing Officer on examination of the invoices and functions of the windmill project noticed that microprocessor, hub etc., are the main power of windmill and, therefore, granted depreciation on these items at the rate of 80% and accepted the claim of the assessee. However, the claim of the assessee for claiming depreciation on civil work, copper wound transformers, electric items and electric lines were not allowed in favour of the assessee. The appeal of the assessee was also rejected. The Tribunal allowed the claim of the depreciation on these products holding that the electrical items and other components are part and parcel of the renewal energy devices. The Tribunal held that if the Assessing Officer can allow depreciation on the components, which are installed at the top of the tower designed especially for the windmill, there was no reason why the components installed at the lower end of the tower should not be considered as an essential part of the renewal energy device. The Tribunal further found that these items are essential and forms an integral part of the windmill project and that without these components, the windmill could not run and, therefore, cannot be separated from the windmill. The Tribunal, accordingly, set aside the orders of the authorities below and directed the Assessing Officer to grant depreciation on these components at the rate of 80%. The department, being aggrieved, has filed the present appeal. In Commissioner of Income Tax, Ahmedabad III v. Sparry Engineering and Electronics Pvt. Ltd., the Gujrat High Court held that: - - "We are of the opinion that the approach of both the authorities is perfectly justified. Windmill would require a scientifically designed machinery in order to harness the wind energy to the maximum potential. Such device has to be fitted and mounted on a civil construction, equipped with the electric fittings in order to transmit the electricity so generated. Such civil structure and electric fittings, therefore, it can be well imagined, would be highly specialized. Thus, such civil construction and electric fitting would have no use other than for the purpose of functioning of the windmill. On the other hand, it can be easily imagined that windmill cannot function without appropriate installation and electrification. In other words, the installation of windmill and the civil structure and the electric fittings are so closely interconnected and linked as to form the common plan. As already noted, the legislature has provided for higher rate of depreciation of 80 per cent on renewable energy devices including windmill and any specially designed devise, which runs on windmill and cannot be separated from the same. The assessee's claim for higher depreciation on such investment was, therefore, rightly allowed." ;