Mukul Shrawat, J.M. ORDER Assessee is in appeal arising out of order of CIT(A)-I, Pune dt. 23rd Jan., 2006 and grounds are narrative, however, issue is in respect of depreciation whether to be allowed at rate of 100 per cent on components of windmill. For sake of completeness, grounds are reproduced below : "On facts and circumstances of case and in law, learned CIT(A)-I, Pune erred in : 1(a) ignoring test of functional use of asset and principle of capitalization while applying different rates of depreciation on different components of cost which bring into existence fixed asset recognized as windmill . 1(b) without prejudice to ground No 1(a) above confirming depreciation at lower rate on following components of cost incurred to bring into existence asset i.e. windmill (entitled for depreciation @ 100 per cent) : Particulars of items of capitalization Depreciation Disputed Cost Depreciation Depreciation isolated while claimed by amount of incurred (Rs.) rate (as per AO) granted (By AO) allowing appellant depreciation depreciation on windmll . (i) Cost of labour work for 75,000 10% $ 75,000 75,000 site development (Page 5 Para 3(1) of CIT(A) s order and Page 3 para 8.1(i) of assessment order) (ii) Civil work control 75,000 10% 7,500 75.000 67,500 room (Page 5 Para 3(2) of CIT(A) s order and Page 4 para 8.1(ii) of assessment order) (iii) Internal road 75,000 10% 7,500 75,000 67,500 development (Page 6 Para 3(3) of CIT(A) s order and Page 4 para 8(iii) of assessment order) (iv) Transformer 7,00,000 25% 1,75,000 7,00,000 5,25,000 upto DP structure (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 learned AO held it to be nil he allowed depreciation @ 10 per cent which error could be rectified any time by AO, appellant has considered depreciation granted as nil while contesting issue before appellate authority accordingly total and disputed amount of depreciation is calculated). 2 . Facts in brief as emerged from corresponding assessment order passed under s. 143(3) dt. 14th March, 2003 are that assessee is mainly in business of breeding of horses. In respect of issue in hand, relevant observations of AO were that during year, assessee company installed windmill at village in District Satara. investment to tune of Rs. 1,77,00,000 was incurred for setting up of windmill. AO has further noted that appellant has claimed depreciation at rate of 100 per cent on entire amount. claim of 100 per cent depreciation included assets such as electrical items, civil works etc. AO was not convinced to allow 100 per cent depreciation on such items of expenditure and proceeded to disallow claim in respect of few items, by making following observations : "(i) Site development expenses of Rs. 75,000 As per bills, it is noticed that Suzlon Developers (P) Ltd. has charged Rs. 75,000 for wind mill as labour cost for site development. This will be treated as expenses for improvement of land at site and therefore will be part of acquisition of land. Therefore, it will not be entitled to any depreciation. (ii) Cost of construction for control room and transformer Rs. 75,000 expenses of Rs 75,000 incurred by assessee for this work is civil i n nature to protect equipment from rain/wind etc. This will, therefore be treated as building only. assessee in its reply submitted that item relates to civil work for control room. In control room there are transformer and other equipments by which outside electricity is used to start functioning of windmill at same time output of energy generated from windmill and transferred to MSEB grids through this control room. Hence, it is contended that control room is critical for functioning of windmill and thus it is also plant and forms part and parcel of windmill. contention of assessee is not acceptable as control room structure is not part of windmill but part of building to protect electrical machinery etc. and not entitled for 100 per cent depreciation. (iii) Labour cost for internal road development Rs. 75.000 On going through 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 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 bill, it is seen that assessee has paid Rs. 7,00,000 for windmill to M/s Suzlon Developers (P) Ltd. for purpose of supplying 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. 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 disallowance in respect of MEDA payment of Rs. 12 ,15,000, however, first appellate authority has held same as revenue expenditure and none of party are stated to be further in appeal. AO has made computation and on that basis held that allowable depreciation on items was Rs. 5,10,000 as against claimed by assessee t Rs. 21,75,000. Rest of amount i.e. Rs. 16,65,000 was assessed in taxable income/loss of assessee. 4 . issue was carried before first appellate authority. Learned CIT(A) has considered these four items in following manner : "(1) Site development expenses : It has been pleaded by appellant that expenditure of Rs. 75,000 was incurred so as to make site proper for installation of windmill. expenditure was for facilitating erection of windmill and not to develop market value of plot as contended by appellant. In my considered opinion, expenditure on site development is not expenditure for erection of windmill. expenditure is incurred for clearing land for use. subsequent use of land for erection of windmill will not entitle appellant to claim such expenditure as cost to windmill. This expenditure gets embedded in cost of land and cost of land is not cost component of windmill. assessment order to extent of this expenditure is upheld. (2) Cost of construction of control room : It has been pleaded by appellant that in control room, transformer and other equipments have been installed and said control room thus becomes intrinsic part of windmill. I am of humble opinion that action taken by AO cannot be faulted as control room is civil construction which gives protection to electrical installations. It is something like constructing factory shed which gives protection to plant and machinery. rate of depreciation for plant and machinery and factory shed are different as prescribed in Appendix to IT Rules, 1962. construction of control room is not specialized construction nor it can be said that it is part and parcel of plant and machinery. In instant case, civil construction has given rise to ordinary room which is used as control room where electrical installations are placed for protection. There is no specific design and civil construction does nt mingle with plant and machinery. assessment order on this issue is upheld. (3) Labour cost for internal road development : AO has considered labour cost for internal road development as building and accordingly depreciation has been allowed as against claim of appellant that same should be considered as windmill. It is contention of appellant that but for these roads, erection and operation of windmill would not have been possible. In my opinion, stand taken by appellant is not correct. intention of legislature is allow higher depreciation on windmill and on devices which run on windmill and not to all incidental facilities. internal road at site is facility which helps appellant but does not mean that facility becomes component of windmill. action taken by AO is upheld. (4) Transformer upto DP structure : It is case of appellant that transformer is integral part of windmill. appellant has submitted sketch of windmill and in basic sketch electrical transformer finds place and hence as per appellant same should be considered as component of windmill. AO has noted that expenditure of Rs. 7 lakhs has been incurred on acquisition of transformer and internal line upto metering. AO held that expenditure in question is for electrical items of general nature and thus not eligible for higher depreciation of 100 per cent." 5. From side of appellant, Shri S.U. Pathak appeared and argued that as far as cost of labour work, construction of control room and expenditure on internal road, being capitalized by assessee, having identical nature of construction activity, can be argued as group, since in nature of civil construction. He has started his arguments by citing CIT vs. Herdillia Chemicals Ltd. (1993) 114 CTR (Bom) 145 : (1995) 216 ITR 742 (Bom), for preposition that expenditure incurred on development, levelling of land and construction of internal roads leading to plant and machinery to be considered as part of actual cost of plant and machinery, therefore be allowed higher depreciation. learned Authorised Representative has also mentioned that in said decision, Hon ble Bombay High Court has referred case of Challapalli Sugars Ltd. vs. CIT 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC), CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 104 CTR (SC) 243 : (1992) 196 ITR 149 (SC), CIT vs. Caltex Oil Refining (I) Ltd. (1976) 102 ITR 260 (Bom) and Addl. CIT vs. Madras Cements Ltd. 1977 CTR (Mad) 513 : (1977) 110 ITR 281 (Mad). learned Authorised Representative has mentioned that undisputed facts in said precedents were that expenditure was incurred on foundation for fixing plant and machinery which was held as forming part of cost of plant and machinery. Hon ble Court has held that assessee would be entitled to depreciation thereon. Next, he has cited CIT vs. Karnataka Power Corporation (2000) 162 CTR (SC) 249 : (2001) 247 ITR 268 (SC) for preposition that whether building can be treated as plant and in that respect observation of Hon ble Court was that where it is found as fact that building has been so p l n n e d and constructed as to serve assessee special technical requirements, it will qualify to be treated as plant for purpose of investment allowance. learned Authorised Representative has mentioned that there was finding by fact-finding authority in that appeal, that assessee s generating station building was so constructed as to be integral part of its generating system, so held as 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 air conditioner fixed in bus was held as integral ITR 91 (Del) wherein air conditioner fixed in bus was held as integral part of bus therefore depreciation on air conditioner was allowed at rate applicable to bus and not at rate applicable to air conditioning plant. another decision of respected co-ordinate Calcutta Bench, in case of ITO vs. Samiran Majumdar (2006) 101 TTJ (Kol) 501 : (2006) 280 ITR 74 (Kol)(AT), has also been cited wherein attachment with computer i.e. printer and scanner were held as integral part of computer system. Hence entitled for higher rate of depreciation, he concluded. 6. On other hand from side of Revenue, learned Departmental Representative Shri D.S. Kothari appeared and supported orders of Revenue authorities. He has argued that site development expenses were for purpose of clearing of land to be used for erection of windmill. There was construction of control room which was civil construction to give protection to electrical installation. It was not specialized construction hence could not be treated as part and parcel of machinery. Likewise, cost of labour for construction of internal road development was not in any manner related with operation of windmill, hence should not be held as device for running windmill. In support various decisions have been cited to be discussed hereinbelow : 7 . We have heard submissions of both sides at length, carefully perused order of authorities below in light of compilation filed and case laws cited. As observed by AO and also mentioned in statement of facts that appellant company has incurred capital expenditure on "windmill" cost at Rs. 1,77,00,000. windmill is eligible for depreciation as per IT Rules at rate of 100 per cent. Therefore, AO has held that as per Appendix I of IT Rules cl. (III)(3)(xiii)(l), assessee is entitled for 100 per cent depreciation towards investment made in installing windmill, accordingly depreciation was allowed. dispute was in respect of expenditure which was capitalized and incurred towards other construction and structure. argument from side of assessee was basically that those structures were integral part of windmill hence also entitled for 100 per cent depreciation. On other hand stand of Revenue was that said construction was not integrated part of windmill therefore, not entitled for higher rate of depreciation but entitled for rate of depreciation as particularly prescribed in depreciation schedule of IT Rules. 7 . 1 It was explained during course of hearing that M/s Suzlon Developers (P) Ltd. undertook process of erection, commissioning and execution of windmill. power so generated was agreed to be supplied to MSEB department. It was also explained that wind turbine generator consists of rotor consisting of blade, hub assembly, gear box, steel tower, foundation and grid assembly i.e. transformer unit for delivering power to grid network. functioning of windmill was first to generate power and thereafter transmission of electric power to MSEB. For this structure, specified rules have been provided in IT Rules and as per Appendix I as applicable for asst. yr. 2002-03 under head "Machinery and plant (iii) there is sub-cl. (xiii) remarked as "Renewal energy devices being renewal energy windmills of any special design devices which run on windmills and 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 cost of windmill as depreciation at rate of 100 per cent was allowed by AO. 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 issue in hand, we may like to quote observation of Hon ble Supreme Court in case of Indian Hotels Co. Ltd. vs. ITO (2000) 162 CTR (SC) 310 : (2000) 245 ITR 538 (SC) with approval "A statute cannot always be construed with dictionary in one hand and statute in other. Regard must also be had to scheme, context and to legislative history of provision". 9 . We may also like to mention that in landmark decision of CIT vs. Anand Theatres (2000) 160 CTR (SC) 492 : (2000) 244 ITR 192 (SC), Hon ble Supreme Court has opined that there is well established distinction in general terms, between premises in which business is carried on and plant with which business is carried on. In that decision, Hon ble Court has distinctly held that premises are not plant. For sake of clarity, we are reproducing important observation from held portion : "Dictionary meanings however helpful in understanding general sense o f words cannot control where scheme of statute or instrument considered as whole clearly conveys somewhat different shade of meaning. Words have to be so construed as to fit in with idea which emerges on consideration of entire context. meanings of words building and plant have to be gathered in context of scheme of s. 32 and it is not necessary to adopt judge-made sense, which is artificial and imprecise in application." 10. Court has also observed that characteristic of plant is it is adjunct to carrying on of business and not essential site or core of business itself. Since question before Hon ble Court in those appeals was whether building which is used as hotel or cinema theatre can be considered to be tool for running business, so that it can be termed as plant, with result depreciation could be allowed accordingly or whether it remains building wherein either hotel business or business for cinema could be conducted ? So Court has held that hotel or cinema building cannot be stated to be adjunct to carrying on of business, that is to say, something added to another, or which is in subordinate, auxiliary or dependent position. It was further observed by Hon ble Court as under : "Moreover, to differentiate between buildings for grant of additional depreciation by holding one to be plant where building is specially designed and constructed with some special features to attract customers and another where building is not so constructed, but used for same purpose, namely as hotel or theatre, would be unreasonable." 1 1 . Court has also observed that depreciation as general principle represents diminution in value of capital when applied to purpose of making profit or gain. object is to get true picture of real income of business. inference was drawn that legislature never intended to give such benefit of depreciation to building which is usually more durable than machinery or plant. Court has finally held as under : "The fact that building in which business is carried on is, by its construction particularly well-suited to business, or indeed was specially built for that business, does not make it plant. Its suitability is simply reason why business is carried on there. But it remains place in which business is carried on and is not something with which business carried on, except in some rare cases where it plays essential part in operations which take place. Hotel premises are not considered to be apparatus or tool for running hotel business but are merely shelter or home or setting in which business is carried on. same would be position with regard to theatre in which cinema business is carried out. Therefore, even functional test is not satisfied." 12 . So emphasis for granting higher rate of depreciation as far as civil construction work is concerned, necessity is to examine functional test of said structure. categorical evidence has to be placed that structure is not building but it is integral part of plant and machinery. Such evidence or finding is absent in this appeal. Even in case of CIT vs. Abad Hotels India (P) Ltd. (2001) 170 CTR (SC) 185 : (2001) 251 ITR 204 (SC), Hon ble Supreme Court has held that hotel building was not plant so assessee was held as not entitled to extra-shift depreciation allowance. In present appeal nothing is on record to establish that on touchstone of functional test control room or site development expenditure or even internal roads were so designed that they can only be used for power generation as done by wind mill and meant for no other use. There is nothing on record, such as report from qualified person to establish that site construction of control room, internal road etc. were designed in such manner to facilitate power generation and distribution of windmill. Naturally machinery does not require protection so installed in building but such building cannot be said to be part and parcel of machinery. Resultantly claims fail on functional test. 1 3 . We have examined decisions as cited by learned Authorised Representative however they are very much distinguishable. In respect of Herdillia Chemicals Ltd. (supra), company was chemical industry. For purpose of erection of plant and building, huge land admeasuring about 360 acres was taken on lease from Maharashtra Industrial Development Corporation. entire factory was stated to be constructed in said large tract of land. To protect property, which covered wide area and also to isolate from surrounding wilderness, assessee erected fencing enclosing property. T h e said decision was on basis of certain findings on facts that foundation was meant for fixing machinery hence formed part of cost of plant and for that purpose levelling of land was required so held that distinction was difficult to segregate expenditure. According to Hon ble Court, issue was covered by few decisions as cited therein, so decided in favour of assessee. distinction is that premises was very large area of land which required proper protection and factory could not be installed without such levelling of land and internal roads therein. On other hand, it is not so in present case because no such factual finding is on record that windmill could not have been run without such civil construction. Their usage and purpose is functionally independent of each other. 14. next decision which was cited is Karnataka Power Corporation (supra). However, in this case Hon ble Supreme Court has given clear observation that question whether building can be treated as plant, basically is question of fact and where it is found as fact that building has been so planned and constructed as to serve assessee special technical requirements, it will qualify to be treated as plant for purpose of investment allowance. Since in that case there was finding by fact-finding authority that assessee s generating station building was so constructed as to be integral part of its generating system, therefore, it was held as "plant". Therefore, in each case such type of question is basically question of facts and where it was factually recorded that building is so planned and constructed to serve special technical requirement, then only can be treated as plant. This is point of differentiation in present appeal because no such fact has been brought on record by assessee that windmill could not generate power without impugned civil construction work. As far as decision of Delhi without impugned civil construction work. As far as decision of Delhi Airport Services (supra) as stated by learned Authorised Representative, question involved in this precedent itself was somewhat different and facts were also distinguishable since air conditioner was installed in bus and on that basis it was held that two could not be segregated and air conditioner had become integral part of bus. distinction is that no such fact is applicable in present appeal. Almost identical is situation in case of Samiran Majumdar (supra) as cited by learned Authorised Representative since in that case as well printer and scanner were undisputably part of computer system therefore held as entitled for higher rate of depreciation as it was applicable to computer. 15. It is accepted principle of interpretation that it is not always safe way to construe statute by dividing it by process of etymological dissection and after separating words from context to give each word some particular definition given by lexicographers and then to reconstruct instrument upon basis of those interpretation. correct method is that when particular meaning is attached to word as is given in instrument is to be gathered from context, nature of subject-matter, purpose or intention of author and effect of giving to them one or more other permissible meaning on object to be achieved. Applying this test, we have to gather meaning of words such as plant and machinery . For interpreting scheme of depreciation as prescribed under s. 32 it is not necessary that we should adopt judge-sense meaning, which is sometimes artificial and imprecise in application by giving meaning altogether different from statutory provisions. scheme of s. 32 unequivocally leads to conclusion that on one hand "plant" and on other hand "machinery" are to be treated as separate for purpose of allowance of depreciation. Moreover, how one can ignore block of assets as prescribed in table of rates for purpose of allowance of depreciation in Appendix I of IT Rules. As per this Appendix Part contains building in separate head, furniture and fittings in another head and machinery and plant in different head by prescribing different rates of depreciations. scientific reason is often discussed as period of diminution for tangible assets. If period of diminution or wear-tear is very fast than higher rate of depreciation is granted. Naturally speed with which machinery gets discarded due to wear and tear, 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 "windmill" as far as period of diminution is concerned. Moreover sometimes to promote particular activity statute provides certain incentives in shape of higher depreciation. We have to keep in mind such intention of legislature as well. However no such intention has ever been expressed in legislature to provide higher rate of depreciation in respect of structure surrounding windmill. Rather Appendix and 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 civil work of control room, site development and internal road development are not specially designed devices hence in our considered opinion, as per discussion made herein above, are not entitled for 100 per cent depreciation. claim in this regard is disallowed. 16. As far as question of depreciation in respect of "transformer upto DP structure" is concerned, appellant had paid sum of Rs. 7,00,000 for purpose of supplying of electrical items like transformer upto DP structure, internal line upto metering. said payment was made to Suzlon Developers (P) Ltd. This gadget is for transmission of electrical power generated upto sub- station of MSEB at site. In our humble opinion electrical energy so produced by wind mill is waste if it is not transmitted to MSEB sub-station. function of such unit is that electricity so generated is required to be transferred and transmitted to cable line upto sub-station, where actual units so generated are stored and metered. Since this is function of transformer upto DP structure, hence ought to be held as integral part of windmill. other reasons such as period during which machinery gets depreciated, as discussed hereinabove, does also apply in case of this machinery. Since we have held so, therefore, appellant is consequently entitled for higher rate of depreciation as prescribed in IT Rules. 17. In result, as per grounds of appeal claim of depreciation in respect of items (i) to (iii) are rejected and claim of depreciation in respect of item No. (iv) is allowed. Resultantly, this appeal is partly allowed. *** POONAWALA FINVEST & AGRO (P) LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX