HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 319 / 2017 Principal Commissioner of Income Tax, Jaipur-2, Jaipur ----Appellant Versus M/s. Sankalp International, F-944, Road No. 14, V.K.I. Area, Jaipur ----Respondent For Appellant(s) : Mr. Prateek Kedawat for Mr. R.B. Mathur HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 06/12/2017 1. By way of this appeal, appellant has assailed judgment and order of tribunal whereby tribunal has allowed appeal of assessee and dismissed appeal of department. 2. Counsel for department has framed following substantial question of law:- i) Whether in facts and circumstances of case ITAT was justified in law in deleting disallowance of depreciation of Rs.17200000/- on windmill at Village Nu despite windmill having been installed only and not having started actual power generation. ii) Whether in facts and circumstances of case ITAT was justified in law in confirming order of CIT(A) in respect disallowance of depreciation of Rs.13955850/- on windmill at Village Akal. iii) Whether depreciation is allowable only when windmill actually starts (2 of 6) [ITA-319/2017] commercial power generation rather than when it is only ready for power generation. iv) Whether in facts and circumstances of case ITAT was justified in law in allowing depreciation when finding of Assessing Officer was that assets were not been put to use during year. 3. facts of case are that during course of assessment proceedings, it was noticed that assessee had installed windmills but TDS has not been deducted by assessee as required under provision of IT Act. It was also noticed that during course of proceeding u/s. 201 of Act ITO had raised liability in case of assessee on account of non deduction of TDS u/s. 194C treating it as composite contract on supply windmill. Total cost of windmills, which were supplied installed, operated and maintained by Suzlon Energy Ltd and Enercon India, was amounting to Rs. 53450150/- thereon no TDS had been deducted by assessee. Assessing Officer treated that contract made was not only for sale. nature of work was to supply, labour, liasioning, consultancy, acquisition of land, making arrangement of sale of power erection and commissioning, operation and maintenance. 4. We have heard Mr. Mathur. 5. Counsel for department Mr. Mathur has taken us to order of AO as well as CIT(A) and Tribunal. 6. He has relied upon decision of Bombay High Court in B. Malani and Co. vs. Commissioner of Income Tax (1995) 214 ITR 192 wherein it has been held as under:- (3 of 6) [ITA-319/2017] Having regard to object of depreciation allowance, expression "owned by assessee and used for purposes of business" and language used in clause (vi), it seems to us that unless machinery is actually put to use for purposes of business of assessee, depreciation allowance is not to be granted. This view is fortified by decision of Gujarat High Court in case of CIT v. Suhrid Geigy Ltd. [1982] 133 ITR 884. Inviting our attention to following words of clause (vi) : "in respect of previous year in which ship or aircraft is acquired or machinery or plant is installed, or if ship, aircraft, machinery or plant is first put to use in immediately succeeding previous year, then, in respect of that previous year," In this context our attention was invited to some decisions. CIT v. Viswanath Bhaskar Sathe[1937] 5 ITR 621. This is Bombay High Court decision taking view that word "use" in section 10(2)(vi) of Indian Income-tax Act, 1922, should be understood in wide sense so as to embrace passive as well as active user. In subsequent decision, Bombay High Court in Whittle Anderson Ltd. v. CIT [1971] 79 ITR 613, following above decision, has given same meaning to word "user" as found in second proviso to section 10(2)(vii) of Indian Income-tax Act, 1922. bare perusal of those provisions will indicate that object, words and context of section 10(2) are not similar to object, words and context of section 32 of Income-tax Act. case of CIT v. Vayithri Plantations Ltd. [1981] 128 ITR 675 (Mad) pertains to development rebate under section 33 of 1961 Act. object of this provision and that of section 32 are not similar and hence ratio of that decision also does not apply to this case. 7. On going through, order of CIT(A) wherein it has been observed as under:- 3.5 In this case, both windmills at Village- Akal and Nu have been commissioned on 31.03.2010. As regards, windmill at (4 of 6) [ITA-319/2017] Village-Nu, it is seen that this windmill has generated only 5.2 units of electricity on 31.03.2010 and thereafter, no electricity has been generated in month of April, 2010. Thereafter, in month of May, 2010; 78089 units were generated, in month of June, 2010; 73,950 units were generated and so on. Since, no generation of electricity has taken place in April, 2010 and only 5.2 units have been sporadically generated on 31.03.2010, it does not appear to me that 5.2 units of electricity were generated during course of successful trial run (on 31.03.2010). From facts of electricity generated by this windmill, it appears to me that trial run was not successful on 31.03.2010 since no electricity could be generated in April 2010 and only meager amount of electricity wa possible to have been recorded on 31.03.2010. Therefore, it is held that this windmill was not ready for use on 31.03.2010, for if it were so, it would have generated electricity in month of April, 2010. In view of above discussion, it is held that this windmill at Village-Nu, was not put to use in this previous year but was only put to use in month of May, 2010. Therefore, disallowance of depreciation on this windmill for this previous year amounting to Rs.1,72,00,000/-, is directed to be added to total income. 3.6 windmill at village-Akal has generated 49 units of electricity and drawn 5 units of electricity, thereby producing net electricity of 44 units. I have perused assessment records and have seen that in case of this windmill, Superintending Engineer, Jodhpur Discom, vide letter dated 26.06.2013, has informed that this windmill has generated 44, 177 units in April 2010; 1,61,634 units in May, 2010.... 44,842 units in August, 2010, 37,085 units in September, 2010 and so on. Therefore, this reply from Superintending Engineer shows that this windmill which was commissioned on 31.03.2010 has continuously generated electricity from this date onwards. Therefore, fact that new metering arrangement was not put in place on 31.03.2010 will not alter fact that this windmill was not put to use during previous year in question. In view of above discussion, it is held that windmill at Village- Akal has been put to use in this previous year (5 of 6) [ITA-319/2017] and therefore, depreciation claimed on this windmill, amounting to Rs.1,39,55,850/- is therefore, not sustainable. 8. In appeal before tribunal, tribunal has observed as under:- 3.7.1 As regards Ground No.1 and 2 of assessee, it is noted that CIT(A) has disallowed depreciation amounting to Rs.1,72,00,000/- with regard to windmill at NU Unit by observing as under:- "3.5 In this case, both windmills at Village- Akar and NU have been commissioned on 31.03.2010. As regards windmill at village- UN, it is seen that this windmill has generated only 5.2 units of electricity on 31.03.2010 and thereafter, no electricity has been generated in month of April, 2010. Therefore in month of May, 2010; 78,089 units were generated, in month of June, 2010; 73,950 units were generated and so on. Since, no generation of electricity has taken placed in April, 2010 and only 5.2 units have been sporadically generated on 31.03.2010, it does not appear to me that 5.2 units of electricity were generated during course of successful trial run (on 31.03.2010). From facts of electriity generated by this windmill, it appears that trial was not successful on 31.03.2010 since no electricity could be generated in April 2010 and only meagre amount of electricity was possible to have been recorded on 31.03.2010. Therefore it is held that this windmill was not ready for use on 31.03.2010, for if it were so, it would have generated electricity in month of April, 2010. In view of above discussion, it is held that this windmill at Village-UN was not put to use in this previous year but was only put to use in month of May, 2010. Therefore, disallowance of depreciation on this windmill for this previous year amounting to Rs. 1,72,00,000/- is directed to be added to total income. 3.7.2 During course of hearing, ld. AR of assessee submitted certificate at Page 74 of Assessee's paper book issued by AEN, AVVNL, Jaipur for period from March (6 of 6) [ITA-319/2017] 2010 to April 2011 in which he has explicitly mentioned that commissioning of NU Unit was done by assessee on 31.03.2010 and 5.2KW electricity was generated by assessee in month of March, 2010. AEN, AVVNL vide his certificate at Page 74 of assessee's paper book has given monthwise details of generation of electricity by assessee as under:- March April May 2010 June July Aug 2010 Sept Oct Nov 2010 Dec 2010 Jan Feb March April 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 5.2 0 780089.44 73950.24 54490.8 65867.36 48250.8 63112.4 51185.68 73237.84 81712.8 72664.8 92107.6 94260.4 Kwh Hence, it is noted from certificate of AEN, AVVNL that wind mills was put to use in month of March, 2010 and it has generated electricity of 5.2 Kwh. Thus it shows that assets of thw wind mill at NU Unit was put to use by assessee for purpose of business. Hence, documents produced by assessee from AEN, AVVL and details of generation of electricity that wind mill at NU Unit was had generated power on 31.03.2010 proves that wind mill at NU unit was put to use. Thus in view of above facts and circumstances of case and case relied on by ld. AR of assessee, we are of considered view that ld. CIT(A) is not justified in confirming disallowance of depreciation of Rs.1,72,00,000/- which is directed to be deleted. Thus Ground No.1 and 2 of assessee are allowed. 9. We see no reason to interfere in this appeal. Hence, no substantial question of law arises. 10. appeal stands dismissed. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. Brijesh 75. Principal Commissioner of Income-tax, Jaipur-2, Jaipur v. Sankalp International