The Madras High Court held that the Assessing Officer (AO) rightly disallowed depreciation on the purchase of windmill.
The assessee, V. Sabitamani an individual filed for return of income for the assessment year under consideration admitting the total income of Rs.12,92,820. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued, after which, the assessment was completed by an order.
The assessment was reopened under Section 147 of the Act on the ground that there was an excess claim of depreciation in respect of the purchase of a windmill. After affording an opportunity to the assessee, the assessment was completed under Section 143(3) read with Section 147 of the Act by an order disallowing the depreciation to the tune of Rs.77,12,645.
The assessee filed an appeal before the CIT(A) raising several contentions and laying stress upon the valuation report submitted by the Chartered Engineer cum Approved and Registered Valuer at the time of sanction of a term loan by the Canara Bank, Gandhipuram Branch, Coimbatore for the purchase of the windmill.
The assessee contended that there is a huge market for second-hand windmills and the assessing officer failed to note the location of the windmill, the make and capacity, it had more than 15 years of balance use life and past performance of the mill in generating electricity. Thus, it was contended that owing to all these features, the assessee had purchased the windmill for a sum of Rs.2,36,00,000.
The division bench of Justice T.S.Sivagnanam and V.Bhawani Subbaroyan noted that the assessee’s vendor had claimed depreciation to the extent of Rs.3 Crores within six years and when the owner sells the windmill to the new purchaser, the new purchaser cannot get the same benefit for the enhanced value, as there is no additional wind energy capacity installed. Ultimately, the assessing officer disagreed with the assessee and disallowed the claim of depreciation to the tune of Rs.77,12,640.
Thus, the court appreciated the factual position and came to the conclusion that the order passed by the assessing officer requires no interference.
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