The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the depreciation on Solar Power Plants shall be allowed if electricity is generated for the captive use of the factory.
The assessee filed its return of income declaring a total income of Rs. 22,74,13,620/-. The case was selected for limited scrutiny through Computer Aided Scrutiny Selection (CASS) and notice under Section 143(2) of the Income Tax Act was issued and served upon the assessee.
The assessee filed its objection before Dispute Resolution Panel (DRP). In respect of the claim of additional depreciation, DRP did not accept the prayer of the assessee on the basis that the solar plant of 160 MW was installed at IMT Manesar, Gurgaon for the captive use of the office. Hence, it was not entitled to additional depreciation.
The Authorized Representative contented that the authorities below grossly erred in not allowing the additional depreciation claimed by the assessee. And the lower authorities were not justified in treating the factory premises as office premises. The authorities below failed to appreciate the fact that the Solar Power Plant was 160 Kilo Watt capacity which is put to use for in-house production at the factory.
The DRP rejected the claim on the premise that the Solar Power Plant is installed on the rooftop of the office building for captive use for office.
The Two-member bench comprising of Kul Bharat (Judicial member) and M. Balaganesh (Accountant member) held that Solar Power Plant is of very high capacity and it is stated at the bar that the office building is part of the factory and electricity so generated is used for factory only.
The issue was restored to the file of the Assessing Officer for verification. If the Assessing Officer finds that the office is part of a factory building and electricity is generated for captive use of the factory. He would allow the depreciation as per the provision of law.
Thus, the ground of the assessee’s appeal was allowed for statistical purposes.
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