Business Loss on Wind Turbine Generators Capital in Nature: ITAT Upholds Disallowance of ₹10.42 Crore u/s 37 [Read Order]
The ITAT upheld the disallowance of ₹10.42 crore claimed by Gujarat Energy Development Agency on account of impairment of assets and abnormal loss. The assessee remains entitled to adjust the written-down value in the block of assets for depreciation purposes.
Wind - Turbine - Generators - Taxscan
Wind - Turbine - Generators - Taxscan
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) upheld the disallowance of ₹10.42 crore claimed by Gujarat Energy Development Agency on account of impairment of assets and abnormal loss. The tribunal held that these losses pertained to capital assets and, therefore, could not be claimed as revenue expenditure under Section 37.
The Gujarat Energy Development Agency (GEDA) had claimed deductions of ₹9.35 crore for impairment of Wind Turbine Generators and ₹1.07 crore for abnormal loss on spares in the Assessment Year 2017-18.
The losses arose from decommissioned and damaged wind turbines set up in the early 1990s with Ministry of New & Renewable Energy (MNRE) assistance, which became non-functional following a cyclone in June 1998.
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The assessee argued that these were genuine business losses, debited to the Income & Expenditure account to compute commercial income correctly. It further contended that general provisions for the allowability of expenses applicable to business income should not apply where income is computed under Sections 11 and 12 for charitable purposes.
The Revenue argued that the amounts were capital in nature, as depreciation had already been claimed on these assets during their operational period. Post-damage, the assets were written off as scrap, and the losses should have been adjusted in the “block of assets” rather than claimed as revenue expenditure under Section 37.
The two-member bench of Sanjay Garg(Judicial Member) and Narendra Prasad Sinha (Accountant Member) examined the books, auditor notes, and statutory certificates. It concluded that the claimed amounts represented the written-down value of capital assets and related spares. As such, the disallowance by the Assessing Officer was upheld.
The tribunal clarified that while the assessee could adjust the written-down value in the block of assets to claim appropriate depreciation going forward, the current claim as a revenue deduction was not permissible under the Income Tax Act.
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