ACIT CENTRAL CIRCLE-18, NEW DELHI V. SOLITAIRE ENERGY PVT LTD, NEW DELHI

ITA 1296/DEL/2020

AI Insights

The case involves Solitaire Energy Pvt. Ltd., which appealed against the order of the CIT(A) that had allowed their claim for depreciation at 80% on certain assets used in solar power generation. The Assessing Officer had initially allowed depreciation at 80% only on assets worth Rs.1.63 crores, out of a total of Rs.218.61 crores, arguing that only specific items qualified as part of the 'Solar Power Generating Systems'. The CIT(A) disagreed with this narrow interpretation, leading to the Revenue's appeal to the Tribunal. The Tribunal found that the Assessing Officer had not adequately examined all details and required a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 112103 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Other Referred Cases: Corporation of Calcutta v. Chairman Cossipure and Chitpore Municipality, Asstt. CIT v Eskay Agencies
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: SANJEEV KAPOOR
• Keywords: Opportunity of being heard; Depreciation; Additional depreciation; Capital expenditure
• Section: 143(3); 142(1); 143(2); 13; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘G’: NEW DELHI BEFORE SHRI YOGESH KUMAR US, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.1296/Del/2020 [Assessment Year: 2012-13 ACIT, Central Circle-18, E-2, ARA Centre, Room No.269B, E-2, Jhandewalan Extension, New Delhi-110055 Vs Solitaire Energy Pvt. Ltd. 616A, Nehru Place, New Delhi-110019 PAN-AAMCS8886P Revenue Assessee Assessee by Shri Sanjeev Kapoor, Adv. Revenue by Shri Sahil Kumar Bansal, Sr. DR Date of Hearing 25.02.2025 Date of Pronouncement 16.04.2025 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the Revenue is directed against the order of Ld. Commissioner of Income Tax(Appeals)-15, New Delhi dated 17.02.2020, arising out of assessment order passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to ‘the Act’), dated 16.03.2015 for Assessment Year 2012-13. 2. Ground of appeal raised by the Revenue are as under:- “1. The Ld.CIT(A)-15, New Delhi has erred in law and on fact in deleting the addition by saying that there is a mistake, arithmetic or inadvertent, committed by the assessing officer in allowing 80% depreciation only in respect of assets worth Rs. 1.63 crores without giving any opportunity to the assessing officer to rectify/correct the same(figures). 2. The Ld.CIT(A)-15, New Delhi has erred in law & on facts in directing the assessing officer to allow depreciation at the rate of 2 ITA No.1296/Del/2020 80% on assets such as steel structure, street light, fans, fire fighting equipments etc., of which productive life is very high and without discussing on merit. 3. The Ld. CTI(A)-15, New Delhi has erred in law & on facts in directing the assessing officer to allow depreciation at the rate of 80% on assets without appreciating the fact that while calculating the depreciation on building, cost of land on which building is situated is not used to be included because land does not suffer any depreciation due to wear & tear or its uses. 4. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs 70.51,63.674/- made by the A.O. without appreciating the fact that the assessee has capitalized expenses such as custom duty, stamp duty, inverter, administrative and other expenses, consultancy charges, fee for term loan, travelling expenses etc., and claimed depreciation @ 80 %as part of Solar Power Generating Systems. 3. Brief facts of the case:- The assessee company is engaged in the business of power generation and infrastructure development and supplies power to Gujarat Urja Vikas Nigam Ltd. The assessee filed its return of income on 30.09.2012 declaring a loss of Rs.81,58,25,669/- (Income declared u/s 115JB at Rs. 54,68,115/-). The case was selected for scrutiny under CASS with the reason - 'Depreciation claimed at higher rates/Higher additional depreciation'. Accordingly, notice u/s 143(2) was sent on 08.08.2013. Again notice under section 143(2) alongwith questionnaire under section 142(1) was sent on 28.10.2014. During the course of assessment proceedings, vide order sheet entry dated 17.02.2015, the Assessing Officer asked the assessee to give reason for claiming depreciation at higher rate/higher additional depreciation alognwith supporting documents. In response to the same, the assessee submitted its reply vide letter dated 24.02.2015 and stated that the assessee company has not claimed any additional depreciation during the period under consideration. It further submitted that it is engaged in the business of Solar Power Generation, wherein, the rate of deprecation on solar power generating 3 ITA No.1296/Del/2020 systems (classified under renewable energy devices) is 80% under the Income Tax Act. The assessee submitted that this was the primary reason for high rate of depreciation claimed in the computation of income filed by the assessee company. 3.1. The assessee has also gave a chart of depreciation claimed, which is at page-2 of the assessment order. Further, the Assessing Officer raised queries regarding the assets put to use on which the assessee has claimed depreciation and how the assessee had claimed depreciation @80% even on the items which does not come under Solar Power generating system such as HR sections, structure for MBSL modules, cables, etc. In response to the same, the assessee vide letter dated 05.03.2015 submitted that the rate of depreciation provided under the Income Tax Act for \"Solar Power Generating System\" was 80%. It was further submitted that the nomenclature used is Solar Power Generating Systems as opposed to just Solar Power Panels. It was further submitted that consequently a power generating system will include all the components that are essential to put together a solar plant that starts generating power. The assessee further submitted the details of three items, which is as hereunder: • HR Section : This is primarily a hot rolled steel item used for transmission. • Structure for MBSL Module: These represent the MS structures on which the solar power panels are embedded. • Cables: These are used to connect the solar power panels. 3.2. The assessee further submitted that all the components used for setting up the Solar Power Generating System shall be included for the purpose of claim of depreciation at the applicable rate. Further, the assessee 4 ITA No.1296/Del/2020 filed the details of bills of fixed assets. As per the details of the Bills as tabulated by the Assessing Officer on page 3 to 9 of the assessment order, the Assessing Officer found that the total fixed assets addition amounted to Rs.15,44,72,437/- only whereas as per the chart of depreciation submitted by the assessee, the total addition under the head ‘Renewal Energy Devices/Energy Saving Devices’ was Rs.218,61,05,231/-. The Assessing Officer after perusing the details of the fixed assets, amounting to Rs.15,44,72,437/- held that out of Rs.15,44,72,437/- the depreciation on Solar Power Generating System was allowable @ 80% only on the fixed assets amounting to Rs.1,63,70,847/- only (@ 40% as assets use less than 180 days). He identified the said items at Sr. No.65, 66, 75, 78, 81, 86, 92, 94, 101, 105, 107, 108, 115, 125, 126, 127, 128 of the combined list of the items at Sr. No.1 to 139 on page no.3 to 9 of the assessment order. According to the Assessing Officer, the assessee plea that all the components used for setting up the Solar Power Generating System shall be included for the purpose of claim of depreciation at the applicable rate does not hold good as if this plea is considered then the depreciation will have to be allowed @ 80% even on the computers, furniture & fixtures, building, office equipment, vehicle etc. as these are also ancillary to the Solar Power Generating Systems. The Assessing Officer further noted that the perusal of the chart of total capitalization as per Chart-2 on page no.2 of the assessment order amount shows that almost each and every item of expense such as custom duty, stamp duty, inverter, custom duty inverter, administrative and other expenses, consultancy charges, syndicate fee for term loan, tour & travelling expenses etc. has been capitalized and depreciation @ 80% has been claimed as a part of Solar Power Generating 5 ITA No.1296/Del/2020 System which according to him could not be allowed. Accordingly, he held that depreciation on Solar Power Generating System was allowable @ 80% upto the amount of Rs.1,63,70,847/- only (@ 40% as assets use less than 180 days) and depreciation on the rest amount i.e. Rs.216,97,34,384/- (Rs. 218,61,05,231 - Rs. 1,63,70,847/-) was allowable @ 15% only being part of 'Plant & Machinery' as claimed by the assessee. Accordingly, he held that an amount of Rs. 70,51,63,674/- (@ 32.5% on Rs. 216,97,34,384/-) {half of 65% (80% - 15%), as assets used less than 180 days; was not allowable during the year under consideration and accordingly he disallowed and added back to total income of the assessee. 4. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). 5. The Ld. CIT(A) deleted the addition by observed as under:- 7. I have considered the assessment order and the submissions made by the appellant. After analyzing the bills of fixed assets added during the year, the Assessing Officer inferred that only steel structure for mounting solar photo voltaic module for solar power generation' costing Rs. 1,63,70,847/-out of total expenses capitalized amounting to Rs. 2,18,61,05,231/-, qualify for depreciation at 80% per annum available for solar power generating system. 8. There appears to be a bonafide error in this line of thought of the Assessing Officer because by this logic even the solar power generation panels go out of the ambit of depreciation @ 80%. 9. From the assessment order it is seen at point 2 in 3.2 that the Assessing officer had questioned the assessee as to how structure for MBSL modules qualifies to be included in the plant and machinery for solar power generation. 10. The above question by the Assessing officer suggests that the Assessing officer had doubted the applicability of the depreciation @ 80% on steel structure for mounting solar photo voltaic module. Let me first focus on whether the above thought of the Assessing officer in regard of steel structure for mounting solar photo voltaic module not being part of power generating system 6 ITA No.1296/Del/2020 holds good. The counsel of the appellant has explained that these structures are necessary for giving the appropriate direction and tilt to the installed panels. In view of this, I find that such structures are integral part of our generating system. 11. Having decided the above question, I find that there is a mistake, arithmetic or inadvertent, committed by the Assessing Officer in allowing 80% depreciation only in respect of assets worth Rs.1.63 crores which he had earlier doubted himself. 12. The Assessing officer has not challenged or explicitly discussed any other item of expenses capitalized during the year. I find that the addition made is clearly without adequate application of mind and has been made in a hurried and casual manner. 13. I am clear that the addition made deserves to be deleted. The addition is deleted. 14. In the result, the appeal is allowed.” 6. Aggrieved with the order of the ld. CIT(A), the assessee is in appeal before us. 7. The Ld. Sr. DR supported the order of the Assessing Officer and the grounds of appeal filed by the Department. He submitted that the Assessing Officer upon verification had given his finding that out of details of capital goods as per the Chart-2 in the assessment order, amounting to Rs.227,44,81,072/- addition on fixed assets was only Rs.15,44,72,437/-. The Ld. Sr. DR further submitted that out of said fixed assets amounting to Rs.15,44,72,437/-, the Assessing Officer held that only an amount of Rs.1,63,70,847/- were items relating to ‘Solar Power Generating Systems’ which were eligible for depreciation @80%. The ld. Sr. DR submitted that the Ld. CIT(A) did not give any specific reason as to how the finding of the Assessing Officer that only items amounting to Rs.1,63,70,847/- related to Solar Power Generating Systems and eligible for depreciation @80% was not correct. Further, the Ld. DR submitted that the Ld. CIT(A) did not give any basis how the balance amount of Rs.216,97,34,384/- (Rs.218,61,05,231 - 7 ITA No.1296/Del/2020 Rs.1,63,70,847/-) was also part of Solar Power Generating Systems and eligible for depreciation @ 80%. 8. The ld. AR supported the order of the ld. CIT(A) and relied upon its written submissions placed at page no. 1 to 5 of the paper book which is reproduced as under:- “The assessee herein, M/s Solitaire Energies Private Ltd. (hereinafter referred to as \"appellant\"), a company incorporated under the Companies Act, 1956, was engaged in the business of Power Generation and Infrastructure Development and supplies power to Gujarat Urja Vikas Nigam Limited from its 15 MWP Solar Power Plant in Gujarat. For the previous year, relevant to the assessment year 2012-13, the appellant filed return of income on 30.09.2012, declaring an loss of Rs. 815,825,669/-. The appellant declared at net taxable income of Rs. 5,468,115/-u/s 115JB of The Income Tax Act. The assessing officer issued a notice under section 142(1)/143(2) of the Act to the appellant along with detailed questionnaire. In the impugned order passed under section 143(3) of the Act the assessing officer has assessed the loss of the appellant at Rs. 110,661,995/- by making the following additions: * Rs. 705,163,674/- on account of disallowance of depreciation. The validity of the addition made by the Ld. assessing officer was challenged before the Hon'ble CIT(A) through various grounds of appeal. The same was allowed in favour of the appellant. Submissions in respect of the grounds of appeal are as follows: Grounds of Appeal No. 1-4 The assessing officer in the impugned assessment order has disallowed a sum of Rs. 705,163,674/- on account of deprecation on the premise that the assets in question do not comprise as Solar Power Generating System and therefore shall be entitled to depreciation @ 15% as opposed to 80% prescribed under The Income Tax Act. At the very outset it is pertinent to point out that the learned assessing officer has passed the order erroneously, even based on his own conclusions. The error in the order can be appreciated by understanding the chronological sequence of events tabulated hereunder: 8 ITA No.1296/Del/2020  During the course of the assessment the learned assessing officer vide order sheet dated 03.03.2015 (refer internal page 3 of the impugned order) enquired as under: \"How the assessee has claimed the depreciation @ 80% even on item which does not come under Solar Power Generating System such as HR sections, structure for MBSL modules, cables etc? Why these should not be treated under plant & machinery?  In response to the same a suitable response was filed by the appellant stating that rate of provided under The Income Tax Act for \"Solar Power Generating Systems\" is 80%. The nomenclature used is Solar Power Generating Systems as opposed to just Solar Power Panels. Consequently a power generating system will include all the components that are essential to put together a solar plant that starts generating power. In context with the three items enquired, the details are provided hereunder: HR Section: This is primarily a hot rolled steel item used for transmission. Structure for MBSL Module: These represent the MS structures on which the solar power panels are embedded. Cables: These are used to connect the solar power panels. Consequently all the components used for setting up the Solar Power Generating System shall be included for the purpose of claim of depreciation at the applicable rate.  The learned assessing officer chose to disregard the above submissions and proceeded to tabulate the total expenditure incurred on \"Steel structure for Mounting Solar Photo Voltaic Modules\" and arrived at a total of Rs. 1,6370,847/- (refer internal page 10 of the impugned order)  However while doing so the learned assessing erroneously classified the above tabulation as \"only following items are related to Solar Power Generating System\" instead of \"following items are not related to Solar Power Generating System\".  In view of the above error the learned assessing officer proceeded to calculate the depreciation on Solar Power Generating System of Rs. 2,169,734,384/- (2,186,105,231/-(-) 16,370,847/-) @ 15% p.a. as opposed to 80% p.a. and also erroneously allowed the depreciation on Rs. 16,370,847/- @ 80%. Thus it is evident that the Ld. assessing officer intended to allow depreciation @15% instead of 80% claimed by the appellant on 9 ITA No.1296/Del/2020 16,370,847/-, but erroneously applied the same to the balance sum of Plant & Machinery. Be as it may, the conclusion drawn by the Ld. assessing officer is completely erroneous and contrary to the provisions laid down under the statute. The rate of deprecation prescribed under The Income Tax is @ 80% in respect of the following assets: III. MACHINERY AND PLANT (1) ...................... (2) ...................... (3) (i).................. (xiii) Renewal energy devices being— (a)................ (b)................ ................. (i0 Solar power generating systems The terminology used is Solar power generating systems. The same will include all the components that go into making a system that generates Solar Power. HR sections, structure for MBSL modules, cables etc. as explained supra are some of the various components that go into to setting up a Solar power generating system. An easy test for the same will be by putting up a question \"that in the absence of these components, will the Solar power systems be able to function and generate power?\". The answer to the same shall be \"No\". Therefore, these components are an integral part of the Solar power generating system. In this regard we may profit from the following observations of their Lordships of the Privy Council in Corporation of Calcutta v. Chairman Cossipure and Chitpore Municipality ILR 49 Cal. 190 ; (AIR 1922 PC 27) as giving support to this decision: \"Their Lordships concur with\" \"Lord Davy in thinking that there is a great danger in attempting to give a definition of the word \"machinery' which will be applicable in all cases. It may be impossible to succeed in such an attempt. If their Lordships were obliged to run the hazard of the attempt they would he inclined to say that the word 'machinery' when used in ordinary language prima facie means some mechanical contrivances which, by themselves or in combination with one or more other mechanical Contrivances, by the combined movement and inter independent operation of their respective ports generate 10 ITA No.1296/Del/2020 power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result.' There can be no dispute that the ordinary meaning of 'machinery includes the working parts of a machinery which are utilised or the component parts of a machinery or plant. But that is not decisive of the matter, since we have to construe the word with reference to the language of the clauses and the scheme of the section. Nor do the remarks of the Court of Appeal in Madan and Ireland Ltd. v. Hinton, (1958) 37 ATC 317 referred to in assist us very much in this enquiry. The question that posed itself in that case was whether the expenditure incurred for purchasing knives and lasts, which were inserted into a machinery, would constitute capital expenditure. Reference is drawn to the decision in the case of Asstt. CIT v Eskay Agencies (2010] 42 DTR (A.T.) 366 {ITAT (Chennai)} wherein it was held as under: 7. We have considered the rival contentions and material on record. It is an undisputed fact that the assessee firm's business is interior decoration, designing and consultancy in the same field. The main objection of the Revenue is that the assessee has used these designs and interior decoration work in its office and, therefore, the same is entitled for depreciation applicable to 'furniture and fittings. From the facts, we find that the purpose of using its own office for displaying the latest work of design and decoration is only to save the expenditure on maintaining a separate exhibition hall for this purpose. It is an undisputed fact that the assessee is frequently doing this decoration and design work and the office of the assessee is used for the purpose of displaying the same to its prospective clients. When the object of the assessee doing this interior design and decoration work in its own office is to exhibit and demonstrate the work of the assessee to its prospective clients, then, merely because the same office is used by the assessee, the designing and decoration work done by the assessee for exhibition purpose cannot partake the character of 'furniture and fittings' of the assessee's office. The work carried our by the assessee is wholly and exclusively for business purposes. Therefore, the same would fall under the category of \"plant\" and eligible for depreciation applicable for\"plant\". Accordingly, we find no error or illegality in the order of the CIT(A) and hence the same is upheld. In the instant case too the expenditure incurred on HR sections, structure for MBSL modules, cables etc. has been exclusively for the purpose of setting up the Solar Power plant and would fall under the category of Solar Power generating system, eligible for depreciation @ 80% p.a. 11 ITA No.1296/Del/2020 In view of the above stated facts and legal precedents the addition of Rs. 705,163,674/- is liable to be deleted in toto 9. We have considered the rival submission and perused the materials available on record. On perusal of Annexure-II (Details of Depreciation as per I.T. Act, 1961) of Form 3CD placed at page no.23 of the paper book, it is seen that during the year, the assessee under the head ‘Renewable Energy Devices/Energy Saving Devices’ had made an addition of Rs.218,61,05,231/- on which depreciation @ 80% amounting to Rs.87,44,42,092/- was claimed and total depreciation claimed was Rs.87,90,35,954/-. The total depreciation of Rs.87,90,35,954/- in this schedule matches with the amount of depreciation available and eligible for depreciation but the same was restricted to Rs.6,32,10,285/- to the extent of available profits as per the details available in the computation of income placed at page no.7 of the paper book. The moot question is the eligibility of the claim of the assessee for claiming depreciation @80% on the fixed assets under head ‘Renewable Energy Devices/Energy Saving Devices’ amounting to Rs.218,61,05,231/-. In this regard, the plea of the Ld. AR that the Assessing Officer had committed an inadvertent error which was also agreed by the Ld. CIT(A) in as much as that the AO wanted to restrict the depreciation @15% only on Rs.1,63,70,847/- and not on the balance amount of Rs.216,97,34,384/- is not correct. The Assessing Officer was quite clear in his mind and according to him out of the ‘Renewable Energy Devices/Energy Saving Devices’ amounting to Rs.218,61,05,231/- only items amounting to Rs.1,63,70,847/- formed part of ‘Solar Power Generating Systems’ and was eligible for depreciation @80%. In view of the 12 ITA No.1296/Del/2020 analysis given by the Assessing Officer, the categorisation of the fixed assets amounting to Rs.218,61,05,231/- is as under:- Sr. No. Depreciation Amount Rate of depreciation 1 Solar Power Generating Systems 1,63,70,847/- 80% 2 Other plant & machinery 13,81,01,590/- (Rs.15,44,72,437- Rs.1,63,70,847/-) 15% 3 Miscellaneous expenses 203,16,32,794/-(Rs.218,61,05,231- Rs.15,44,72,437/-) @15% 9.1. Therefore, the plea of the ld. AR and its confirmation by the ld. CIT(A) that the AO committed either an arithmetical or inadvertent error in allowing depreciation @80% only on Rs.1,63,70,847/- and @15% on the balance amount of Rs.216,92,34,384/- (Rs.13,81,01,590/- + Rs.2,03,16,32,794/-) is not correct. As per the discussion in the assessment order, the AO had given reasons for allowing depreciation @80% only on Rs.1,63,70,847/- and @15% on the balance amount of Rs.216,92,34,384/- and there was no arithmetical or inadvertent error as claimed by the assessee and accepted by the ld. CIT(A). However, the AO did not examine the full details of the items claimed by the assessee under the head ‘Renewable Energy Devices/Energy Saving Devices’ amounting to Rs.218,61,05,231/- and did not give adequate reasons/finding for the treatment of depreciation made in the assessment order. The assessee’s claim that the entire amount of Rs.218,61,05,231/- constitutes Solar Power Generating Systems requires factual verification vis-à-vis both with respect to capital goods added and as to whether the other expenses under the head custom duty, stamp duty, inverter, custom duty inverter, administrative and 13 ITA No.1296/Del/2020 other expenses, consultancy charges, syndicate fee for term loan, tour & travelling expenses etc. as listed out in the Chart-2 as reproduced on page no.2 of the assessment order will also be part of the ‘Solar Power Generation Systems’ or not. We, therefore, set-aside the order of the Ld. CIT(A) and restore the matter to the file of the Assessing Officer for deciding this issue afresh as per law keeping in view of the above observation. Needless to the say the Assessing Officer will give proper opportunity of being heard to the assessee and pass the order in accordance with law. Ground no.1, 2, 3 and 4 of the appeal are allowed for statistical purposes. 10. In the result, the appeal of the Revenue is allowed for statistical purpose. Order pronounced in the open court on 16TH April, 2025. Sd/- Sd/- [YOGESH KUMAR US] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 16.04.2025 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Assessee 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "