[Opinion] Office or Factory Rooftops? Solar Plants Face The Heat

Meenakshi Subramaniam – [2023] 153 taxmann.com 82 (Article)

Recently, the Sun God revealed at a conference of fellow-gods: “I got angry on two occasions. One, when a poet said, ‘Jahaan na pahunche Ravi, Wahan pahunche Kavi (Where the Sun does not reach, the poet reaches). Two, I heard that solar plants on office rooftops are not getting depreciation, while factory roofs are. O Narada, our guest, give a witty statement, or else my temper will scorch everything.” At once, Narada said: ‘The income tax department thinks that sunlight does not reach office rooftop.” !!!

Section 32(1)(iia) of Income Tax Act talks of depreciation, but there’s a twist in the tale. It eloquently states that offices and office appliances, which use any power like solar energy don’t qualify for depreciation. In other words, solar plants for offices are not getting full depreciation.

[2023] 152 taxmann.com 638 (Delhi – Trib.)
Viney Corpn. Ltd.
v.
Assistant Commissioner of Income-tax

The assessee is engaged in manufacturing of auto components and raised appeal against the assessment order passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (“the Act”) dated 31.10.2019 stating that the Ld. DRP without any cogent reason directed that solar plant installed at the roof of the office premises for captive consumption is not eligible to claim additional depreciation u/s 32(1)(iia) of the Act.

The assessee had installed two solar power plants, one of which was installed at Bikaner, Rajasthan, from where electricity generated and sold to ‘Rajasthan State Electricity Board’ and second was installed at factory premises of the assessee in IMT Manesar, Gurgaon. The cost of these plants were Rs.6,03,75,057/- and Rs.1,04,00,000/- respectively.

As regards the first solar power plant, additional depreciation was held to be allowable. However, it is in respect of second solar power plant which although admittedly installed in factory premises has been treated to have been installed in the office premises, which according to the learned DRP gets covered in the exception as contained in section 32(1)(iia) of the Income Tax Act.

According to assessee, once it has been accepted that the solar power plant has been installed at the factory premises of the assessee, for which all the evidences were available, the DRP was not justified in treating the factory premises as the office premises. It was to be appreciated that this solar power plant was of 160 Kilo Watt which was put to use for in-house production at the factory. Factory premises are mostly meant for carrying out the production activities although it does have some office part which is also very much part of the factory functioning.

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