Facts of the Case

The Revenue filed appeals challenging the order of the Income Tax Appellate Tribunal (ITAT), wherein relief was granted to the assessee for Assessment Years 2007-08 and 2008-09.

The core issue revolved around allowability of depreciation @80% on electronic/energy meters treated as energy-saving devices and whether bus bars formed an integral part of such meters.

Earlier, the ITAT (order dated 05.10.2015) had remanded the matter to the Assessing Officer (AO) for limited verification:

  • To determine the proportion of energy-saving meters eligible for higher depreciation
  • To examine whether bus bars are integral to meters

However, during remand proceedings, the AO went beyond the scope of remand and held that energy meters were not energy-saving devices.

Issues Involved

  1. Whether the Assessing Officer exceeded jurisdiction by going beyond the scope of remand order dated 05.10.2015?
  2. Whether ITAT should have directed the AO to strictly comply with its earlier remand directions?
  3. Whether energy meters qualify as energy-saving devices eligible for 80% depreciation under Section 32?
  4. Whether bus bars constitute an integral/inextricable part of energy meters for depreciation purposes?

Petitioner’s Arguments (Revenue)

  • The Tribunal failed to ensure finality by not directing the AO to strictly adhere to the earlier remand order.
  • The AO did not properly examine:
    • The percentage of energy-saving meters
    • The functional integration of bus bars
  • Therefore, the matter required fresh remand with strict directions to comply with earlier findings.

Respondent’s Arguments (Assessee)

  • The issue regarding eligibility of energy meters for 80% depreciation already stood concluded by:
    • ITAT’s earlier order (05.10.2015)
    • Dismissal of Revenue’s appeal by the High Court (ITA 666/2016)
  • Hence, the AO could not reopen or re-adjudicate this settled issue. 

Court’s Findings / Order

  • The Court agreed with the assessee that eligibility of energy meters as energy-saving devices was already settled.
  • However, it observed that:
    • The Tribunal failed to ensure adjudication of remaining issues as per remand order
    • The AO exceeded jurisdiction by re-examining settled issues
    • Certain aspects (extent of eligible meters & role of bus bars) remained unaddressed

Final Order:

  • The question of law was answered in favour of the Revenue
  • The matter was remanded back to the Assessing Officer
  • AO was directed to:
    • Act strictly in terms of remand order dated 05.10.2015
    • Limit inquiry only to specified issues
    • Not reopen settled findings

Important Clarifications

  • Scope of Remand is Binding: An Assessing Officer cannot go beyond directions issued in a remand order.
  • Finality of Findings: Once an issue is settled by higher judicial forums, it cannot be reopened during remand.
  • Depreciation on Energy Meters: Energy meters with “Time of Day (TOD)” features qualify as energy-saving devices eligible for 80% depreciation.
  • Functional Test for Components: Whether a component (like bus bars) qualifies for depreciation depends on whether it is integral to the main asset.

Sections Involved

  • Section 32, Income-tax Act, 1961 – Depreciation
  • Income-tax Rules, 1962 (Appendix I) – Depreciation Schedule (Energy Saving Devices including TOD Meters)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3916-DB/VSA08012020ITA22020_163529.pdf

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