Wind tirbines
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 July 2011
A company(dealing in real estate) had Rs.11 crore business income in 10-11. To claim deduction, it invested in Wind turbines thereby generating & selling power so that it can claim depreciation. Now, in year 11-12, it wants to sell off this wind turbine. Now can a company be called as a one engaged in power & therefore claim dep. on SLM basis, so that the STCG that will now arise on sale of turbines be claimed as a business income & accordingly be donated/etc to claim deductions? or will it be taxable as STCG @ 30%. Pls suggest how to save tax?
16 July 2011
1. Depreciation on SLM basis can be claimed in respect of power generating unit only and this power generating unit is described as separate undertaking.
2. On other business assets held by the Estate Company, WDV method is applicable.
3. When the Power Unit will be sold -
and Sales consideration exceeds the Original Cost (Without Depreciation)of the Unit, the extra amount so received will be treated as STCG.
The amount of depreciation claimed in the earlier year -will be balancing charge
and treated as business income.
4. Against STCG and such business income
business losses of current year if any can be set off.
2. On other business assets held by the Estate Company, WDV method is applicable.
3. When the Power Unit will be sold -
and Sales consideration exceeds the Original Cost (Without Depreciation)of the Unit, the extra amount so received will be treated as STCG.
The amount of depreciation claimed in the earlier year -will be balancing charge
and treated as business income.
4. Against STCG and such business income
business losses of current year if any can be set off.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
16 July 2011
Thank you. Now that means we can give donations to claim 150%/ 175% deductions since this will be a business income. Also, since the MOA/AOA states that the purpose of company is in real estate, cn the company be called to be engaged in power sector just because it is selling electricity?
03 August 2025
You're asking whether a real estate company that purchased wind turbines (presumably to claim depreciation) and is now selling them can:
Claim depreciation on SLM basis (as a power generation unit),
Claim the gain on sale as business income, and
Claim deductions like 150%/175% on donations under section 35AC or similar, based on that business income.
Let’s break this down:
✅ 1. Can the company claim SLM depreciation as a power-generating undertaking?
Only if:
The windmill is treated as a separate undertaking, and
The company is engaged in the business of generation or generation and distribution of power (as per Rule 5(1A) of the Income Tax Rules).
However:
If the wind turbine was installed only for tax-saving purposes, and the company is primarily a real estate business, it's unlikely to be treated as “engaged in the business of power generation.”
Occasional or incidental power sale does not qualify the company to use SLM.
So, WDV method applies, and SLM depreciation would not be allowed.
✅ 2. Tax Treatment on Sale of Wind Turbine
On sale in FY 2011-12:
If it was the only asset in that block of assets and is now sold,
And if sale consideration > WDV but original cost, the excess over original cost is STCG, and the depreciation claimed earlier is treated as business income (balancing charge concept, though not in the same way as under erstwhile Section 41(2)).
So, STCG will be taxable at normal rates, i.e., 30% if applicable, not concessional capital gains rate.
✅ 3. Can donations be claimed as 150%/175% deduction from that income?
If the donation is made to an eligible institution approved under section 35AC (or now Section 80GGA/35(1)(ii)/(iii) for scientific/social research), then:
Only business income is eligible for weighted deduction (e.g., 150%, 175% — as applicable at the time).
If the gain is treated as business income (not capital gain), such donations can be claimed against it.
However, if:
The income is treated as capital gain, then weighted deduction cannot be claimed — only donation under section 80G (limited to 50%/100%) is allowed, and subject to limits.
⚠️ 4. What about MOA/AOA not mentioning power generation?
That’s a red flag.
If the Main Object Clause in the MOA/AOA does not cover power generation, and the company does not carry on any regular business in power, the department may deny it the status of power-generating undertaking.
Occasional generation of power (only to claim depreciation) may not qualify you as engaged in that line of business.
So, to be safe: the sale proceeds should be offered as STCG, and depreciation must have been claimed on WDV basis.
✅ Summary:
Question Answer
Can SLM be used for depreciation? ❌ No – not a power generation business
Is gain business income? ❌ Mostly STCG under Section 50
Can donations be deducted @150%? ✅ Only against business income – not STCG
Can company be treated as engaged in power? ❌ Not if only incidental power sale, and MOA is real estate focused
Claim depreciation on SLM basis (as a power generation unit),
Claim the gain on sale as business income, and
Claim deductions like 150%/175% on donations under section 35AC or similar, based on that business income.
Let’s break this down:
✅ 1. Can the company claim SLM depreciation as a power-generating undertaking?
Only if:
The windmill is treated as a separate undertaking, and
The company is engaged in the business of generation or generation and distribution of power (as per Rule 5(1A) of the Income Tax Rules).
However:
If the wind turbine was installed only for tax-saving purposes, and the company is primarily a real estate business, it's unlikely to be treated as “engaged in the business of power generation.”
Occasional or incidental power sale does not qualify the company to use SLM.
So, WDV method applies, and SLM depreciation would not be allowed.
✅ 2. Tax Treatment on Sale of Wind Turbine
On sale in FY 2011-12:
If it was the only asset in that block of assets and is now sold,
And if sale consideration > WDV but original cost, the excess over original cost is STCG, and the depreciation claimed earlier is treated as business income (balancing charge concept, though not in the same way as under erstwhile Section 41(2)).
So, STCG will be taxable at normal rates, i.e., 30% if applicable, not concessional capital gains rate.
✅ 3. Can donations be claimed as 150%/175% deduction from that income?
If the donation is made to an eligible institution approved under section 35AC (or now Section 80GGA/35(1)(ii)/(iii) for scientific/social research), then:
Only business income is eligible for weighted deduction (e.g., 150%, 175% — as applicable at the time).
If the gain is treated as business income (not capital gain), such donations can be claimed against it.
However, if:
The income is treated as capital gain, then weighted deduction cannot be claimed — only donation under section 80G (limited to 50%/100%) is allowed, and subject to limits.
⚠️ 4. What about MOA/AOA not mentioning power generation?
That’s a red flag.
If the Main Object Clause in the MOA/AOA does not cover power generation, and the company does not carry on any regular business in power, the department may deny it the status of power-generating undertaking.
Occasional generation of power (only to claim depreciation) may not qualify you as engaged in that line of business.
So, to be safe: the sale proceeds should be offered as STCG, and depreciation must have been claimed on WDV basis.
✅ Summary:
Question Answer
Can SLM be used for depreciation? ❌ No – not a power generation business
Is gain business income? ❌ Mostly STCG under Section 50
Can donations be deducted @150%? ✅ Only against business income – not STCG
Can company be treated as engaged in power? ❌ Not if only incidental power sale, and MOA is real estate focused
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