2011 (12) TMI 659 - AT - Income Tax

Summary

Issues involved: Appeal against the order of ld.CIT for assessment year 2006-07 regarding allowance of additional depreciation u/s 32(1)(ii)(a) on windmill.

Summary:

Issue 1: Allowance of additional depreciation u/s 32(1)(ii)(a) on windmill
The ld.CIT found the AO's order erroneous for allowing additional depreciation along with depreciation on windmill u/s 32(1)(i). The Tribunal noted that depreciation u/s 32(1)(i) is based on actual cost, while u/s 32(1)(ii) is on written down value. Rule 5(1A) allows undertaking covered u/s 32(1)(i) to claim depreciation on written down value. The Madras High Court held in CIT vs Hi Tech Arai Ltd. that additional depreciation is allowable on windmills. The Tribunal concluded that the AO's decision was a possible view and not prejudicial to Revenue, citing Malabar Industrial Co. Ltd. vs CIT. Therefore, the ld.CIT's order was cancelled, and the appeal of the assessee was allowed.

This judgment clarifies the eligibility for additional depreciation on windmills and the difference between depreciation u/s 32(1)(i) and 32(1)(ii). It emphasizes the importance of following relevant rules and legal precedents in determining the allowability of additional depreciation, ensuring fair treatment for taxpayers.