2013 (5) TMI 933 - AT - Income Tax

Claim of additional depreciation of wind electric generator allowed - As far as application of section 32(1)(iia) of the Act is concerned what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31-3-2002 by an assessee who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant which was acquired and installed up to 31-3-2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore the contention that the setting up of a wind mill has nothing to do with the power industry namely manufacture of oil seeds etc. is totally not germane to the specific provision contained in section 32(1)(iia) of the Act.

Summary

Issues:
Claim of additional depreciation on wind electric generator.

Analysis:
The appeal was filed by the Revenue against the order of the ld. CIT(A)-I, Baroda, for the assessment year 2007-08. The dispute revolved around the assessee's claim of additional depreciation on a wind electric generator. The Revenue contended that the wind electric generator did not result in the manufacture or production of an article or thing, as it was used solely for generating electricity. The A.O. disallowed the claim, stating that the plant and machinery should fall under a specific clause to be eligible for additional depreciation. However, the CIT(A) granted relief to the assessee based on precedents like CIT vs. VTM Ltd. and CIT v. Texmo Precision Castings. The Revenue challenged this decision before the Appellate Tribunal.

During the proceedings, the assessee argued that being engaged in the business of manufacturing speciality chemicals and generating wind power fulfilled the criteria for claiming additional depreciation. The assessee emphasized that the asset did not need to directly result in the production of an article or thing to be eligible for additional depreciation. Relying on the decisions in the aforementioned cases, the assessee contended that as long as the conditions specified in the relevant clause were met, the additional depreciation should be allowed. The Tribunal examined the facts and the legal provisions in detail.

The Tribunal noted that the assessee's activities included manufacturing speciality chemicals and generating wind power, with the installation date of the wind power generator being undisputed. Referring to the decision in CIT v. Hi Tech Arai Ltd., the Tribunal highlighted that the setting up of new machinery or plant did not need operational connectivity to the existing manufactured products for claiming additional depreciation. The Tribunal also cited the decision in CIT vs. VTM Ltd., which supported the assessee's position. The Tribunal found that the issue was directly covered in favor of the assessee by these decisions and concluded that the Revenue had not presented any contrary decision for consideration. Therefore, the Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the allowance of additional depreciation on the wind electric generator for the assessee engaged in manufacturing speciality chemicals and generating wind power.