2016 (3) TMI 1183 - AT - Income Tax

Disallowance of additional depreciation on windmill - A.O. disallowed the claim for the reason that the wind power generator does not result into the manufacture or production of article or thing - Held that - 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. See The DCIT vs. M/s. Diamines and Chemicals Ltd 2013 (5) TMI 933 - ITAT AHMEDABAD - Decided against revenue.

Summary

Issues:
1. Disallowance of additional depreciation claimed by the assessee on wind mill for manufacturing tiles.
2. Deletion of excise duty on closing stock of finished goods.

Analysis:
1. The first issue pertains to the disallowance of additional depreciation claimed by the assessee on a wind mill for manufacturing tiles. The Revenue contended that the wind mill did not qualify for additional depreciation under section 32(1) as the power generated was controlled and purchased by a different entity, not used for the assessee's manufacturing business. The ITAT referred to a similar case where the Tribunal had dismissed the Revenue's appeal on identical grounds. The Tribunal held that the wind mill installation date was undisputed, and the claim for additional depreciation was valid based on precedents where setting up new machinery unrelated to the existing business qualified for additional depreciation. Consequently, the ITAT dismissed the Revenue's appeal in line with the previous decision, upholding the assessee's claim for additional depreciation on the wind mill.

2. The second issue involved the deletion of excise duty on the closing stock of finished goods by the CIT(A). The Revenue challenged this deletion, arguing that excise duty should be applicable to the entire closing stock of finished goods. However, the ITAT noted that the CBDT had issued instructions prohibiting appeals where the tax effect is less than a specified amount, applicable retrospectively. As the tax effect of the excise duty deletion fell below the threshold, the ITAT dismissed the Revenue's appeal, citing violation of CBDT instructions. The ITAT also allowed the Department to approach the Tribunal for a recall if the tax effect exceeded the threshold or fell within exceptions provided in the instructions. Consequently, the ITAT upheld the CIT(A)'s decision to delete excise duty on the closing stock of finished goods, dismissing the Revenue's appeal.

In conclusion, the ITAT, comprising Shri Rajpal Yadav and Shri Manish Borad, dismissed all three appeals - two by the Revenue and one Cross Objection by the assessee - against the orders of CIT(A)-VIII, Ahmedabad, for the Assessment Years 2006-07 and 2009-10. The judgments were pronounced on 2nd March 2016.