2017 (4) TMI 1534 - AT - Income Tax

Disallowance u/s. 32(1)(iia) - additional depreciation on the purchase of wind mills u/s. 32(1)(iia) - main business of the assessee is not producing or generating electricity therefore the assessee company is not entitled for any benefit - CIT(A) allowed the claim on additional depreciation on windmill for the year under consideration in view of the fact that benefit of additional depreciation on power generation will apply in relation to assessment year 2013-14 onwards and will not apply to the year under consideration as per amended provisions of section 32(1)(iia) of Finance Act 2012 w.e.f. 01.04.2013 - HELD THAT - We on perusal of the assessment order found that the Revenue has not accepted the decision and filed SLP. This Tribunal is of the considered opinion that mere pendency of Special Leave Petition (SLP) before the Hon ble Apex Court cannot be a reason to take a different view. The judgment of Madras High Court is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. Therefore the Commissioner of Income Tax (Appeals) has rightly allowed the claim of the assessee by following the binding judgment of Madras High Court in EXMO PRECISION CASTINGS 2009 (10) TMI 140 - MADRAS HIGH COURT and M/S. HI TECH ARAI LIMITED 2009 (9) TMI 60 - MADRAS HIGH COURT Accordingly we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) and upheld the same and the Revenue grounds are dismissed. The appeal of the Revenue is dismissed.

Summary

Issues:
- Disallowance of additional depreciation under section 32(1)(iia)
- Eligibility of the assessee for additional depreciation on wind mills
- Interpretation of main business for claiming additional depreciation

Analysis:
1. The Revenue appealed against the CIT(A)'s order deleting the disallowance of additional depreciation under section 32(1)(iia) amounting to ?3,45,52,281. The Revenue contended that the assessee, engaged in the manufacture and sale of PET Bottles, is not eligible for additional depreciation on wind mills as its main business is not electricity generation. The AO disallowed the claim, citing that the primary business did not include the generation of wind energy. The CIT(A) allowed the appeal, relying on judicial decisions and the jurisdictional High Court's view that the assessee was entitled to additional depreciation due to increased power generation capacity.

2. The CIT(A) considered the arguments of both parties and found that the issue revolved around the eligibility of the assessee for additional depreciation under section 32(1)(iia) concerning wind mills. The CIT(A) referenced the jurisdictional High Court's decisions in similar cases, including CIT vs. Hi Tech Arai Ltd. and CIT vs. Texmo Precision Castings, to support the assessee's claim. The CIT(A) upheld the appeal, stating that the assessee was entitled to additional depreciation as per the High Court's rulings, emphasizing the increased power generation capacity as a significant factor.

3. The Tribunal, after hearing both sides and reviewing the case details, focused on whether the assessee's claim for additional depreciation on wind mills was justified. The Revenue argued that the assessee's main business did not involve electricity production, challenging the CIT(A)'s decision. However, the Tribunal opined that the pendency of a Special Leave Petition (SLP) before the Supreme Court did not warrant a different view. The Tribunal emphasized that the Madras High Court's judgment was binding in the region, endorsing the CIT(A)'s decision to allow the claim based on the High Court's precedent. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order and upholding the assessee's entitlement to additional depreciation on wind mills.

In conclusion, the judgment addressed the disallowance of additional depreciation, the eligibility of the assessee for such depreciation on wind mills, and the interpretation of the main business for claiming additional depreciation under section 32(1)(iia). The decision favored the assessee, relying on judicial precedents and the binding nature of the Madras High Court's rulings to support the allowance of the additional depreciation claim, ultimately dismissing the Revenue's appeal.