2018 (11) TMI 1907 - AT - Income Tax

Additional depreciation for wind mills u/s. 32(1)(iia) - additional depreciation was claimed u/s. 32(1)(iia) of the Act for the reason that the assessee is engaged in manufacturing/production of any article or thing and this new Plant Machinery was acquired before and installed before 31-03-2010 - CIT(A) allowed the claim of assessee by stating that this Plant Machinery was installed in AY. 2010-11 i.e. wind mill having capacity of 1, 800 KV and this was commissioned and put to use on or before 31-03-2011. Assessee claimed the additional depreciation @ 10% in claimed depreciation in AY. 2011-12 - HELD THAT - As decided in assessee own case 2016 (8) TMI 1574 - ITAT MUMBAI following the ratio of VMT Ltd.( 2009 (9) TMI 35 - MADRAS HIGH COURT issue has been decided in favour of assessee with regard to addition depreciation u/s.32(1)(iia) of the Act. Hon ble Supreme Court in case of CST vs. M.P. Electricity Board ( 1968 (11) TMI 85 - SUPREME COURT held that the electricity generated by an assessee is an article or goods. The explanation to amendments (memorandum) as inserted by Finance Act 2012 as relied upon by CIT(A) cannot be said to overrule and earlier decision of Hon ble High Court. An amendment that has prospective application cannot be said to retrospectively take away the rights of an assessee qua it s explanatory notes. Where there is no ambiguity in the Section there is no warrant for resort to external aids of interpretation namely the notes on clauses and the memorandum explaining its provisions. In the light of decision of VTM Ltd.(supra) with regard to claim of additional depreciation u/s.32(1)(iia) for setting up a windmill wherein material being sole decision by Hon ble High Court on the matter we hold that additional depreciation should be allowed. - Decided against revenue.

Summary

Issues:
- Additional depreciation for wind mills u/s. 32(1)(iia) of the Income Tax Act, 1961 allowed by CIT (A).
- Applicability of the decision of CIT Vs. VTM Ltd. (319 ITR 336) to the case of a trader.

Analysis:

Issue 1: Additional Depreciation for Wind Mills
The appeals by the Revenue were against the orders of the Commissioner of Income Tax (Appeals) allowing additional depreciation for wind mills u/s. 32(1)(iia) of the Income Tax Act, 1961. The Revenue contended that the additional depreciation was not applicable for the assessment year 2011-12, as per the provisions of the Act and the Memorandum to the Finance Act, 2012, which allowed it for subsequent assessment years only. The assessee, engaged in trading and power generation, claimed additional depreciation for wind mills installed during the relevant year. The CIT (A) allowed the claim, stating that the wind mill was acquired and installed before the specified date, making the assessee eligible for additional depreciation. The Tribunal upheld the CIT (A)'s decision based on the assessee's engagement in the generation of power, similar to the decision in the assessee's own case from the preceding assessment year. Consequently, the Tribunal dismissed the Revenue's appeals.

Issue 2: Applicability of CIT Vs. VTM Ltd. Decision
The Revenue argued that the decision of CIT Vs. VTM Ltd. (319 ITR 336) was not applicable to the case of a trader claiming additional depreciation for wind mills, as the VTM Ltd. case involved a textile manufacturer. However, the Tribunal found that the VTM Ltd. decision was relevant as it dealt with the allowance of additional depreciation u/s. 32(1)(iia) for setting up a windmill, which was applicable to the current scenario. The Tribunal held that the VTM Ltd. decision supported the assessee's claim for additional depreciation, emphasizing that electricity generated by an assessee constitutes an article or goods. Therefore, the Tribunal dismissed the Revenue's appeals, affirming the applicability of the VTM Ltd. decision to the trader's case.

In conclusion, the Tribunal upheld the CIT (A)'s decision to allow additional depreciation for wind mills to the trader engaged in power generation, based on the provisions of the Income Tax Act and relevant judicial precedents, including the VTM Ltd. case.