2009 (9) TMI 35 - HC - Income Tax

Additional Depreciation on Windmill whether generation of power by windmill would amount to manufacture or production of any article or thing held that - When we find that the Tribunal has applied the law correctly in the impugned order, there is no gain saying that there was an earlier order by the Co-ordinate Bench and therefore, for that reason, this time also the Tribunal should have blindly followed its own earlier decision even if such earlier decision did not reflect the correct position of the law. Additional depreciation allowed decision of the ITAT hold that activity of generation of power is manufacturing activity upheld.

Summary

Issues:
1. Whether the Tribunal was correct in allowing the claim of additional depreciation on windmill under Section 32(1)(iia)?
2. Whether the Tribunal was correct in determining that the generation of power by a windmill amounts to the manufacture or production of any article or thing?

Analysis:

Issue 1:
The appellant contended that the Tribunal had previously disallowed similar additional depreciation claims under Section 32(1)(iia) but changed its stance in the present case, which should render the current decision invalid. However, the court disagreed, stating that the Tribunal applied the law correctly in the impugned order. The provision allows for a further deduction of fifteen percent for new machinery or plant acquired and installed after March 31, 2002, by an assessee engaged in manufacturing or production. The court emphasized that the law does not require operational connectivity between the new machinery and the existing manufacturing activity. Therefore, the appellant's argument that setting up a windmill is unrelated to textile manufacturing was deemed irrelevant to the specific provision of Section 32(1)(iia).

Issue 2:
Regarding the second issue, the court found that the assessee had indeed set up a windmill at a substantial cost. Despite the appellant's argument that the windmill's operation had no connection to the textile industry, the court reiterated that the law does not mandate such a connection for claiming additional depreciation. The court upheld the Tribunal's decision, stating that setting up a windmill falls within the scope of setting up new machinery or plant as per the relevant provision. Consequently, the court dismissed the appeal, emphasizing that no substantial question of law warranted further consideration, and no costs were awarded.

In conclusion, the High Court of Madras upheld the Tribunal's decision, emphasizing the correct application of the law in allowing the additional depreciation claim on the windmill and rejecting the appellant's arguments against it.