2019 (5) TMI 34 - HC - Income Tax

Additional depreciation u/s 32 - addition of a capacity of windmills by 750 kW as against the 1000 kW installed prior to 01.04.2002 - HELD THAT - As relying on cases M/S. HI TECH ARAI LIMITED 2009 (9) TMI 60 - MADRAS HIGH COURT and TEXMO PRECISION CASTINGS 2009 (10) TMI 140 - MADRAS HIGH COURT since the assessee satisfied the conditions for claiming additional depreciation on the addition of a capacity of windmills by 750 kW as against the 1000 kW installed prior to 01.04.2002, the assessee is entitled to the said additional depreciation under the said provisions of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to additional depreciation under Section 32(1)(iia) of the Income Tax Act for windmills.
2. Interpretation of the term "Article" in relation to power generation.

Analysis:
1. The appellant filed an appeal under Section 260A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal that dismissed the appellant's claim for additional depreciation under Section 32(1)(iia) for windmills. The Tribunal relied on precedents to hold that the word "article" does not include power generation, thus denying the appellant's claim. The High Court admitted the appeal and considered the substantial questions of law raised by the appellant.

2. The appellant argued that their case aligns with previous decisions of the High Court where it was held that setting up new machinery or plant, like windmills, for power generation qualifies for additional depreciation under Section 32(1)(iia). Citing cases Commissioner of Income Tax v. Hi Tech Arai Limited and Commissioner of Income Tax v. Texmo Precision Castings, the appellant contended that the installation of windmills increased power generation capacity, making them eligible for additional depreciation.

3. Section 32(1)(iia) of the Act, applicable for the Assessment Year 2003-2004, allowed a further deduction of 15% of the actual cost of new machinery or plant for businesses engaged in manufacturing or production of any article or thing. The provision detailed conditions for claiming additional depreciation and specified exclusions. The High Court, after reviewing relevant case laws and statutory provisions, concluded that the appellant met the criteria for claiming additional depreciation on the windmills installed post-March 31, 2002.

4. Considering the arguments presented, the High Court found in favor of the appellant, allowing the appeal and answering the questions of law in favor of the assessee against the Revenue. The Court held that the appellant's installation of windmills for power generation qualified for additional depreciation under Section 32(1)(iia) of the Income Tax Act. The judgment emphasized the importance of statutory provisions and precedent in determining the eligibility for tax benefits, ultimately ruling in favor of the appellant.