2012 (7) TMI 429 - AT - Income Tax

Eligible for claiming additional depreciation u/s 32(1)(iia) - prior to the installation of the wind mill, assessee was doing only the business of transportation of spirit and molassess - Held that - As decided in C.I.T v. VTM Ltd. 2009 (9) TMI 35 (HC) 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 31st March, 2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing - here, the assessee was not into any business of manufacture or production but only transportation of molasses and spirit. Thus, the first condition is not satisfied and thus not eligible for claiming additional depreciation - against assessee.

Summary

Issues:
Claim of additional depreciation under Section 32(1)(iia) on wind mill installation.

Analysis:
The Assessee claimed additional depreciation under Section 32(1)(iia) of the Income Tax Act on a newly acquired wind mill used for less than 180 days during the previous year. The Assessing Officer denied the claim, stating that the wind energy undertaking did not qualify as an undertaking engaged in manufacturing. The Commissioner of Income-tax (Appeals) upheld the denial, emphasizing that the Assessee was not previously engaged in manufacturing. The Assessee argued that electricity production constitutes manufacturing, citing relevant case law. The Departmental Representative contended that the Assessee must be engaged in manufacturing to claim additional depreciation.

The Tribunal analyzed the provisions of Section 32(1)(iia) and relevant case law. It noted that the wind mill started electricity production during the relevant year and that electricity is considered an article or good. The Tribunal highlighted that the provision does not explicitly require pre-existing manufacturing activity for claiming additional depreciation. It distinguished between cases of substantial capacity expansion and new industrial undertakings, emphasizing that the provision allows for both scenarios. The Tribunal referenced a High Court judgment emphasizing the necessity of the Assessee being engaged in manufacturing or production to claim additional depreciation.

The Tribunal concluded that the Assessee, previously engaged only in transportation, did not meet the requirement of being in the business of manufacturing or production to claim additional depreciation. It distinguished a previous case where a hospital was considered an industrial undertaking. The Tribunal dismissed the Assessee's appeal, affirming the lower authorities' decision to deny the additional depreciation claim under Section 32(1)(iia) of the Act.