Assessee entitled to claim additional depreciation on windmill

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

The aforesaid captioned cross appeals filed by the assessee and the Revenue are against the order of Commissioner (Appeals)-11, Pune, dated 17-8-2015 relating to assessment years 2011-12 & 2012-13 arising from the assessment order passed under section 143(3) of the Income Tax Act, 1961 (in short “the Act”).

2. The cross appeals filed by the assessee and the Revenue were heard together and are being disposed of by this consolidated order.

ITA No. 1384/PN/2015, assessment year 2011-12 (By Assessee) :–

3. In this appeal, the issue in controversy agitated on behalf of the assessee is dis-allowance of ‘additional depreciation’ on windmill quantified at Rs. 12,62,02,718 relevant to assessment year 2011-12.

4. The relevant facts, in brief, are that the assessee is engaged in the business of water park and trading in goods. The assessee filed return of income declaring total income of Rs. 79,06,340. In the course of assessment proceedings, the assessing officer noticed that the assessee has purchased certain windmills to the tune of Rs. 1,17,33,88,103 during the year on which normal depreciation allowance @ 80% was claimed under section 32(1) of the Act. Besides, the assessee also claimed additional depreciation @ 20% ascribed under section 32(1)(iia) of the Act amounting to Rs. 12,62,02,718 on the aforesaid acquisitions. The assessing officer show-caused the assessee to justify the eligibility of claim of additional depreciation under section 32(1)(iia) of the Act. The assessee canvassed before the assessing officer that electricity produced by the windmill is an “article or thing” within the meaning of section 32(1)(iia) of the Act. It was submitted that when the windmills so installed converts wind energy into electric energy, it is certainly an activity of ‘manufacture’ because the wind energy is converted into totally different form i.e., electric energy. The electrical energy is having a different name, character and use vis-à-vis the wind energy and hence it falls within the definition of expression ‘manufacture’. The assessee relied upon the following judicial precedents wherein it was held that process of generation of electricity is akin to manufacture or production of article or thing and therefore the assessee is entitled to additional depreciation as claimed :–

(i) Dy. CIT v. Avinash Nivrutti Bhosale (IT Appeal No. 823/PN/2011, date 27-8-2012).

(ii) Asst. CIT v. M. SatishKumar in (IT Appeal No. 718 (Mds.) of 2012, date (assessment year 2008-09), date 28-9-2012),

(iii) N.T.P.C Ltd. v. Dy Commissioner (2012) 54 SOT 177 (URO) (Delhi)

(iv) Dy. CIT v. Hutti Gold Mines Co. Ltd. (2013) 60 SOT 147 (URO) (Bang.-Trib).

(v) D. J Malpani v. ACIT (IT Appeal Nos. 1148 to 1154/Pn/2013, order date 30-10-2015)

(vi) CIT v. United Western Bank Ltd. (2003) 259 ITR 312/127 Taxman 238 (Bom.)

5. The assessing officer, however, rejected the contentions of the assessee that electricity produced by operating windmills falls under expression ‘article or thing’. The assessing officer also observed that additional depreciation is available only to an assessee engaged in manufacture or production of article or thing. The assessee is neither engaged in manufacturing activity nor engaged in production activity. The assessee is engaged in business of Water Park and trading in goods which is not manufacturing activity in the year under consideration. The assessing officer went on to observe that generation of electricity with the use of windmill does not tantamount to production of article or thing per se. He held that the conditions of section 32(1)(iia) are not fulfilled and accordingly disallowed the additional depreciation claim of the assessee.