Windmill electricity deemed goods; denied depreciation. Appeal dismissed, income upheld.

The Tribunal concluded that electricity generated by the windmill constitutes an article or goods, allowing the appellant's claim on this part. However, the Tribunal upheld the CIT(A)'s decision to deny additional depreciation, stating it is only allowable if the assessee was engaged in manufacturing or production prior to installation, which was not the case for the appellant. Consequently, the appeal was dismissed, confirming the denial of additional depreciation and upholding the income assessed by the AO. The Tribunal's order was pronounced on May 1, 2013.

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Issues Involved:
1. Confirmation of income assessed by the AO.
2. Denial of additional depreciation under Section 32(1)(iia) of the Act on windmills.
3. Determination of whether electricity generated by windmills constitutes an article or goods.
4. Applicability of Section 2(29BA) of the Act to the AY 2007-08.

Detailed Analysis:

1. Confirmation of Income Assessed by the AO:
The appellant contested the CIT(A)'s decision to confirm the income assessed by the AO at Rs. 1,67,43,760/- instead of Rs. 90,03,758/- as returned by the appellant. The CIT(A) upheld the AO's assessment, leading to the appellant's appeal.

2. Denial of Additional Depreciation on Windmills:
The appellant claimed additional depreciation on windmills under Section 32(1)(iia) of the Act. The AO denied this claim, stating the appellant failed to provide necessary details. The CIT(A) upheld the AO's decision, reasoning that electricity generation does not constitute manufacturing or production of any article or thing under the newly inserted Section 2(29BA) of the Act. The appellant argued that the definition of manufacturing in Section 2(29BA) was not applicable to AY 2007-08 and that electricity should be considered an article or goods.

3. Determination of Whether Electricity is an Article or Goods:
The core issue was whether electricity generated by the windmill constitutes an article or goods. The appellant relied on the Tribunal's decision in the case of Shiva Cargo Movers Ltd. and the Supreme Court's judgment in CST Vs. M.P. Electricity Board, which held that electricity is an article or goods. The Tribunal agreed with the appellant, stating that electricity is indeed an article or goods within the meaning of Section 32(1)(iia) of the Act.

4. Applicability of Section 2(29BA) to AY 2007-08:
The CIT(A) applied Section 2(29BA) retrospectively to deny the additional depreciation claim. However, the Tribunal noted that these provisions were not applicable to AY 2007-08, as they were introduced with effect from 01.04.2009. Thus, the CIT(A) erred in applying these provisions to the current assessment year.

Tribunal's Decision:
The Tribunal concluded that electricity generated by the windmill constitutes an article or goods, thereby allowing the appellant's claim on this part. However, regarding the appellant's eligibility for additional depreciation, the Tribunal referred to the Chennai Bench's decision in Shiva Cargo Movers Ltd., which stated that additional depreciation is allowable only if the assessee was already engaged in the business of manufacturing or production of an article or thing. Since the appellant was engaged in construction and not in manufacturing or production prior to the installation of the windmill, the Tribunal upheld the CIT(A)'s decision to deny the additional depreciation.

Conclusion:
The Tribunal dismissed the appeal, confirming the CIT(A)'s decision to deny additional depreciation on the windmill and uphold the income assessed by the AO. The Tribunal pronounced the order on May 1, 2013.

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