Additional depreciation on new wind mills depends on installation and manufacturing business, not operational nexus with existing products.

Section 32(1)(iia) allows additional depreciation for new machinery or plant acquired and installed after 31 March 2002 by an assessee engaged in manufacture or production of articles or things. The provision does not require a direct operational nexus between the newly installed machinery and the assessee's existing manufactured product. On that interpretation, wind mills installed to expand power generation capacity qualify as new plant for the allowance.

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Issues: Whether additional depreciation under Section 32(1)(iia) of the Income-tax Act, 1961 was allowable on new wind mills installed by an assessee engaged in manufacture of articles or things, and whether such allowance depended upon operational connectivity between the new machinery and the assessee's existing manufacturing business.

Analysis: Section 32(1)(iia) applies where new machinery or plant is acquired and installed after 31 March 2002 by an assessee engaged in the business of manufacture or production of any article or thing. The provision does not impose any requirement that the newly installed machinery must have a direct operational nexus with the particular manufactured product of the assessee's existing business. The installation of additional wind mills increased the assessee's power generation capacity and constituted acquisition and installation of new plant within the meaning of the provision. A contrary view taken by an earlier co-ordinate bench did not compel departure from the correct interpretation of the statute.

Conclusion: The assessee was entitled to additional depreciation on the wind mills, and the Revenue's challenge failed.

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