Additional depreciation under Section 32(1)(iia) allowed for post-31-03-2002 windmills used for captive use and sale

HC dismissed the appeals, holding additional depreciation under Section 32(1)(iia) is allowable for windmills installed after 31-03-2002. The court found windmills constitute "new machinery or plant" even though the assessee's main business was not power generation; no requirement exists that the new plant be operationally connected to the article previously manufactured. The Tribunal had correctly applied the law despite earlier contrary coordinate-bench decisions, and the installation of two additional windmills (raising capacity by over 50%) used for captive consumption and sale warranted the relief.

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The case involves the Madras High Court judgment delivered by F. M. Ibrahim Kalifulla and Mrs. R. Banumathi, JJ. The Revenue raised substantial questions of law regarding the entitlement to additional depreciation on the purchase of Wind Mills, the correctness of allowing depreciation under Section 32(1)(iia) for assessment years 2003-2004 and 2004-2005, and the consideration of a Co-ordinate Bench judgment. The Revenue also questioned whether new machinery is eligible for additional depreciation, or if only machinery used in the main business qualifies for the exemption under Section 32(1)(iia). The Court dismissed the appeals, stating that the Tribunal correctly applied the law in allowing the additional depreciation claimed under Section 32(1)(iia). The Court found that the setting up of wind mills by the assessee, a company engaged in manufacturing and power generation, met the criteria for additional depreciation, as the provision does not require operational connectivity between the new machinery and the existing business. Therefore, the Court upheld the Tribunal's decision, dismissing the appeals and confirming the order of the Commissioner of Income-tax (Appeals). The Court found no substantial question of law to entertain the appeals.

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