Supreme Court Upholds Additional Depreciation for Electricity Generation under Income Tax Act

The Supreme Court dismissed the Revenue's appeal against the disallowance of additional depreciation claimed by the assessee for Assessment Year 2011-2012. The Court held that electricity generated by the assessee qualifies as an article or thing, making it eligible for additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961. The Court emphasized that electricity possesses the necessary attributes of movable property, aligning with the requirements for the benefit. The amendment effective from 01.04.2013 explicitly included assessees engaged in power generation under Section 32(1)(iia), leading to the dismissal of the Revenue's appeal.

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Issues:
1. Disallowance of additional depreciation claimed by the respondent/assessee for Assessment Year 2011-2012.

Detailed Analysis:

1. The appeal by the Revenue under Section 260A of the Income Tax Act, 1961 was against the order of the Income Tax Appellate Tribunal dismissing the Revenue's appeal regarding the disallowance of additional depreciation claimed by the respondent/assessee for Assessment Year 2011-2012.

2. The Assessing Officer raised a query regarding the assessee's claim for additional depreciation under Section 32(1)(iia) of the Act, contending that such deduction was permissible only if the assessee was engaged in the production of any article or thing which, according to the AO, did not include the generation of power.

3. The Assessing Officer disallowed the additional depreciation, stating that it could be claimed only by an assessee producing something tangible or movable. The CIT(A) allowed the assessee's appeal, following a Tribunal order in a similar case.

4. The Karnataka High Court's judgment in a related case highlighted that electricity generated by the assessee company falls within the definition of an article or thing, making it eligible for additional depreciation. The Supreme Court's judgment also recognized electricity as goods for the purposes of sales tax.

5. The Tribunal's judgment in another case confirmed that electricity has the necessary attributes of articles or things, justifying the grant of additional depreciation to generating entities. The Court agreed that denying the benefit based on electricity not being an article or thing was restrictive.

6. The Court noted that an amendment from 01.04.2013 expressly included assessees engaged in power generation under Section 32(1)(iia). Consequently, the Court found no substantial question of law and dismissed the appeal by the Revenue.

7. In conclusion, the Court upheld the grant of additional depreciation to the assessee, emphasizing that electricity's characteristics align with those of movable property, making it eligible for the benefit under Section 32(1)(iia) of the Income Tax Act, 1961.

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