TaxTMI 
TaxTMI 
2013 (5) TMI 353
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....iation and additional depreciation on the Windmill @ 100% ie @ 80% towards normal depreciation and @ 20% towards additional depreciation. The windmill was purchased after September 2006 and therefore, assessee claimed the half of the eligible depreciation. AO allowed the claim of normal depreciation and however, he denied the claim relating to the additional depreciation for want of details from the assessee side. During the first appellate proceeding, assessee submitted that the AO is wrong in mentioning that details were not furnished and relied the details furnished by him vide his letter dated 18.11.2009 which was not considered by the AO. Considering the principles of natural justice, CIT(A) remanded the matter to the AO, who submitted a remand report dated 03.02.2011. In the remand report, AO reasoned that the production of electricity using the said windmill does not amount to manufacturing or production of any good or article or thing. In this regard, he relied on the newly inserted provisions of section 2(29BA) of the Act relating to the definition of "manufacture" and mentioned that claim of additional depreciation U/s 32(1)(iia) is untenable. In the counter to the remand....
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....tents of para-6 for the proposition that electricity generated by the windmill constitutes manufacturing activity of an article or goods. Ld Counsel also relied on Apex Court's judgment in the case of CST Vs. M.P. Electricity Board AIR 1970 SC 732 in this regard. 6. Thus, the case of the assessee as per its Counsel is that the windmill has to be considered as an industrial undertaking and the electricity generated by use of the windmill constitutes manufacturing and production of an article or goods. Further, referring to the same decision of the Chennai Bench in the case of Shiva Cargo Movers Ltd, Learned counsel fairly mentioned the claim of addition depreciation was not allowed in that case considering the fact that assessee who was engaged in the business of transport of spirit and molasses was not considered engaged in the manufacture of article or a thing which is requirement of Section 32(1)(iia) of the Act. Mentioning to the said decision, Ld Counsel mentioned fairly that unless the assesee is already "engaged" in manufacturing activity, the additional depreciation is not allowed. Ld. Counsel questioned this line of interpretation of the provisions of Section 32(1)(iia) ....
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....djudication i.e. (a) if the electricity constitutes an good, article or thing out of manufacturing activity using Wind Mill; and (b) if the assesee meets the meaning of the expression "engaged". 10. On the issue whether, electricity is a goods or not? We have perused the decision of the Tribunal in the case of Shiva Cargo Movers Ltd. (supra) and find that para-6 of the said decision is relevant and same reads as under:- "6. We have perused the orders of the authorities below and heard the rival contentions. The fact is not in dispute that prior to the installation of the windmill, assessee was doing only the business of transportation of spirit and molassess. In our opinion, there can be no quarrel with the submission of the Authorized Representative that production of electricity will amount to manufacture or production of any article or thing. No doubt the Assessing Officer, took a view that electricity cannot be considered as article or thing resulting out of manufacture or production. We are of the opinion that this view cannot be accepted since it will be a narrow interpretation not warranted by the wordings of the provision. Hon'ble Supreme Court in the case of CST Vs. ....
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.... which is engaged in the business of manufacture or production. Question now is whether in such a situation proviso (A) would become otiose. Addition of plant and machinery in an already existing unit, for claiming additional depreciation would have to result in substantial expansion of the installed capacity by not less than ten per cent as per proviso (B). The condition regarding existence of a business of manufacture or production of any article or thing will be ordinarily relevant and applicable only where additional depreciation claim is for plant and machinery resulting in substantial expansion of capacity. To bring in a harmonious interpretation, the only sense in which Proviso (A) can be understood is that as a result of new plant and machinery being installed by an assesee, who is already engaged in manufacture or production, a new industrial undertaking itself should have come into existence. Or in other words, in addition to the already existing line of manufacture or production of an article or thing, a new industrial undertaking should have resulted from the acquisition of plant and machinery. In such a case, Proviso (B) which stipulate substantial expansion by way of ....
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....facturing or production, though operational connectivity was not required. Here, the assesee was not into any business of manufacture or production but only transportation of molasses and spirit. Thus, the first condition in the enacting provision, that assesee has to be engaged in the business of manufacture or production of an article or thing is not satisfied. The progress stops there. The application stops there. As for the decision of Co-ordinate Bench in the case of Sheela Clinic ( supra ) there it was held the assesee was already running a hospital and claim of additional depreciation on windmill was indeed allowed. What would have weighed with the Co- ordinate Bench might be that a hospital could be considered as an industrial undertaking engaged in some manufacture or production of article or thing. Here the assesee was only doing transport of spirit and molasses and therefore, that case will not in any way held its cause. We therefore, are of the considered opinion that assesee was not eligible for claiming additional depreciation under Section 32(1)(iia) of the Act. Lower authorities were correct in taking this view." 13. The decision of the Tribunal in the case of Sh....