By TIOL News Service

AHMEDABAD, MAR 15, 2017: THE ISSUE IS - Whether once the acquisition & establishment of the windmill is established, the additional depreciation on the cost of such windmill u/s 32(1)(iia) is allowable. YES is the verdict.

Facts of the case:

The assessee engaged in the business of manufacturing ceramic glaze tiles, had set up an industrial unit for production of ceramic glaze tiles. It had also installed windmill through which the production of electricity was done, and consequently it claimed additional depreciation u/s 32(1)(iia) of Rs.1,33,96,265/- at 10% on the cost of windmill. The AO denied the same by observing that as the plant and machinery of windmill was controlled by GEB and even the electricity generated through the windmill was also used by GEB, it could not be said that the plant and machinery so installed was owned by the assessee. Consequently, the AO denied the additional depreciation by observing that one of the condition provided u/s 32(1)(iia) that the plant and machinery for which additional depreciation was claimed must be owned by the assessee has not been fulfilled. The AO also observed that the assessee could not be said to be in the business of generating of electricity by installing the windmill. On appeal, the CIT(A) held that the assessee was entitled to additional depreciation as claimed on the cost of windmill acquired and installed by the assessee.

On appeal, the HC held that,

++ so far as the contention on behalf of the revenue that the assessee cannot be said to be engaged in the business of generation of electricity, and therefore, the assessee is not entitled to additional depreciation on such windmill is concerned, the same has no substance. Considering Section 32(1)(iia), what is required to be seen is whether any plant and machinery of windmill has been installed and acquired by the assessee or not and for which the assessee has invested and /or incurred the expenses or not. Once the same is established that the Company has acquired and established the windmill /plant and machinery, the assessee is entitled to the additional depreciation on the cost of such windmill u/s 32(1)(iia).

(See 2017-TIOL-493-HC-AHM-IT)