Can additional depreciation under section 32(1)(iia) of the Income-Tax Act on setting up of a windmill by an assessee manufacturing textile goods ?

Can additional depreciation under section 32(1)(iia) of the Income-Tax Act  on setting up of a windmill  by an assessee manufacturing textile goods ?

Case: CIT v. VTM Limited (2009) 319 ITR 336 (Mad.)

The assessee is a company engaged in the business of manufacture of textile goods. It claimed additional depreciation on the setting up of wind mills for generation of power. The Revenue contended that the setting up of a windmill for generation of power had absolutely no connection with the business of the company i.e. for the manufacture of textile goods, and, therefore, the company was not entitled to claim the additional depreciation under section 32(1)(iia).

The High Court held that in order to claim the benefit of section 32(1)(iia), what is required to be satisfied is that the new machinery or plant should have been acquired and installed after March 31, 2002 (March, 31, 2005, as per the amended provisions), by an assessee, who was already engaged in the business of manufacture or production of any article or thing.

 

 The provision does not state that the setting up of a new machinery or plant should have any operational connectivity to the article or thing that is already being manufactured by the assessee. Hence, it was held that the assessee is entitled to additional depreciation on setting up of a wind mill.