Commissioner of Income Tax-I vs Diamines and Chemicals Ltd.

M.R. Shah, J.—Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ''ITAT'') dated 10/05/2013 in ITA No. 409/Ahd/2013 for the Assessment Year 2007-08, the revenue has preferred the present Tax Appeal with the following substantial question of law:

Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in law in deleting the addition of Rs. 1,17,98,030/- on account of disallowance of additional depreciation on wind electric generator without appreciating that the wind electric generator does not result into manufacture or production or article or thing, but it is used to generate electricity and that the basic criteria to get additional depreciation under Clause (iia) of Section 32(1) of the Act is that the plant and machinery should be covered under Clause (ii) of Section 32(1) of the Act, whereas wind electric generator is classified as per Clause (i) of Section 32(1) of the Act?

The assessee is a Company mainly engaged in the business of manufacture and sale of various specialty in chemicals. The assessee filed its return of income for the year under consideration declaring the total income of Rs. 11,21,743/-. Thereafter, a revised return of income was filed declaring the loss of Rs. 33,13,525/-. The return of the assessee was selected for scrutiny. The assessee claimed deduction u/s 32(1)(iia) of the income tax Act, being the cost incurred for installing various wind-mills for generation of electricity. The Assessing Officer framed the assessment u/s 143(3) of the income tax Act and vide order dated 03/11/2009 the return submitted by the assessee declaring the total loss of Rs. 33,13,525/- came to be accepted. Thereafter, the assessment was reopened and the assessment was framed u/s 143(3) read with Section 147 of the income tax Act and vide order dated 05/12/2011 the total income came to be determined at Rs. 86,17,396/-.

1.1 Being aggrieved and dissatisfied with the assessment u/s 143(3) read with Section 147 of the income tax Act dated 05/12/2011, the assessee preferred appeal before the CIT(A) and considering the decisions of Madras High Court in the case of Commissioner of Income Tax Vs. VTM Limited, and in the case of The Commissioner of Income Tax Vs. Hi Tech Arai Limited, the CIT(A) deleted the addition of Rs. 1,17,98,030/- on account of disallowance of Wind Electric Generator and held that the assessee will be entitled to deduction as claimed u/s 32(1)(iia) of the income tax Act.

1.2 Being aggrieved and dissatisfied with the order passed by the CIT(A), the revenue preferred appeal before the ITAT and by impugned judgment and order the ITAT has dismissed the appeal preferred by the revenue confirming the order passed by the CIT(A) deleting the addition of Rs. 1,17,98,030/-.

1.3 Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present Tax Appeal with the aforesaid proposed substantial question of law.

Heard Shri K.M. Parikh, learned Counsel appearing on behalf of the revenue and perused the impugned judgment and order passed by the ITAT. At the outset, it is required to be noted that the assessee claimed the deduction u/s 32(1)(iia) of the income tax Act with respect to the cost incurred by it for installation of the Wind Electric Generator. The Assessing Officer disallowed the same and made the addition of Rs. 1,17,98,030/- by observing that as the assessee is not in the business of generation and distribution of power, the assessee shall not be entitled to deduction u/s 32(1)(iia) of the income tax Act of Rs. 1,17,98,030/-. The said addition has been deleted by the CIT(A) relying upon the decisions of the Madras High Court in the case of VTM Ltd. (Supra) and in the case of Hi Tech Arai Ltd. (Supra). In both the aforesaid decisions, the Madras High Court had an occasion to consider the similar issue and it is held that while claiming the deduction u/s 32(1)(iia) of the income tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. Considering the aforesaid facts and circumstances and considering the relevant provisions of Section 32(1)(iia) of the income tax Act, which was prevailing at the relevant time, i.e. during the year under consideration, it cannot be said that the ITAT by applying the ratio of decision of the Madras High Court in the case of VTM Ltd. (Supra) and in the case of Hi Tech Arai Ltd. (Supra) has committed any error in deleting the addition of Rs. 1,17,98,030/- on account of disallowance of additional depreciation of Wind Electric Generator. We see no reason to interfere with the impugned judgment and order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.