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TMI Blog2012 (7) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year. The total cost of the wind mill was Rs. 1,58,00,000/- and it was commissioned on 27.03.2005. Since wind mill was used for less than 180 days, depreciation was claimed at 50% of the normal rate. Assessee also claimed additional depreciation under Section 32(1)(iia) of Rs. 11,85,000/- on such wind mill. However, Assessing Officer was of the opinion that such additional depreciation could not be allowed since wind energy undertaking of the assessee could not be treated as an undertaking engaged in manufacture of article or thing. Further, as per the Assessing Officer original business of the assessee was not manufacturing or producing any article or thing, but only transporting spirit and molasses. In this view of the matter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been already in the line of production or manufacturing for claiming such a benefit. This was available even for an undertaking which had newly started production. Even otherwise assessee was already in business, though it was transportation of spirit and molasses. Reliance was placed on the decision of coordinate Bench of Tribunal in the case of M/s. Sheela Clinic in ITA No. 480/Mds./2011 dated 30.05.2011 in support of this contention. 5. Per contra, Departmental Representative submitted that assessee had to be engaged in the business of manufacture or production of any thing or article and in the course of such business, it should have acquired machinery and plant for being eligible for additional depreciation on such new plant or machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not in a business of manufacture or production, would still be eligible for additional depreciation on a new industrial undertaking established by it. Undisputedly, the wind mill, which was newly erected, had started production of electricity only during the relevant previous year. To resolve the question whether it is necessary that an assessee must be engaged in a business of manufacture or production when making a claim for additional depreciation on new machinery and/or new industrial undertaking, we have to make a careful analysis of Sec. 32(1)(iia) prior to its substitution by Finance Act 2005 with effect from 01.04.06. The said clause stood as under there:- '(iia) in the case of any new machinery or plant (other than ships and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r;] Provided that no deduction shall be allowed under clause (A) or, as the case may be, clause (B) of the first proviso unless the assessee furnishes the details of machinery or plant and increase in the installed capacity of production in such form, a may be prescribed along with the return of income and the report of an accountant, as defined in the Explanation below sub-section (2) of section 288 certifying that the deduction has been correctly claimed in accordance with the provisions of this clause. Explanation - For the purposes of this clause,- (1) "new industrial undertaking" means an undertaking which is not formed,- (a) by the splitting up, or the reconstruction, of a business already in existence; or (b) by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture 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 increase in capacity will not be applicable. Legislature thus envisaged two situations. One where the addition of plant and machinery resulted in an altogether new line of business, than one already carried on by the assessee, where Proviso (A) is applicable, and the second where on account of addition of plant and machinery, production capacity increased in same line of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which was acquired and installed upto 31st March, 2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a windmill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not gemane to the specific provision contained in s. 32(1)(iia) of the Act." The judgment will clearly imply that assessee necessarily had to have a line of manufacturing or production, though operational connectivity was not required. Here, the assessee 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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