Section 32 1 iia nbsp of the nbsp Income Tax Act 1961 nbsp Act for short provides that in the case of new machinery of plant other than ships and aircraft which has been acquired and installed after the 31st day of March 2002 by an assessee engaged in the business of manufacture or production of any article or thing a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause ii Such further deduction of fifteen per cent shall be allowed to a new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April 2002 or any industrial undertaking existing before the 1st day of April 2002 during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent As far as application of nbsp Sec 32 1 iia nbsp of the nbsp Act nbsp is concerned what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after March 31 2002 by an assessee who was already engaged in the business of manufacture or production of any article or thing nbsp nbsp The said provision does not state that the setting up of a new machinery or plant which was acquired and installed after March 31 2002 should have any operational connectivity to the article or thing that was already being manufactured by assessee nbsp The above view has been confirmed by the Madras High Court in two cases In Commissioner of Income Tax V Hi Tech Arai Ltd 2010 321 ITR 477 Mad the assessee is engaged in the business of manufacture of oil seeds moulded rubber parts red value assemblies apart from generation of power The assessee has set up two wind mills in addition to the already existing four wind mills and thereby increased its power generation capacity by above 50 per cent nbsp nbsp The assessee claimed additional depreciation for the new wind mills nbsp The Assessing Officer has disallowed the claim of the assessee on the ground that the assessee is basically generating the electricity by wind mills for its own consumption and it is not the business of the assessee Therefore the assessee is not entitled for additional depreciation for wind mills under nbsp Section 32 1 iia The Commissioner Appeals has allowed the claim of the assessee on the ground that it is not essential that the assessee is in the business of generation of electricity nbsp nbsp But since the assessee is generating the electricity by windmills the conditions of the law are fulfilled for claiming additional depreciation It is an undisputed fact that after addition of two units during the period relevant to the assessment year the capacity of generation of power through wind mills was enhanced by 50 per cent nbsp The Revenue being failed in the Appellate tribunal also came to High Court raising the following substantial questions of law Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in holding that the assessee is entitled to additional depreciation on the purchase of wind mills even though the main business of the assessee is not producing or generating of electricity Whether on the facts and circumstances of the case the Tribunal was right in allowing additional depreciation under nbsp Section 32 1 iia nbsp wind mill amounting to Rs 33 29 562 and Rs 37 28 824 respectively for assessment years 2003 04 and 2004 05 was proper Whether the Tribunal was right in not considering the judgment of a co ordinate Chennai Bench passed in the case of Texmo Industries which is binding on it and in favor of the Revenue Whether the new machinery or plant purchas.................

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