ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. This appeal is filed under Section 260A of the Income Tax Act, 1961 (for short “the Act”) by the Appellant-Revenue proposing the following substantial questions of law arising out from the order dated 19.5.2023 passed by the Income Tax Appellate Tribunal, Ahmedabad (for short “the Tribunal”) in ITA No.1916/Ahd/2014 for the Assessment Year 2007-08.

“(A) Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the addition of Rs.10,47,07,692/- made on account of additional depreciation u/s

32(1)(ii) of the Act?

(B) Whether on the facts and circumstances of the case and in law, the ITAT has erred in restricting the addition of Rs.5,76,368/- made u/s 14A of the I. T. Act to the extent of exempt income of Rs.

2,85,000/-

2. So far as the question “A” is concerned, the Assessing Officer made an addition of Rs.10,47,07,692/- on account of additional depreciation under Section 32(1)(iia) of the Act on the ground that the respondent assessee did not manufacture any article or things which is condition precedent for claiming the additional depreciation claimed on windmill.

3. Feeling aggrieved, the respondent-assessee preferred appeal before CIT (Appeals). CIT (Appeals) considered the facts of the case that the asssessee generated power through windmill. It was held that such electricity generation produced through windmill would amount to manufacture of an article or things and as the assessee was already in the business of production/generation of electricity which is covered under Sale of Goods Act, 1930 i.e. electricity is an article and thing and that assessee installed/commissioned windmill during previous year, the assessee was entitled to additional depreciation under Section 32(1)(iia) of the Act. It was also held that such claim made by the assessee was duly supported by filing Form No.3AA as required under the said section and the rules.

4. The CIT(Appeals) also took note that with effect from 1.4.2013 by Finance Act, 2012, provisions of Section 32(1)(iia) of the Act was amended to include the business of “generation or generation and distribution of power” being eligible for additional depreciation. The reliance was placed by the CIT(Appeals) to allow the appeal of the assessee on this issue on the decision of this Court in the case of Commissioner of Income tax -I Vs. Diamines & Chemicals Ltd.reported in [2014] 42 taxmann.com.193 (Gujarat). 5. The Tribunal has also upheld the reasoning of the CIT (Appeals) and dismissed the appeal filed by the revenue observing as under :-

“27. We have heard the rival contentions and perused the material on record. We observe that in the case of S. Srinivasaraghavan v. ACIT 139 taxmann.com 230 (Madras), the High Court held that generation of electricity by windmill should be equated to term "manufacturing or production of article or thing", and, therefore, assessee was entitled to claim additional depreciation on windmill installed as per provision of section 32(1)(iia) of the Act. The aforesaid decision was followed in assesse's own case for assessment year 2006-07 in DCIT v. Vishal Export Overseas Ltd 143 taxmann.com 305 (Ahmedabad - Trib.), wherein the ITAT Ahmedabad held that activity of generating electricity by windmill would be manufacturing in nature, thus, assessee would be eligible to claim additional depreciation with respect to windmill installed during relevant year. Accordingly, in view of the aforesaid decisions, we are of the considered view that Ld. CIT(Appeals) has not erred in fact and law allowing the appeal of the assessee on this issue.”

6. Considering the above concurrent findings arrived at by the CIT (Appeals) and the Tribunal to the effect that the respondent assessee was engaged in the business of generation of electricity which is an article and thing, the additional depreciation as per Section 32(1)(iia) is rightly allowed as held by this Court in case of Diamines & Chemica