A company, manufacturing rubber products and which already owned windmills, put up an additional windmill in the previous year relevant to Asst. Year 2003-04. Electricity generated is both captively used by it in its manufacturing activity and also sold to State Electricity Board. During the year, there was increase in installed capacity of rubber products by more than 20% over last year. By this, it claimed additional depreciation of 15% u/s 32(1)(iia) on all the eligible assets, including new windmill. The A.O disallowed additional depreciation on the windmill on the following grounds: (1) Eletricity produced is not an “article or thing” as contemplated in Sec. 32(1)(iia) (2) Even if so, electricity has been captively used (meaning that it wont tantamount to manufacture or production). (3) Increase in production of 20% over last year’s as required in the section should be applied even for the electricity.
Is A.O’s stand sustainable? Any decision or material to support the case may also be quoted.
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