ACIT, Trichy V. M/s. Atlas Financial Services (P) Ltd., Karur

ITA 122/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6304 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 122/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(1) TRICHY. VS M/S. ATLAS FINANCIAL SERVICES (P) LTD., 29-J, PUGALUR ROAD, KARUR. PAN:AAACA5651N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. GURU BHASHYAM, JCIT /RESPONDENT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 5 TH MAY, 2014 /DATE OF PRONOUNCEMENT : 20 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRA PPALLI DATED 7.10.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION UNDE R SECTION ITA NO.122/MDS/2014 2 32(1)(IIA) OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED ADDITIONAL DEPRECIATION C LAIMED UNDER SECTION 32(1)(IIA) OF THE ACT BY THE ASSESSEE ON THE GROUND THAT ASSESSEE MUST BE ENGAGED IN MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND SINCE THE AS SESSEE IS ENGAGED IN GENERATION OF WIND POWER IT IS NOT AMOUN TED TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING A ND THEREFORE NOT ENTITLED FOR ADDITIONAL DEPRECIATION. ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CL AIM OF THE ASSESSEE. 3. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND ALSO PLACES RELIANCE ON THE D ECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHIVA CARGO MOVERS LTD. VS. DCIT (53 SOT 44) . 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON T HE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF ITO VS. ER.R.RAMASAMY IN ITA NOS.162 AND 163/MDS/20 14 DATED 9.4.2014, COPY OF WHICH IS PLACED ON RECORD. ITA NO.122/MDS/2014 3 5. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON. THE ASSES SEE IN THIS CASE IS INTO THE BUSINESS OF TRADING IN SHARES, SE CURITIES, AND TEXTILE GOODS. THE ASSESSEE COMPANY HAS INSTALLED W INDMILL DURING THIS ASSESSMENT YEAR AND CLAIMED NORMAL DEPRECIATION AND ALSO ADDITIONAL DEPRECIATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT WINDMILL CONVERTS ENER GY FROM ONE FORM INTO ANOTHER FORM OF ENERGY AND THERE IS NO MA NUFACTURE OF ANY ARTICLE OR THING WHICH IS A PRE-CONDITION F OR ALLOWING ADDITIONAL DEPRECIATION AND THEREFORE NOT ENTITLED FOR ADDITIONAL DEPRECIATION. THE COMMISSIONER OF INCOME TAX (APPEA LS) REFERRING TO THE DECISIONS OF HONBLE MADRAS HIGH C OURT IN THE CASE OF M/S. VTM LTD. AND CIT VS. HITECH ARAI LTD . ALLOWED THE CLAIM OF THE ASSESSEE. ON A PERUSAL OF THE CO-O RDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ER.R.RAMASAMY (SUPRA), WE FIND THAT THIS TRIBUNAL HELD THAT GENE RATION OF ELECTRICITY THROUGH WINDMILL IS MANUFACTURE OR PR ODUCTION OF AN ARTICLE OR THING FOR THE PURPOSE OF ALLOWING ADD ITIONAL DEPRECIATION. WHILE HOLDING SO, THE TRIBUNAL OBSERV ED ASUNDER:- ITA NO.122/MDS/2014 4 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISIONS ON WHICH THE LD.COUNSEL HAS PLACED RELIAN CE. WE FIND THAT THE ISSUE WHETHER THE ASSESSEE IS ENG AGED IN THE MANUFACTURE/PRODUCTION OF ARTICLES OR THINGS BY GENERATION OF ELECTRICITY THROUGH WIND MILL HAS BE EN DEALT WITH BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. M.SATISHKUMAR (SUPRA). THE TRIBUNAL IN THE SAID CASE HAS HELD AS UNDER: 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RESPECTIVE PARTIES AND HAVE ALSO EXAMINED THE JUDGEMENTS ORDERS RELIED ON BY THE A.R. OF THE ASSESSEE. A PERUSAL OF THE JUDGEMENTS CLEARLY SHOW THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTU RING OF A NEW PRODUCT. IN THE INSTANT CASE, ELECTRICITY WHICH MAY NOT BE SEEN WITH THE EYES, HOWEVER, ITS EFFECT CAN BE SEEN AND FELT. THE ELECTRICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HONBLE SUPREME COURT IN THE CASE OF THE CST VS. MADHYA PRADESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHI N THE DEFINITION OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT, 1930. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF SEVERAL JUDGEMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCLUDED THAT THE PROCE SS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OF AN ARTICLE OR THING. 10. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT GENERATION OF ELECTRICITY IS A MANUFACTURING ACTIVITY. THE ASSESSEE IS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLS THE CONDITI ONS AS LAID DOWN UNDER SECTION 32(1)(IIA). THE GOVERNMENT VIDE FINANCE ACT, 2012 HAS AMENDED THE PROVISIONS OF SECTION 32(1)(IIA) TO INCLUDE THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER, ELIGIBLE FOR BENEFIT UNDER SECTION 32(1)( IIA). ALTHOUGH THE SAID AMENDMENT IS WITH EFFECT FROM 1.4.2013 BUT IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURING PROCES S AND QUALIFIES FOR THE BENEFITS UNDER SECTION 32(1)( IIA). IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS ITA NO.122/MDS/2014 5 UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. THE ISSUE IN PRESENT APPEAL IS SIMILAR TO THE ONE A LREADY ADJUDICATED BY THE TRIBUNAL IN THE CASE OF ACIT VS. M.SATISHKUMAR (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. THE DECISION RELIED ON BY THE DEPARTMENTAL REPRESENTATIVE IN THE CASE OF SHIVA CARGO MOVERS L TD. (SUPRA) HAS NO APPLICATION TO THE CASE OF THE ASSE SSEE AS THE DECISION IN THE CASE OF SHIVA CARGO MOVERS LTD . (SUPRA) WAS RENDERED PRIOR TO THE AMENDMENT OF SECTION 32(1 )(IIA) AND WAS RELEVANT TO THE ASSESSMENT YEAR 2005-06. CLAUSE (IIA) OF SECTION 32 WAS SUBSTITUTED BY THE FINANCE ACT, 2005 WITH EFFECT FROM 1.4.2006 WHEREIN THE FIRST PROVISO AND THIRD PROVISO WERE REMOVED FROM THE STATUTE. FIRST PROVIS O AS PER THE PRE-AMENDED CLAUSE (IIA) REQUIRES TO SET UP NE W INDUSTRIAL UNDERTAKING OR TO ACHIEVE SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY BY NOT LESS THAN TEN PERCENT SO AS TO BE ELIGIBLE FOR THE CLAIM OF ADDITIONAL DEPRE CIATION. HOWEVER, THIS CONDITION IS NOT THERE IN THE POST-AM ENDED PROVISIONS OF CLAUSE (IIA) OF SECTION 32 WITH EFFEC T FROM 1.4.2006. IN SUCH CIRCUMSTANCES, THE DECISION IN TH E CASE OF ITA NO.122/MDS/2014 6 SHIVA CARGO MOVERS LTD (SUPRA) RENDERED PRIOR TO T HE AMENDED PROVISIONS OF CLAUSE (IIA) OF SECTION 32 H AS NO RELEVANCE. FROM PLAIN READING CLAUSE (IIA) OF SECTI ON 32 OF THE ACT WHICH IS SUBSTITUTED WITH EFFECT FROM 1.4.2006, WE DO NOT SEE ANY REQUIREMENT OF THE ASSESSEE TO BE ALREADY I NTO THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING PRIOR TO INSTALLATION OF WINDMILL SO AS TO CLAIM AD DITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. IN THE CIRCUMSTANCES OF THE CASE, WE FOLLOW THE DECISIONS OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ER.R.RAMASAMY (SUPRA) AND ACIT VS. M.SATISH KUMAR 1 9 ITR (TRIB) 646 WHICH ARE RENDERED FOR THE ASSESSMEN T YEAR 2007-08 AND 2008-09 WHICH ARE POST-AMENDED PROVISIO NS OF CLAUSE (IIA) TO SECTION 32 OF THE ACT. THUS, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS OF REVENUE. ITA NO.122/MDS/2014 7 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEN DRA PRASAD ) . ( & () ) ACCOUNTANT MEMBER / + JUDICIAL MEMBER/ ( + ( /CHENNAI, , /DATED, 20 TH JUNE, 2014 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .