ITO, Karur V. ER. R. Ramasamy, Karur

ITA 163/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6220 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 162 & 163/MDS/2014 ASSESSMENT YEARS : 2007-08 & 2008-09 INCOME TAX OFFICER, WARD-I(2), KARUR ( !% /APPELLANT) VS ER.R. RAMASAMY, NO.67, WEST PRADHAKSHNAM ROAD, KARUR [PAN: AAEPR 09112 R] ( &'!% /RESPONDENT) / APPELLANT BY : SHRI T.N.BETGERI, JCIT / RESPONDENT BY : SHRI R.VIJAYARAGHAVAN, ADV. / DATE OF HEARING : 09-04-2014 / DATE OF PRONOUNCEMENT : 09-04-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEALS HAVE BEEN FILED BY THE REVENUE FOR THE TWO ASSESSMENT YEARS (AYS) 2007-08 & 2008-09 AGAINST TH E ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS), TIRUCHIRAP ALLI FOR THE RESPECTIVE AYS. SINCE COMMON ISSUES ARE INVOLVED I N BOTH THE AYS, BOTH THE APPEALS ARE TAKEN UP TOGETHER FOR ADJ UDICATION. THE ISSUES RAISED IN APPEALS BY THE REVENUE ARE: ITA. NOS. 162 & 163/MDS/2014 2 I. FOR CLAIMING ADDITIONAL DEPRECIATION U/S. 32(1)( II) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT), THE ASSESSEE HAS NOT SATISFIED THE CONDITION OF ENGAGING IN THE BUSINESS OF MANUFACTURE OR PRODUCTI ON OF ANY ARTICLE OR THING; II. IN ERECTION OF WIND MILL, THE WIND MILL AND ELE CTRICAL WORKS ARE TWO SEPARATE COMPONENTS, WHEREAS, THE CIT(APPEALS) HAS ERRED IN CONSIDERING THEM AS SINGL E UNIT. 2. THE ASSESSEE FOR THE AY.2007-08, FILED HIS RETUR N OF INCOME ON 20-10-2007 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISSUED TO THE ASSESSEE ON 15-09-2008. THE ASSESSING OFFICER DIS- ALLOWED ADDITIONAL DEPRECIATION OF 20% CLAIMED BY THE ASSES SEE ON WIND MILL. THE ASSESSING OFFICER FURTHER RESTRICTED THE RATE OF DEPRECIATION ON CIVIL WORKS ON ELECTRICAL FITTINGS TO 10% AS AGAINST 80% CLAIMED BY THE ASSESSEE. 3. SIMILARLY, FOR THE AY.2008-09, THE ASSESSEE FILE D RETURN OF INCOME ON 18-09-2008 DECLARING NIL INCOME AND AGR ICULTURAL ITA. NOS. 162 & 163/MDS/2014 3 INCOME OF ` 2,50,000/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS, THE ASSES SING OFFICER RESTRICTED THE DEPRECIATION ON CIVIL WORKS AND ELEC TRICAL WORKS TO 10% AS AGAINST 80% CLAIMED BY THE ASSESSEE. AGGRIEVED AGAINST THE ASSESSMENT ORDER FOR THE RES PECTIVE AYS, THE ASSESSEE FILED APPEALS BEFORE THE CIT(APPE ALS). THE CIT(APPEALS) ALLOWED THE APPEALS OF THE ASSESSEE. AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS) FOR THE AYS.2007-08 & 2008-09, THE REVENUE HAS COME IN APPE AL BEFORE THE TRIBUNAL. 4. SHRI T.N.BETGERI, APPEARING ON BEHALF OF THE REV ENUE VEHEMENTLY OPPOSED THE ORDER OF CIT(APPEALS) AND PR AYED FOR THE RESTORATION OF THE FINDINGS OF THE ASSESSING OFFICE R. 5. ON THE OTHER HAND, SHRI R.VIJAYARAGHAVAN, APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ISSUE IN APPEAL RELATING TO CONDITIONS TO BE FULFILLED FOR CLAIMING ADDITION AL DEPRECIATION U/S.32(1)(II) HAS BEEN ADJUDICATED BY THE TRIBUNAL IN THE CASE OF ITA. NOS. 162 & 163/MDS/2014 4 ACIT VS. M.SATISHKUMAR REPORTED AS 19 ITR (TRIB) 646 (CHENNAI). THE SECOND ISSUE REGARDING RATE OF DEPRECIATION ON CIVIL WORKS AND ELECTRICAL FITTINGS HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF R.RAMANATHAN VS. DCIT (ITA NO.350/MDS/10) DECIDED ON 11-08-2011. THE LD.COUNSEL PLACED ON RECORD THE COP Y OF AFOREMENTIONED DECISIONS. 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 DECI SIONS ON WHICH THE LD.COUNSEL HAS PLACED RELIANCE. WE FIND THAT T HE ISSUE WHETHER THE ASSESSEE IS ENGAGED IN THE MANUFACTURE/ PRODUCTION OF ARTICLES OR THINGS BY GENERATION OF ELECTRICITY THR OUGH WIND MILL HAS BEEN DEALT WITH BY THE CO-ORDINATE BENCH OF THE TRI BUNAL IN THE 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 RESPE CTIVE PARTIES AND HAVE ALSO EXAMINED THE JUDGEMENTS ORDER S RELIED ON BY THE A.R. OF THE ASSESSEE. A PERUSAL OF THE JU DGEMENTS CLEARLY SHOW THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURING OF A NEW PRODUCT. IN THE INSTANT CASE , ELECTRICITY ITA. NOS. 162 & 163/MDS/2014 5 WHICH MAY NOT BE SEEN WITH THE EYES, HOWEVER, ITS E FFECT CAN BE SEEN AND FELT. THE ELECTRICITY CAN BE TRANSMITTE D, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HONBLE SUPREME COURT IN THE CASE OF THE CST VS. MADHYA PRA DESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITION OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT, 1930. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE O F NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF SEVERA L JUDGEMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCLU DED THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MAN UFACTURE OF AN ARTICLE OR THING. 10. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT GENERATION OF ELECTRICITY IS A MANUFACTURING ACTIVI TY. THE ASSESSEE IS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLS THE CONDITIONS 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 BUS INESS OF GENERATION OR GENERATION AND DISTRIBUTION 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 T O THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURING P ROCESS AND QUALIFIES FOR THE BENEFITS UNDER SECTION 32(1)(IIA) . IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS UPHELD AND THE AP PEAL 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 ITA. NOS. 162 & 163/MDS/2014 6 (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THIS GRO UND OF APPEAL OF THE REVENUE IS DISMISSED. 7. THE NEXT ISSUE IN APPEAL IS WITH REGARD TO RATE OF DEPRECIATION ON CIVIL AND ELECTRICAL FITTINGS. WE FIND THAT THIS ISSUE HAS ALSO BEEN DEALT WITH IN THE CASE OF R.RAMANATHAN VS. DCIT (SUPRA), WHEREIN THE TRIBUNAL HAS HELD THAT WIND MILLS ARE FABRICATE D/ERECTED ON A SPECIALIZED FOUNDATION AND THE CIVIL AND ELECTRICAL COMPONENTS OF THE STRUCTURE ARE INDIVISIBLE PARTS OF THE WIND MIL L PARTS AS A WHOLE. AS SUCH, THE CIVIL AND ELECTRICAL COMPONENTS OF THE WIND MILL STRUCTURE CANNOT BE DIS- ASSOCIATED FROM THE SOLE A ND SUBSTANCE OF THE WIND MILL AND CANNOT BE GIVEN A SEPARATE TREATM ENT FOR DEPRECIATION. THE TRIBUNAL PLACED RELIANCE ON THE DECISION OF M/S.ASIAN HANDLOOMS VS. DCIT (ITA NO.2291/MDS/2008) DECIDED ON 20-11-2009 AND DIRECTED THE ASSESSING AUTHORITY TO GRANT DEPRECIATION @ 80% ON THE WHOLE COST OF WIND MILL I NCLUDING CIVIL AND ELECTRICAL COMPONENTS. IN VIEW OF THE ABOVE DECISIONS OF THE TRIBUNAL, WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE LD.DR. ACCORDI NGLY, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. ITA. NOS. 162 & 163/MDS/2014 7 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 09 TH APRIL, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIKAS AWAS THY) ( . . . ) ( ! ) / VICE PRESIDENT ! '# / JUDICIAL MEMBER $ /CHENNAI, %'& /DATED: 09 TH APRIL, 2014 TNMM ''(!)*+* /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. ' ' ,-. /CIT(A) 4. ' ' , /CIT 5. */0!!12 /DR 6. 0345 /GF