ACIT-CENTRAL-CIRCLE-2(3), Nagpur V. SHRI PADMESH GUPTA, Nagpur

ITA 202/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1635 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 153A

Judgement Text

1 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 2 02 /NAG/2014 ASSESSMENT YEAR : 200 7 - 08 ASSTT. COMMISSIONER OF INCOME - TAX, SHRI PADMESH GUPTA, CENTRAL CIRCLE - 2(3), NAGPUR. VS. 7 TH FLOOR SHRIRAM TOWERS, KINGSWAY, NAGPUR. PAN AAEPG8809Q APPELLANT. RESPONDENT. AND C.O. NO. 0 5 /NAG/2014 (IN ITA NO. 2 02 /NAG/2014) ASSESSME NT YEAR : 200 7 - 08 . SHRI PADMESH GUPTA, ASSTT. COMMISSIONER OF NAGPUR. VS. INCOME - TAX, CENTRAL CIR.2(3) NAGPUR. CROSS OBJECTOR. RESPONDENT. DEPARTMENT BY : SHRI NARENDRA KANE. ASSESSEE BY : SHRI RAJESH LOYA. DATE OF HEARING : 2 8 - 08 - 2015 DATE OF PRONOUNCEMENT : 11 TH SEPT. , 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE RESPONDENT - ASSESSEE, BOTH EMANATE FROM AN ORDER OF LEARNED CIT(APPEALS) - II I, 2 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 NAGPUR DATED 24 - 01 - 2004. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE REVENUE DEPARTMENT. THE GROUND RAISED IS REPRODUCED BELOW: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) HAS ERRED IN DIRECTING THE ALLOWANCE OF ` .62, 59,456/ - , ON ACCOUNT OF DEPRECIATION IN RESPECT OF INTANGIBLE ASSETS, IN THE FORM OF GENERATION OF ELECTRICITY? 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 153A DATED 28 - 12 - 2011 WERE THAT THE A SSESSEE IN INDIVIDUAL CAPACITY HAS FILED THE RETURN OF INCOME AT ` .85,85,467 / - . DURING THE COURSE OF PROCEEDINGS IT WAS NOTICED BY THE AO THAT IN THE ASSESSEES PROPRIETORSHIP CONCERN VIZ. P.D. GUPTA ENTERPRISES, THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECI ATION OF 10% ON WIND MILLS AS PER SECTION 32(1)(IIA). THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAD CLAIMED NORMAL DEPRECIATION ON WIND MILL AT THE RATE OF 40% AMOUNTING TO ` .2,50,37,822/ - BECAUSE THE SAID WIND MILL WAS IN OPERATION FOR LESS THAN 180 DAYS. HOWEVER, THE ASSESSEE HAD ALSO CLAIMED ADDITIONAL DEPRECIATION AT THE RATE OF 10% OF ` .62,59,465/ - WHICH WAS OBJECTED BY THE AO. THE MAIN OBJECTION OF THE AO WAS THAT THERE WAS NO PRODUCTION OF ANY ARTICLE OR THING. THE AO WAS OF THE VIEW THAT EL ECTRICITY PRODUCTION WAS NOT AN ARTICLE OR THING SO AS TO QUALIFY FOR ADDITIONAL DEPRECIATION. RELIANCE WAS PLACED ON LUCKY MINERAL PVT. LTD. VS. CIT 245 ITR 830 (SC). AS A RESULT THE ADDITIONAL DEPRECIATION WAS DISALLOWED. BEING AGGRIEVED, THE MATTER W AS CARRIED BEFORE THE FIST APPELLATE AUTHORITY. 3. AFTER HEARING THE SUBMISSIONS AND THE EVIDENCES PLACED ON RECORD, LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM IN THE FOLLOWING MANNER : 3 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 THE AFORESAID SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSLDERE: AFTER EXAMINATION OF THE RECORD , THE SAME IS FOUND TO HAVE MERITS . MENTIONED IN PARA 7 . 4 OF THE ASSESSMENT ORDER , THE AO DISALLOWED THE CK ADDITIONAL DEPRECIATION ON WIND MILL ACQUIRED DURING THE YEAR HOLDING THE ONLY WHEN THE NEW PLANT AND MACHINERY IS USED I N THE MANUFACTUR I PRODUCT I ON ACTIVITY AND RESULTS IN PRODUCTION OF AN ARTICLE OR THING , ONE IS EL FOR ADDITIONAL DEPRECIATION ON THAT PARTICULAR PLANT AND MACH I NERY. EXAMINATION OF THE RECORDS , I FIND THAT THE APPELLANT HAD PURCHASED WIN FROM SU ZLON ENERGY LTD . AT THE COST OF RS . 6 , 25 , 94 , 556/ - WHICH HAS S OPERATION IN THE YEAR UNDER CONSIDERATION . THE CLAIM OF DEPRECIATION @ (1/2 OF 80%) HAD BEEN ALLOWED IN THE ASSESSMENT AND THUS THERE IS NO D I ABOUT THE ACQUISITION AND ITS USE . THE ISSUE IS REGARDING THE ALLOWABILITY OF ADDITIONAL DEPRECIATION CH U/S . 32(1)(IIA) ON THE WIND MILL . ON FURTHER EXAMINATION OF RECORDS , I FIND THE APPELLANT HAS ENTERED INTO AN AGREEMENT WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO . LTD ., DHULE (MS) FOR SUPPLY OF ELECTRICITY GENERATED FROM THE WIND MILL . THE ELECTRICITY GENERATED DURING THE YEAR HAS BEEN SOLD AS PER THE AFORESAID AGREEMENT TO MSEDCL WHICH IS SUPPORTED BY THE SALE BILLS. THUS THERE I S NO DISPUTE ABOUT THE FACT OF GENERATI ON OF ELECTRICITY IN THE YEAR UNDER CONSIDERATION . AS PER THE PROVISIONS OF SECTION 32(1)(IIA) , THE ADDITIONAL DEPRECIATION IS ALLOWABLE IN THE CASE OF NEW PLANT AND MACHINERY WHICH WAS ACQUIRED AND INSTALLED FOR THE PURPOSE OF MANUFACTURING OR PRODUCTI ON OF ANY ARTICLE OR THING. ACCORDING TO THE AO , THE GENERAT I ON OF ELECTRICITY THROUGH WIND MILL IS NOT AN ACTIVITY OF MANUFACTURING OR PRODUCT I ON OF ANY ARTICLE OR THING WITHIN THE MEANING OF SECTION 32(1)(IIA). THE APPELLANT HAS PLACED RELIANCE ON VAR IOUS JUDGEMENT AND DECISIONS OF HON'BLE COURTS FOR THE PROPOSITION THAT SUCH ACTIVITY AMOUNTS TO MANUFACTURE AND PRODUCTION OF ART I CLE AND TH I NG . THE CLAUSE 32(1)( I I) PROVIDES FOR DEPRECIATION ON THE BLOCK OF ASSETS AS PER APPENDIX ' 1' OF THE RULES AND I N SUCH APPENDIX THE RATE OF DEPRECIATION FOR WIND MILL HAS BEEN PROVIDED I N CLAUSE (XII) AND SUB CLAUSE (I) . SECTION 32(1)(IIA) PROVIDES FOR ADDITIONA L DEPRECIATION ON PLANT AND MACHINERY COVERED BY CLAUSE 32(1)(II) . THUS WIND MILL IS COVERED WITHIN THE DEFINITION OF PLANT AND MACHINERY . THE ISSUE WHETHER THE ACT I VITY OF GENERATION OF POWER IS AN ACTIVITY OF MANUFACTURING AND PRODUCTION OR NOT AND WHETHER THE ELECTRICITY SO GENERATED IS A THING OR ARTICLE OR NOT , THE ISSUE HAS BEEN SETTLED BY THE H ON ' BLE SUPREME COURT AND VARIOUS HIGH COURTS . ON PERUSAL OF THE JUDGEMENTS, I FIND THAT IT HAS BEEN HELD THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURING OF A NEW PRODUCT . IN THE INSTANT CASE , ELECTRICITY MAY NOT BE SEEN WITH THE EYES , HOWEVER , I TS EFFECT CAN BE SEEN AND FELT . THE ELECTR I CITY CAN BE TRANSM I TTED , TRANSFERRED , DELIVERED ETC. THE HON'BLE SUPREME COURT IN THE CASE OF CST VS . MADHYA PRADESH ELECTRICITY BOARD (1970) 25 STC 188 (SC) AND IN THE CASE OF STATE OF ANDHRA PRADESH VS . NTPC 127 STC 280 (SC) HAS HELD THAT E L ECTR I CITY FALLS W I TH I N THE DEFINITION OF 4 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 GOODS AND THE PROCESS INVOLVED IS MANUFACTURING AND PRODUCTION . HON'BLE SUPREME COURT IN THE CASE OF CIT VS . SESA GOA LTD. 279 ITR 331 AND CIT VS. INDIA CINE AGENCIES 308 ITR 98 HAS EXPLAINED A BROADER TEST TO DETERMINE WHETHER MANUFACTURE IS THERE OR NOT . IT IS PROPOUNDED THAT WHEN A CHANGE OR SERIES OF CHANGES ARE BROUGHT OUT BY APPLICATION OF PROCESSES WHICH TAKE THE COMMODITY TO THE POINT WHERE, COMMERCIALLY, IT CANNOT BE REGARDED AS THE ORIGINAL COMMODITY, BUT IS, INSTEAD RECOGNISED AS A DISTINCT AND NEW ARTICLE THAT HAS EMERGED AS A RESULT OF THE PROCESS. SIMILAR ISSUE OF WHETHER GENERATION OF ELECTRICITY AMOUNTS TO MANUFACTURING AND PRODUCTION OR NOT AND WHETHER ELECTRICITY IS AN ARTICLE OR THING OR NOT AND INCLUDING THE OBSERVATION OF THE AO IN PARA 7 . 3 WAS INVOLVED IN THE CASE OF NTPC VS . DCIT IN ITA NO . 1438/DEL/2009 ASSTT . YEAR 2005 - 06 , WHEREIN THE HON'BLE ITAT, DELHI VIDE ITS ORDER DATED 30/4/2012 AFTER CONSIDERING THE JUDGEMENTS OF HON'BLE SUPREME COURT AND HIGH COURTS HAS HELD THAT ELECTRICITY IS AN ARTICLE OR THING AND GENERATION OF POWER IS MANUFACTURE AND PRODUCTION AND ALLOWED THE ADDITIONAL DEPRE CIATION . IN A RECENT CASE DCIT VS . HUTTI GOLD MINES CO . LTD . (2013) 39 TAXMAN . COM 18 (8ANG - TRIB) THE ISSUE OF AVAILABILITY OF ADDITIONAL DEPRECIATION IN ASSTT YEAR 2008 - 09 ON WINDMILL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE . IN THE INSTANT CASE, ON THE BASIS OF THE JUDICIAL PRONOUNCEMENTS, FACTS OF THE CASE AND EXAMINATION OF RECORDS, I HOLD THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING AND PRODUCTION OF ARTICLE AND THING AND IS ENTITLED FOR ADDITIONAL DEPRECIATION WITHIN THE PROVISIONS OF SE CTION 32(1)(IIA) OF THE INCOME TAX ACT , 1961 . THE AO IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION OF RS. 62,59,456/ - . THE GROUND IS ALLOWED IN FAVOUR OF THE APPELLANT . 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE BEEN INFORMED THAT NOW THI S ISSUE IS SQUARELY COVERED BY FEW DECISIONS OF THE TRIBUNAL IN ADDITION TO THE DECISIONS CITED BY THE LEARNED CIT(APPEALS) , FOR REFERENCE RELEVANT PARAGRAPH ALREADY REPRODUCED ABOVE. IN THE CASE OF DCIT VS. HUTTI GOLD MINES CO. LTD. 60 SOT 147 (BANGLORE ) IT WAS HELD BY THE RESPECTED COORDINATE BENCH THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OF AN ARTICLE OR THING. AN OBSERVATION WAS MADE THAT ELECTRICITY WHICH MAY NOT BE SEEN WITH EYES, ITS EFFECT CAN BE SEEN AND FELT. THE ELE CTRICITY CAN BE TRANSMITTED, DELIVERED AND STORED. LIKEWISE IN THE CASE OF NTPC LTD., ITAT, E - BENCH, NEW DELHI IN ITA NO. 1438/DEL/2009 ASSESSMENT YEAR 2005 - 06, ORDER DATED 30 TH OF APRIL, 2010 HAS HELD THAT ELECTRICITY ENERGY HAS 5 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 ALL TRAPPING OF AN ARTIC LE OR GOODS. THE PROCESS OF ITS GENERATION IS LIKE PRODUCTION OF AN ARTICLE. A CONCLUSION WAS DRAWN THAT THE ADDITIONAL DEPRECIATION COULD NOT BE DENIED TO THE ASSESSEE. RESPECTFULLY FOLLOWING THESE DECISIONS, WE ARE OF THE CONSIDERED OPINION THAT THE LEAR NED CIT(APPEALS) HAS RIGHTLY APPLIED FEW CASE LAWS TO RESOLVE THE ISSUE IN FAVOUR OF THE ASSESSEE. RESULTANTLY WE FIND NO FORCE IN THIS GROUND OF THE REVENUE AND THE SAME IS HEREBY DISMISSED. 5. REVENUES APPEAL IS DISMISSED. 6. THE RESPONDENT ASSESSEE HAS FILED A CROSS OBJECTION CHALLENGING THE PROCEEDINGS INITIATED U/S 153A OF THE I.T. ACT. LEARNED A.R., MR. RAJESH LOYA HAS EXPRESSED NOT TO PRESS THE CROSS OBJECTION ON THIS ISSUE. IN REST OF THE GROUNDS, THE CROSS OBJECTOR HAS SUPPORTED THE ORDER OF LE ARNED CIT(APPEALS). SINCE THE LEARNED A.R. IS NOT CONTESTING THE ISSUE RAISED IN THE CROSS OBJECTION, THEREFORE, NO ADJUDICATION IS REQUIRED. HENCE DISMISSED. 7. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSESSEES CROSS OBJECTION, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT., 2015. SD/ SD/ (SHAMIM YAHYA) (MUKUL K. SHRAWAT) (ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 11 TH SEPT. 2015. 6 ITA NO. 202/NAG/2014 & CO NO. 05/NAG/2014 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR