DCIT 4(2), MUMBAI V. NEHRAJ STOCK BROKERS P. LTD, MUMBAI

ITA 2068/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5858 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 2068 / MUM/20 1 0 ( ASSESSMENT YEAR : 200 6 - 0 7 ) ACIT, CIR .4(2), MUMBAI VS. M/S NEHARAJ STOCK BROKERS PVT. LTD., 51, ADVENT 12 - A, GEN. JAGANNATHRAO BHOSALE MARG, NARIMAN POINT, MUMBAI - 400021 PAN/GIR NO. : A A BCN 4279 L ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI RAVI PRAKASH /ASSESSEE BY : SHRI NARESH KUMAR DATE OF HEARING : 10 TH FEBRUARY , 201 4 DATE O F PRONOUNCEMENT : 28 TH MARCH , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THE REVENUE HAS PREFERRED THIS APPEAL AGAINST THE ORDER OF CIT(A) - 8 , DATED 9 - 12 - 2009 , FOR THE ASSESSMENT YEAR 200 6 - 0 7 , IN THE MATTER OF ORDER PASSED UNDER SECTION 1 43(3) OF THE I.T. ACT. 2 . THE ONLY GRIEVANCE OF THE REVENUE IS RELATING TO DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECATION CLAIMED BY THE ASSESSEE ON WIND TURBINE CONVERTER. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD P ERUSED. 4 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN GENERATION OF WIND POWER. DURING THE COURSE OF SCRUTINY ITA NO. 2068 /20 1 0 2 ASSESSMENT, THE AO ALLOWED THE CLAIM OF 80% DEPRECIATION U/S.32(III) , HOWEVER, THE ADDITIONAL DEPRECIATION CLA IMED UNDER SECTION 32(1)(IIA) WAS DISALLOWED ON THE PLEA THAT THE ADDITIONAL DEPRECIATION IS ONLY ALLOWABLE ON PLANT AND MACHINERY THAT IS USED FOR MANUFACTURING. 5 . BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED THE ASSESSEES CLAIM AFTER HAVING FOLLOWING OBS ERVATIONS : - 3.2. I HAVE GONE THROUGH THE ORDER OF THE AC AND THE SUBMISSIONS OF THE APPELLANT. THE AC HAS REJECTED THE ASSESSEES CLAIM BY STATING THAT THE WORD GENERATION IS NOT MENTIONED IN SECTION 32(1 ) (IIA) AND THE PRESENCE OF WORDS ARTICLES OR THINGS IN CONJUNCTION WITH MANUFACTURE MAKES IT ABUNDANTLY CLEAR THAT THE LEGISLATIVE INTENT IN THIS CASE WAS TO PROVIDE ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY WHICH WAS USED FOR MANUFACTURE THINGS THAT ARE TANGIBLE IN NATURE AND ELECTRICITY DOES NOT FIT INTO DEFINITION OF TANGIBLE. THE AC HAS IGNORED THE WORD PRODUCTION IN SECTION 32(1)(IIA); THE WORDS IN FACT ARE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE PRODUCTION OF ELECTRICITY IS A THING AND ELECT RICITY, CANNOT BE TREATED TO BE AN INTANGIBLE THING. AS A MATTER OF FACT, ELECTRICITY IS FELT IN THE FORM OF HEAT AND LIGHT WOULD FALL IN THE CATEGORY OF A TANGIBLE THING RATHER THAN AN INTANGIBLE THING WHICH CANNOT BE FELT BY ANY PHYSICAL MEANS BUT IS FEL T ONLY BY PSYCHOLOGICAL MEANS. THE ELECTRICITY IS FELT BY PHYSICAL MEANS AND, THEREFORE, IT IS A TANGIBLE THING. THOUGH THE WORD GENERATION IS NOT IN THE SECTION 32(1)(IIA), THE WORDS PRODUCTION OF ELECTRICITY IS ALSO VERY COMMONLY AND COMMERCIALLY USE D FOR THE WORDS GENERATION OF ELECTRICITY. AS ADDITIONAL DEPRECIATION U/S 32(2)(IIA) IS AVAILABLE TO AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THE PRODUCTION OF ELECTRICITY FALLS WITHIN THE PURVIEW OF THE WORDS PRODUCTION OF ANY ARTICLE OR THING. THE ADDITIONAL DEPRECIATION IS AVAILABLE FOR PRODUCTION OF ELECTRICITY AS PRODUCTION IS A VERY WIDE TERM WHICH INCLUDES THE WORD GENERATION WITHIN ITS AMBIT. THE SUPREME COURT IN CASE OF COMMISSIONER OF SA LES TAX, MADHYA PRADESH VS MADHYA PRADESH ELECTRICI TY BOARD HAS HELD THAT GENERATION OF ELECTRICAL ENERGY IS A MOVABLE PROPERTY AND IS CONSIDERED AS A GOOD. FURTHER, THE MADRAS HIGH COURT HAS SHOWN NOT AN IOTA OF DOUBT ABOUT THE ALLOWING OF ADDITIONAL DE PRECIATION ON GENERATION OF ELECTRICITY B Y WINDMILL, IN CASE OF CIT VS M/ S HI TECH ARA I LIMITED BUT HAS STRAIGHT AWAY GONE IN TO THE ISSUE WHETHER ADDITIONAL DEPRECIATION IS AVAILABLE FOR SETTING UP OF NEW MACHINERY OR PLANT TO HAVE ANY OPERATIONAL CO NNECT IVITY WITH THE MAIN BUSINESS OF THE TAX PAY ER. AS ELABORATELY DISCUSSED ABOVE, PRODUCTION OF ELECTRICITY COMES WITHOUT THE PURVIEW OF SECTION 32(1)(IIA) AND THE ADDITIONAL DEPRECIATION 20% IS ALLOWABLE TO THE ASSESSEE. GROUND NO. 3 IS, THEREFORE, ALLOWED. ITA NO. 2068 /20 1 0 3 6 . AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AU THORITIES IN THEIR RESPECTIVE ORDERS. FROM THE RECORD, WE FOUND THAT ADDITIONAL DEPRECIATION WAS DECLINED BY THE AO ON THE PLEA THAT GENERATION OF THE ELECTRICITY IS NOT PRODUCTION OF AN ARTICLE. THE CIT(A) AFTER DISCUSSING THE VERDICT OF HON BLE SUPREME C OURT IN THE CASE OF M.P. ELECTRICITY BOARD , AIR 1970 SC 732 , AND ALSO THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF M/S HI T ECH ARAI LIMITED [ (APPEAL) NOS.670 AND 671 OF 2009] ON THE VERY SAME ISSUE, CAME TO THE CONCLUSION THAT GENERATION OF ELECTRICITY IS EQUIVALENT TO MANUFACTURE OF ELECTRICITY, THEREFORE, WIND MILL IS ENTITLED TO ADDITIONAL DEPRECIATION UNDER SECTION 32 ( 1 )(IIA) . THE DETAILED FINDINGS RECORDED BY THE CIT(A) AT PARA 3.2 HAS NOT BEEN CONTROVERTED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DIRECTING THE AO TO ALLOW ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION ON THE WIND TURBINE CONVERTER. 8 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MARCH . 201 4 . 28 TH MARCH ,2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 28 / 0 3 /2014 /PKM , PS ITA NO. 2068 /20 1 0 4 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLA NT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//