ACIT 16(1), MUMBAI V. RAJSHRI PRODUCTIONS P.LTD, MUMBAI

ITA 2110/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7844 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: DILKHUSH MALESHA
• Keywords: Depreciation; Additional depreciation
• Section: 32(1)(iia); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM ITA NO. 2110 /MUM/ 2017 (ASSESSMENT YEAR: 2010 - 11) ACIT - 16(1), ROOM NO. 439, AAYAKAR BHAVAN, M. K. MARG, MUMBAI - 20 VS. M/S. RAJSHRI PRODUCTIONS PVT. LTD. BHAVNA, 1 ST FLOOR, 422, SAVARKAR ROAD, PRABHADEVI, MUMBAI - 400 025 PAN/GIR NO. AAACR 4139 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI CHAITANYA ANJARIA RESPONDENT BY : SHRI DILKHUSH MALESHA DATE OF HEARING : 01.11.2018 DATE OF PRONOUNCEMENT : 28.12 .2018 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 4, MUMBAI (LD.CIT(A) FOR SHORT) DATED 19.12.2016 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2. THE GROUNDS OF APPEAL RAISED READ S AS UNDER: 1. WHETHER ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.1,1 9,69,919/ - ON THE COST OF WIND MILLS PURCHASED U/S. 32(1)(II) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT SUCH ADDITIONAL DEPRECIATION IS AVAILABLE TO ELECTRICITY GENERATION ONLY AFTER 01.04.2013. 2. WHETHER ON THE FACTS, IN THE CIRCUMST ANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.1,19,69,919/ - ON THE COST OF WIND MILLS PURCHASED U/S. 32(1)(II) OF THE INCOME TAX ACT, 1961 BY RELYING ON IN THE CASE OF AC IT VS. M/S. DELTA ENTERPRISES (ITA NO. 944/MUM/2012 A.Y. 07 - 08) WHEREAS THE FACTS AND CIRCUMSTANCES OF THE CASE IS DIFFERENT AS ASSESSEE IN THE BUSINESS OF PRODUCTION OF FILMS. 2 ITA NO. 2110/MUM/2017 3. BRIEF FACTS OF THE CASE ARE AS UNDER: T HE ASSESSEE IS ENGAGED IN PRODUCTI ON OF FILMS AND T.V. SERIALS. ORIGINAL ASSESSMENT WAS MADE U/S.143(3) ON 21.03.2013 DETERMINING TOTAL INCOME OF RS.1,77,38,960 / - AGAINST THE RETURNED INCOME OF RS.20,70,580 / - . ACCORDING TO THE ASSESSING OFFICER THE A DDITIONAL DEPRECIATION U/S.32(1 )(IIA) @ 20% WAS ALLOWED WHEREAS UNDER THIS SECTION ADDITIONAL DEPRECIATION WAS TO BE ALLOWED TO AN ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THAT I F PLANT & MACHINERY NOT USED IN MANUFACTURING ACTIVITY, IT DOES N OT QUALIFY FOR ADDITIONAL DEPRECIATION. THAT F URTHER, SEC.32(1)(IIA) WAS AMENDED BY FINANCE ACT 2012 TO ALLOW ADDITIONAL DEPRECIATION TO THE ASSESSEE ENGAGED IN BUSINESS OF GENERATION OR DISTRIBUTION OF POWER. THAT T HIS AMENDMENT WAS APPLICABLE FROM A.Y.2 013 - 14 HENCE, IN A.Y.2009 - 10, THE ASSESSEE WAS NOT ENTITLED FOR ADDITIONAL DEPRECIATION HENCE, ACCORDING TO THE ASSESSING OFFICER, THERE WAS AN EXCESSIVE CLAIM OF DEPRECIATION OF RS.1 , 19 , 69 , 919/ - @10% FOR LESS THAN 6 MONTHS ON WIND ENERGY MILLS HENCE, REAS ON WAS RECORDED U/S.148 INCOME - TAX ACT, 1961 ON 12.03.2015 AND NOTICE WAS ISSUED FOR ESCAPEMENT ASSESSMENT . 4. ACCORDING TO THE A.O. SECTION 32(1)(IIA) HAS BEEN AMENDED BY FINANCE ACT, 2012 FOR ALLOWING ADDITIONAL DEPRECATION TO THE ASSESSEE ENGAGED IN GE NERATION AND DISTRIBUTION OF POWER. THAT T HIS AMENDMENT IS APPLICABLE TO A.Y. 2013 - 14 HENCE, ADDITIONAL DEPRECATION CANNOT BE ALLOWED IN A.Y. 2010 - 11. IN REPLY, THE ASSESSEE GAVE EXPLANATIONS AND RELIED UPON VARIOUS CASE LAWS. HOWEVER, THE A.O. HAS NOT ACC EPTED THE SAME ON THE GROUND THAT FACTS OF THOSE CASES ARE NOT APPLICABLE. ACCORDING TO THE A.O., ISSUE IN THIS CASE IS RELATED TO ALLOWABILITY OF ADDITIONAL DEPRECIATION IN THIS ORDER AND THERE IS AN 3 ITA NO. 2110/MUM/2017 AMENDMENT BY FINANCE INCOME TAX ACT, 1961, 2012 APPLICA BLE FOR A.Y. 2013 - 14. THUS, THE A.O. HAS DISALLOWED ADDITIONAL DEPRECATION OF RS.1,19,69,919/ - . 5. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY PLACING RELIANCE UPON THE DECISION OF ITAT IN THE CASE OF ACIT VS. DELTA ENTERPRISES (IN ITA NO. 944/MUM/2012 FOR A.Y. 2007 - 08). THE LD. CIT(A) HELD AS UNDER: 4.2. I HAVE CONSIDERED THE ISSUE UNDER APPEAL, CAREFULLY. I FIND THAT THIS ISSUE HAS BEEN DECIDED IN THE FAVOUR OF THE ASSESSEE BY THE HON'BLE JURISDICTIONAL ITAT IN THE CASE OF ACIT VS. DELTA ENTERPRISES, ITA NO.944/MUM/2012 A.Y.2007 - 08. THE RELEVANT PART OF THE DECISION IS AS UNDER : - 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES AND GONE T HROUGH TH E ORDERS OF LOWER AUTHORITIES AS WELL AS ITA NO. 944/MUM/ 12 AY 0 7 - 08 [ AC IT VS . M/S. DELTA ENTERPRIS ES] PAGE 5 MATERIAL PLACED BEFORE US FOR OUR CONSIDERATION. THE BRIEF FACTS ARE THAT ASSESSES WAS HAVING A WIND MILL DIVISION. THE CLAIM OF DEPREDATION MADE BY THE ASSESSEE IN THE RETURN OF INCOME INCLUDED DEPRECIATION O F WIND MILL @ 80% AND ADDITIONAL DEPRECIATION & 20% AS PER SECTION 32(I)(IIA) OF THE INCOME TAX ACT, 1961. THE ASSESSEE'S CLAIM O F ADDITIONAL DEPRECIATION WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT ADDI TIONAL DEPRECIATION WAS ALLOWABLE IN T HE CASE OF ANY NEW MACHINERY OR PLANT INSTALLED AFTER 31 ST DA Y OF MARCH , 2005 , BY THE ASSESSEE IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF AN Y ARTICLE OR THING . AS PER A.O. THE PRODUCTION OF ELECTRICITY BY USE OF WIND ENERGY, COULD BY NO STRETCH OF I MAGINATION BE REGARDED A S ANY 'ARTICLE OR THING' WITHIN THE MEANING OF THE SAID SECTION. THE A.O. DID NOT ACCEPT ASSESSEE'S CONTENTION THAT ELECTRICITY IS PRODUCED AND COMMERCIALLY TRADABLE AND THEREFORE, IT WAS 'ARTICLE OR THING W ITHIN T HE MEANING OF SEC TION 3 2 (I)(IIA). HE HELD THAT ONLY MATERIAL THINGS CAN Q UALIFY FOR BEING ART ICLE OR THING', IT SHOULD BE TANGIBLE. E LECTROMAGNET IC FIELD COULD NOT HE SAID TO BE ' ART ICLE OR THING' AND THAT IT SHOULD BE CAPABLE OF STORAGE AND THE ELECTRICITY COULD NOT BE S TO RED. HE HELD THAT THE WIND MILL COULD NOT BE SAID TO BE INDIRECTLY USED IN MANUFACTURING ACTIVITY. THUS THE WINDMILL WAS NOT PRODUCING AN 'ARTICLE OR THING', EITHER DIRECTLY OR INDIRECTLY, LIE. THEREFORE - , DISALLOWED ASSESSEE 'S CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.1,54,80,000/ - CLAIMED U/S . 32 (1) (IIA) OF THE ACT. ITA N O. 944 / MUM/ 12 A.Y. 07 - 08 [ACIT VS. M/ S. DE LTA ENTERPRISES] PAGE 6 8.1, DURING APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) , THE ASSESSES EXPLAINED THAT IT HAD GENERATED ELE CTRICITY BY HARNESSING WIND ENERGY AND EARNED INCOME FROM SALE OF THE ELECTRICITY SO GENERATED, IN THE STATES OF MAHARASHTRA AND RAJ ASTHAN. THE ELECTR ICITY GENERATED WAS MEASURED AND 4 ITA NO. 2110/MUM/2017 TRADED I N UNITS KNOWN AS 'KILOWATTS'. THE ELECTRICITY IS AN ACTIVELY TRAD ED GOOD, AND THERE WAS EVEN AN EXCHANGE SPECIFICALLY FOR THIS PURPOSE. AS REGARDS THE CONTENTION OF A O THAT ELECTRICITY WAS NOT AN 'ARTICLE OR THING' THE ASS E SSEE RELIED UPON FOLLOWING DECISIONS, TO SHOW THAT THIS CONTENTION WAS ERRONEOUS: C IT VS GEO TECH FOUNDATIONS & CONSTRUCTIONS 241 ITR 90 (KER) AIRFREIGHT LTD. VS. STATE OF KARNATAKA (1999) 6 SCC 561 ASPINWALL AND CO. LTD. VS. CIT 251 ITR 323 GANGADHAR NARASINGDAS AGARWAL VS. UNION OF INDIA (1967) 1 MLJ 197 SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. VS. ELECTRICITY INSPECTOR AND E.T.I.O. 2007 (3) CTC 273 (SC) - COMMISSIONER OF SALES TAX VS. MADHYA PRADESH ELECTRICITY BOARD (1969) 1 SCC 200 - S T ATE OF A.P. VS. NATIONAL THERMAL POWER CORPORATION LTD, (2002) 5 SCC 203 BY RELYING ON ABOVE DECISIONS, THE ASSESSEE CLAIMED T HAT IT WAS ENGAGED IN MANUFACTURING OF ELECTRICITY AND THE ELECTRICITY SO GENERATED WAS 'ARTICLE OR THING' WITHIN THE MEANING OF SECTION 32(I)(IIA). THE ASSESSEE ARGUED THAT IT WAS ENTITLED TO C LAIM ADDITIONAL DEPRECIATION AND THE SAID CLAIM HAD BEEN ACCEPTED BY THE TAX DEPARTMENT IN THE EARLIER YEARS, AND THER E BEING NO ITA N O. 944/M U M / 12 A .Y. 07 - 08 [ ACIT VS. SCC 203, M.P. CEMENT MANUFACTURERS ASSOCIATION VS. STATE OF MAD HYA PRADESH (2004) 2 SSC 249 REF ERRED TO IN TATA CONSULTANCY SERV ICES VS. STATE OF A.P. (200 1) AN ITR 401 THAT THE E LECTRICIT Y WAS CAPABLE OF ABSTRACTION, CONSUMPTION AND USE WHICH, IF DONE DISHO NESTLY WAS PUNISHABLE U/S. 39 OF THE INDIAN ELECTRICITY INCOME TAX ACT, 1961, 191 0. IT WAS HELD THAT ELECTRIC ENERG Y COULD BE TRANSMITTED, TRANSFERRED, DEL IV ERED, STORED AND PO SSESS ED. ETC. IN THE SAME WAY AS ANY OTHER MOVABLE PROPERTY. IT WAS HELD THAT ELECTRICITY WAS THUS 'GOODS' WITHIN THE MEANING OF SALES TAX ACT. 4. FROM THE ABOVE JUDGEMENT OF THE HON'BLE .SUPREME COURT, ELECTRICITY IS AN 'ARTICLE OR THING' FOR THE PURPOSE OF SALES TAX. THE SAME DEFINITION IF APPLIED TO INCOME TA X MAKES THE ASSESSEE ELIGIBLE FOR ITS CLAIM OF DEPRECIATION U/S. 32(I)(IIA). 5. TH E SUBMISSIONS AN D ARGUMENTS OF THE ASSESSEE WERE DULY CONSIDERED AND WERE FOUND TO BE SUBSTANTIAL TO QUALITY PRODUCTION OF ELECTRICITY AS MANUFACTURE OR PRODUCTION OF ARTICLES OR THINGS AND HENCE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U/S . 32(1)(IIA). ' I TA N O . 9 4 4 / M U M / L 2 A , Y . 0 7 - O 8 | A C I T V S . M / S. DELTA ENTERPRISES] PAGE 9 8.3. F URTHER, IT IS OBSERVED BY US THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE IN MANY JUDGMENTS PASSED, BY THE TRIBUNAL ALSO, AS WERE RELIED UPON BY THE ID. COUNSE L, DURING COURSE OF HEARING. WE CAN TAKE SUPPORT FROM THE JUDGMENTS OF AC1T VS. M. SATISHKUMAR (SUPRA), WHEREIN SIMILAR CLAIM HAS BEEN ALLOWED BY THE BENCH AFTER CONSIDERING THE AMENDMENT MADE BY FINANCE ACT, 2012, WHICH HAS BEEN REFERRED TO IN GROUNDS OF APPEAL FILED BY THE REVENUE. SIMILAR VIEW HAS BEEN TAKEN IN ANOTHER CASE BY HON'BLE ITAT, CHENNAI BENCH IN CASE OF ACIT VS. M/S, MALLOW INTERNATIONAL IN ITA NO.I52/MDS/2OI4 5 ITA NO. 2110/MUM/2017 DATED 19.12.2014 FOR A.Y. 2006 - 07. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUC ED BELOW: - '6. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. HI TECH ARAL LTD. (SUPRA) HAS HELD THAT WHERE THE ASSESSEE HAS SET UP WINDMILL IN ADDITION TO SOME OTHER EXISTING BUSINESS, AND IS ENGAGED IN THE GENERATION OF ELECTRICITY, THE ASSESSEE IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION ON THE SAME. 7. WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISIONS OF THE HON'BLE MADRAS HIGH COURT: AND THE CO - ORDINATE BENCH OF THE TRIBUNAL. WE DO NOT F IND ANY INFIRMITY IN THE IMPUGNED ORDER.' 8.4 THEREFORE, KEEPING IN VIEW THE AFO RESAID FACTS AND CIRCUMSTANCES OF THE CASE AND CLEAR POSITION OF LAW, W E FIND THAT THE CLAIM MADE BY ASSESSEE ON ACCOUNT OF ADDITIONAL DEPRECIATION IS ALLOWABLE, NO INTERFERENC E IS CALLED FOR IN THE ORDER OF CIT(A) AND THEREFORE SAME IS UPHELD. THE AO IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION U/S 32( 1) (IIA) OF THE ACT. ALL OF THE, ITA N O. 944/ MUM / 12 A .Y. 07 - 08 [ AC I T VS . M /S. DELT A E NTERPRISES] PAGE 10 GROUNDS RAISED BY REVENUE IT RE DISMISSED. FURTHER, THE APPELLANT GETS SUPPORT FROM THE OTHER ABOVE CITED CASE LAWS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE HIGH COURT AND ESPECIALLY JURISDICTIONAL ITAT(SUPRA), THE CLAIM OF DEPRECIATION OF THE APPELLANT I S ALLOWED AND THE ASSESSING OFFICER THEREFORE DIRECTED TO DELETE THE DISALLOWANCE OF ADDITION ON DEPRECIATION OF RS.1,19,69,919/ - . 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD S. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS DECISION ABOVE. THE ABOVE DECISION DULY DRAWS SUPPORT FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF HI TECH ARAI LTD. (IN APPEALS NOS. 670 & 671 OF 2 009). THE HONBLE MADRAS HIGH COURT HAS EXPOUNDED THAT WHERE THE ASSESSEE HAS SET UP WINDMILL IN ADDITION TO SOME OTHER EXISTING BUSINESS, AND IS ENGAGED IN THE GENERATION OF ELECTRICITY, THE ASSESSEE IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION ON THE SAM E. HENCE, THE CASE LAWS AS ABOVE ARE FULLY APPLICABLE IN THIS CASE. THE D I S T I N C T I O N MADE BY THE REVENUE IN THE GROUNDS OF APPEAL IS TOTALLY UNSUSTAINABLE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A). 6 ITA NO. 2110/MUM/2017 8. IN THE RESULT, THE REVENUES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 . 1 2 . 2 0 1 8 S D / - S D / - ( RAVISH SOOD ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 8 . 1 2 . 2 0 1 8 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI