Nalwa Steel & Power Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 2707/DEL/2009

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1865 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 27-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA SENIOR
• Assessee Lawyers: V K TULSIYAN
• Keywords: Business income; Depreciation; Additional depreciation
• Section: 142(1); 14A; 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.2707/DEL./2009 (ASSESSMENT YEAR : 2005-06) M/S. NALWA STEEL & POWER LIMITED, VS. ADDL.CIT, RA NGE 13, (EARLIER KNOWN AS NALWA SPONGE IRON LTD.) NEW DELH I. 28, NAJAFGARH ROAD, NEW DELHI 110 015. (PAN : AABCN3209L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. TULSIYAN, CA REVENUE BY : SHRI P. DAM KANUNJNA, SENIOR DR DATE OF HEARING : 02.09.2015 DATE OF PRONOUNCEMENT : 18.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-X VI, NEW DELHI DATED 20.03.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RING AND SELLING OF SPONGE IRON, BILLETS WHICH ARE USED FOR MAKING S TEEL AT ITS WORKS AT RAIGHARH IN THE STATE OF CHHATTISGARH. DURING THE YEAR, THE ASSESSEE COMPANY ALSO STARTED OPERATION OF POWER AT ITS PLAN T FOR CAPTIVE ITA NO2707 /DEL./2009 2 CONSUMPTION OF POWER. THE RETURN OF INCOME WAS FIL ED ON 21.10.2005 DECLARING AN INCOME OF RS.4,51,27,183/- UNDER THE N ORMAL PROVISIONS OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) AND BO OK PROFIT OF RS.82,97,30,572/- U/S 115JB OF THE ACT. THE CASE W AS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSEES CASE WAS SELECTE D FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 07.08.2006. SUBSEQUENTLY, NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ALSO ISSUED ON 06.07.2007. IN RESPONSE TO THESE NOTICES, THE ASSESSEE FILED THE R EQUISITE DETAILS / INFORMATION. THE ASSESSMENT WAS COMPLETED U/S 143( 3) OF THE ACT AT A TOTAL TAXABLE INCOME AT RS.10,16,78,149/- BY MAKING TWO DISALLOWANCES I.E. DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.5,64, 30,426/- AND DISALLOWANCE U/S 14A OF THE ACT OF RS.1,20,540/-. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO T HE FIRST APPELLATE AUTHORITY. THE CIT (A) UPHELD THE DISALLOWANCE OF ADDITIONAL DEPRECIATION MADE BY THE AO AND ALSO WHILE UPHOLDING THE DISALLO WANCE U/S 14A MADE BY THE AO, HE INCREASED THE DISALLOWANCE TO RS.2,26 ,000/- (I.E. RS.1,20,540/- MADE BY AO + RS.1,05,460/- ENHANCED B Y THE CIT (A) = RS.2,26,000/-). 4. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XVI, NEW DELHI HAS GROSSLY ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN REJECTING S TATUTORY CLAIM ITA NO2707 /DEL./2009 3 FOR DEDUCTION OF ADDITIONAL DEPRECIATION U/S 32(1)( IIA) OF RS.5,64,30,426/- ON POWER TURBINES EMPLOYED FOR GEN ERATION OF POWER FOR CAPTIVE CONSUMPTION IN THE BUSINESS OF MANUFACTURING OF STEEL AND IRON PRODUCTS. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XVI, NEW DELHI HAS GROSSLY ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT APPRECI ATING THE FACT OF INCREASE IN INSTALLED CAPACITY OF SPONGE IRON AN D BILLETS BY 676121 MT DURING THE PREVIOUS YEAR AS PER STATEMENT OF INSTALLED CAPACITY OF TURBINE GENERATOR. 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) -XVI, NEW DELHI HAS GROSSLY ERRED ON FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND IN LAW IN RE-COMPUTIN G DISALLOWANCE U/S 14A AS PER RULE 80 FORMULA AT THE ENHANCED SUM RS.2,26,000/- ON THE BASIS OF DECISION OF MUMBA I TRIBUNAL IN ITO V. DAGA CAPITAL MANAGEMENT (P.) LTD. (2008) 2650T603 WHERE FACTS OF THE CASE ARE ENTIRELY DIFFERENT FROM THE FACTS IN THE APPELLANT COMPANY'S CASE. 5. GROUND NOS.1 & 2 IS AGAINST THE DISALLOWANCE OF STATUTORY CLAIM FOR DEDUCTION OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF RS.5,64,30,426/- ON POWER TURBINES EMPLOYED FOR GENERATION OF POWER FOR CAPTIVE CONSUMPTION IN THE BUSINESS OF MANUFACTURING OF STEEL AND IRON PRODUCTS. 6. BRIEF FACTS RELATING TO GROUND NO.1 ARE THAT THE COMPANY HAD SET UP A TWO UNITS LOWER PLANTS OF 8MW EACH WHICH COMMENCE D THE GENERATION OF POWER ON 27.05.2004 AND 1 ST AUGUST, 2004 AND FOR THIS PURPOSE, THE PURCHASED EQUIPMENTS OF RS.37,86,62,841/- AND CLAIM ED ADDITIONAL DEPRECIATION ON THE SAME. THE AO OBSERVED THAT IN VIEW OF THE PROVISIONS OF SECTION 32(1)(IIA), SINCE THE ASSESSEE WAS ENGA GED IN GENERATION OF POWER, THE SAME WAS NOT ELIGIBLE FOR CLAIM OF ADDIT IONAL DEPRECIATION. THE ITA NO2707 /DEL./2009 4 AO ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF ADDI TIONAL DEPRECIATION. THE ASSESSEE COMPANY FILED ITS REPLY VIDE LETTERS D ATED 20.11.2007 AND 28.11.2007. THE AO CONSIDERED THE SUBMISSIONS OF T HE ASSESSEE WHEREIN ASSESSEE HAD CLAIMED THAT ACTIVITY OF GENERATION OF POWER AND ACTIVITY OF MANUFACTURING/PRODUCING OF ARTICLE OR THING IS SAME . THE AO OBSERVED THAT ASSESSEE HAD IGNORED THE FACT THAT ON ONE HAND ALL THE ARTICLES OR THINGS WERE TANGIBLE, COULD BE HANDLED/TOUCHED AND COULD B E STORED BUT THE ELECTRICITY OR ENERGY BEING INTANGIBLE WAS NOT CAPA BLE OF BEING SUBJECTED TO PHYSICAL HANDLING OR STORAGE, HENCE BY NO MEANS ENE RGY COULD BE CONSIDERED AS ARTICLE OR THING . HE OBSERVED THAT THIS DISTINCTION BETWEEN THE MANUFACTURING UNDERTAKING AND UNDERTAKINGS ENGA GED IN GENERATIONAL POWER WAS MAINTAINED THROUGHOUT IN THE INCOME TAX L EGISLATION. ACCORDING TO AO, THIS FACT BECOME FURTHER EVIDENT IF ONE WENT THROUGH THE VARIOUS DEDUCTIONS/EXEMPTIONS GRANTED TO THE POWER SECTOR I N THE HISTORY OF INCOME TAX LEGISLATION. AND,THE ACTIVITY OF MANUFAC TURING OR PRODUCTION OF ARTICLE OR THING WAS ALWAYS TREATED DIFFERENTLY FRO M THE OTHER ACTIVITIES LIKE CONSTRUCTION, MINING, HOTEL BUSINESS, GENERATION OF POWER AND OTHER INFRASTRUCTURE PROJECTS. AFTER OBSERVING FEW SECTI ONS WHERE BENEFIT WAS INTENDED TO THE SECTOR OF MANUFACTURING OR PRODUCTI ON OF ARTICLE OR THING AND ALSO OTHER INDUSTRIAL UNDERTAKINGS AS WELL AS T HE DECISION OF THE ITAT CHENNAI BENCH IN THE CASE OF TAMILNADU CHLORATES VS . JCIT (2006) 98 ITD 1 (CHENNAI), THE AO HELD THAT THE BENEFIT OF ADDITI ONAL DEPRECIATION WAS ITA NO2707 /DEL./2009 5 NOT AVAILABLE TO THE UNDERTAKINGS ENGAGED IN GENERA TION OF POWER AND MADE THE AFORESAID DISALLOWANCE. 6.1 THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) ON THIS ISSUE AND THE CIT (A), AFTER DISCUSSING THE PROVISIONS OF SECTION 32(1)(IIA) AND THE CASE LAWS RELIED UPON BY THE ASSESSEE, UPHELD THE ORDER OF THE AO. 6.2 THE ASSESSEE, BEING AGGRIEVED, CAME UP IN APPEA L BEFORE US ON THIS ISSUE. 7. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE INCOME-TAX AUTHORITIES. HE FURTHER SUBMITTED THAT THIS ISSUE IS DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NTPC LIMITED VS. CIT V IN ITA NO.507/2013 DATED 1 6 TH APRIL, 2014 IN FAVOUR OF THE ASSESSEE AND PLEADED TO SET ASIDE THE ORDERS OF THE INCOME-TAX AUTHORITIES ON THIS ISSUE. 8. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO AND CIT ( A) DISALLOWED THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE WIT H A FINDING THAT THE ASSESSEE WAS ENGAGED IN GENERATION OF POWER AND THE SAME WAS NOT ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION IN VIEW OF THE EXPRESS PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. OUR ATTENTION HAS B EEN TAKEN TO THE DECISION OF THE TRIBUNAL IN NTPC LIMITED VS. DCIT IN ITA NO. 1438/DEL/2009 FOR ITA NO2707 /DEL./2009 6 AY 2005-06 DATED 30.04.2012 WHEREIN THE TRIBUNAL WH ILE ADJUDICATING AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE COMMIS SIONER OF INCOME-TAX- V ORDER UNDER SECTION 263 DISALLOWING ADDITIONAL DE PRECIATION BY NOTING THAT NTPC GENERATES POWER AND THAT SECTION 32(1)(II A) OF THE ACT PROVIDED ADDITIONAL DEPRECIATION TO UNDERTAKINGS ENGAGED IN MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. SO, IN THAT CA SE ACCORDING TO THE COMMISSIONER, GENERATION OF POWER CANNOT BE EQUATED WITH THE PRODUCTION OF ARTICLE OR THING BECAUSE ARTICLE OR THING IN COM MON PARLANCE IS KNOWN AS SOMETHING TANGIBLE AND MOVEABLE ETC. THE COMMISSIO NER WAS OF THE VIEW THAT WHEREVER A DEDUCTION IS GRANTED FOR POWER GENE RATION UNDERTAKING, A SEPARATE MECHANISM HAS BEEN PROVIDED UNDER THE ACT. HE NOTED THAT SECTION 32(1)(VI) (AS STOOD PRIOR TO 01.04.1998) PR OVIDED FOR ADDITIONAL DEPRECIATION BUT THAT IT CATEGORICALLY SPECIFIED BO TH BUSINESSES I.E. GENERATION OF POWER AND MANUFACTURE OF PRODUCTION O R AN ARTICLE OR THING. THUS, THE COMMISSIONER HELD THAT ADDITIONAL DEPRECI ATION WAS INADMISSIBLE TO NTPC AND HE HELD THAT AO INCORRECTLY ALLOWED ADD ITIONAL DEPRECIATION AND, THEREFORE, HE SET ASIDE AOS ORDER AND DIRECTE D THE LATTER TO WITHDRAW THE ADDITIONAL DEPRECIATION OF RS.187,55,71,000/-. THE OTHER ISSUE ON WHICH THE COMMISSIONER FOUND FAULT WITH THE AO TO E XERCISE HIS REVISIONAL POWER UNDER SECTION 263 WAS WITH REGARD TO THE TARI FF OF ELECTRICITY WHEREIN THE COMMISSIONER OBSERVED THAT CERC WAS TASKED BY L AW TO REGULATE THE TARIFF OF ELECTRICITY GENERATING COMPANIES OWNED OR CONTROLLED BY THE ITA NO2707 /DEL./2009 7 CENTRAL GOVERNMENT. NPTC HAS ISSUED TOTAL SALES BI LLS OF RS.23,066.30 CRORES TO ITS CUSTOMERS IN TERMS OF CERCS EXISTING NORMS. CERCS FINAL NORM FIXATION ORDER WAS NOT MADE DURING THE YEAR. YET NTPC REVISED THE SALES DOWNWARDS TO RS.22,128 CRORES AND DID NOT TAK E INTO ACCOUNT A SUM OF RS.938.30 CRORES. ACCORDING TO THE COMMISSIONER , AO PERMITTED THIS WITHOUT ANY INQUIRY. ON THE AFORESAID SCORE, THE C OMMISSIONER SET ASIDE THE ASSESSMENT ORDER AND REMITTED THIS ISSUE TO THE AO FOR FRESH EXAMINATION. NTPC THEREAFTER APPROACHED THE TRIBUN AL. THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL IN RESPECT TO THE ADD ITIONAL DEPRECIATION, HOWEVER, UPHELD THE ACTION OF THE COMMISSIONER IN R ESPECT TO THE TARIFF, THEREBY PARTLY ALLOWED THE APPEAL. THE IMPUGNED OR DER OF THE TRIBUNAL WAS CHALLENGED BEFORE THE HONBLE JURISDICTIONAL HI GH COURT WHO VIDE ORDER DATED 16.04.2014 IN ITA 507/2013 SET ASIDE TH E ORDERS OF THE AUTHORITIES BELOW AND RESTORED THE ORDER OF THE AO. THUS, THE ADDITIONAL DEPRECIATION GRANTED BY THE AO STOOD RESTORED. IN THE LIGHT OF THE AFORESAID FACTS OF THE MATTER AND THAT TOO FOR ASSESSMENT YEA R 2005-06, WHICH IS RELEVANT ASSESSMENT YEAR BEFORE US, WE CONCUR WITH THE VIEW THAT HAS BEEN TAKEN BY THE TRIBUNAL WHILE UPHOLDING THE CLAIM OF THE ASSESSEE IN RESPECT TO THE ADDITIONAL DEPRECIATION IN THE FIELD OF POWE R GENERATION. THE COORDINATE BENCH OF THE TRIBUNALS DECISION IN NTPC LIMITED (SUPRA) IS REPRODUCED BELOW :- ITA NO2707 /DEL./2009 8 17. THE NEXT QUESTION FOR OUR ADJUDICATION IS WHET HER LEARNED COMMISSIONER HAS RIGHTLY WITHDREW THE ADDIT IONAL DEPRECIATION CLAIMED BY THE ASSESSEE AND GRANTED BY THE ASSESSING OFFICER? AS DISCUSSED EARLIER, THE ASSESS EE HAS CLAIMED ADDITIONAL DEPRECIATION FOR THE FIRST TIME AMOUNTING TO RS.187,55,71,000. LEARNED COMMISSIONER WITHDREW THI S ADDITIONAL DEPRECIATION ON THE GROUND THAT ASSESSIN G OFFICER HAS NOT CONDUCTED INQUIRY BEFORE ALLOWING THIS DEPRECIA TION. ON MERIT, LD. COMMISSIONER HAS OBSERVED THAT ASSESSEE IS ENGAGED IN THE ACTIVITY OF GENERATION OF POWER. SECTION 32( 1)(IIA) OF THE ACT PROVIDES ADDITIONAL DEPRECIATION TO THOSE UNDER TAKING WHICH ARE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODU CTION OF ANY ARTICLE OR THING. ACCORDING TO THE LEARNED COMMISSI ONER, OTHER BUSINESSES ARE NOT ELIGIBLE TO CLAIM THE BENEFIT. H E OBSERVED THAT GENERATION OF POWER CANNOT BE EQUATED WITH THE PROD UCTION OF ARTICLE OR THING BECAUSE ARTICLE OR THING IN COMMON PARLANCE IS KNOWN SOMETHING TANGIBLE AND MOVEABLE ETC. GENERATI ON OF POWER IS GIVING ENERGY AS OUTPUT AND, THEREFORE, TH IS ACTIVITY IS 25 NOWHERE SIMILAR TO PRODUCTION OF ARTICLE OR THIN G BECAUSE AN ARTICLE OR THING IS ALWAYS ASSOCIATED WITH THE CONC EPT OF WEIGHT, MASS AND VOLUME. THE POWER OR ELECTRICITY DOES NOT HAVE ANY OF THESE ATTRIBUTES. IT HAS NO VOLUME AND IT DOES NOT OCCUPY ANY SPACE, NO WEIGHT OR NO MASS CAN BE ATTRIBUTED TO IT . THE LEARNED COUNSEL FOR THE ASSESSEE IN ORDER TO APPRAISE US TH E MEANING OF EXPRESSION MANUFACTURE AND PRODUCTION MADE REFEREN CE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SE SA GOA LTD. AND INDIA CINE AGENCY (SUPRA) 18. IN THE CASE OF INDIA CINE AGENCY, HON'BLE SUPRE ME COURT HAS CONSIDERED THE JUDGMENT RENDERED IN THE CASE OF SESA GOA (SUPRA) AND ALL OTHER DECISIONS ON THE POINT WHICH CONTEMPLATE THE MEANING OF EXPRESSION MANUFACTURE AS WELL AS PRODUCTION. THE RELEVANT DISCUSSION MADE BY THE H ONBLE COURT READS AS UNDER: 2. AS NOTED ABOVE, THE CORE ISSUE IS WHETHER ACTIV ITY UNDERTAKEN WAS MANUFACTURE OR PRODUCTION. 3. IN BLACKS LAW DICTIONARY (5TH EDITION), THE WOR D 'MANUFACTURE HAS BEEN DEFINED AS, 'THE PROCESS OR OPERATION OF MAKING GOODS OR ANY MATERIAL PRODUCED BY HAND, BY M ACHINERY OR BY OTHER AGENCY; BY THE HAND, BY MACHINERY, OR B Y ART. THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY ITA NO2707 /DEL./2009 9 GIVING SUCH MATERIALS NEW FORMS, QUALITIES, PROPERT IES OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINE'. T HUS BY PROCESS OF MANUFACTURE SOMETHING IS PRODUCED AND BR OUGHT INTO EXISTENCE WHICH IS DIFFERENT FROM THAT, OUT OF WHIC H IT IS 26 MADE IN THE SENSE THAT THE THING PRODUCED IS BY ITS ELF A COMMERCIAL COMMODITY CAPABLE OF BEING SOLD OR SUPPL IED. THE MATERIAL FROM WHICH THE THING OR PRODUCT IS MANUFAC TURED MAY NECESSARILY LOSE ITS IDENTITY OR MAY BECOME TRANSFO RMED INTO THE BASIC OR ESSENTIAL PROPERTIES. (SEE DY. CST (LAW), BOARD OF REVENUE (TAXES) COCO FIBRES [1992] SUPP. 1 SCC 290) . 4. MANUFACTURE IMPLIES A CHANGE BUT EVERY CHANGE IS NOT MANUFACTURE, YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT, LABOUR AND MANIPULATION. NATURALLY, MANU FACTURE IS THE END RESULT OF ONE OR MORE PROCESSES THROUGH WHI CH THE ORIGINAL COMMODITIES ARE MADE TO PASS. THE NATURE A ND EXTENT OF PROCESSING MAY VARY FROM ONE CLASS TO ANOTHER. THER E MAY BE SEVERAL STAGES OF PROCESSING, A DIFFERENT KIND OF P ROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINA L COMMODITY EXPERIENCES A CHANGE. WHENEVER A COMMODITY UNDERGOE S A CHANGE AS A RESULT OF SOME OPERATION PERFORMED ON I T OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO PROCES SING OF THE COMMODITY. BUT IT IS ONLY WHEN THE CHANGE OR A SERI ES OF CHANGES TAKES THE COMMODITY TO THE POINT WHERE COMM ERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMOD ITY BUT INSTEAD IS RECOGNIZED AS A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLACE. PROCESS IN M ANUFACTURE OR IN RELATION TO MANUFACTURE IMPLIES NOT ONLY THE PRODUCTION BUT ALSO VARIOUS STAGES THROUGH WHICH THE RAW MATERIAL IS SUBJECTED TO CHANGE BY DIFFERENT OPERATIONS. IT IS THE CUMULA TIVE EFFECT OF THE VARIOUS PROCESSES TO WHICH THE RAW MATERIAL IS SUBJECTED TO THAT THE MANUFACTURED PRODUCT EMERGES. THEREFORE, E ACH STEP TOWARDS SUCH PRODUCTION WOULD BE A PROCESS IN RELAT ION TO THE MANUFACTURE. WHERE ANY PARTICULAR PROCESS IS SO INT EGRALLY CONNECTED WITH THE ULTIMATE PRODUCTION OF GOODS THA T BUT FOR THAT PROCESS PROCESSING OF GOODS WOULD BE IMPOSSIBL E OR COMMERCIALLY INEXPEDIENT, THAT PROCESS IS ONE IN RE LATION TO THE MANUFACTURE. (SEE COLLECTOR OF CENTRAL EXCISE V. RA JASTHAN STATE CHEMICAL WORKS [1991] 4 SCC 473). X X X X X X X X X X X X X X X X X X X X X X ITA NO2707 /DEL./2009 10 7. TO PUT IT DIFFERENTLY, THE TEST TO DETERMINE WHE THER A PARTICULAR ACTIVITY AMOUNTS TO 'MANUFACTURE OR NOT IS: DOES A NEW AND DIFFERENT GOOD EMERGE HAVING DISTINCTIVE NA ME, USE AND CHARACTER. THE MOMENT THERE IS TRANSFORMATION I NTO A NEW COMMODITY COMMERCIALLY KNOWN AS A DISTINCT AND SEPA RATE COMMODITY HAVING ITS OWN CHARACTER, USE AND NAME, W HETHER BE IT THE RESULT OF ONE PROCESS OR SEVERAL PROCESSES MANUFACTURE TAKES PLACE AND LIABILITY TO DUTY IS ATTRACTED. ETY MOLOGICALLY THE WORD MANUFACTURE PROPERLY CONSTRUED WOULD DOUBTLE SS COVER THE TRANSFORMATION. IT IS THE TRANSFORMATION OF A M ATTER INTO SOMETHING ELSE AND THAT SOMETHING ELSE IS A QUESTIO N OF DEGREE, WHETHER THAT SOMETHING ELSE IS A DIFFERENT COMMERCI AL COMMODITY HAVING ITS DISTINCT CHARACTER, USE AND NA ME AND COMMERCIALLY KNOWN AS SUCH FROM THAT POINT OF VIEW, IS A QUESTION DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. (SEE EMPIRE INDUSTRIES LTD. V. UNION OF INDIA [1985] 3 SCC 314). X X X X X X X X X X X X X X X X X X X X X X 19. IN THIS CASE, ASSESSEE WAS CARRYING ON BUSINESS OF CONVERSION OF JUMBO ROLLS OF PHOTOGRAPHIC FILMS INT O SMALL FLATS AND ROLLS IN DESIRED SIZES. IT CLAIMED DEDUCT ION UNDER SEC. 80-HH AND 80-I AS WELL AS INVESTMENT ALLOWANCE UNDE R SEC. 32AB. THE CONTROVERSY AROSE WHETHER CONVERSION OF J UMBO ROLLS INTO SMALL SIZES AMOUNTS TO MANUFACTURE OR PRODUCTI ON, ELIGIBLE FOR DEDUCTION UNDER SEC. 32AB OR DEDUCTION UNDER SE CTIONS 80- HH AND 80-I 28 OF THE INCOME-TAX ACT, 1961/ HON'BLE SUPREME COURT HAS HELD THAT THIS ACTIVITY AMOUNTS TO MANUFA CTURE OR PRODUCTION. THUS, WE THINK IT IS NOT NECESSARY TO R ECAPITULATE AND RECITE ALL THE DECISION ON THE CONSTRUCTION EXP RESSION MANUFACTURE. BUT SUFFICE TO SAY THAT CORE OF ALL THE DECISIONS OF THE HON'BLE SUPREME COURT OR HON'BLE HIGH COURT IS TO THE EFFECT THAT BROADLY MANUFACTURE IS A TRANSFORMATION OF AN ARTICLE, WHICH IS COMMERCIALLY DIFFERENT FROM THE ONE WHICH IS CONVERTED. IT IS A CHANGE OF ONE OBJECT TO ANOTHER FOR THE PURPOSE OF MARKETABILITY. IT BRINGS SOMETHING INTO EXISTENC E, WHICH IS DIFFERENT FROM THAT, WHICH ORIGINALLY EXISTED. THE NEW PRODUCT IS A DIFFERENT COMMODITY PHYSICALLY AS WELL AS COMMERC IALLY. THE HONBLE COURT ALSO EXPLAINED BROADER TEST TO DETERM INE WHETHER MANUFACTURE IS THERE OR NOT, IT IS PROPOUNDED THAT WHEN A CHANGE OR SERIES OF CHANGES ARE BROUGHT OUT BY APPLICATION OF PROCESSES ITA NO2707 /DEL./2009 11 WHICH TAKE THE COMMODITY TO THE POINT WHERE, COMMER CIALLY, IT CANNOT BE REGARDED AS THE ORIGINAL COMMODITY BUT IS , INSTEAD RECOGNIZED AS A DISTINCT AND NEW ARTICLE THAT HAS E MERGED AS A RESULT OF THE PROCESS. 20. AS OBSERVED EARLIER, LEARNED COMMISSIONER WITHD REW THE ADDITIONAL DEPRECIATION PRIMARILY ON THE GROUND THA T POWER/ELECTRICITY GENERATED BY THE ASSESSEE CANNOT BE EQUATED WITH AN ARTICLE OR THING WHICH IS BEING 29 MANUFACT URED IN AN INDUSTRIAL UNDERTAKING. THE LEARNED COUNSEL FOR THE ASSESSEE IN ORDER TO BUTTRESS HIS ARGUMENTS, POWER/ELECTRICITY GENERATED BY THE ASSESSEE IS AN ARTICLE OR GOODS, MADE REFERENCE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CS T VS. MP ELECTRICITY POWER. IN THIS CASE, THE MPEST BOARD SO LD, SUPPLIED AND DISTRIBUTED ELECTRIC ENERGY TO VARIOUS CONSUMER S. IT ALSO SOLD COAL-ASH, A WASTE PRODUCT AND SUPPLIED STREAM TO NE PA MILLS OF BURHANPUR. THE SALE OF ELECTRICITY IS EXEMPT FROM S ALES-TAX. HOWEVER, FOR THE PURPOSE OF DETERMINING THE GROSS T URN OVER, THE SALE OF ELECTRIC ENERGY IS TO BE TAKEN INTO ACC OUNT. THE FIRST QUESTION WHICH AROSE BEFORE THE HONBLE COURT WAS; ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER OR NOT THE MADHYA PRADESH ELECTRICITY BOARD IS A DEALER WITHIN THE MEANING OF SECTION 2(C) OF THE C.P. AND BARE SALES- TAX ACT, AND SECTION 2(D) OF THE MADHYA PRADESH GENERAL SALES-TA X ACT, 1958, IN RESPECT OF ITS ACTIVITY OF GENERATION, DIS TRIBUTION, SALE AND SUPPLY OF ELECTRIC ENERGY? 20.1 IN ORDER TO DECIDE WHETHER MADHYA PRADESH ELEC TRICITY BOARD IS A DEALER OR NOT, HONBLE COURT TOOK INTO C ONSIDERATION THE DEFINITION OF DEALER AS GIVEN IN THE TWO ACTS REFERRED IN THE QUESTION AND OBSERVED THAT THE DEFINITION CONTEMPLA TES THAT ANY PERSON WHO CARRIES ON THE BUSINESS OF BUYING, SELLI NG, SUPPLYING OR DISTRIBUTING THE GOODS AS A DEALER. THE 30 EXP RESSION GOODS ARE DEFINED BY SECTION 2(D) OF THE ACT, 194 7 ACCORDING TO WHICH ALL KINDS OF MOVEABLE PROPERTIES OTHER THA N ACTIONABLE CLAIM. AND INCLUDE MATERIAL ARTICLES AND COMMOD ITIES WHETHER OR NOT TO BE USED IN THE CONSTRUCTION, FITT ING OUT, IMPROVEMENT OR REPAIR OF IMMOVEABLE PROPERTY. ACCOR DING TO THE HONBLE COURT, THE DEFINITION OF EXPRESSION GO ODS CONTAINED IN SECTION 2(G) OF THE ACT NO. 11 OF 1959 HAS ALMOST SIMILAR. IN THE LIGHT OF THESE DEFINITIONS, HONBLE COURT HAS ITA NO2707 /DEL./2009 12 EXAMINED WHETHER ELECTRICITY CAN BE TERMED AS A GOO DS. THE DISCUSSION MADE BY THE HONBLE COURT IN THE JUDGMEN T READS AS UNDER: THE REASONING WHICH PREVAILED WITH THE HIGH COURT WAS THAT A WELL DEFINED DISTINCTION EXISTED BETWEEN THE SALE O R PURCHASE OF GOODS AND CONSUMPTION OR SALE OF ELECTRICITY; OTH ERWISE THERE WAS NO NECESSITY OF HAVING ENTRY NO.53. BUT UNDER E NTRY 53 TAXES CAN BE LEVIED NOT ONLY ON SALE OF ELECTRICITY TO DERIVE MUCH ASSISTANCE FROM THE AFORESAID ENTRIES. WHAT HAS ESS ENTIALLY TO BE SEEN IS WHETHER ELECTRIC ENERGY IS GOODS WITHIN T HE MEANING OF THE RELEVANT PROVISIONS OF THE TWO ACTS. THE DEF INITION IN TERMS IS VERY WIDE ACCORDING TO WHICH GOODS MEAN ALL KINDS OF MOVABLE PROPERTY. THEN, CERTAIN ITEMS ARE SPECIFICA LLY EXCLUDED OR INCLUDED IN ELECTRIC ENERGY OR ELECTRICITY IS, N OT ONE OF THEM. THE TERM MOVEABLE PROPERTY WHEN CONSIDERED WITH R EFERENCE TO GOODS AS DEFINED FOR THE PURPOSES OF SALES TAX CANNOT BE TAKEN IN A NARROW SENSE AND MERELY BECAUSE ELECTRIC ENERGY IS NOT TANGIBLE OR CANNOT BE MOVED OR TOUCHED LIKE, FO R INSTANCE, A PIECE OF WOOD OR A BOOK IT CANNOT BE CEASE TO BE MO VABLE 31 PROPERTY WHEN IT HAS ALL THE ATTRIBUTES OF SUCH PRO PERTY. IT IS NEEDLESS TO REPEAT THAT IT IS CAPABLE OF ABSTRACTIO N, CONSUMPTION AND USE WHICH, IF DONE DISHONESTLY, WOULD ATTRACT P UNISHMENT UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT, 1910. IT CAN BE TRANSMITTED, TRANSFERRED, DELIVERED STORED, POSSESS ED ETC. IN THE SAME WAY AS ANY OTHER MOVABLE PROPERTY. EVEN IN BAN JAMIN ON SALE, 8TH EDN., REFERENCE HAS BEEN MADE AT PAGE 171 TO COUNTRY OF DURHAM ELECTRICAL, ETC., CO. V. INLAND REVENUE(1 ) IN WHICH ELECTRIC ENERGY WAS ASSUMED TO BE GOODS. IF THERE CAN BE SALE AND PURCHASE OF ELECTRIC ENERGY LIKE ANY OTHER MOVE ABLE OBJECT WE SEE NO DIFFICULTY IN HOLDING THAT ELECTRIC ENERG Y WAS INTENDED TO BE COVERED BY THE DEFINITION OF GOODS IN THE T WO ACTS. IF THAT HAD NOT BEEN THE CASE THERE WAS NO NECESSITY O F SPECIFICALLY EXEMPTING SALE OF ELECTRIC ENERGY FROM THE PAYMENT OF SALES TAX BY MAKING A PROVISION FOR IT IN THE SCHEDULES TO TH E TWO ACTS. IT CANNOT BE DENIED THAT THE ELECTRICITY BOARD CARRIED ON PRINCIPALLY THE BUSINESS OF SELLING, SUPPLYING OR D ISTRIBUTING ELECTRIC ENERGY. IT WOULD THEREFORE CLEARLY FALL WI THIN THE MEANING OF THE EXPRESSION DEALER IN THE TWO ACTS . 20.2 THIS QUESTION AGAIN FALLEN FOR THE CONSIDERATI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF STATE OF ANDHR A PRADESH ITA NO2707 /DEL./2009 13 VS. NTPC. THE DISPUTE IN THIS CASE WAS THAT RESPOND ENT NTPC HAD A THERMAL POWER STATION AT RAMAGUNDAM WITHIN TH E STATE OF ANDHRA PRADESH AND SOLD THE ELECTRICITY TO THE BOAR D OF KARNATAKA, KERALA, TAMILNADU AND THE STATE OF GOA I N PURSUANCE OF CONTRACT OF SALES OCCASIONING INTERSTA TE MOVEMENT OF ELECTRICITY. THE ANDHRA PRADESH GOVERNMENT WANTE D TO LEVY OF DUTY ON 32 CERTAIN SALES OF ELECTRIC ENERGY. ACC ORDING TO THE UNDERSTANDING OF ANDHRA PRADESH GOVERNMENT, SECTION 3 OF THEIR SALES-TAX ACT PROVIDES THAT EVERY DISTRIBUTOR OF ELECTRIC ENERGY AND EVERY PRODUCER SHALL SUBJECT TO CERTAIN EXCEPTIONS PAY EVERY MONTH TO THE STATE GOVERNMENT A DUTY CALC ULATED AT THE RATES SPECIFIED IN THE TABLE APPENDED THERETO O N THE UNITS OF ELECTRIC ENERGY SOLD OR SUPPLIED TO A CONSUMER OR C ONSUMED BY HIMSELF FOR HIS OWN PURPOSE OR FOR THE PURPOSE OF H IS TOWNSHIP OR COLONY DURING THE PRECEDING MONTHS. SIMILAR STEP S WERE TAKEN BY THE MADHYA PRADESH GOVERNMENT FOR THE PLAN TS SITUATED IN ITS TERRITORIAL JURISDICTION. THE QUEST ION AROSE WHETHER ELECTRICITY SOLD TO OTHER STATES WOULD BE AMENABLE TO DUTIES. THE HONBLE COURT IN THAT CONTEXT CONSIDERED, WHAT IS A N ELECTRIC ENERGY AND MADE FOLLOWING OBSERVATIONS: BEFORE WE DEAL WITH THE CONSTITUTIONAL ASPECTS LET US FIRST STATE WHAT ELECTRICITY IS, AS UNDERSTOOD IN LAW, AND WHAT ARE ITS RELEVANT CHARACTERISTICS. IT IS SETTLED WITH THE PR ONOUNCEMENT OF THIS COURT IN COMMISSIONER OF SALES-TAX, MADHYA PRA DESH, INDORE VS. MADHYA PRADESH ELECTRICITY BOARD, JABALP UR- 1969 (2) SCR 939 THAT ELECTRICITY IS GOODS. THE DEFINITI ON OF GOODS AS GIVEN IN ARTICLE 366(12) OF THE CONSTITUTION WAS CO NSIDERED BY THIS COURT AND IT WAS HELD THAT THE DEFINITION IN T ERMS IS VERY WIDE ACCORDING TO WHICH GOODS MEANS ALL KINDS OF MOVEABLE PROPERTY. THE TERM MOVEABLE PROPERTY WHEN CONSIDE RED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSE OF SALES-TAX CANNOT BE TAKEN IN A NARROW SENSE AND MERELY BECAUS E 33 ELECTRICITY ENERGY IS NOT TANGIBLE OR CANNOT BE MOV ED OR TOUCHED LIKE, FOR INSTANCE, A PIECE OF WOOD OR A BOOK IT CA NNOT BE CEASE TO BE MOVEABLE PROPERTY WHEN IT HAS ALL THE ATTRIBU TES OF SUCH PROPERTY. IT IS CAPABLE OF ABSTRACTION, CONSUMPTION AND USE WHICH IF DONE DISHONESTLY IS PUNISHABLE UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT, 1910. IF THERE CAN BE SALE AND PURCHASE OF ELECTRICAL ENERGY LIKE ANY OTHER MOVEABLE OBJECT, T HIS COURT HELD THAT THERE WAS NO DIFFICULTY IN HOLDING THAT ELECTR IC ENERGY WAS INTENDED TO BE COVERED BY THE DEFINITION OF GOODS . HOWEVER, A.N. GROVER, J. SPEAKING FOR THREE-JUDGE BENCH OF T HIS COURT ITA NO2707 /DEL./2009 14 WENT ON TO OBSERVE THAT ELECTRIC ENERGY CAN BE TRA NSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. IN T HE SAME WAY AS ANY OTHER MOVEABLE PROPERTY. IN THIS OBSERVATION W E AGREE WITH GROVER, J. ON ALL OTHER CHARACTERISTICS OF ELECTRIC ENERGY EXCEPT THAT IT CAN BE STORED AND TO THE EXTENT THAT ELEC TRIC ENERGY CAN BE STORED, THE OBSERVATION MUST BE HELD TO BE ERR ONEOUS OR BY OVERSIGHT. THE SCIENCE AND TECHNOLOGY TILL THIS DAY HAVE NOT BEEN ABLE TO EVOLVE ANY METHODOLOGY BY WHICH ELECTR IC ENERGY CAN BE PRESERVED OR STORED. ANOTHER SIGNIFICANT CHARACTERISTIC OF ELECTRIC ENER GY IS THAT ITS GENERATION OR PRODUCTION COINCIDES ALMOST INSTANTAN EOUSLY WITH ITS CONSUMPTION. TO QUOTE FROM AIYARS LAW LEXICON (SECOND ADDITION, 2000)__ ELECTRICITY IN PHYSICS IS THE N AME GIVEN TO THE CAUSE OF A SERIES OF PHENOMENA EXHIBITED BY VAR IOUS SUBSTANCES, AND ALSO TO THE PHENOMENA THEMSELVES. ITS TRUE NATURE IS NOT UNDERSTOOD. IMPERIAL DICT. (QUOTED IN SPENSLEY V. LANCASHIRE INS. CO., 54 WIS. 433, 442, 11 NW 894, W HERE THE COURT, QUOTING FROM THE SAME AUTHORITY, SAID, WE 3 4 ARE TOTALLY IGNORAN OF THE NATURE OF THIS CAUSE WHETHER IT BE A MATERIAL AGENT OR MERELY A PROPERTY OF MATTER. BUT AS SOME HYPOTHE SIS IS NECESSARY FOR EXPLAINING THE PHENOMENA OBSERVED, IT HAS BEEN ASSUMED TO BE A HIGHLY SUBTLE, IMPONDERABLE FLUID, IDENTICAL WITH LIGHTNING, WHICH PERVADES THE PORES OF ALL BOD IES, AND IS CAPABLE OF MOTION FROM ONE BODY TO ANOTHER. THIS CHARACTERISTIC QUALITY OF ELECTRIC ENERGY WAS JUDIC IALLY NOTICED IN INDIAN ALUMINIUM CO. ETC. ETC. VS. STATE OF KERALA & ORS (1996) 7 SCC 637. VIDE PARA 25 THIS COURT HAS NOTED , CONTINUITY OF SUPPLY AND CONSUMPTION STARTS FROM T HE MOMENT THE ELECTRICAL ENERGY PASSES THROUGH THE METERS AND SALE SIMULTANEOUSLY TAKES PLACE AS SOON AS METER READING IS RECORDED. ALL THE THREE STEPS OR PHASES (I.E. SALE, SUPPLY AN D CONSUMPTION) TAKE PLACE WITHOUT ANY HIATUS. IT IS TRUE THAT FROM THE PLACE OF GENERATING ELECTRICITY, THE ELECTRICITY IS SUPPLIED TO THE SUB- STATION INSTALLED AT THE UNITS OF THE CONSUMERS THR OUGH ELECTRICAL HIGHER-TENSION TRANSFORMERS AND FROM THERE ELECTRIC ITY IS SUPPLIED TO THE METER. BUT THE MOMENT ELECTRICITY I S SUPPLIED THROUGH THE METER, CONSUMPTION AND SALE SIMULTANEOU SLY TAKE PLACE. AS SOON AS THE ELECTRICAL ENERGY IS SUPPLIE D TO THE CONSUMERS AND IS TRANSMITTED THROUGH THE METER, CON SUMPTION TAKES PLACE SIMULTANEOUSLY WITH THE SUPPLY. THERE I S NO HIATUS IN ITS OPERATION. SIMULTANEOUSLY SALE ALSO TAKES PLACE . THESE ITA NO2707 /DEL./2009 15 PROPERTIES OF ELECTRICITY AS GOODS ARE OF IMMENSE R ELEVANCE AS WE WOULD STATE HEREAFTER. 21. ON DUE CONSIDERATION OF THESE TWO DECISIONS, IT IS IMPLICITLY CLEAR THAT THE HON'BLE SUPREME COURT HAS EXPLAINED THE MEANING OF ELECTRICITY, THE 35 HONBLE COURT HA S CONSIDERED THE DEFINITION OF GOODS AS GIVEN IN ARTICLE 366(12) OF THE CONSTITUTION OF INDIA. IT ALSO TOOK INTO CONSIDERAT ION THE SALES TAX ACT OF THE STATE OF ANDHRA PRADESH AS WELL AS M ADHYA PRADESH AND ALSO CONSIDERED THE DICTIONARY MEANING. THEREAFTER HONBLE COURT HAS OBSERVED THAT GOODS MEANS, ALL KI ND OF MOVEABLE PROPERTIES. THE TERMS MOVEABLE PROPERTY WH EN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR T HE PURPOSE OF SALES-TAX CANNOT BE TAKEN IN A NARROW SENSE AND MER ELY BECAUSE ELECTRIC ENERGY IS NOT A TANGIBLE OR CANNOT BE MOVE D OR TOUCHED LIKE, FOR INSTANCE, A PIECE OF WOOD OR A BOOK IT CA NNOT CEASE TO BE MOVEABLE PROPERTY WHEN IT HAS ALL THE ATTRIBUTES OF SUCH PROPERTIES. IT IS CAPABLE OF ABSTRACTION, CONSUMPTI ON AND USE OF WHICH IF DONE DISHONESTLY IS PUNISHABLE UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT. IF THERE CAN BE SALES AND P URCHASE OF ELECTRIC ENERGY LIKE ANY MOVEABLE OBJECT THAN THERE WAS NO DIFFICULTY IN HOLDING THAT ELECTRIC ENERGY WAS INTE NDED TO BE COVERED BY THE DEFINITION OF GOODS. 22. THE EXPRESSION ARTICLE, THING OR GOODS ARE NO T DEFINED IN THE INCOME-TAX ACT, 1961. LEARNED COMMISSIONER W HILE TREATING THE ELECTRICITY AS NOT AN ARTICLE OR THING HAS NOT MADE REFERENCE TO ANY PROVISIONS OF THE INCOME-TAX ACT, 1961, HE SIMPLY CONSTRUED THE MEANING OF ELECTRICITY AS NOT ARTICLE OR THING ON THE BASIS OF HIS OWN INFERENCE DRAWN FROM THE NATURE OF 36 THIS ITEM BUT IF WE EVALUATE THE CONCLUSION DRAW N BY THE LEARNED COMMISSIONER IN THE LIGHT OF THE DECISION O F THE HON'BLE SUPREME COURT GIVEN IN THE CASE OF INDIAN C INE AGENCY, CST VS. M.P. ELECTRICITY BOARD AND STATE OF MADHYA PRADESH VS. NTPC THEN IT WOULD SUGGEST THAT ELECTRI C ENERGY HAS ALL TRAPPING OF AN ARTICLE OR GOODS. THE PROCES S OF ITS GENERATION IS ALSO AKIN TO MANUFACTURE OR PRODUCTIO N OF AN ARTICLE OR THING. IT IS BEING GENERATED IN HUGE PLA NTS THOUGH SCIENTIFICALLY ONE MAY SAY IT IS TRANSFORMATION OF ONE SOURCE OF ENERGY INTO THE OTHER. BUT ALL THESE ASPECTS HAVE B EEN CONSIDERED IN THESE THREE JUDGMENTS OF THE HON'BLE SUPREME COU RT WHEREIN HONBLE COURT HAS EXPLAINED WHAT IS MANUFACTURE OR PRODUCTION AND WHAT IS ELECTRICITY. LEARNED DR AT THE TIME OF HEARING, HAD ITA NO2707 /DEL./2009 16 MADE REFERENCE TO THE ORDER OF THE ITAT, CHENNAI AN D THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F NC BUDHIRAJA. AS FAR AS THE JUDGMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF N.C. BUDHIRAJA IS CONCERNED THAT HAS BEEN CONSIDERED BY THE HON'BLE SUPREME COURT ITSELF IN T HE CASE OF INDIAN CINE AGENCY (SUPRA). THE ITAT IN THE CASE OF TAMILNADU CHLORATES HAS CONSIDERED THE ADMISSIBILIT Y OF DEDUCTION UNDER SECTION 80-HH AND IN THAT TEST HELD THAT ELECTRICITY IS NOT AN ARTICLE. THE ITAT HAS NOT DEA LT WITH THESE TWO JUDGMENTS EXTENSIVELY RATHER SIMPLY OBSERVED TH AT DECISION IN THE CASE OF MADHYA PRADESH ELECTRICITY BOARD WAS GIVEN IN THE CONTEXT OF THE 37 LANGUAGE OF A PARTICULAR STAT UTE. THE ONLY DISCUSSION MADE BY THE ITAT WITH REGARD TO THESE TW O JUDGMENTS OF THE HON'BLE SUPREME COURT READS AS UND ER: 6. REFERENCE WAS MADE TO THE DECISIONS OF APEX COU RT RENDERED IN THE CASE OF M.P. ELECTRICITY BOARD 35 S TC 188 (SIC). IN THIS CASE IT WAS HELD THAT ELECTRICITY IS GOODS WITHIN THE MEANING OF SECTION 2(3) OF CENTRAL PROVINCE AND VIR AR SALES-TAX ACT. THIS DECISION WAS RENDERED IN THE CONTEXT OF T HE LANGUAGE OF A PARTICULAR STATUTE. AS SUCH THIS MEANING CANNO T BE EXTENDED TO THE FACTS OF THE PRESENT CASE. 23. THUS, TAKING INTO CONSIDERATION ALL THESE ASPEC TS, WE ARE OF THE VIEW THAT ADMISSIBILITY OF ADDITIONAL DEPREC IATION CANNOT BE DENIED TO THE ASSESSEE MERELY ON THE GROUND THAT ELECTRICITY IS NOT AN ARTICLE OR THING. THE ORDER OF THE LEARNED C IT(APPEALS) IS REVERSED TO THIS EXTENT AND THE DISALLOWANCE IS DELETED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E COORDINATE BENCH OF THE TRIBUNAL AND THE HONBLE JURISDICTIONAL HIGH CO URT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND A LLOW GROUNDS NO.1 & 2 OF THE ASSESSEES APPEAL. ITA NO2707 /DEL./2009 17 10. GROUND NO.3 RELATES TO RE-COMPUTING OF DISALLOW ANCE U/S 14A AS PER RULE 8D FORMULA AT THE ENHANCED SUM OF RS.2,26,000/ -. LOOKING AT THE SMALLNESS OF THE ADDITION, ON A QUERY FROM THE BENC H, THE LD. AR SAYS THAT HE WOULD NOT PRESS THIS GROUND, HOWEVER URGED BEFOR E US THAT BY CONCEDING THIS GROUND SHOULD NOT BE TREATED AS A PRECEDENT FO R SUBSEQUENT YEARS. IN THE LIGHT OF THE SAID SUBMISSION, WE DISMISS THIS G ROUND FOR THIS ASSESSMENT YEAR AND OBSERVE THAT BY NOT-PRESSING THIS GROUND I N THIS AY, SHALL NOT BE TREATED AS A PRECEDENT FOR ANY OTHER ASSESSMENT YEA RS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF NOVEMBER, 2015. SD/- SD/- (O.P. KANT) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 18 TH DAY OF NOVEMBER, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.