Telangana State Power Generation Corporation Limited , Hyderabad V. Asst. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 285/Hyd/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3002 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Appeal Filed On: 20-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Depreciation; Additional depreciation; Revised return; Set aside
• Section: 143(3); 14A; 32(1)(iia); 64; 43; 48; 73; 72; 13; 22; 32; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE S HRI SATBEER SINGH GODARA , JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU , ACCOUNTANT MEMBER ITA NO. 285 /H/20 20 ASSESSMENT YEAR: 20 17 - 18 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYDERABAD. PAN A AFCT 0257Q VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M. CHANDRAMOULESWARA RAO REVENUE BY: SHRI YVST SAI DATE OF HEARING: 1 5 /0 6 /2021 DATE OF PRONOUNCEMENT: 17 / 0 6 /2021 O R D E R PER L.P. SAHU , AM: TH IS APPEAL FILED BY THE ASSESSEE FOR AY 20 17 - 18 IS DIRECTED AGAINST THE CIT(A) - 2 , HYDERABAD S ORDER , DATED 2 1 /0 1 /20 20 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN SUSTAINING THE REJECTION OF THE CLAIM BY THE AO FOR GRANT OF INVESTMENT ALLOWANCE U/S 32AC. HE OUGHT TO HAVE CONSIDERED THAT POWER GENERATION IS AKIN TO MANUFACTURE AND ALLOWANCE U/S 32AC IS TO BE GRANTED. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 2 2. SUCH OTHER GROUND AND THAT MAY BE URGED DURING THE HEARING OF THE APPEAL . 2. BRIEF F ACTS OF THE C ASE ARE THAT T HE A SSESSEE COMPANY FILED ITS ORIGINAL RETURN OF INCOME FOR A.Y. 2017 - 18 ON 2 6 . 1 0.201 7 WITH PROVISIONAL FINANCIALS AND FILED REVISED RETURN OF INCOME ON 08 .0 9 .2018 ELECTRONICALLY U/S 139 OF THE ACT DECLARING A TOTAL LOSS OF RS. 129,65,47,595/ - UNDER NORMAL PROVISIONS AND RS. 151,32,40,375 / - UNDER MAT PROVISIONS. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 06/12/2019 BY DETERMINING THE TOTAL INCOME OF RS. 58,43,65,649/ - UNDER NORMAL PROVISIONS AND RS. 210,27,06,024/ - UNDER M AT PROVISIONS. THE A. O DISALLOWED INVESTMENT ALLOWANCE OF RS. 46,89,27,229/ - , DISALLOWED OTHER INCOME FOR 80LA OF RS. 2,64,96,420/ - AND MADE DISALLOWANCE U/S 14A OF RS. 9,40,42,000/ - . 3. THE SUBJECT MATTER OF APPEAL IS ONLY REGARDING DISALLOWANCE OF IN VESTMENT ALLOWANCE U/S 32AC OF RS. 46,89,27,229 / - . THE AO FOR MAKING THIS DISALLOWANCE, OBSERVED IN HIS ORDER AS UNDER: 4.1 FOR THE YEAR UND E R CONSIDERATION , THE ASSESSEE CLAIMED TO HAVE INSTALLED NEW MACHINERY OF THE ORDER OF RS. 312,61,81,526/ - IN NEW PROJECTS TAKEN UP AT (I) PULICHLNTALA HYDRO ELECTRIC STATION , (II ) KAKATIYA THERMAL POWER PROJECT, STAGE - U (III) LOWER JURALA HYDRO ELECTRIC PROJECT. ON THE S AID NEW MACHINERY, T HE ASSESSEE CLAIMED INVESTMENT I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 3 ALLOWANCE U/S 32AC AT RS. 46,89,27,229/ - BEING 15% OF THE NEW MACHINERY INSTALLED/ CAPITALIZED DURING THE YEAR. 4.2 DURING THE COURSE OF HEARINGS, THE ASSESSEE WAS ASKED TO SUBSTANTIATE THEIR ENTITLEMENT TO THE SAID A LLOWA N CE U/S. 32AC, THE ASSESSEE VIDE NOTE DATED 23.10.2019 SUBMITTED THAT THE DETAILS OF INVESTMENT ALLOWANCE CLAIMED. 4.3. THE SUBMISSIONS MADE BY THE ASSESSEE IN THE PREVIOUS SC1UTINY ASSESSMENT PROCEEDINGS AND THE CASE LAWS RELIED BY TH E ASSESSEE ARE CONSIDERED. THE MOOT POINT FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ENTITLED TO CLAIM THE INCENTIVE AVAILABLE U/S 32AG. 4.4. THE INCOME TAX 'ACT PROVIDES VARIOUS INCENTIVES IN DIFFERENT SECTIONS TO THE COMPANIES ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY CUTICLE OR THING. THE SECTION IN RELATION TO, INVESTMENT ALLOWANCE READS AS UNDER: '32AC, (1) WHERE AN ASSESSEE, BEING A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, ACQUIRES AND INSTALLS NEW ASSET AFTER THE 3 ST DAY OF MARCH, 2013 BUT BEFORE THE 1ST DAY OF APRIL , 2015 AND THE AGGREGATE AMOUNT 6F ACTUAL COST OF SUCH NEW ASSETS EXCEEDS ONE HUNDRED CR ORE RUPEES, THEN, THERE SHALL BE ALLOWED A DEDUCTION, - (B) FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2015, OF A SUM EQUAL TO FIFTEEN PER CENT OF THE ACTUAL COST OF N EW ASSETS ACQUIR ED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2013 BUT BEFORE THE 1ST DAY OF APRIL, 2015, AS REDUCED BY THE AMOUNT OF DEDUCTION ALLOWED, IF ANY, UNDER CLAUSE (A)'. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 4 4.5 BEFORE GOING INTO THE DISCUSSION FURTHER, IT IS RELEVANT TO REFER TO THE CASE LAW RELI ED U PON BY THE ASSESSEE IN THE CASE OF DAMODAR VALLEY CORPORATION AND NTPC (SUPRA). BOTH THESE DECISIONS ARE GIVEN IN THE CONTEXT OF ALLOWABILITY OF ADDITIONAL DEPRECIATION U/S 32(L)(IIA). VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUE MAKE IT CLEAR THAT IN ORDER TO FIND OUT WHETHER ANY ASSESSEE IS ENTITLED FOR ANY PARTICULAR DEDUCTION, EACH CASE IS REQUIRED TO BE EXAMINED IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THAT VERY CASE AND THE VERY PROVISIONS OF THE ACT. IN THE LIGHT OF ABOVE OBSERVATIONS, LET US E XAMINE THE INCENTIVES PROVIDED BY THE INCOME T AX ACT TO POWER GENERATION COMPANIES AND THE INTENTION OF LEGISLATION BEHIND PROVIDING SUCH INCENTIVES. 4.6 SECTION 32(L)(IIA) PROVIDES FOR ADDITIONAL DEPRECIATION TO INCENTIVIZE THE PROMOTION OF CAPITAL GOOD S INDUSTRY, ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, AND THIS SECTION CAME INTO FORCE VIDE FINANCE ACT 2002. THOUGH THE PROVISO RELATING TO ALLOWING ADDITIONAL DEPRECIATION U/S 32(L)(IIA) STARTS WITH THE WORDS 'ENGAGED IN THE BUSINESS OF MANUFACTURE OF AN ARTICLE OR THING' AKIN TO THE PRO V ISO 32AC(L) 'WHERE AN ASSESSEE, BEING A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING' THE INCENTIVE OF ADDITIONAL DEPRECIATION WAS NOT CONSIDERE D FOR POWER GENERATION COMPANIES. HOWEVER; THE SAID INCENTIVE OF ADDITIONAL DEPRECIATION WAS EXTENDED TO THE POWER GENERATION COMPANIES BY AN AMENDMENT TO THE SECTION 32(L)(IIA) BY INCLUDING THE POWER GENERATION COMPANIES IN THE SAID PROVISO WITH EFFECT FR OM 01.04.2013 BY THE FINANCE ACT, 2012. IN THE MEMORANDUM TO FINANCE ACT, 2012, THE REASONS FOR EXTENDING THE BENEFIT OF ADDITIONAL DEPRECIATION TO POWER GENERATION COMPANIES WAS SPEL T OUT AS UNDER: UNDER THE EXISTING PROVISIONS, THE BENEFIT OF INITIAL D EPRECIATION IS NOT AVAILABLE ON THE NEW MACHINERY I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 5 OR PLANT INSTALLED BY AN ASSESSEE ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER. IN ORDER TO ENCOURAGE NEW INVESTMENT BY THE ASSESSEES ENGAGED IN THE BUSINESS OF GENERATION O R GENERATION AND DISTRIBUTION OF POWER, IT IS PROPOSED TO AMEND THIS SECTION TO PROVIDE THAT AN ASSESSEE ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER SHALL ALSO BE ALLOWED INITIAL DEPRECIATION AT THE RATE OF 20% OF ACTUAL C OST OF NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) ACQUIRED AND INSTALLED IN A PREVIOUS YEAR; THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2013 - 14 AND SUBSEQUENT ASSESSMENT YEARS. 4.7 FROM THE ABOVE, IT CAN BE SEEN THAT WHILE BRINGING THE PROVISIONS FOR ADDITIONAL DEPRECIATION UNDER SECTION 32(I){II) INTO EXISTENCE, THE POWER GENERATING COMPANIES WERE NOT CONSIDERED INITIALLY . IT IS ONLY BY AN AMENDMETL.T TO SECTION 32(I)(I I), THE POWER GENERATING UNITS WERE INCLUDED TO GET THE BENEFIT OF ADDITIONAL DEPRECATION. IT IS REFERRING TO THIS POSITION AND PROVISIONS OF SECTION 32(I)(II} ONLY, THE COURTS IN DAMODAR VALLEY CORPORATION AND NTPC CASES DECIDED IN THE ISSUE IN FAVOUR OF THE ASSESSEE. 4.8 NOW COMING TO SECTION. 32AC, AS PER MEMORANDUM TO FINANCE ACT, 2013, THIS SECTION WAS INTRODUCED AS A MEASURE TO PROMOTE SOCIO - ECONOMIC GROWTH. 'INCENTIVE FOR ACQUISITION AND INSTALLATION OF NEW PLANT OR MACHINERY BY MANUFACTURING COMPA NY IN ORDER TO ENCOURAGE SUBSTANTIAL I NVESTMENT IN PLANT OR MACHINERY, IT IS PROPOSED TO INSERT A NEW SECTION 32AC IN THE INCOME TAX ACT TO PROVIDE THAT WHERE AN ASSESSEE, BEING A COMPANY, (A) IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF AN ARTICLE OR THIN G; AND (B) INVESTS A SUM OF MORE THAN RS. 100 CORE IN NEW ASSETS (PLANT OR MACHINERY) DURING THE PERIOD BEGINNING FROM 1 ST APRIL, 2013 AND ENDING ON 31 ST MARCH, 2015.' IN THE SAID I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 6 MEMORANDUM, THE POWER GENERATING COMPANIES WERE NOT INCLUDED. IN THE ABSENCE OF SPECIFIC INCLUSION OF POWER GENERATING UNITS INTO THE PURVIEW OF SECTION 32AC, THE BENEFITS MENTIONED IN SECTION 32(1)(II) CANNOT BE EXTENDED TO POWER GENERATION COMP ANIES. THEREFORE, THE CASE LAWS RELIED UPON BY THE ASSESSEE, WHICH WERE RENDERED IN THE CONTEXT OF 32(1)(IIA) CANNOT BE APPLIED TO PROVISIONS OF SECTION 32AC AND ACCORDINGLY, THE CLAIM OF INVESTMENT ALLOWANCE CLAIMED BY THE ASSESSEE AT RSA6,89,27,229/ - IS DISALLOWED AND ADDED TO THE INCOME RETURNED. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WHICH WERE EXTRACTED IN HIS ORDER AT PAGES 8 TO 1 3. 4. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT . 5. BEFORE US, THE LD. AR OF THE ASSESSEE FILED WRITTEN SUBMISSIONS IN SUPPORT OF ASSESSEES CASE, WHICH ARE AS UNDER: THE APPELLANT IS A STATE GOVERNMENT PUBLIC SECTOR UNDERTAKING ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY. IT FILED ITS INCOME TAX RETURN (REVISED) DECLARING A LOSS OF RS. 129,65,47,595/ - . INCOME UNDER REGULAR PROVISIONS AND RS 151,32,40,375 / - UNDER MAT PROVISIONS . IN THE SCRUTINY ASSESSMENT, THE LD. ASSESSING OFFICER HAS DISALLOWED THE CLAIM MADE FOR RS . 46,89,27,229/ - TOWARDS IN VESTMENT A LLOWANCE U/S. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 7 32AC OF INCOME TAX ACT. 1961 SOLELY ON THE GROUND THAT GENERATION OF POWER C ANNOT BE TREATED AS A MANUFACTURING ACTIV ITY AND THE BENEFITS MENTIONED UNDER THAT SECTION ROT BE EXTENDED TO POWER GENERATING COMPANIES AS SUCH COMPANIES HAVE NOT BEEN SPECIFICALLY M:LUDED IN THIS SECTION. IN THE APPEAL, THE LD. COMMISSIONER OF INCOME T AX (APPEALS) BAS APPEALED THE DISALLOWANCE OF INVESTMENT ALLOWANCE AND STATED THAT POWER GENERATION COMPANIES ARE NOT INCLUDED SPECIFICALLY IN THE PURVIEW OF SECTION 32AC. IN T HE APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT WAS SUBMITTED THAT - (I) TO BE ELIGIBLE FOR DEDUCTION U /S 32AC, THE ASSESSEE MUST BE A COMPAN Y EN GAGED THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, (II) IT SHOULD ACQUIRE AND INSTALL NEW ASSET DURING THE PREVIOUS YEAR AND SUCH INVESTMENT SHOULD EXCEED 25 CRORES AND SUCH COMPANY ASSESS EE WILL BE ELIGIBLE OF SUM EQUAL ACTUAL COST OF NEW ASSET. THE AP PELLANT SUBMITTED THAT, IT IS SATISFYING ALL THE REQUIRED ATTRIBUTES SPECIFIED IN SECTION 32AC AND THAT IT IS GENERATING 'ELECTRICITY'. THE HON'BLE SUPREME COURT IN THE CASE OF CST VS MADHYA PRADESH STATE ELECTRICITY BOARD REPORTED IN A - L 970 (SC - 732) AND IN THE CASE OF STATE OF AP VS NTPC REPORTED IN 127 SIC 280(SC), HAS HELD THAT ELECTRICITY IS A' GOOD'. THE APPELLANT FURTHER SUBMITTED BEFORE THE LD. CIT (A) THAT, THE ISSUE WHETHER' ELECTRICITY' IS A 'COMMODITY' OR A 'GOOD' HAS BEEN SETTLED BY A CATENA OF JUDICIAL PRONOUNCEMENTS OF VARIOUS HIGH COURTS AND SUPREME COURT AND IT IS HELD TO BE' A GOOD'. THE APPELLANT IS RELYING UPON THE FOLLOWING DECISIONS WHICH HAVE ADJUDICATED THAT THE' I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 8 ELECTRICITY ' IS 'A GOOD' AND ' GENERATION OF ELECTRICITY' IS A MANUFA CTURE', CST VS . MADYAPRADESH ELECTRICITY BOARD REPORTED IN A - 1970(S.C - 732) STATE OF AP VS NTPC - 127 STC 280(SC). ORIENT PAPER VS ORISSA STATE 42 ELT 552 C M S (INDIA) OPERATIONS VS CCE7 STR 369 (CEGAT) NTPC - SAIL VS CCE (UNREPORTED) TAMILNADU CHOLRATES VS JCIT 98 LTD 1 (CHE) CIT VS HI TECH ARAI 321 ITR 427 (MAD) 1 CIT VS TEXMO PRECISION CASTINGS 321 ITR 481 (MAD). IT IS SUBMITTED BEFORE THE LD.CIT (A) THAT, THE HON'BLE ITAT, B - BENCH - CHENNAI IP THE CASE OF ACIT VS MR. M SATHEESH KUMAR, COIMBATORE IN ITA NO. 718/MDS/2012 ORDER DT:28.09.2012 HAS STATED THAT' ALTHOUGH THE SAID AMENDMENT (TO SECTION 32 (1)(IIA)) IS EFF ECTIVE FROM 01.04.2013, BUT IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURING PROCESS AND QUALIFIES FOR THE BENEFIT DIS 32(1)(IIA) AND IT UPHELD THAT THE ORDER OF CIT(A) AND ALLOWING DEDUCTION TO ELECTRICITY GENERATING COMPANIE S FOR A Y 2008 - 09 IS UPHELD BY DISMISSING REVENUE APPEAL BEING DEVOID OF MERIT. THE HON'BLE ITAT IN THE SATHEESH KUMAR CASE HAS HELD THAT GENERATION OF ELECTRICITY IS A MANUFACTURING PROCESS MUCH EARLIER TO THE AMENDMENT BROUGHT OUT TO INCLUDE ELECTRICITY GENERATING COMPANIES FOR BENEFIT DIS 32(1 )(IIA). THE APPELLANT PLACED RELIANCE ON THE JUDGEMENT OF HON'BLE AC CENTRAL EXCISE, NEW DELHI VS BALLARPOOR INDUSTRIES LTD (1990) 77 STC 282 (SC), TO SUBMIT THAT COAL IS A RAW, MATERIAL FOR PRODUCTION OF ELECTRI CITY. IT FURTHER RELIED ON THE JUDGEMENT OF HON'BLE ODISHA HIGH COURT IN THE CASE OF ORIENT PAPER & INDUSTRIES LTD V S ODISHA STATE ELECTRICITY BOARD (1989) 42 EL T 552(ORI), FOR THE PROPOSITION THAT ELECTRICITY IS A GOOD AND GENERATION OF ELECTRICITY INVO LVES MANUFACTURING PROCESS. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 9 IN VIEW OF THE ABOVE DECISIONS AND THE INTERPRETATIONS APPLIED BY THE JUDICIAL AUTHORITIES, IT WAS SUBMITTED BEFORE CIT(A) THAT THE CONTENTIONS OF THE ASSESSING OFFICER THAT THE PROVISIONS OF SECTION 32(1)(IIA) HAS NOT GRANT ED THE ADDITIONAL DEPRECIATION ALLOWANCE TO THE POWER GENERATING COMPANIES UNTIL AN AMENDMENT TO INCLUDE POWER GENERATING COMPANIES FOR GRANT OF CONCESSION WAS BROUGHT OUT BY FINANCE ACT, 2012 W.E.F 01.04.2013, WAS A NARROW INTERPRETATION OF THE PROVISIONS OF SECTION 32(1 )(IIA) AND HAS NO JUSTIFICATION AND LACKS ANY JUDICIAL AUTHORITY SUPPORT. THE HON'BLE ITAT HAS REFERRED TO NUMBER OF DECISIONS OF VARIOUS BENCHES OF TRIBUNAL, HIGH COURTS AND THE HON'BLE SUPREME COURT AND AFTER. ANALYSING HAS HELD THAT PO WER GENERATION TANTAMOUNT TO ' PRODUCTION'. THE LD. ASSESSING OFFICER AND ALSO THE LD: CIT(A) HAVE DENIED' INVESTMENT ALLOWANCE DIS. 32AC' TO THE APPELLANT POWER GENERATING COMPANY CONTENDING THAT, THE LEGISLATURE ONLY AMENDMENT SEC 32(1)(IIA) WHICH WAS FOR AN ADDITIONAL INCENTIVE BY INCLUDING THE BUSINESS OF GENERATION, TRANSMISSION OR DISTRIBUTION OF POWER BUT DID NOT AMENDED THE SECTION 32AC WHICH ALSO FORMS AN ADDITIONAL INCENTIVE AND ONLY REFERS TO MANUFACTURE OR PRODUCTION OF ARTICLE OR THING AND E XPLICITLY DOES NOT MENTIONED' OR THE BUSINESS OF ' AND THUS THE INTENT OF NOT GRANTING BENEFIT CONCLUDED AS EXPLICIT NATURE LEAVING NO AMBIGUITY IN THIS REGARD. THUS THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER DENYING 'INVESTMENT ALLOWANCE U/S 32AC' TO THE APPELLANT, ENGAGED IN THE POWER GENERATION BUSINESS. THE APPELLANT HUMBLY SUBMIT THAT, THE ACTIVITY WHICH IS CONSIDERED AS 'MANUFACTURING / PRODUCTION' OF AN ARTICLE OR THING U/S. 32(1)(IIA) CANNOT BE SO CONSIDER OTHERWISE AND NOT AS A MANUFACTURING I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 10 COMPANY WHEN IT COMES TO GRANTING OF INCENTIVE TO A COMPANY UNDER SECTION 32AC. 'ELECTRICITY GENERATING COMPANIES WERE HELD AS 'GOODS / COMMODITY' MANUFACTURING COMPANIES UNDER SECTION 32(IIA) BY HON'BLE JUDICIAL AUTHORITIES AND THEREFORE, SUCH ELECTRICITY MANUFACTURING COMPANIES ARE ALSO TO BE TREATED AS SUCH UNDER SECTION 32AC OF INCOME TAX ACT. THE ISSUE OF GRANTING INCENTIVE U/S.32AC IS COMPLE TELY COVERED IN FAVOUR OF THE ASSESSEE ELECTRICITY GENERATING COMPANY AS PET THE CASE LAW GIVE HEREIN BELOW: - THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, DELHI' 1 - 2' BENCH IN ITA NO.12 DEL/2020 ORDER DT. 21.09.2020 IN THE CASE OF VEDANTA LTD VS THE ACIT, CIRCLE - 26(2), NEW DELHI REPORTED IN (2020) 084ITR(TRIB)0084 HA~ CONSIDER THE ISSUE OF DENIAL OF INVESTMENT ALLOWANCE U/S 32AC TO THE POWER GENERATION BUSINESS COMPANY. THE HON'BLE TRIBUNAL HAS VERY ELABORATELY DISCUSSED AS TO WHETHER POWER GENERATION CA N BE CONSIDERED AS MANUFACTURING I PRODUCTION OF AN ARTICLE OR THING AND AFTER A DETAILED ANALYSIS OF NUMBER OF DECISIONS OF VARIOUS JUDICIAL AUTHORITIES RANGING FROM IT A T TO SUPREME COURT OF INDIA AND CONCLUDED THAT GENERATION OF ELECTRICITY TANTAMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. (COPY OF ITAT ORDER IS ENCLOSED). THE ASSESSEE'S CASE IN THE PRESENT APPEAL RELATING TO GRANTING OF 'INVESTMENT ALLOWANCE' VIS. 32AC, IS COMPLETELY COVERED BY THE DECISION OF THE HON'BLE ITAT, DELHI BENC H IN THE DECISION IN 'M / S. VEDANTA' ( SUPRA). IN PARA NO.81 OF THE ORDER I THE HON'BLE BENCH CONCLUDED AS FOLLOWS: - 81. IN LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SESA GOA AND NTPC SAIL POWER CO. PVT LTD [SUPRA], WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION U/S 32AC OF THE ACT. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 11 THIS GROUND IS, ACCORDINGLY, ALLOWED. COPY OF THE HON'BLE TRIBUNAL ORDER IS ENCLOSED. THE APPELLANT SUBMIT THAT: - THE HON'BLE ITAT HAS CONSIDERED SIMILAR AND IDENTICAL FACTS OF THE P RESENT APPELLANT, IN THE CASE OF M/S.VENDANTA LTD (SUPRA) AND HELD THAT POWER GENERATING COMPANIES ARE ELIGIBLE FOR INCENTIVES VIS. 32AC AND SUCH POWER GENERATION IS TO BE CONSIDERED AS MANUFACTURING ACTIVITY. THE APPELLANT ASSESSEE HUMBLY PRAY THE HON'BL E TRIBTMAL TO GRANT INVESTMENT ALLOWANCE U/S 32AC TO THE APPELLANT POWER GENERATING COMPANY. 6. THE LD. DR, ON THE OTHER HAND BESIDES RELYING ON THE ORDERS OF AUTHORITIES BELOW, PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F NC BUDHARAJA AND CO., [1993] 204 ITR 412 (SC) AND DILIP KUMAR & COMPANY AND CO. [2018] 95 TAXMANN.COM 327 (SC). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. WE FIND THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2016 - 17 IN ITA NO. 1424/HYD/2019 , ORDER DATED 14/06/2021, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. WE FIND THAT THE WRITTEN SUBMISSIONS CITED SUPRA BEFORE US BY THE LD. AR OF THE ASSESSEE WERE ALSO SUBMITTED BEFORE THE C IT(A), BUT, THE CIT(A) IGNORING THE I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 12 WRITTEN SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE ORDER OF AO MAKING DISALLOWANCE ON ACCOUNT OF INVESTMENT ALLOWANCE U/S 32AC. WE FIND FORCE IN THE WRITTEN SUBMISSIONS FILED BY THE LD. AR OF THE ASSESSEE. IN THE CASE OF VEDANTA LTD. (SUPRA), THE ITAT, DELHI BENCH RELYING ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SESA GOA AND NTPC LTD, DIRECTED THE AO TO ALLOW THE CLAIM OF DEDUCTION U/S 32AC OF THE ACT. 7.1 IN THE CASE OF ACIT, COIMBATORE VS. M. SATIS H KUMAR, THE ITAT, CHENNAI BENCH IN ITA NO. 718/MDS/2012, DATED 28/09/2012,ON WHICH RELIANCE PLACED BY THE ASSESSEE IN ITS GROUND OF APPEAL, HAS HELD AS UNDER: 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RESPECTIVE PARTIES AND HAVE ALSO EXAMINED THE JUD GEMENTS ORDERS RELIED ON BY THE A.R. OF THE ASSESSEE. A PERUSAL OF THE JUDGEMENTS CLEARLY SHOW THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURING OF A NEW PRODUCT. IN THE INSTANT CASE, ELECTRICITY WHICH MAY NOT BE SEEN WITH THE EYES, HOWEVER, ITS EFFE CT CAN BE SEEN AND FELT. THE ELECTRICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HON'BLE SUPREME COURT IN THE CASE OF THE CST VS. MADHYA PRADESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITION OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT , 1930. THE DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF SEVERAL JUDGEMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCLUDED THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OF AN ARTICLE OR THING. 10. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT GENERATION OF ELECTRICITY IS A MANUFACTURING ACTIVITY. THE ASSESSEE IS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLS THE CONDITIONS AS LAID DOWN UNDER SECTION 3 P 2(1)(IIA) . THE I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 13 GOVERNMENT VIDE FINANCE ACT , 2012 HAS AMENDED THE PROVISIONS OF SECTION 32(1)(IIA) TO INCLUDE THE BUSINESS 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 TO 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 APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 28TH DAY OF SEPTEMBER, 2012 AT CHENNAI. 7.2 AS THE ISSUE IN DISPUTE IS SIMILAR TO THE ISSUE DECIDED BY THE ITAT, DELHI IN VEDANTA LTD. AND THE CHENNAI BENCH HAS DECIDED THAT GENERATION OF ELECTRICITY IS A MANUFACTURING ACTIVITY DECISION CITED SUPRA, THE ELECTRICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HON'BLE SUPREME COURT IN THE CASE OF THE CST VS. MADHYA PRADESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITION OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT , 1930. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENTS , WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO ALLOW THE ASSESSEES CLAIM OF DEDUCTIO N U/S 32AC OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 7.1 AS THE FACTS AND GROUNDS RAISED IN THE IMPUGNED AY ARE SIMILAR TO THAT OF AY 2016 - 17, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN AY 2016 - 17 CITED SUPRA, WE DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION U/S 32AC OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 14 8. IN THE RESULT, APPEAL OF THE I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 15 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 16 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 17 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 18 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 19 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 20 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 21 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 22 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 23 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 24 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 25 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 26 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 27 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 28 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 29 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 30 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 31 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 32 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 33 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 34 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 35 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 36 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 37 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 38 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 39 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 40 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 41 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 42 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 43 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 44 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 45 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 46 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 47 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 48 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 49 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 50 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 51 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 52 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 53 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 54 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 55 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 56 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 57 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 58 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 59 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 60 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 61 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 62 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 63 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 64 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 65 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 66 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 67 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 68 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 69 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 70 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 71 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 72 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 73 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 74 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 75 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 76 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 77 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 78 I.T.A. NO. 285 /HYD/20 20 TELANGANA STATE POWER GENERATION CORPORATION LTD., HYD. 79 ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE , 2021. SD/ - ( S.S. GODARA ) JUDICIAL MEMBER SD/ - ( L.P. SAHU ) ACCOUNTANT MEMBER HYDERABAD, DATED 17 TH JUNE, 2021 KV 1 TELANGANA STATE POWER GENERATION CORPORATION LTD., FA&CCA (ACS), 3 RD FLOOR, A, BLOCK, VIDYUT SOUDHA, KHAIRTABAD, HYDERABAD 500 082 2 AC IT, CIRCLE 2 ( 2 ) , HYDERABAD. 3 CIT(A) - 2 , HYDERABAD. 4 PR. CIT 2 , HYDERABAD. 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.