ACIT, Coimbatore V. Sri M.Satishkumar, Coimbatore

ITA 718/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64360 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: T BANUSEKHAR
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.718/MDS /2012 (ASSESSMENT YEAR: 2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III, 63, RACE COURSE ROAD, COIMBATORE-641 018. VS. MR. M.SATISHKUMAR, 75, ANNA NAGAR, RAMANATHAPURAM COIMBATORE-641 045. PAN:AGUPS1101N (APPELLANT) (RESPONDENT) APPELLANT BY : MR. GURU BHASHYAM, JCIT RESPONDENT BY : MR. T.B ANUSEKHAR, C.A DATE OF HEARING : 6 TH SEPTEMBER, 2012 DATE OF PRONOUNCEMENT : 28 TH SEPTEMBER, 2012 O R D E R PER VIKAS AWASTHY, JM: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(A)-I, COIMBATORE DATED 16.1.2012 VIDE WHIC H THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND GRAN TED ADDITIONAL DEPRECIATION ON THE WINDMILL INSTALLED BY THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF SALE OF IMPORTED SECOND HAND TEXTIL E MACHINERY AND GENERATION OF ELECTRICITY THROUGH WI NDMILLS. ITA NO. 718 /MDS/2012 2 THE ASSESSEE HAD INSTALLED TWO WINDMILLS. THE FIRS T WINDMILL WAS INSTALLED BY THE ASSESSEE IN THE YEAR 2005. TH E SECOND WINDMILL WAS INSTALLED BY THE ASSESSEE IN THE MONT H OF SEPTEMBER, 2007 IN THE CURRENT ASSESSMENT YEAR. TH E ASSESSEE HAD CLAIMED 100% DEPRECIATION IN RESPECT OF THE SECOND WINDMILL INSTALLED AS PER THE PROVISIONS OF SECTION 32(1) AND ITEM XIII OF NEW APPENDIX I READ WITH RUL E 5. 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME REL EVANT TO THE ASSESSMENT YEAR 2008-09 ON 29.09.2008 DECLARIN G ITS INCOME AS RS.31,43,360/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 3.9.2009. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 14.12.2010 REJECTED THE CLAI M OF THE ASSESSEE FOR THE GRANT OF ADDITIONAL DEPRECIATION ON THE WINDMILL INSTALLED DURING THE RELEVANT ASSESSMENT Y EAR . THE ASSESSING OFFICER WHILE REJECTING THE CLAIM OF THE ASSESSEE OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO CL AIM ADDITIONAL DEPRECIATION ON THE WINDMILL AS THE ASSESSEE IS NOT INVOLVED IN MANUFACTURING OF ANY GOODS. ITA NO. 718 /MDS/2012 3 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 16.1.2012 ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE JUDGEMENTS OF HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. TECH ARAI LTD., REPORTED AS 321 ITR 477(MAD) AND CIT VS. TEXMO PRECISION CASTINGS REPORTED AS 32 1 ITR 481. 5. NOW, THE REVENUE HAS COME IN APPEAL IMPUGNING TH E ORDER OF THE CIT(A)-I, COIMBATORE. MR. GURU BHASHY AM, APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT T HE ASSESSEE IS A COMMISSION AGENT AND NOT A MANUFACTU RER. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO ADDITIO NAL DEPRECIATION UNDER THE PROVISIONS OF SECTION 32(1)( IIA). THE D.R. FURTHER SUBMITTED THAT THE CIT(A) HAS ERRED IN RELYING ON THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN T HE CASE OF TECH ARAI LTD.(SUPRA) AND TEXMO PRECISION CASTINGS (SUPRA) AS BOTH THE CASES ARE DISTINGUISHABLE. IN THE AFOR ESAID CASES, THE ASSESSEES WERE IN THE BUSINESS OF MANUFACTURING/PRODUCTION ACTIVITY. WHEREAS, IN THE PRESENT CASE, THE ASSESSEE IS NOT INVOLVED IN ANY MANUFACT URING ITA NO. 718 /MDS/2012 4 ACTIVITY. FOR AVAILING THE BENEFIT OF ADDITIONAL DE PRECIATION, IT IS ESSENTIAL THAT ASSESSEE SHOULD BE ENGAGED IN MANUF ACTURING ACTIVITY. 6. ON THE OTHER HAND, MR. T.BANUSEKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSE E IS OPERATING WINDMILL FOR GENERATION OF ELECTRICITY. THE ASSESSEE HAD INSTALLED FIRST WINDMILL WAY BACK IN THE YEAR 2 005. THE ASSESSEE HAD NOT CLAIMED ADDITIONAL DEPRECIATION O N THE FIRST WINDMILL, SINCE THE ASSESSEE WAS NOT INVOLVED IN ANY MANUFACTURING OR PRODUCTION ACTIVITY AT THAT TIME. NOW, THE ASSESSEE IS CLAIMING ADDITIONAL DEPRECIATION ON TH E SECOND WINDMILL AS THE ASSESSEE IS ALREADY IN THE BUSINES S OF PRODUCTION/GENERATION OF ELECTRICITY. IN ORDER TO SUPPORT HIS CONTENTIONS HE RELIED ON THE JUDGEMENT OF HONBLE S UPREME COURT OF INDIA IN THE CASE OF CST VS. MADHYA PRADES H ELECTRICITY BOARD REPORTED AS(1970) AIR 732 (SC), WHEREIN THE HONBLE APEX COURT HAS HELD THAT THE ELECTRICIT Y FALLS WITHIN THE DEFINITION OF GOODS AS DEFINED UNDER SALE OF GO ODS ACT, 1930. THE A.R. FURTHER RELIED ON THE JUDGEMENT OF T HE HONBLE SUPREME COURT OF INDIA IN THE CASE OF STATE OF ANDH RA ITA NO. 718 /MDS/2012 5 PRADESH & ORS. VS. NATIONAL THERMAL POWER CORPORATI ON LTD. REPORTED AS 2002 (4) TMI 694(SC). IN THE SAID JUDGE MENT, THE HONBLE SUPREME COURT HAS ELABORATELY EXPLAINED WHA T IS ELECTRICITY. THE HONBLE COURT HAS OBSERVED THAT .HOWEVER, WE ARE DEALING WITH THE CASE OF ELECTRICITY AS GOOD S, THE PROPERTY WHEREOF, AS WE HAVE ALREADY NOTED, IS THAT THE PRODUCTION (GENERATION), TRANSMISSION, DELIVERY AND CONSUMPTION ARE SIMULTANEOUS, ALMOST INSTANTANEOUS. ELECTRICITY AS GOODS COMES INTO EXISTENCE AND IS CO NSUMED SIMULTANEOUSLY, THE EVENT OF SALE IN THE SENSE OF T RANSFERRING PROPERTY IN THE GOODS MERELY INTERVENES AS A STEP B ETWEEN GENERATION AND CONSUMPTION. 7. THE A.R. POINTED OUT THAT THE OBSERVATION OF THE HONBLE SUPREME COURT OF INDIA IN THE AFORESAID CAS E CLEARLY SHOWS THAT THE TERM PRODUCTION AND GENERATION CAN BE USED INTERCHANGEABLY IN THE CASE OF ELECTRICITY AND GENE RATION OF ELECTRICITY CAN ALSO BE TERMED AS PRODUCTION OF ELE CTRICITY. THE A.R. IN ORDER TO FURTHER CLARIFY THE FACT THAT PROD UCTION OR GENERATION OF ELECTRICITY IS THE SAME AS MANUFACTUR ING ACTIVITY RELIED ON THE ORDER OF THE DELHI BENCH OF THE TRIBU NAL IN THE ITA NO. 718 /MDS/2012 6 CASE OF NATIONAL THERMAL POWER CORPORATION LTD. VS. DCIT., REPORTED AS 2012 (5) TMI 127 ITAT DELHI, WHEREIN TH E TRIBUNAL HAS HELD THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. THE A.R. HAS ALSO REFERRED TO THE JUDGEMENT IN THE CASE OF INDIA CINE AGENCIES VS. CIT REPORTED AS 308 ITR 98( SC) AND CONTENDED THAT THE TERM PRODUCTION AND MANUFACT URE SIGNIFY THE SAME MEANING, RATHER THE WORD PRODUCTI ON HAS A WIDER CONNOTATION THAN THE WORD MANUFACTURE. WHI LE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVE RY PRODUCTION NEED NOT AMOUNT TO MANUFACTURE. THE WOR D PRODUCTION OR PRODUCE WHEN USED IN JUXTAPOSIT ION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. 8. THE A.R. STRONGLY SUPPORTED THE ORDER PASSED BY THE CIT(A) AND PRAYED FOR THE DISMISSAL OF APPEAL OF TH E REVENUE. 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RESPEC TIVE PARTIES AND HAVE ALSO EXAMINED THE JUDGEMENTS ORDER S RELIED ON BY THE A.R. OF THE ASSESSEE. A PERUSAL OF THE J UDGEMENTS ITA NO. 718 /MDS/2012 7 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 E FFECT CAN BE SEEN AND FELT. THE ELECTRICITY CAN BE TRANSMITTE D, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HONBLE SUPREME COURT IN THE CASE OF THE CST VS. MADHYA PRA DESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITION OF GOODS UNDER THE PROVISIONS OF SAL E OF GOODS ACT, 1930. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF S EVERAL JUDGEMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCL UDED 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 A CTIVITY. THE ASSESSEE IS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLS THE CONDITIONS AS LAID DOWN UNDER SECTION 32(1)(IIA ). THE GOVERNMENT VIDE FINANCE ACT, 2012 HAS AMENDED THE PROVISIONS OF SECTION 32(1)(IIA) TO INCLUDE THE BU SINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER, ELIGIBLE FOR ITA NO. 718 /MDS/2012 8 BENEFIT UNDER SECTION 32(1)(IIA). ALTHOUGH THE SAI D AMENDMENT IS WITH EFFECT FROM 1.4.2013 BUT IT GIVE S IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MAN UFACTURING PROCESS AND QUALIFIES FOR THE BENEFITS UNDER SECTIO N 32(1)(IIA). IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS UP HELD AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, TH E 28 TH DAY OF SEPTEMBER, 2012 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 28 TH SEPTEMBER, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.