DCIT,Cir.-3, Pune V. Shri Avinash Nivrutti Bhosale, Pune

ITA 823/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9738 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEM BER AND SHRI R.K. PANDA, ACCOUNTANT MEMBE R ITA NO. 823/PN/2011 (ASSTT. YEAR : 2007-08) DEPUTY COMMISSIONE R OF INCOME TAX ... APPELLANT CIRCLE 3, PUNE V. SHRI AVINASH NIVRUTTI BHOSALE RESPONDENT 759/34, BHOSALE PAVILION BHANDARKAR ROAD, DECCAN GYMKHANA, PUNE 411 004 PAN : ABTPB 8151 F APPELLANT BY : SHRI MUKESH VERMA RESPONDENT BY : SHRI SUNIL PATHAK DATE OF HEARING : 28/6/12 DATE OF PRONOUNCEMENT: -8-12 ORDER PER R.S. PADVEKAR, JM THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD CIT(A) II, PUNE DATED 30.3.2011 FOR THE A .Y. 2007-08. 2. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE. GROUND NOS. 3 TO 6 ARE IN RESPECT OF ISSUE OF DETERMINING THE ANNUAL LETTING VALUE (ALV) OF THE ASSESSEES FLAT IN THE WALKESHWAR, MUMBAI. 3. THE FACTS AS NOTED BY THE AUTHORITIES BELOW ARE AS UNDER. THE ASSESSEE IS AN INDIVIDUAL HAVING FLAT AT WALKESHW AR IN MUMBAI. THE AREA OF FLAT IS 1169 SQ. FT. WHICH IS LET OUT ON RE NT TO ASSESSEES ASSOCIATE CONCERN M/S. AVINASH CONSTRUCTION. THE ASSESSEE C LAIMED THAT THE ACTUAL RENT RECEIVED IN RESPECT OF THE SAID FLAT IS 1,15, 000/-. THE ASSESSEE ALSO CLAIMED DEDUCTION AT 30% TOWARDS REPAIRS AND COLLE CTION CHARGES AND DECLARED THE NET RENTAL INCOME AT RS. 80,500/-. I N THE OPINION OF THE A.O, THE ANNUAL VALUE OF THE PROPERTY WAS REQUIRED TO BE DETERMINED U/S. 23(1)(A) OF THE ACT. FOR GETTING THE INFORMATION O N RENT, THE A.O USED ONE WEB SITE TO FIND OUT RENT FOR THE DIFFERENT SI ZES OF THE FLAT IN SAID AREA.. AFTER CONSIDERING THE OBJECTION OF THE AS SESSEE AND RELYING ON THE WEB SITE RESULTS, ADOPTED THE ANNUAL VALUE (ALV) OF THE FLAT AT RS. 30,00,000/- I.E. TAKING THE RENT AT RS. 2,50,000/- PER MONTH OF THE SAID FLAT AS A MARKET RENT. THE ASSESSEE RESISTED THE A CTION OF THE A.O BY CHALLENGING THE ANNUAL VALUE DETERMINED BY THE A.O U/S. 23(1)(A) OF THE ACT. THE LD CIT(A) CONSIDERING THE DECISION OF THE ITAT, PUNE BENCH IN 2 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 THE ASSESSEES OWN CASE ON THE ISSUE OF THE DETERMI NATION OF THE ALV OF THE ASSESSEES FLAT FOR THE A.Y. 2005-06, ALLOWED T HE GROUND TAKEN BY THE ASSESSEE. NOW BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT IDENTIC AL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2005-06 IN THE APPEAL FILED BY THE REVENUE BEING ITA NO. 1 524/PN/2008, ORDER DATED 24 TH SEPTEMBER 2010. THE OPERATIVE PART OF THE ORDER O F THE TRIBUNAL READS AS UNDER : 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS PAPER BOOK F ILED BEFORE US AND COPIES OF THE DECISIONS FILED BEFORE US. UNDIS PUTEDLY, THIS IS THE CASE, WHERE THE PROPERTY IS LET TO THE SISTER CONCE RN FOR RENT AND THEREFORE, CLAUSE (B) OF SECTION 23(1) APPLY TO THE CASE. AO HAS NOT MADE OUT A CASE THAT THE CASE FALL IN THE EXEMPTED CASES OF MAHARASHTRA RENT CONTROL ACT, 1999. THE PROVISIONS OF CLAUSE (B) OF SECTION 23 ARE AS UNDER : 23(1) ANNUAL VALUE HOW DETERMINED SUBSECTION (1) FOR THE PURPOSE OF SECTION 22, THE A NNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE, (A)THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B)WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), TH E AMOUNT SO RECEIVED OR RECEIVABLE. CLAUSE (B) REFERS TO A PROPERTY, WHICH ARE LET, ANN UAL VALUE OF A PROPERTY DETERMINED UNDER SECTION 23 SHALL BE ADOPT ED FOR COMPUTING THE INCOME FROM PROPERTY IN TERMS OF SECT ION 22. THE ANNUAL VALUE DETERMINATION SHALL BE STRICTLY IN ACC ORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 23 AS UPHELD BY THE CO-ORDINATE BENCH IN THE CASE OF DELITE ENTERPRISES (P) LTD V. ITO [2008] 22 SOT 245(MUM). ACCORDINGLY, WHERE THE RENT CONTROL ACT IS APPLICABLE ONLY THE STANDARD RENT IS TO BE TAKEN A S THE ANNUAL LETTING VALUE. IN THE ABSENCE OF STANDARD RENT THE MUNICIPAL RATABLE VALUE IS TO BE TAKEN. WHERE THE MUNICIPAL R ATABLE VALUE OF RENT IS LESS THAN ACTUAL RENT, THE ACTUAL RENT SHAL L BE FAIR RENTAL VALUE FOR COMPUTING INCOME FROM HOUSE PROPERTY. HO WEVER, IT IS THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE O F MAKRUPA CHEMICALS (P) LTD [2007] 108 ITD 95/12 SOT 68(MUM) THAT THE STANDARD RENT IS THE UPPER LIMIT FOR DETERMINING THE ANNUAL VALUE. THE ABOVE SYNOPSIS GOES WELL WITH THE DECIS IONS OF THE APEX COURT IN THE CASE OF DEWAN DAULAT RAJ KAPOOR (SUPRA ) AND ALSO APEX COURT JUDGMENT IN THE CASE OF DR BALBIR SINGH AND OTHERS (SUPRA) FOR THE PROPOSITION THAT THE RATABLE VALUE DETERMINED BY THE MUNICIPAL AUTHORITY IS BINDING UNLESS THE STANDARD RENT IS HIGHER. 3 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 II. IN THE LIGHT OF THE ABOVE LEGAL POSITION WE HAV E EXAMINED THE FACTS OF THE INSTANT CASE. THE ASSESSEE HAS LET OUT SPACE TO THE SISTER CONCERN, WHICH IS UNDISPUTED FACT AND IS REC EIVING RS. 10,000/- PER MONTH FROM EACH SISTER CONCERN. THERE FORE, THE ASSESSEES PROPERTY IS COVERED BY PROVISIONS OF CLA USE (B) OF SECTION 23(1). THIS IS A FACT THAT ASSESSEES ACTUALLY REN T RECEIVED OR RECEIVABLE IN RESPECT OF THE SAID PROPERTY IS NOT I N EXCESS OF THE ALV COMPUTED UNDER CLAUSE (A) OF SECTION 23(1). IN TH E LIGHT OF THESE FACTS, AOS DECISION TO INVOKE A COMPARABLE CASE TO THE PROPERTY COVERED UNDER CLAUSE (B) IS NOT IN TUNE WITH THE A BOVE REFERRED LEGAL POSITION. FURTHER, IT IS NOT ALSO THE CASE O F THE AO THAT ASSESSEE IS COVERED BY THE EXEMPTIONS PROVIDED IN T HE MAHARASHTRA RENT CONTROL ACT AND, THEREFORE, ALV OF THE PROPERT Y SHALL BE DETERMINED ON THE BASIS OF THE COMPARABLE CASES. I N ANY CASE, THE STANDARD RENT IS UPPER LIMIT FOR DETERMINATION THE ALV HAS HELD IN THE CASE OF MAKRUPA CHEMICALS PVT LTD (SUPR A). THEREFORE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 22. THUS, IT IS NOT THE CASE OF THE REVENUE THAT T HE ALV DETERMINED BY THE ASSESSEE IS LESS THAN THE STANDAR D RENT. CONSIDERING THE ABOVE FACTUAL AND LEGAL POSITION IS FORCE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT C ALL FOR ANY INTERFERENCE FOR THE ABOVE REASONS. ACCORDINGLY, G ROUND 1 OF THE REVENUE IS DISMISSED. 5. AS THE FACTS ARE IDENTICAL IN THIS YEAR, WE HAVE NO REASON TO TAKE DIFFERENT VIEW ON THE ISSUE ON THE ALV TO BE DETERM INED U/S. 23(1)(A) OF THE ACT. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT( A) ON THIS ISSUE. ACCORDINGLY, THE SAME IS CONFIRMED. IN THE RESULT, GROUND NOS. 3 TO 6 ARE DISMISSED. 6. NEXT ISSUE IS WHETHER THE LD CIT(A) WAS JUSTIFIE D IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE ADDITIONAL DEPRECIATIO N U/S. 32(1)(IA) ON THE WIND MILLS AND THIS ISSUE ARISES FROM GROUND NOS. 7 TO 9. 7. THE FACTS REVEAL FROM THE ORDERS OF THE AUTHORI TIES BELOW ARE AS UNDER. THE ASSESSEE HAD INSTALLED 8 WIND MILLS HAVING TOTA L COST OF RS. 30,96,00,000/- IN THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2005-06. THE A.O HAS OBSERVED THAT TOTAL WDV OF THE WIND MILLS CONSIDERING THE WIND MI LLS INSTALLED IN THE EARLIER YEARS WAS RS.44,50,50,000/-. THE ASSESSEE HAD CLAI MED TOTAL DEPRECIATION OF RS. 41,79,60,000/- ON THE WIND MILLS. THE ASSESSEE HAS CLAIMED THE ADDITIONAL DEPRECIATION AT 20% IN TERMS OF SEC. 32(1)(IIA) OF THE ACT. THE ASSESSEE CONTENDED THAT THE ELECTRICITY PRODUCED BY OPERATI NG WIND MILLS IS LIKE ARTICLE OR GOOD. THE ELECTRICITY IS NOT AVAILABLE NATURALL Y BUT IT HAS TO BE PRODUCED I.E. BROUGHT INTO EXISTENCE IN ITS USEFUL FORM. THE ASS ESSEE ALSO CONTENDED THAT IT WOULD COME INTO EXISTENCE ONLY AFTER CARRYING OUT A PARTICULAR PRODUCTION PROCESS AND ONE OF WHICH IS THROUGH THE WIND MILL. THE A.O HAD RESERVATION 4 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 FOR ALLOWING THE ADDITIONAL DEPRECIATION U/S. 32(1 )(IIA) OF THE ACT AS CLAIMED BY THE ASSESSEE ON THE WIND MILL. THE A.O HAS GIVE N REASON FOR NOT ACCEPTING THE CONTENTION OF THE ASSESSEE WHICH ARE AS UNDER : I) THE POWER HAS BEEN DESCRIBED TO BE GENERATED IN THE I.T. ACT, WHERE EVER THERE IS ANY REFERENCE TO IT. IT H AS NO WHERE BEEN DESCRIBED TO BE PRODUCED AS CLAIMED BY THE ASSESSEE IN THE I.T. ACT. THUS THE STATUTE DOES NOT DESCRIBE THE PROCES S OF POWER GENERATION AS PRODUCTION AS CLAIMED BY THE ASSES SEE. II) MANUFACTURING OR PRODUCTION OF ARTICLE OR THING AND GENERATION OF POWER ARE TREATED SEPARATELY IN THE I.T. ACT. T HE PROVISIONS FOR DEDUCTION IN RESPECT OF GENERATION OF POWER UNDER C HAPTER VIA ARE COVERED BY SECTION 80IA(IV) OF THE I.T. ACT, WHEREA S THOSE FOR MANUFACTURING AND PRODUCTION OF ARTICLE OR THING AR E COVERED BY THE PROVISIONS OF SECTION 80IB(2)(III) OF THE I.T. ACT. III) ASSESSEE STATES THAT THE WORD MANUFACTURE OR P RODUCTION APPLIES TO A CASE (SIC) WHICH BRINGS IN TO EXISTEN CE A PRODUCT WHICH IS SOMETHING DIFFERENT FROM ITS COMPONENTS AND FURT HER CLAIMS THAT THE GENERATION OF POWER FITS IN TO THIS DEFINITION. HOWEVER THERE ARE NO COMPONENTS FROM WHICH THE POWER IS PRODUCED. TH E POWER GETS GENERATED DUE TO WIND VELOCITY, IT DOESNT GET PROD UCED FROM COMPONENTS AS CLAIMED BY THE ASSESSEE. IV) ASESSEE DOESNT HAVE TO PAY ANY EXCISE DUTY ON THE SO CALLED PRODUCTION OF THE ELECTRICITY. HAD IT BEEN A MANU FACTURING OR PRODUCTION OF ARTICLE OR THING IT WOULD HAVE BEEN C OVERED BY THE PROVISIONS OF THE EXCISE ACT. THUS, THE PROVISIONS OF SECTION 32(1)(IIA) OF I.T. ACT ARE NOT APPLICABLE TO THE NEWLY INSTALLED WINDMILLS, SINCE THOSE DO NOT FALL IN THE CATEGORY OF MACHINERY OR PLANT FOR THE BUSINES S OF MANUFACTURING OR PRODUCTION OF ARTICLE OR THING. THUS ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILLS IS IN CORRECT AND THEREFORE DESERVES TO BE DISALLOWED. 8. AGGRIEVED, THE ASSESSEE CARRIED THE ISSUE OF A DDITIONAL DEPRECIATION ON THE WIND MILL BEFORE THE LD CIT(A). THE ASSESSEE FORCEFULLY ARGUED THAT THE WIND MILL IS A PLANT AND MACHINERY AND ELECTRI CITY COMES UNDER GOODS AND THE PROCESS OF BRINGING IT INTO THE EXISTENCE OF A ELECTRICITY IS THE PRODUCTION OR MANUFACTURE. THE ASSESSEE RELIED ON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF CST VS. M.P. ELECTRICITY BOARD (1970 ), 25 STC 188 (SC). IN THE SAID CASE, THE HONBLE SUPREME COURT HAS HELD THAT THE M.P. ELECTRICITY BOARD CARRIED ON THE BUSINESS OF SELLING, SUPPLYING AND D ISTRIBUTING THE ELECTRICITY WHICH FELL WITHIN THE MEANING OF EXPRESSION GOODS AND ELECTRICITY BOARD WAS, THEREFORE, A DEALER. THE HONBLE SUPREME COURT FUR THER HELD THAT THE ELECTRICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVE RED, STORED IN THE SAME WAY AS ANY OTHER MOVABLE PROPERTY. IT WAS FINALLY HELD THAT ELECTRICITY LIKE ANY OTHER MOVABLE OBJECT IS COVERED IN THE DEFINITION O F GOODS. IN HIS DETAILED 5 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 REASONING AND CONSIDERING ALL THE DECISIONS RELIED ON BY THE ASSESSEE, THE LD CIT(A) HELD THAT THE ELECTRICITY IS AN ARTICLE OR THING AND PROCESS OF GENERATION OF ELECTRICITY THROUGH THE WIND MILL HAS TO BE CONS IDERED WITHIN THE SCOPE OF EXPRESSION MANUFACTURE OR PRODUCTION AND THE ASSE SSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. NOW, THE REVENUE IS IN APPEAL BEFORE US. 9. THE LD. D.R. SUPPORTED THE ORDER OF THE A.O FOR DISALLOWING THE ADDITIONAL DEPRECIATION ON THE WIND MILL. THE LD C OUNSEL RELIED ON THE DECISION OF THE ITAT NEW DELH IN THE CASE OF NTPC LTD VS. DY CIT, NEW DELHI, ITA NO. 1438/DEL/2009, ORDER DATED 30 APRIL 2012. HE SUBMI TS THAT IN THE SAID CASE, THE LD CIT, NEW DELHI, EXERCISING HIS REVISIONAL JU RISDICTION SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE A.O TO WITHDRAW T HE ADDITIONAL DEPRECIATION ALLOWED U/S. 32(1)(IIA) ON THE ASSETS OF RAMAGUNDA M AND TALCHAR SUPER POWER PLANTS. THE MAIN RESERVATION OF THE LD CIT W AS GENERATION OF POWER CANNOT BE EQUATED WITH THE PRODUCTION OF ARTICLE O R THING. AFTER CONSIDERING THE RATIO IN THE CASE OF M.P. ELECTRICITY BOARD (S UPRA) AND PLETHORA OF OTHER DECISIONS, IT IS HELD THAT ELECTRICITY IS AN ARTICL E OR THING AS CONTEMPLATED U/S. 32(1)(IIA) OF THE ACT FOR THE PURPOSE OF THE ADDITI ONAL DEPRECIATION. THE OPERATIVE PART OF THE REASONS AND FINDINGS OF THE T RIBUNAL IN THE CASE OF NTPC LIMITED (SUPRA) IS AS UNDER : 17. THE NEXT QUESTION FOR OUR ADJUDICATION IS WHETHER LEARNED COMMISSIONER HAS RIGHTLY WITHDREW THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE AND GRANTED BY THE ASSESSING OFFICER? AS DISCUSSED EARLIER, THE ASSESSEE HAS CLAIM ED ADDITIONAL DEPRECIATION FOR THE FIRST TIME AMOUNTING TO RS.187,55,71,000. LEARNED COMMISSIONER WITHDREW THIS ADDITION AL DEPRECIATION ON THE GROUND THAT ASSESSING OFFICER HAS NOT CONDUC TED INQUIRY BEFORE ALLOWING THIS DEPRECIATION. ON MERIT, LD. COMMISSION ER HAS OBSERVED THAT ASSESSEE IS ENGAGED IN THE ACTIVITY OF GENERAT ION OF POWER. SECTION 32(1) (IIA) OF THE ACT PROVIDES ADDITIONAL DEPRECIATION T O THOSE UNDERTAKING WHICH ARE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. ACCORDING TO THE LEARNED COMMISSIONER, OTHER BUSINESSES ARE NOT ELIGIBLE TO CLAIM THE BENEFIT. HE OBSERVED THAT GENERATION OF POWER CANNOT BE EQUATED WITH THE PRODUCTION OF ARTICLE OR THING BECAUSE ARTICLE OR THING IN COMMON PARLANCE IS KNOWN SOMETHING TANGIBLE AND MOVEABLE E TC. GENERATION OF POWER IS GIVING ENERGY AS OUTPUT AND, THEREFORE, THIS ACTIVITY IS NOWHERE SIMILAR TO PRODUCTION OF ARTICLE OR THING B ECAUSE AN ARTICLE OR THING IS ALWAYS ASSOCIATED WITH THE CONCEPT OF WEIGHT, MA SS AND VOLUME. THE POWER OR ELECTRICITY DOES NOT HAVE ANY OF THESE ATT RIBUTES. IT HAS NO VOLUME AND IT DOES NOT OCCUPY ANY SPACE, NO WEIGHT OR NO MASS CAN BE ATTRIBUTED TO IT. THE LEARNED COUNSEL F OR THE ASSESSEE IN ORDER TO APPRAISE US THE MEANING OF EXPRESSION MAN UFACTURE AND 6 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 PRODUCTION MADE REFERENCE TO THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF SESA GOA LTD. AND INDIA CINE AGENCY (SU PRA) 18. IN THE CASE OF INDIA CINE AGENCY, HON'BLE SUPREME C OURT HAS CONSIDERED THE JUDGMENT RENDERED IN THE CASE OF SES A GOA (SUPRA) AND ALL OTHER DECISIONS ON THE POINT WHICH CONTEMPLATE THE MEANING OF EXPRESSION MANUFACTURE AS WELL AS PRO DUCTION. THE RELEVANT DISCUSSION MADE BY THE HONBLE COURT READS AS UNDER: 2. AS NOTED ABOVE, THE CORE ISSUE IS WHETHER ACTIVITY UNDERTAKEN WAS MANUFACTURE OR PRODUCTION. 3. IN BLACKS LAW DICTIONARY (5TH EDITION), THE WORD MANUFACTURE HAS BEEN DEFINED AS, 'THE PROCESS OR OPERATION OF MAKING GOODS OR ANY MATERIAL PRODUCED BY HAND, BY MACHINERY OR BY OTHER AGENCY; BY THE HAND, BY MACHINERY, OR BY ART. THE PRODUCTION OF ARTICLES FO R USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES, PROPERTIES OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINE'. THUS BY PROCESS OF MANUFACTURE SOMETHING IS PRODUCED AND BROUGHT INTO EXISTENCE WHICH IS DIFFERENT FROM THAT, OUT OF WHIC H IT IS MADE IN THE SENSE THAT THE THING PRODUCED IS BY ITS ELF A COMMERCIAL COMMODITY CAPABLE OF BEING SOLD OR SUPPLIED. THE MATERIAL FROM WHICH THE THING OR PRODUCT IS MANUFACTURED MAY NECESSARILY LOSE ITS IDENTITY OR MAY BECOME TRANSFORMED INTO THE BASIC OR ESSENTIA L 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 N OT MANUFACTURE, YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT, LABOUR AND MANIPULATION. NATURALLY, MANUFACTURE IS THE END RESULT OF ONE OR MORE PROCES SES THROUGH WHICH THE ORIGINAL COMMODITIES ARE MADE TO PASS. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM O NE CLASS TO ANOTHER. THERE MAY BE SEVERAL STAGES OF PROCESSING, A DIFFERENT KIND OF PROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINAL 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 SERIES OF CHANGES TAKES THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT INSTEAD IS RECOGNIZED AS A NEW AND 7 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLACE. PROCESS IN MANUFACTURE OR IN RELATION TO MANUFACTURE IMPLIES NOT ONLY THE PRODUCTION BUT ALSO VARIOUS STAGES THROUGH WHICH THE RAW MATERIAL IS SU BJECTED 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, EACH STEP TOWARDS SUCH PRODUCTION WOULD BE A PROCESS IN RELATION TO THE MANUFACTURE. WHERE ANY PARTICULAR PROCESS IS SO INTEGRALLY CONNECTED WITH THE ULTIMATE PRODUCTION OF GOODS THAT BUT FOR THAT PROC ESS PROCESSING OF GOODS WOULD BE IMPOSSIBLE OR COMMERCIALLY INEXPEDIENT, THAT PROCESS IS ONE IN RELATION TO THE MANUFACTURE. (SEE COLLECTOR OF CENTRAL EXCISE V. RAJASTHAN STATE CHEMICAL WORKS [1991] 4 SCC 473). 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 INTO SMALL FLATS AND ROLLS IN DESIRED SIZES. IT CLAIMED DEDUCTION UNDER SEC. 80-HH AND 80-I AS WELL AS INVESTMENT ALLOWANCE UNDER SEC. 32AB. THE CONTROVERSY AROSE WH ETHER CONVERSION OF JUMBO ROLLS INTO SMALL SIZES AMOUNTS TO MANUFACTURE OR PRODUCTION, ELIGIBLE FOR DEDUCTION UNDER SEC. 32AB OR DEDUCTION UNDER SECTIO NS 80-HH AND 80-I OF THE INCOME-TAX ACT, 1961/ HON'BLE SUPREME COURT HAS HEL D THAT THIS ACTIVITY AMOUNTS TO MANUFACTURE OR PRODUCTION. THUS, WE THIN K IT IS NOT NECESSARY TO RECAPITULATE AND RECITE ALL THE DECISION ON THE CONSTRUCTION EXPRESSION 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 EFFEC T THAT BROADLY MANUFACTURE IS A TRANSFORMATION OF AN ARTICLE, WHIC H 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 EXISTENCE, WHICH IS DIFFERENT FROM THAT, WHICH ORIGINALLY EXISTED. THE NEW PRODUCT IS A DIFFERENT COMMODITY PHYSICALLY AS WELL AS COMMERCIALLY. THE H ONBLE COURT ALSO EXPLAINED BROADER TEST TO DETERMINE WHETHER MANUFACTURE IS TH ERE OR NOT, IT IS PROPOUNDED THAT WHEN A CHANGE OR SERIES OF CHANGES ARE BROUGHT OUT BY APPLICATION OF PROCESSES WHICH TAKE THE COMMODITY TO THE POINT WHE RE, COMMERCIALLY, IT CANNOT BE REGARDED AS THE ORIGINAL COMMODITY BUT IS , INSTEAD RECOGNIZED AS A DISTINCT AND NEW ARTICLE THAT HAS EMERGED AS A RE SULT OF THE PROCESS. 20. AS OBSERVED EARLIER, LEARNED COMMISSIONER WITH DREW THE ADDITIONAL DEPRECIATION PRIMARILY ON THE GROUND THAT POWER/ELE CTRICITY GENERATED BY THE ASSESSEE CANNOT BE EQUATED WITH AN ARTICLE O R THING WHICH IS BEING MANUFACTURED IN AN INDUSTRIAL UNDERTAKING. THE LEAR NED 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 CST VS. MP ELECTRICITY POWER. IN THIS CASE, 8 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 THE MPEST BOARD SOLD, SUPPLIED AND DISTRIBUTED ELEC TRIC ENERGY TO VARIOUS CONSUMERS. IT ALSO SOLD COAL-ASH, A WASTE PRODUCT A ND SUPPLIED STREAM TO NEPA MILLS OF BURHANPUR. THE SALE OF ELECTRICITY IS EXEMPT FROM SALES-TAX. HOWEVER, FOR THE PURPOSE OF DETERMINING THE GROSS T URN OVER, THE SALE OF ELECTRIC ENERGY IS TO BE TAKEN INTO ACCOUNT. THE FI RST 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 WITH I N THE MEANING OF SECTION 2 OF THE C.P. AND BARE SALES-TA X ACT, AND SECTION 2(D) OF THE MADHYA PRADESH GENERAL SALES-TA X ACT, 1958, IN RESPECT OF ITS ACTIVITY OF GENERATION, DISTRUPTION, SALE AND SUPPLY OF ELECTRIC ENERGY? 20.1 IN ORDER TO DECIDE WHETHER MADHYA PRADESH ELE CTRICITY BOARD IS A DEALER OR NOT, HONBLE COURT TOOK INTO CONSIDERATIO N THE DEFINITION OF DEALER AS GIVEN IN THE TWO ACTS REFERRED IN THE Q UESTION AND OBSERVED THAT THE DEFINITION CONTEMPLATES THAT ANY PERSON WHO CAR RIES ON THE BUSINESS OF BUYING, SELLING, SUPPLYING OR DISTRIBUTING THE GOOD S AS A DEALER. THE EXPRESSION GOODS ARE DEFINED BY SECTION 2(D) OF T HE ACT, 1947 ACCORDING TO WHICH ALL KINDS OF MOVEABLE PROPERTIES OTHER THAN ACTIONABLE CLAIM. AND INCLUDE MATERIAL ARTICLES AND COMMOD ITIES WHETHER OR NOT TO BE USED IN THE CONSTRUCTION, FITTING OUT, IMPROVEME NT OR REPAIR OF IMMOVEABLE PROPERTY. ACCORDING TO THE HONBLE COURT , THE DEFINITION OF EXPRESSION GOODS CONTAINED IN SECTION 2(G) OF THE ACT NO. 11 OF 1959 HAS ALMOST SIMILAR. IN THE LIGHT OF THESE DEFINITIONS, HONBLE COURT HAS EXAMINED WHETHER ELECTRICITY CAN BE TERMED AS A GOODS. THE D ISCUSSION MADE BY THE HONBLE COURT IN THE JUDGMENT 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 ; OTHERWISE THERE WAS NO NECESSITY OF HAVING ENTRY NO.53. BUT UNDER ENTRY 53 TAXES CAN BE LEVIED NOT ONLY ON SALE OF ELECTRICITY TO DERIVE MUCH ASSISTANCE FROM THE AFORESAID ENTRIES. WHAT HAS ESSENTIALLY TO BE SEEN IS WHETHER ELECTRIC ENERGY IS GOODS WITHIN THE MEANING OF THE RELEVANT PROVISIONS OF THE TWO ACTS. THE DEFINITION IN TERMS IS VERY WIDE ACCORDING TO WHICH GOODS MEAN ALL KINDS OF MOVABLE PROPERTY. THEN, C ERTAIN ITEMS ARE SPECIFICALLY EXCLUDED OR INCLUDED IN ELECTRIC E NERGY OR ELECTRICITY IS, NOT ONE OF THEM. THE TERM MOVEABLE PROPERTY WHEN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSES OF SALES TAX CANNOT BE TAKEN IN A NARROW SENSE AND MER ELY BECAUSE ELECTRIC ENERGY IS NOT TANGIBLE OR CANNOT BE MOVED OR TOUCHED LIKE, FOR INSTANCE, A PIECE OF WOOD OR A BO OK IT CANNOT BE CEASE TO BE MOVABLE PROPERTY WHEN IT HAS ALL THE AT TRIBUTES OF SUCH PROPERTY. IT IS NEEDLESS TO REPEAT THAT IT IS CAPABLE OF ABSTRACTION, CONSUMPTION AND USE WHICH, IF DONE DISHONESTLY, 9 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 WOULD ATTRACT PUNISHMENT UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT, 1910. IT CAN BE TRANSMITTED, TRANSFERRED, DELIVERED STORED, POSSESSED ETC. IN THE SAME WAY AS ANY OTHER MOVABLE PROPERTY. EVEN IN BANJAMIN ON SALE, 8 TH EDN., REFERENCE HAS BEEN MADE AT PAGE 171 TO COUNTRY OF DURHAM ELECTRICIAL, ETC., CO. V. INLAND REVENUE(1) IN WHIC H ELECTRIC ENERGY WAS ASSUMED TO BE GOODS. IF THERE CAN BE SALE AND PURCHASE OF ELECTRIC ENERGY LIKE ANY OTHER MOVEABLE OBJECT WE SEE NO DIFFICULTY IN HOLDING THAT ELECTRIC ENERGY WAS INTENDED TO BE COVERED BY THE DEFINITION OF GOODS IN THE TWO ACT S. IF THAT HAD NOT BEEN THE CASE THERE WAS NO NECESSITY OF 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 DISTRIBUTING ELECTRIC ENERGY. IT WOULD THEREFORE CLEARLY FALL WITHIN THE MEANING OF THE EXPRESSION DEALER IN THE TWO ACTS. 20.2 THIS QUESTION AGAIN FALLEN FOR THE CONS IDERATION OF THE HON'BLE SUPREME COURT IN THE CASE OF STATE OF ANDHRA PRADESH VS. NTPC. THE DISPUTE IN THIS CASE WAS THAT RESPONDENT NTPC HAD A THERMAL POWER STATION AT RAMA GUNDAM WITHIN THE STATE OF ANDHRA PRADESH AND SOLD THE ELE CTRICITY TO THE BOARD OF KARNATAKA, KERALA, TAMILNADU AND THE STATE OF GOA IN PURSUANCE OF CONTRACT OF SALES OCCASION ING INTERSTATE MOVEMENT OF ELECTRICITY. THE ANDHRA PR ADESH GOVERNMENT WANTED TO LEVY OF DUTY ON CERTAIN SALES OF ELECTRIC ENERGY. ACCORDING TO THE UNDERSTANDING OF ANDHRA PRADESH GOVERNMENT, SECTION 3 OF THEIR SALES-TAX ACT PROVID ES THAT EVERY DISTRIBUTOR OF ELECTRIC ENERGY AND EVERY PRODUCER S HALL SUBJECT TO CERTAIN EXCEPTIONS PAY EVERY MONTH TO THE STATE GOVERNMENT A DUTY CALCULATED AT THE RATES SPECIFIED IN THE TABLE APPENDED THERETO ON THE UNITS OF ELECTRIC ENERGY SO LD OR SUPPLIED TO A CONSUMER OR CONSUMED BY HIMSELF FOR HIS OWN PU RPOSE OR FOR THE PURPOSE OF HIS TOWNSHIP OR COLONY DURING THE PR ECEDING MONTHS. SIMILAR STEPS WERE TAKEN BY THE MADHYA PRAD ESH GOVERNMENT FOR THE PLANTS SITUATED IN ITS TERRITORI AL JURISDICTION. THE QUESTION AROSE WHETHER ELECTRICITY SOLD TO OTHE R STATES WOULD BE AMENABLE TO DUTIES. THE HONBLE COURT IN THAT CONTEXT CONSIDERED, WHAT IS AN ELECTRIC ENERGY AND M ADE 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 PRONOUNCEMENT OF THIS COURT IN COMMISSIONER OF SALES-TAX, MADHYA PRADESH, INDORE VS. MADHYA PRADESH ELECTRICITY 10 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 BOARD, JABALPUR- 1969 (2) SCR 939 THAT ELECTRICITY IS GOODS. THE DEFINITION OF GOODS AS GIVEN IN ARTICLE 366(12) OF THE CONSTITUTION WAS CONSIDERED BY THIS COURT AND IT WA S HELD THAT THE DEFINITION IN TERMS IS VERY WIDE ACCORDING TO WHICH GOODS MEANS ALL KINDS OF MOVEABLE PROPERTY. THE TERM MOVEABLE PROPERTY WHEN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSE OF SALES-TAX CAN NOT BE TAKEN IN A NARROW SENSE AND MERELY BECAUSE ELECTRICITY ENERGY IS NOT TANGIBLE OR CANNOT BE MOVED OR TOUCHE D LIKE, FOR INSTANCE, A PIECE OF WOOD OR A BOOK IT CANNOT BE CE ASE TO BE MOVEABLE PROPERTY WHEN IT HAS ALL THE ATTRIBUTES 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, THIS COURT HELD THAT THERE WAS NO DIFFICULTY IN HOLDING THAT ELECTRIC ENERGY WAS INTENDED TO BE COVERED BY THE DEFINITION OF GOODS. HOWEVER, A.N. GROVER, J. SPEAKING FOR THRE E-JUDGE BENCH OF THIS COURT WENT ON TO OBSERVE THAT ELECTRI C ENERGY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED , POSSESSED ETC. IN THE SAME WAY AS ANY OTHER MOVEABLE PROPERTY . IN THIS OBSERVATION WE AGREE WITH GROVER, J. ON ALL OTHER CHARACTERISTICS OF ELECTRIC ENERGY EXCEPT THAT IT C AN BE STORED AND TO THE EXTENT THAT ELECTRIC ENERGY CAN BE STORED, THE OBSERVATION MUST BE HELD TO BE ERRONEOUS OR BY OVERSIGHT. THE SCIENCE AND TECHNOLOGY TILL THIS DAY HAVE NOT BEEN ABLE TO EVOLVE ANY METHODOLOGY BY WHICH ELECTRIC ENERGY CAN BE PRESERVED OR STORED. ANOTHER SIGNIFICANT CHARACTERISTIC OF ELECTRIC ENERGY IS THAT ITS GENERATION OR PRODUCTION COINCIDES ALMOST INSTANTANEOUSLY WITH ITS CONSUMPTION. TO QUOTE FROM AIYARS LAW LEXICON (SEC OND ADITION, 2000)__ ELECTRICITY IN PHYSICS IS THE NA ME 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 A RE TOTALLY IGNORAN OF THE NATURE OF THIS CAUSE WHETHER IT BE A MATERIAL AGENT OR MERELY A PROPERTY OF MATTER. BUT AS SOME HYPOTHESIS 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 BODIES, AND IS CAPABLE OF MOTION FROM ONE BODY TO ANOTHER. THIS CHARACTERISTIC QUAL ITY OF ELECTRIC ENERGY WAS JUDICIALLY NOTICED IN INDIAN AL UMINIUM CO. ETC. ETC. VS. STATE OF KERALA & ORS (1996) 7 SC C 637. VIDE PARA 25 THIS COURT HAS NOTED, CONTINUITY OF S UPPLY AND 11 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 CONSUMPTION STARTS FROM THE MOMENT THE ELECTRICAL E NERGY PASSES THROUGH THE METERS AND SALE SIMULTANEOUSLY T AKES PLACE AS SOON AS METER READING IS RECORDED. ALL THE THREE STEPS OR PHASES (I.E. SALE, SUPPLY AND 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 ELECTRICITY IS SUPPLIED TO THE METER. BUT THE MOMEN T ELECTRICITY IS SUPPLIED THROUGH THE METER, CO NSUMPTION AND SALE SIMULTANEOUSLY TAKE PLACE. AS SOON AS TH E ELECTRICAL ENERGY IS SUPPLIED TO THE CONSUMERS AND IS TRANSMIT TED THROUGH THE METER, CONSUMPTION TAKES PLACE SIMULTAN EOUSLY WITH THE SUPPLY. THERE IS NO HIATUS IN ITS OPERATIO N. SIMULTANEOUSLY SALE ALSO TAKES PLACE. THESE PROPER TIES OF ELECTRICITY AS GOODS ARE OF IMMENSE RELEVANCE 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 HONBLE COURT HAS 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 KIND OF MOVEABLE PROPERTIES. THE TERMS MOVEABLE PROPERTY WHEN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSE OF SALES-TAX CANNOT BE TAKEN IN A N ARROW SENSE AND MERELY BECAUSE ELECTRIC ENERGY IS NOT A T ANGIBLE OR CANNOT BE MOVED OR TOUCHED LIKE, FOR INSTANCE, A PI ECE OF WOOD OR A BOOK IT CANNOT CEASE TO BE MOVEABLE PROPE RTY WHEN IT HAS ALL THE ATTRIBUTES OF SUCH PROPERTIES. IT IS CAPABLE OF ABSTRACTION, CONSUMPTION AND USE OF WHICH IF DONE DISHONESTLY IS PUNISHABLE UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT. IF THERE CAN BE SALES AND PURCHASE OF ELECTRIC ENERGY LIKE ANY MOVEABLE OBJECT THAN THERE WAS NO D IFFICULTY IN HOLDING THAT ELECTRIC ENERGY WAS INTENDED TO BE COV ERED BY THE DEFINITION OF GOODS. 22. THE EXPRESSION ARTICLE, THING OR GOODS ARE NOT DEFINED IN THE INCOME-TAX ACT, 1961. LEARNED COMMISSIONER WHILE 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 ELECTRICIT Y AS NOT ARTICLE OR THING ON THE BASIS OF HIS OWN INFERENCE DRAWN FROM THE NATURE OF THIS ITEM BUT IF WE EVALUATE THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER IN THE LIGHT OF THE 12 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 DECISION OF THE HON'BLE SUPREME COURT GIVEN IN THE CASE OF INDIAN CINE AGENCY, CST VS. M.P. ELECTRICITY BOARD AND STATE OF MADHYA PRADESH VS. NTPC THEN IT WOULD SUGGEST TH AT ELECTRIC ENERGY HAS ALL TRAPPING OF AN ARTICLE OR G OODS. THE PROCESS OF ITS GENERATION IS ALSO AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. IT IS BEING GENERATED IN HUGE PLANTS THOUGH SCIENTIFICALLY ONE MAY SAY IT IS TRANSFORMATION OF ONE SOURCE OF ENERGY INTO THE OTH ER. BUT ALL THESE ASPECTS HAVE BEEN CONSIDERED IN THESE THREE JUDGMENTS OF THE HON'BLE SUPREME COURT WHEREIN HONBLE COURT HAS EXPLAINED WHAT IS MANUFACTUREOR PRODUCTION AND W HAT IS ELECTRICITY. LEARNED DR AT THE TIME OF HEARING, HAD MADE REFERENCE TO THE ORDER OF THE ITAT, CHENNAI AND THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NC BUDH IRAJA. AS FAR AS THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF N.C. BUDHIRAJA IS CONCERNED THAT HAS BEEN CONSIDERED BY THE HON'BLE SUPREME COURT ITSELF IN THE CASE OF IND IAN CINE AGENCY (SUPRA). THE ITAT IN THE CASE OF TAMILNADU C HLORATES HAS CONSIDERED THE ADMISSIBILITY OF DEDUCTION UNDER SECTION 80-HH AND IN THAT TEST HELD THAT ELECTRICITY IS NOT AN ARTICLE. THE ITAT HAS NOT DEALT WITH THESE TWO JUDGMENTS EXT ENSIVELY RATHER SIMPLY OBSERVED THAT DECISION IN THE CASE OF MADHYA PRADESH ELECTRICITY BOARD WAS GIVEN IN THE CONTEXT OF THE LANGUAGE OF A PARTICULAR STATUTE. THE ONLY DISCUSSI ON MADE BY THE ITAT WITH REGARD TO THESE TWO JUDGMENTS OF THE HON'BLE SUPREME COURT READS ASUNDER: 6. REFERENCE WAS MADE TO THE DECISIONS OF APEX COURT RENDERED IN THE CASE OF M.P. ELECTRICITY BOARD 35 STC 188 (SIC). IN THIS CASE IT WAS HELD THAT ELECTRICITY IS GOODS WITHIN THE MEANING OF SECTION 2(3) OF CENTRAL PROVINCE AND VIRAR SALES-TAX ACT. THIS DECISION WAS RENDERED IN THE CONTEXT OF THE LANGUAGE OF A PARTICULAR STATUTE . AS SUCH THIS MEANING CANNOT BE EXTENDED TO THE FACTS OF THE PRESENT CASE. 23. THUS, TAKING INTO CONSIDERATION ALL THESE ASP ECTS, 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 LEARNE D CIT(APPEALS) IS REVERSED TO THIS EXTENT AND THE DIS ALLOWANCE IS DELETED. 10. WE FIND THAT THE ISSUE STANDS FAIRLY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH I N THE CASE OF NTPC LIMITED (SUPRA). WE , THEREFORE, HOLD THAT THE LD CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE OF THE ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. ACCORDINGLY, GROUND NOS. 7 T O 9 ARE DISMISSED. 13 ITA NO. 823/PN/2011 SHRI AVINASH NIVRU TTI BHOSALE, A.Y. 2007-08 11. IN THE RESULT, REVENUES APPEAL IS DISMIS SED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27TH A UGUST 2012. SD/- S D/- (R.K. PANDA) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 27TH AUGUST , 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), NAGPUR 400 001 4. THE CIT(A)-I, NASHIK 5. THE D.R. B BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE ITA . NO.971/PN/2011 KARDA CONSTRUCTION PVT. LTD. A.Y. 2009-10 PAGE OF 15 15