DCIT, Bangalore V. M/s The Hutti Gold Mines Co. Ltd., Bangalore

ITA 832/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68297 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: N R TIRUMAL
• Keywords: Depreciation; Additional depreciation
• Section: 143(3)

Judgement Text

ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCHES, BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 832/BANG/2012 (ASSESSMENT YEAR: 2008-09) DY. COMMISSIONER OF INCOME TAX, CIRCLE-12(4), 14/3 4 TH FLOOR, RASTROTHANA BAHVAN, OPP: RBI, NRUPATHUNGA ROAD, BANGALORE 560001 VS. THE HUTTI GOLD MINES CO.LTD NO.3 RD FLOOR, NATIONAL GAMES VILLAGES, KHB SHOPPING COMPLEX, KORAMANGALA, BANGALORE 560 047 PAN: AABCT 4338 C (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI FARHAT HUSSAIN QURESHI, DR ASSESSEE BY: SHRI N.R. TIRUMAL, CA DATE OF HEARING: 30/07/2013 DATE OF PRONOUNCEMENT: 02/08/2013 O R D E R PER GEORGE GEORGE K. J.M. THIS APPEAL AT THE INSTANCE OF THE DEPARTMENT IS D IRECTED AGAINST THE ORDER OF THE CIT (A)-III BANGALORE DATE D 30.03.2012 IN RELATION TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF GOLD MINING EXTRACTION AND WINDMILL POWER GENERATION. FO R THE ASSESSMENT YEAR IN QUESTION, THE RETURN OF INCOME W AS FILED ON 27.09.2008 DECLARING TOTAL INCOME OF RS.130,06,59,8 47. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 13.08.2009. IN THE COURSE OF THE SCRUTINY ASSESSMEN T, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD ERECTED AND COMMISSIONED ON 23.01.2008 WINDMILL OF POWER GENERA TION CAPACITY OF 4.5 MW. THE COST OF WINDMILL WAS RS.27,58,72,617 . THE ASSESSEE APART FROM CLAIMING NORMAL RATE OF DEPRECIATION OF 80% (APPLIED ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 2 OF 6 40% BEING USED FOR LESS THAN 180 DAYS), ALSO CLAIME D ADDITIONAL DEPRECIATION AT 10% AMOUNTING TO RS.2,75,87,268. 3. THE SCRUTINY ASSESSMENT ORDER WAS COMPLETED U/S 143(3) OF THE ACT BY DENYING THE BENEFIT OF ADDITIONAL DEPREC IATION. THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER FOR D ENYING THE CLAIM OF ADDITIONAL DEPRECIATION READS AS FOLLOWS: (AT PAGE 3) AS PER THE PROVISIONS, ADDITIONAL DEPRECIATION I S ALLOWABLE TO ANY ASSESSEE ENGAGED IN THE BUSINESS O F MANUFACTURE AND PRODUCTION OF ANY ARTICLE OR THING ON THE PLANT AND MACHINERY ACQUIRED AND INSTALLED FOR THE PURPOSE OF PRODUCING SUCH ARTICLE OR THING. IN THIS ASSESSEES CASE, THE ASSESSEE RUNS TWO LINES OF BUSIENSS, ONE BEING MINING AND SELLING OF ORE AND T HE OTHER IS WIND POWER DIVISION. THE FACT THAT WIND PO WER GENERATION, ITS MAINTENANCE OPERATIONS AND ALL OTHE R ACTIVITIES ARE ORGANIZED AS A SEPARATE BUSINESS CAL LED AS WIND POWER DIVISION IS EVIDENT FROM THE LETTER H EADS PRODUCED BY THE ASSESSEE. IN SO FAR AS THIS LINE OF BUSINESS IS CONCERNED, THE POWER GENERATED IN THE WINDMILL IS DIRECTLY SUPPLIED TO KPTCL AND INVOICED AS PER POWER PURCHASE AGREEMENT. THEREFORE, THE POWER PRODUCED BY THIS PLANT & MACHINERY HAS NOT BEEN USE D IN THE PRODUCTION OF EITHER ORE OR FINE GOLD WHICH ARE THE PRODUCTS OF THE ASSESSEE. IN THIS VIEW, THE PLANT & MACHINERY OF WINDMILL CANNOT BE HELD AS INSTALLED F OR THE BUSINESS OF MANUFACTURE OF PRODUCTION OF GOLD. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIO NAL DEPRECIATION ON WINDMILL. THE CLAIM OF RS.2,75,87,2 68 MADE UNDER THIS HEAD IS ACCORDINGLY DENIED. 4. THE ASSESSEE BEING AGGRIEVED FILED AN APPEAL BEF ORE THE CIT (A). IT WAS CONTENDED BEFORE THE CIT (A) THAT THE A SSESSING OFFICER HAS ERRED IN LAW AND FACTS IN NOT ALLOWING THE DEDU CTION ON ACCOUNT OF ADDITIONAL DEPRECIATION ON THE ASSUMPTION THAT T HE WINDMILL WAS NOT USED IN THE MANUFACTURE OF PRODUCTS OF THE COMP ANY AND SUMMISING THAT THE SALE OF POWER BY THE COMPANY IS NOT ITS ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 3 OF 6 BUSINESS. THE ASSESSING OFFICER HAS ERRED IN ASSUMI NG THAT THE POWER PRODUCED BY THE COMPANY SHOULD BE USED ONLY I N PRODUCING THE PRODUCTS OF THE COMPANY. 4.1 THE CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE A ND DIRECTED THE ASSESSING OFFICER THAT THE DISALLOWANCE OF RS.2,75, 87,268 MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. THE FINDIN GS OF THE CIT (A) READ AS FOLLOWS: 4.9.1 I FIND THAT THE OBJECTS OF THE COMPANY ARE DETAILED IN PARA 3 OF THE SAME, WHEREIN AT SUB-PARA (E) IT IS THUS STATED: TO CARRY ON THE BUSINESS OF A GENERAL ELECTRIC POWER SUPPLY COMPANY IN ALL ITS BRANCHES, AND TO CONSTRUCT, LAY DOWN, ESTABLISH, FIX AND CARRY OUT ALL NECESSARY POWER STATIONS, CABLES, WIRES, LINES, ACCUMULATORS, LAMPS AND OTHER WORKS AND TO GENERATE, ACCUMULATE, DISTRIBUTE AND SUPPLY ELECTRICITY, AND TO LIGHT CITIES, TOWNS, STREETS, MARKETS, THEATRES, BUILDINGS AND PLACES BOTH PUBLIC AND PRIVATE. THIS BEING THE CASE, I AM NOT IN AGREEMENT WITH THE AO THAT THE POWER GENERATED BY THE APPELLANT SHOULD ON LY BE USED FOR THE PRODUCTION OF GOLD. IT IS A SEPARATE L INE OF BUSINESS THAT IS BEING RUN, AND THE POWER IS BEING SOLD TO KPTCL THROUGH A POWER PURCHASE AGREEMENT, AN ARRANGEMENT WHICH HAS BEEN ACCEPTED BY THE AO ON SCRUTINY OF THE CASE. HENCE, IT IS CLEAR THAT THE W INDMILLS ARE BEING USED FOR THE APPELLANTS BUSINESS PURPOSE S. ADDITIONAL DEPRECIATION ON THEM AS AVAILABLE PER LA W CANNOT THEREFORE BE DENIED ON THIS GROUND. THE DISALLOWANCE OF RS.2,75,87,268 MADE BY THE AO IS ACCORDINGLY DELETED AND THE APPELLANT GAINS RELIEF TO THIS EXTENT UNDER THIS GROUND OF APPEAL. 5. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US RAISING THE FOLLOWING EFFECTIVE GROUNDS: ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 4 OF 6 2. THE CIT (A) ERRED IN GRANTING ADDITIONAL DEPREC IATION OF RS.2,75,87,268 ON COST OF WINDMILL WHILE SUCH BE NEFIT U.S 32(1)(IIA) IS ALLOWABLE TO THE ASSESSEE ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THI NG BUT IN THE ASSESSEES CASE, THE POWER PRODUCED IS NOT U SED IN PRODUCTION OF ANY ARTICLE OR THING AS IT IS SOLD TO KPTCL AND THE POWER AS SUCH CANNOT BE CALLED AS AN ARTICLE OR A THING. 3. THE CIT (A) OUGHT TO HAVE APPRECIATED THAT IN VI EW OF CLAUSE (D) OF THE PROVISO U/S 32(1)(IIA), THIS BENE FIT IS NOT INTENDED FOR ACQUISITION AND INSTALLATION OF SU CH PLANT & MACHINERY WHOSE TOTAL COST IS ALLOWED AS DEDUCTION IN ANY ONE PREVIOUS YEAR AND WINDMILLS ALTHOUGH NOW ARE ELIGIBLE FOR 80% DEPRECIATION WERE EARLIER ELIGIBLE FOR 100% DEPRECIATION. 6. THE LEARNED DR RELIED ON THE GROUNDS RAISED IN T HE MEMORANDUM OF APPEAL, WHEREAS THE LEARNED AR SUPPOR TED THE CONCLUSIONS OF THE CIT (A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE C IT (A), ON PERUSAL OF THE OBJECT OF THE COMPANY, IT IS CLEAR THAT THE POWER GENERATED THROUGH WINDMILL IS SECOND LINE OF BUSINESS OF THE ASSESSEE COMPANY. THE POWER GENERATED BY THE WINDMILL IS A P RODUCT OF THE ASSESSEE COMPANY AND IT IS COVERED UNDER THE WORDS ARTICLE OR THING WHICH IS TRADABLE/IDENTIFIABLE. IN OTHER W ORDS, ELECTRICITY FALLS WITHIN THE DEFINITION OF SALE OF GOODS ACT, 1 930 AND PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. THE POWER GENERATED NEED NOT NECESSARILY BE USED IN THE PRODUCTION OF ASSESSEES OWN PRODUCTS N AMELY MINING AND EXTRACTION OF GOLD. THE USE OF ELECTRICITY IN T HE MANUFACTURING ACTIVITY OF THE CORE BUSINESS OF THE ASSESSEE IS NO T A PRECONDITION FOR THE GRANT OF ADDITIONAL DEPRECIATION UNDER THE STAT UE. ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 5 OF 6 7.1 THE AMENDMENT BROUGHT ABOUT IN SECTION 32(1)(I IA) BY THE FINANCE ACT, 2012 TO INCLUDE THE BUSINESS OF GENERA TION AND DISTRIBUTION OF POWER TO THE BENEFIT OF ADDITIONAL DEPRECIATION IS ONLY CLARIFICATORY. A SIMILAR VIEW HAS BEEN HELD BY THE HON'BLE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M SAT ISH KUMAR IN ITA NO.718/MDS/2012 DATED 28 TH SEPTEMBER, 2012. THE RELEVANT FINDINGS OF THE TRIBUNAL READ AS FOLLOWS: 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RESPECTIVE PARTIES AND HAVE ALSO EXAMINED THE JUDGMENTS ORDERS RELIED ON BY THE A.R. OF THE ASSES SEE. A PERUSAL OF THE JUDGMENTS 7 ITA NO. 718 /MDS/2012 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 EFFECT CAN BE SEEN AND FELT. THE ELECT RICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HON'BLE SUPREME COURT IN THE CAS E OF THE CST VS. MADHYA PRADESH ELECTRICITY BOARD (SU PRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITI ON OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT, 19 30. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF SEVERAL JUDGMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCLUD ED THAT THE PROCESS OF GENERATION OF ELECTRICITY IS AK IN 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 MANUFAC TURING ACTIVITY. THE ASSESSEE IS INVOLVED IN THE MANUFACTU RING ACTIVITY AND FULFILLS THE CONDITIONS AS LAID DOWN U NDER SECTION 32(1)(IIA). THE GOVERNMENT VIDE FINANCE ACT , 2012 HAS AMENDED THE PROVISIONS OF SECTION 32(1)(II A) TO INCLUDE THE BUSINESS OF GENERATION OR GENERATION AN D DISTRIBUTION OF POWER, ELIGIBLE FOR 8 ITA NO. 718 /MDS/2012 BENEFIT UNDER SECTION 32(1)(IIA). ALTHOUG H THE SAID AMENDMENT IS WITH EFFECT FROM 1.4.2013 BUT IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTR ICITY IS A MANUFACTURING PROCESS AND QUALIFIES FOR THE BENEF ITS UNDER SECTION 32(1)(IIA). IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS UPHELD AND THE APPEAL OF THE REVEN UE IS DISMISSED BEING DEVOID OF MERIT. ITA NO.832 OF 2012 HUTTI GOLD MINES CO LTD BANGALOR E PAGE 6 OF 6 7.2 THE PLEA OF THE REVENUE RAISED IN GROUND NO.3 I S ALSO DEVOID OF MERITS, SINCE IN THE RELEVANT PREVIOUS YEAR (THE YEAR IN WHICH THE WINDMILLS WERE INSTALLED), ASSESSEE WAS ENTITLED TO DEPRECIATION ONLY AT THE RATE OF 80%. THE ASSESSEE WOULD NOT HAVE BEE N ENTITLED TO ADDITIONAL DEPRECIATION, IF THE ASSESSEE WAS ELIGIB LE FOR 100% DEPRECIATION. 8. IN VIEW OF THE AFORESAID REASONS AND FOLLOWING T HE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACI T VS. M. SATISH KUMAR (SUPRA), WE UPHOLD THE ORDER OF THE CIT (A). IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED AT THE END OF THE HEARING ON 2 ND AUGUST, 2013. SD/- SD/- (JASON P. BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 2 ND AUGUST, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE