Dy. Commissioner of Income Tax, Circle-3, Pune V. M/s. Urban Habitat & Enviro, Pune

ITA 958/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80040 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation; Additional depreciation
• Section: 32; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.958/PN/2013 (A.Y: 2008-09) DY.CIT, CIRCLE-3, PUNE APPELLANT VS. M/S. URBAN HABITAT & ENVIRO 101/16, UDAY GRUHA NIRMAN VASAHAT, ERANDAVANE, GAVTHAN, PUNE 411004 PAN: AACFU0393C RESPONDENT APPELLANT BY : SHRI B.C. MA LAKAR RESPONDENT BY : SHRI M.K. KULKARNI DATE OF HEARING: 15.07.2014 DATE OF ORDER : 30.07.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-II, [IN SHOR T CIT(A)] PUNE, DATED 18.12.2012 FOR A.Y. 2008-09 ON THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN DELETING THE DISALLOWANCE OF RS. 11,00,145/- MADE IN THE ASSESSMENT ON ACCOUNT OF THE ASSESSEE'S CLAIM OF ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) INSTEAD OF CONFIRMING THE SAID DISALLOW ANCE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER WHIC H IS NOT AN ARTICLE OR THING WITHIN THE MEANING OF SECTI ON 2 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO 32(1)(IIA); AND THEREFORE, THE ASSESSING OFFICER HA D CORRECTLY DISALLOWED THE ASSESSEE'S CLAIM OF ADDITI ONAL DEPRECIATION. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE AME NDMENT TO SECTION 32(1)(IIA) VIDE THE FINANCE ACT, 2012 WH EREBY DISTRIBUTION OF POWER WAS INCLUDED FOR THE PURPOSE OF SECTION 32(1)(IIA) IS PROSPECTIVE IN NATURE, NOT RETROSPECTIVE, AND THIS IN ITSELF WOULD ESTABLISH THAT THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF ADD ITIONAL DEPRECIATION ON THE WINDMILL INSTALLED AND USED IN THE AFORESAID BUSINESS FOR THE RELEVANT ASSESSMENT YEAR . 5. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL. 2. THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON T HE BUSINESS OF REAL ESTATE AND POWER GENERATION. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DE PRECIATION UNDER CLAUSE (IIA) OF SECTION 32(1) OF THE ACT WHIC H IS AVAILABLE ON ANY PLANT AND MACHINERY ACQUIRED OR INSTALLED BY AS SESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF ARTICLE OR THING. THE ASSESSING OFFICER HELD THAT THE ASSE SSEE WAS NOT ENGAGED IN SUCH BUSINESS AS WINDMILL WAS CLASSIFIED AS RENEWED ENERGY DEVICE USED IN THE GENERATION OF POWER WHICH WAS NOT AN ARTICLE OR THING. HENCE, THE ASSESSING OFFICER HEL D THAT THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF ADDITIONA L DEPRECIATION OF 11,00,145/- AND ADDED THE SAME TO THE TOTAL INCOME. 3. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND THE CIT(A) HAVING CONSIDERED THE SAME, HAD GRAN TED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) GROS SLY ERRED IN 3 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO DELETING THE DISALLOWANCE OF 11,00,145/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE ASSESSEE'S CLAIM OF ADDIT IONAL DEPRECIATION U/S.32(1)(IIA) INSTEAD OF CONFIRMING T HE SAID DISALLOWANCE. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION O F POWER WHICH IS NOT AN ARTICLE OR THING WITHIN THE MEANING OF SE CTION 32(1)(IIA); AND THEREFORE, THE ASSESSING OFFICER HAS CORRECTLY DISALLOWED THE ASSESSEE'S CLAIM OF ADDITIONAL DEPRECIATION. THE C IT(A) FURTHER ERRED IN FAILING TO APPRECIATE THAT THE AMENDMENT T O SECTION 32(1)(IIA) VIDE THE FINANCE ACT, 2012 WHEREBY DISTR IBUTION OF POWER WAS INCLUDED FOR THE PURPOSE OF SECTION 32(1) (IIA) WAS PROSPECTIVE IN NATURE, NOT RETROSPECTIVE, AND THIS IN ITSELF ESTABLISHED THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF ADDITIONAL DEPRECIATION ON THE WINDMILL INSTALLE D AND USED IN THE AFORESAID BUSINESS FOR THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNE D AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) AN D FILED DETAILED PAPER BOOK TO SUPPORT HIS CONTENTIONS. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ISSUE BEFORE US IS WITH RE GARD TO DISALLOWANCE OF 11,00,145/- ON ACCOUNT OF ADDITIONAL DEPRECIATION U/S.32(1)(IIA) OF THE ACT. AS STATED ABOVE, THE ASSESSING OFFICER HAS DISALLOWED 11,00,145/- ON ACCOUNT OF ADDITIONAL DEPRECIATION ON WINDMILL AS CLAIMED U/S 32(1)(IIA) ON THE GROUND THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THING RATHE R HELD THAT WINDMILL IS CLASSIFIED AS RENEWED ENERGY DEVICE USE D IN THE GENERATION OF POWER WHICH IS NOT AN ARTICLE OR A TH ING. AS STATED ABOVE THAT THE SAID WINDMILL WAS NOT USED AS AN OFF ICE APPLIANCE AND THE WHOLE AND THE ACTUAL COST HAS NOT BEEN ALLO WED AS A DEDUCTION BY WAY OF DEPRECIATION IN COMPUTING THE I NCOME 4 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSIN ESS AND PROFESSION OF ANY PREVIOUS YEAR. IT WAS STATED ON BEHALF OF ASSESSEE THAT THE CONDITIONS AS PROVIDED U/S 32(1)( IIA) OF THE ACT HAS BEEN FULLY COMPLIED WITH WHILE CLAIMING THE ADD ITIONAL DEPRECIATION. THE ADDITIONAL DEPRECIATION IS ALLOW ABLE AS ELECTRICITY HAS ALL FEATURES OF ARTICLE/GOODS AND T HE PROCESS OF ITS GENERATION IS RELATED TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR A THING. SECTION 32(1)(IIA) OF THE ACT READS AS UNDER: SEC. 32 (1) [IN RESPECT OF DEPRECIATION OF (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND IN STALLED AFTER THE 31 ST DAY OF MARCH 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OF PRODUCTION OF ANY AR TICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT OF TH E ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE IND IA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COS T OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR;] 4.1 THE ASSESSING OFFICER HAS NOT DISPUTED THE INST ALLATION OF THE NEW PLANT AND MACHINERY IN THE FORM OF WINDMILL . THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF ADDIT IONAL DEPRECIATION TO THE ASSESSEE ON THE GROUND THAT THE SAME IS AVAILABLE ON ANY PLANT AND MACHINERY ACQUIRED OR IN STALLED BY THE 5 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THING. THE ASSESSEE WAS NOT ENGAGED IN SUCH BUSINESS AND THAT THE WINDMILL IS CLASSIFIED AS REN EWED ENERGY DEVICE AND IN THE GENERATION OF POWER WHICH IS NOT AN ARTICLE OR THING. WE FIND THAT ITAT, DELHI BENCH IN THE CASE OF NTPC VS DCIT (2012) 22 TAXMAN.COM247 (DELHI TRIB.) HAS HEL D AS UNDER: 'ON DUE CONSIDERATION OF SETTLED JUDICIAL DECISIONS , IT IS IMPLICITLY CLEAR THAT THE SUPREME COURT HAS EXPLAIN ED THE MEANING OF ELECTRICITY, THE COURT HAS CONSIDERED TH E DEFINITION OF GOODS AS 366(12) OF THE CONSTITUTION OF INDIA. IT ALSO TOOK INTO CONSIDERATION THE SALES TAX ACT OF T HE STATE OF ANDHRA PRADESH AS WELL AS MADHYA PRADESH AND ALSO CONSIDERED THE DICTIONARY MEANING. THEREAFTER THE C OURT HAS OBSERVED THAT GOODS MEANS, ALL KIND OF MOVEABLE PRO PERTIES. THE TERMS MOVEABLE PROPERTY WHEN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSE OF SA LES-TAX CANNOT BE TAKEN IN A NARROW SENSE AND MERELY BECAUS E ELECTRIC ENERGY IS NOT A TANGIBLE OR CANNOT BE MOVE D OR TOUCHED LIKE, FOR INSTANCE, A PIECE OF WOOD OR A BO OK IT CANNOT CEASE TO BE MOVEABLE PROPERTY WHEN IT HAS AL L THE ATTRIBUTES OF SUCH PROPERTIES. IT IS CAPABLE OF ABS TRACTION, 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 DIFFICULTY IN HOL DING THAT ELECTRIC ENERGY WAS INTENDED TO BE COVERED BY THE D EFINITION OF GOODS; THE EXPRESSION 'ARTICLE, THING OR GOODS' ARE NOT DE FINED IN THE INCOME-TAX ACT, 1961. THE COMMISSIONER WHILE TR EATING 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 THIS ITEM BUT IF WE EVALUATE THE CONCLUSI ON DRAWN BY THE COMMISSIONER IN THE LIGHT OF THE DECISION OF THE SUPREME COURT GIVEN IN THE CASE OF INDIAN CINE AGEN CY, CST VS. M.P. ELECTRICITY BOARD AND SATE OF MADHYA P RADESH VS. NTPC THEN IT WOULD SUGGEST THAT ELECTRIC ENERGY HAS ALL TRAPPINGS OF AN ARTICLE OR GOODS. THE PROCESS OF IT S 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 HAV E BEEN CONSIDERED IN THESE THREE JUDGMENTS OF THE SUPREME COURT 6 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO WHEREIN THE COURT HAS EXPLAINED WHAT IS MANUFACTURE OR PRODUCTION AND WHAT IS ELECTRICITY; THUS, TAKING INTO CONSIDERATION ALL THESE ASPECTS, WE ARE OF THE VIEW THAT ADMISSIBILITY OF ADDITIONAL DEPRECIAT ION CANNOT BE DENIED TO THE ASSESSEE MERELY ON THE GROUND THAT ELECTRICITY IS NOT AN ARTICLE OR THING. THE ORDER O F THE CIT (APPEALS) IS REVERSED TO THIS EXTENT AND THE DISALL OWANCE IS DELETED.' 4.2 FURTHER WE ALSO FIND IN THE CASE OF CIT VS. HI TECH ARAI LTD. (2010) 321 ITR 477 (MAD), THE HONBLE MADRAS HIGH C OURT HAS HELD AS UNDER: 'SEC 32(1) (IIA) DOES NOT STATE THAT THE SETTING UP A NEW MACHINERY OR A PLANT, WHICH WAS ACQUIRED OR INSTALL ED UPTO 31 ST MARCH 2002, SHOULD HAVE ANY OPERATIONAL CONNECTIVI TY TO THE ARTICLE OR A THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE THE CONTENT ION THAT THE SETTING UP OF A WINDMILL HAD NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY MANUFACTURE OF OIL SEEDS ETC , WAS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISION CONTA INED IN SEC 32(1)(IIA). IT COULD NOT ALSO BE SAID THAT SETT ING UP OF A WINDMILL NOT FALL WITHIN THE EXPRESSION SETTING UP OF A NEW MACHINERY OR A PLANT HENCE, THE ASSESSEE WAS ENTITL ED TO ADDITIONAL DEPRECIATION.' THE RATIO OF HI TECH ARAI LTD. (SUPRA) HAS BEEN FO LLOWED BY THE JAIPUR ITAT IN THE CASE OF FASHION SUITS PVT. L TD. VS. DCIT IN ITA NO.142/JOD/2011 DATED 16.12.2011. 4.3 WE ALSO FIND THAT ITAT, CHENNAI BENCH IN THE CA SE OF ACIT VS M. SATISHKUMAR (2012) 191 ITR (TRIB) 646 (CHENNA I) HAS HELD THAT THE GENERATION OF ELECTRICITY IS A MANUFACTURI NG ACTIVITY. THE ASSESSEE WAS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLED THE CONDITIONS AS LAID DOWN U/S 32(1)(IIA). THE BE NCH ALSO HELD THAT THE GOVERNMENT VIDE FINANCE ACT 2012 HAS AMEND ED THE PROVISIONS OF SEC. 32(1)(IIA) TO INCLUDE THE BUSINE SS OF GENERATION AND DISTRIBUTION OF POWER, ELIGIBLE FOR BENEFIT U/S 32(1)(IIA) AND THAT ALTHOUGH THE SAID AMENDMENT IS W.E.F. 01.04.20 12 IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A 7 ITA NO.958 OF 13 M/S. URBAN HABITAT & ENVIRO MANUFACTURING PROCESS AND QUALIFIES FOR THE BENEFIT U/S 32(I)(IIA) OF THE ACT. IN VIEW OF ABOVE LEGAL AND FACTUAL DIS CUSSION, IT IS EVIDENT THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF ADDITIONAL DEPRECIATION, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER OF 11,00,145/- WAS RIGHTLY DELETED BY THE CIT(A). THI S REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH OF JULY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH JULY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE