2018 (9) TMI 1868 - AT - Income Tax

Additional depreciation claimed u/s 32 (1) (iia) on plants and machinery installed in the Captive Power Plant - P M acquired and installed by assessee - HELD THAT - Delhi Tribunal in case of NTPC Ltd. Vs. DCIT 2012 (5) TMI 127 - ITAT DELHI wherein assessee s claim of additional depreciation was disallowed on the ground that power/electricity generated by assessee could not be equated with an article or thing which was being manufactured in an industrial undertaking held that if there can be sale and purchase of electric energy like any moveable object then electric energy is covered by the definition of goods and thus admissibility of additional depreciation could not be denied to assessee merely on the ground that electricity is not an article or thing. Now coming to the amendment which has been brought-in by the Finance Act 2012 w.e.f. A.Y. 2013-14 whereby the assessee engaged in the business of generation or generation distribution of power have specifically been included and held eligible for claim of additional depreciation. In our view the said amendment cannot be held to disentitle the assessee to claim of the additional depreciation. Various Coordinate Benches have held that even prior to the amendment brought in by the Finance Act 2012 the assessees engaged in generation or generation and distribution of electricity were held eligible for additional depreciation. In this regard reference can be drawn to the decision of NTPC Ltd. (supra). No contrary authority has been brought to our notice. In our view the said amendment cannot be read to negate the settled legal position that generation of electricity is akin to manufacture or production of an article or thing. The said amendment by the Finance Act 2012 gives an impetus to the view that generation of electricity is a manufacturing process. In light of above the assessee is held entitled to the additional claim of depreciation on plants and machinery installed in the Captive Power Plant. Hence the Ground No. 2 of appeal of the assessee is allowed.

Summary

Issues:
1. Disallowance of additional depreciation claimed under section 32(1)(iia) of the Act.

Analysis:
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of additional depreciation claimed by the Assessee for the Assessment Year 2006-07. The Assessee claimed additional depreciation on power plant and electric installations under section 32(1)(iia) of the Act. The Assessing Officer (AO) disallowed the claim, stating that normal depreciation under section 32(1)(i) was allowable, making additional depreciation not applicable. The Assessee contended that it was a Joint Venture Company (JVC) for setting up a Captive Power Plant and should be eligible for additional depreciation. However, the AO disallowed the claim. The Commissioner of Income Tax (Appeals) upheld the disallowance, stating that the Assessee was not eligible for additional depreciation under section 32(1)(iia) as it was not engaged in the business of generation or distribution of power. The Assessee then appealed to the Tribunal.

The Tribunal observed that the Assessee, as a Special Purpose Vehicle engaged in power generation for its Captive Power Plant, should be entitled to additional depreciation under section 32(1)(iia). The Tribunal referred to relevant provisions and previous decisions to support the Assessee's claim. It noted that the Assessee had claimed depreciation under section 32(1)(ii) and should also be eligible for additional depreciation under section 32(1)(iia) for the same assets. The Tribunal held that the generation of electricity is akin to the production of an article or thing, making the Assessee eligible for additional depreciation. The Tribunal emphasized that even prior to the amendment in 2012, assessees engaged in power generation were eligible for additional depreciation. Therefore, the Assessee was entitled to the additional claim of depreciation on the plants and machinery in the Captive Power Plant. Consequently, the appeal of the Assessee was partly allowed.

In conclusion, the Tribunal's decision allowed the Assessee's appeal, establishing the eligibility for additional depreciation under section 32(1)(iia) for a Special Purpose Vehicle engaged in power generation for a Captive Power Plant. The judgment clarified the interpretation of relevant provisions and previous decisions to support the Assessee's claim, emphasizing the similarity between power generation and the production of an article or thing.