2022 (4) TMI 98 - AT - Income Tax

Revision u/s 263 - claim of the assessee for additional depreciation under Section 32(1)(iia) - scope of amendment to the provisions of Section 32(1)(iia) - PCIT, noted that the assessee-company engaged only in the business of distribution of electricity was not entitled to claim additional depreciation as per the relevant provision of Section 32(1)(iia) as applicable to the year under consideration, i.e. AY 2015-16 - HELD THAT - As provisions of Section 32(1)(iia) of the Act, as amended from time to time, relating to the additional depreciation are applicable to the electricity companies across all the States on the basis of nature of business carried on by them and the benefit of the same thus is available uniformly to all the electricity companies irrespective of their States on the basis of the nature of their activities, notwithstanding the organizational set up decided by them. It, therefore, cannot be said that there is any hardship or discrimination causing to the electricity companies on the basis of their State if the provisions of Section 32(1)(iia) of the Act, as amended from time to time, are interpreted on the basis of language used therein which is plain, clear and unambiguous and applied accordingly. Having regard to the language used while making the amendment to the provisions of Section 32(1)(iia) by the Finance Act, 2016 which is plain, clear and unambiguous and keeping in view the legislative intention behind the said amendment as explained in the relevant memorandum to extend the benefit of additional depreciation in respect of the cost of new plant or machinery acquired and installed even by the assessees engaged only in the business of distribution of electricity/power from a certain date, i.e. 1st April 2017, we are of the view that the same cannot be treated as declaratory/curative in nature so as to give retrospective effect to it as sought to be contended by the learned Counsel for the assessee. The said amendment made effective by the legislature clearly from 1st April 2017; thus is applicable in relation to Assessment year 2017-18 and subsequent Assessment Years; and the same, therefore, cannot be applied to the year under consideration, i.e. AY 2015-16, to allow the assessee additional depreciation under Section 32(1)(iia) The assessment order passed under Section 143(3) of the Act allowing the said claim of the assessee thus was erroneous as well as prejudicial to the interest of the Revenue; and, the learned PCIT, in our opinion, was fully justified in revising the same by his impugned order passed under Section 263 - Decided against assessee.

Summary

Issues Involved:
1. Eligibility of additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961 for a company engaged only in the distribution of electricity.
2. Interpretation and retrospective application of legislative amendments to Section 32(1)(iia).
3. Validity of the Principal Commissioner of Income-tax (PCIT) order under Section 263 of the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility of Additional Depreciation:
The assessee, a company engaged in the distribution of electricity, claimed additional depreciation of ?58,57,95,373 under Section 32(1)(iia) of the Income Tax Act, 1961. The Assessing Officer allowed this claim in the assessment completed under Section 143(3) of the Act. However, the PCIT noted that the assessee was only engaged in the distribution of electricity and, as per the provisions applicable for AY 2015-16, additional depreciation was only available to companies engaged in the business of generation or generation and distribution of power. Consequently, the PCIT held that the assessee was not entitled to the additional depreciation claimed.

2. Interpretation and Retrospective Application of Legislative Amendments:
The assessee argued that the legislative intent behind the amendment made by the Finance Act, 2012, which included the words "generation or generation and distribution of power," was to extend the benefit to the power sector broadly, including distribution companies. The assessee further contended that the amendment made by the Finance Act, 2016, which explicitly included companies engaged only in the distribution of power, should be treated as retrospective. The assessee cited various judicial pronouncements to support this view.

The Tribunal, however, found that the language of Section 32(1)(iia) as amended by the Finance Act, 2012, was clear and unambiguous, allowing additional depreciation only to companies engaged in generation or generation and distribution of power, not merely distribution. The Tribunal noted that the amendment by the Finance Act, 2016, effective from 1st April 2017, was not curative in nature and therefore could not be applied retrospectively to AY 2015-16.

3. Validity of PCIT's Order under Section 263:
The PCIT exercised powers under Section 263 to revise the assessment order, arguing that the allowance of additional depreciation to the assessee was erroneous and prejudicial to the interests of the Revenue. The Tribunal upheld the PCIT's order, stating that the assessment order was indeed erroneous as it allowed a claim not permissible under the provisions applicable for AY 2015-16. The Tribunal emphasized that legislative amendments with a clear effective date cannot be applied retrospectively unless explicitly stated.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the PCIT's order under Section 263. The Tribunal concluded that the assessee, engaged only in the distribution of electricity, was not entitled to additional depreciation under Section 32(1)(iia) for AY 2015-16, as the relevant amendment allowing such a claim was effective only from 1st April 2017. The Tribunal found no ambiguity in the legislative provisions and ruled that the amendment could not be given retrospective effect.