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TMI Blog2017 (5) TMI 1727X X X X Extracts X X X X X X X X Extracts X X X X ..... and installed after the 31st March 2005. It is also not in dispute that the assessee has claimed depreciation u/s 32(1)(ii) of the Act. Once the AO has accepted the assessee's claim u/s 32(1)(ii) of the Act, we do not see a reason why the assessee should be denied the claim of additional depreciation on the same assets u/s 32(1)(iia) of the Act. We find that it is now a settled proposition as held by the Hon'ble Supreme Court and the various Co-ordinate Benches of the Tribunal that the process of generation of electricity is akin to manufacture of an article or thing, the assessee in the instant case satisfy the requirement that it is engaged in the business of manufacture or production of an article or thing. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bad in law. 3. That the Ld. CIT (A) erred in maintaining disallowance of claim of additional depreciation under section 32 (1) (iia) of the Act of ₹ 1, 20, 20, 000/-. 4. That the Ld. CIT (A) erred in maintaining Levy of interest under section 234B without VAT invoice special provisions of section 234B applicable in the facts of the case. 2. Ground No. 1 and 2 of appeal relates challenging the initiation of reassessment proceedings under section 147 of the Act, which were upheld by the learned CIT (A). 3. Succinctly, facts as culled out from the orders of lower authorities are that the assessee is a limited company and engaged in the business of processing, extraction, and refining of soya seeds and soya refined oil and also in generation of power. The assessee has filed original return of income on 04- 11-2007 declaring total income at ₹ 8, 58, 82, 560/-. This was revised on 16-03-2009 by declaring total income of ₹ 8, 35, 82,306/-. The original assessment under section 143 (3) was completed vide order dated 30-10-2009 determining total income at ₹ 8, 76, 15, 740/-. Subsequently the case was reopened under section 147 by issuing notice under section 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of audit report, and there is no application of mind of the AO, therefore, the reopening of assessment is not in accordance with law and deserve to be quashed. 6. On the other hand, the Ld. Sr. D.R., relying on the order of the CIT (A) submitted that the assessment has been reopened on the basis of material noticed during the course of assessment proceeding for the assessment year 2008-09, wherein the opening WDV on windmill after claim of additional depreciation was furnished by the assessee was noticed, which showed that the assessee has claimed additional depreciation on windmill installed for captive power generation, which is not permissible in law and therefore, the assessment reopened by the AO, after recording reasons for doing so. The copy of the same was also made available to the assessee during asp proceeding wherein the assessee has not taken any objection on this ground. 7. We have heard the rival submissions of both the parties and have perused the material available on record. We find that the assessment year involve under consideration is A.Y. 2007-08. The four assessment years from the end of assessment year expires on 31-03-2012. The notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. The words escaped assessment , where the return is filed, cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration, or caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based. In cases where the Assessing Officer had over-looked something at the first assessment, there can be no question of any change of opinion, when the income which was chargeable to tax is actually taxed as it ought to have been under the law, but was not, due to an error committed at the first assessment. 9. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words reason to believe cannot mean that the Assessing Officer should have finally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an income to the extent of ₹ 6,70,758. Under Explanation 1 to the proviso, mere production of account books from which material evidence could have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the proviso. Therefore, mere production of the balance-sheet, profit and loss account or account books will not necessarily amount to disclosure within the meaning of the proviso. In the present case, the facts show that the Assessing Officer overlooked the aforestated item. That, he noticed it subsequently. That, at the time of passing the original order of assessment, he could not be said to have opined on the above item. Therefore, there was no change of opinion. Therefore, in the present case, the impugned notice is sustained. 11. Adverting to the facts of instance case, we find that the assessee, in the instant case, there is no evidence on record; to suggest that the assessee has furnished full particulars with regard to nature of the claim of additional depreciation on wind electric generator as could be seen from the reasons recorded that the assessee has neither furnished depreciation chart as per Income Tax Act nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is not permissible in law. In this regard we rely in the case of CIT v. P.V. S. Beedies (P.) Ltd. [1999] 237 ITR 13/103 Taxman 294 (SC), the Apex Court held that the audit party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has rightly noticed, this was not a case of the Assessing Officer merely acting at the behest of the audit party or on its report. It has independently examined the materials collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question is, therefore, in the affirmative, in favour of the Revenue and against the assessee. 15. Ongoing through the assessment order, and reasons recorded by the AO, we find to the AO had applied his independent mind on the basis of material available on record for A.Y. 2008-08 and also for assessment year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled by the assessee to manufacture or produce of any article or thing. It was submitted that the Electric energy is good and, thus, an article or thing. The electricity is sold and duties are collected on production of electricity energy . In the VAT Act, the electrical energy is placed in Schedule-I as Exempted goods . Therefore, there is no dispute that electrical energy is good and capable of being transferred and sold. The Ld. CIT (A) noted that the assessee had two separate major business segments i.e. solvent extraction and refining and power generation. The assessee has acquired Wind Electric Generator for its new business of power generation. Now the issue involved is whether an assessee engaged in the business of generation of power was entitled for deduction of additional depreciation of 20% of the actual cost of any new machinery or plant acquired after 31st day of March 2005. The CIT (A) referred the relevant provision inserted in the Finance Act 2012 or in the business of generation for generation and distribution of power in section 32 (1)(iia) with effect from 01-04-2013. Therefore, the Ld. CIT (A) held that the amended provision are applicable for A.Y. 2013-14 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that electricity is produced and, commercially tradeable and therefore it was 'article or thing' within the meaning of section 32 (1) (iia) of the Act. The learned counsel referred the VAT Act and submitted that in the said Act, the electricity is considered as good for the levy of VAT. The learned Counsel for the assessee also cited a decision in the case of Commissioner of Sales Tax v. Madhya Pradesh Electricity Board Jabalpur AIR 1970 SC 732, wherein supply Electric energy was treated as good and electricity board was treated as a dealer for the purpose of sales tax. The learned Counsel for the assessee also placed reliance in the case of ACIT v. Delta Enterprise [IT Appeal No. 944 (Mum) of 2012, dated 09- 10-2015], wherein relying on the decision of Southern Petrochemical and Industries Co. Ltd., the Supreme Court held that the electricity has to be considered as (goods) for the purpose of application of Sales Tax Laws. In the case of NTPC Ltd. (supra), M. P. Cement Manufactures Association v. State of Madhya Pradesh [2004] 2 SCC 249 referred to in Tata Consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is not engaged in the business of manufacture or production of an article or thing prior to the manufacture of the electricity using the impugned windmill . Considering the above settled nature of the issue, we are of the opinion, assessee is not entitled to the claim additional depreciation. 26. The learned Sr. D.R. further referring to newly inserted provisions of section 2 (29BA) of the Act relating to the definition of manufacture submitted that the claim of the assessee is untenable, as word manufacture required a change in no leaving physical object or article or a thing. And in the instant case qua the electricity generated , no new and distinct object or article or a thing has been brought in existence by using windmill . Therefore, generation of electricity by use of windmill does not amount to manufacturing activity by the assessee. The use of electricity by windmill is therefore, allowed only after amendment in Finance Act, 2012, with effect from 01-04-2013. 27. We have heard the rival submissions of both the parties and have perused the material available on record. On perusal of the above, it seems that the AO was of the view that the assessee case is cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production of any article or thing or in the business of generation or generation distribution of power. In the instant case, it is not in dispute that new machinery or plant has been acquired and installed after the 31st March 2005. It is also not in dispute that the assessee has claimed depreciation u/s 32(1)(ii) of the Act. Once the AO has accepted the assessee's claim u/s 32(1)(ii) of the Act, we do not see a reason why the assessee should be denied the claim of additional depreciation on the same assets u/s 32(1)(iia) of the Act. 30. In the case of Jt. CIT v. Mineral Enterprises Ltd. [2013] 144 ITD 680/37 taxmann.com 220 (Bang. - Trib.) : The assessee was engaged in manufacture of article or thing. By exercising the option provided under second proviso to rule 5(1A), it claimed additional depreciation on wind mill. The AO disallowed the claim of additional depreciation on wind mill on the ground that provisions of the Act allowed depreciation only in case of any new machinery or plant (other than ships and aircraft) and not for wind mill, which was engaged in power generation. It was held that in view of the decision of Madras High Court rendered in case of CIT v. VTM L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of additional depreciation could not be denied to assessee merely on the ground that electricity is not an article or thing. In view of the said decisions, P M acquired and installed by assessee for generation of electricity is akin to manufacture or production of an article or thing and consequently assessee is entitled for additional depreciation u/s 32(1)(iia) on same. 33. We find to the AO, while framing assessment u/s. 143(3)/147 held that assessee's submission is not acceptable in view of amended provision of sec. 32(1)(iia) whereby assessee's engaged in the business of generation or generation and distribution of power is allowed additional depreciation with effect from A.Y. 13-14, meaning thereby, that they were not allowed additional depreciation during the year under consideration i.e. A.Y. 08-09. The said amendment has been incorrectly interpreted by AO. The coordinated bench of Chennai Tribunal in case of Asstt. CIT v. M. Satishkumar [2013] 33 taxmann.com 396, case pertaining to A.Y. 08-09, has given a finding on such amendment and has held that generation of electricity is a manufacturing activity entitling assessee to claim additional depreciation u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 32(1)(iia) to include the business of generation or generation and distribution of power, eligible for benefit under but it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefits under section 32(1)(iia). 35. Further, the coordinated bench of Kolkata Tribunal in case of Damodar Valley Corporation v. Dy. CIT [2016] 160 ITD 78/72 taxmann.com 127, case pertaining to A.Y. 11-12 held that On perusal of section 32(1)(iia) of the Act as it stood upto A.Y. 2012-13, it is evident that the additional depreciation is permissible to all assessees who are engaged in the business of manufacture or production of any article or thing. In the circumstances, the assessee who is desirous of claiming the additional depreciation need only to prove that during the relevant year he was engaged in the business of manufacture or production of any article or thing. Now the question to be decided is as to whether the assessee engaged in generation and distribution of electricity could be said to be engaged in the business of manufacture or production of any article or thing so as to be eligible for claiming additional depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.03.2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not germane to the specific provision contained in section 32(1)(iia) of the Act. 37. In the case of CIT v. Diamines Chemicals Ltd. [2014] 42 taxmann.com 193 (Guj.) : The assessee already in the business of manufacture of chemicals, is eligible for additional depreciation u/s 32(1)(iia) in respect of windmill electricity generating machinery acquired by it. 38. The submissions of the Ld. D.R. that manufacture of electricity does not transform in physical form in view of definition contained in section 2 (29BA) of the Act nor it amount to manufacture of an article or a thing. In the instant case, the assessee had set up windmill the by using windmill the wind gets converted into electricity through the manufacturing process. Hence, it is undisputed that transformation from wind to electricity through a process in to electricity happens pursuant to the manufacturing process and the electricity so produced or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible, that construction which favours the assessee must be adopted. This is well-accepted rule of construction recognized by this court in several of its decisions. (iii) CIT v. Madho Pd. Jatia [1976] 105 ITR 179 (SC) held where ambiguous interpretation of statute - admitting two views- views which is favourable to subject should be adopted. (iv) Petron Engg Construction (P.) Ltd. v. CBDT [1989] 175 ITR 523/[1988] 41 Taxman 294 (SC) held that principle that when two interpretations are possible to be made, the interpretation, which is favourable to the assessee, should be adopted is well settled and there is no doubt about that. (v) CIT (TDS) v. Reliance Engineering Associates (P.) Ltd. [2012] 21 taxmann.com 539/209 Taxman 351 (Guj.) held that it is well-settled law that where two interpretations are possible, the one which is favourable to the assessee should be adopted. Appeal dismissed. 40. In view of above, we find that it is settled law where two interpretations are possible, the one, which is favourable to the assessee should be adopted. Applying the ratio of above decisions to the facts of the case, it can safely said that that when two views are possible on the same subj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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