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TMI Blog2021 (6) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the order of CIT(A) and direct the AO allow the assessee s claim of deduction u/s 32AC of the Act. Accordingly, the ground raised by the assessee on this issue is allowed. - ITA No. 1424/H/2019 - - - Dated:- 14-6-2021 - Shri Satbeer Singh Godara, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri M. Chandramouleswara Rao For the Revenue : Shri YVST Sai CIT DR ORDER PER L.P. SAHU, AM: This appeal filed by the assessee for AY 2016-17 is directed against the CIT(A) - 2, Hyderabad s order, dated 21/08/2019 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short the Act . 2. Brief facts of the case are that the assessee company filed its original return of income for A.Y. 2016-17 on 29.09.2016 with provisional financials and filed revised Return of Income 29.03.2018 declaring total income of NIL under normal provisions and ₹ 68,60,35,517/- under MAT provisions. The case was selected for Scrutiny under CASS and assessment u/s 143(3) was completed on 24.12.2018 by determining the total income of ₹ 331,75,48,852/- under normal provisions and ₹ 400,86,84,369/ -under MAT provisions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation Ltd ( 127 STC 280 SC) In the above decisions it 'has been held by the Apex court that the generation of power amounts to production of (goods'. Attention is specifically drawn to the decision of the Supreme Court in the case of Madhya Pradesh Electricity Board (Supra). In the decided case the State Electricity Board generated and distributed electricity energy to various consumers. The question posed before the Supreme Court was whether the activity of generation, sale and supply of electricity comes within the purview of the Sales Tax Act. The assessee in that case contended before the Court that (electricity; generated was not goods as it did not have any physical existence or attributes or mas which goods possess. The Supreme Court observed that the term (goods' has to be understood in a wider sense and merely because electric energy is not tangible or cannot be moved it does not cease to be goods'. 4.3 The submissions made and the case laws relied by the assessee are considered. The moot point for consideration is whether the assessee is entitled to claim the incentive available u/ s 32AG. 4.4 The Income Tax Act provides various incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n companies by an amendment to the section. 32(l)(iia) by including the power generation companies in the said proviso with effect from 01.04.2013 by the Finance Act, 2012. In the Memorandum to Finance Act, 2012, the reasons for extending the benefit of additional depreciation to power generation companies was spelt out as under: Under the existing provisions, the benefit of initial depreciation is not available on the new machinery or plant installed by an assessee engaged in the business of generation or generation and distribution of power. In order to encourage new investment by the assessees engaged in the business of generation or generation -and distribution of power, it is proposed to amend this section to provide that an assessee engaged in the business of generation or generation and distribution of power shall also be allowed initial depreciation at the rate of 20% of actual cost of new machinery or plant (other than ships and aircraft) acquired and installed in a previous year. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. 4.7 From the above, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. Commissioner 0 Income Tax (A) ought to have considered the fact that the Hon'ble ITAT, Chennai in ACIT Coimbatore Vs M. Satish Kumar in ITA No.718/Mds/2012, Order Dt.28.09.2012 has declared that Generation of Electricity is akin to Manufactur activity even before the amendment to Section 32(1)(iia). 2. Such other ground and that may be urged during the hearing of the appeal. 5. Before us, the ld. AR of the assessee filed written submissions in support of assessee s case, which are as under: The Appellant is a State Government Public Sector Undertaking engaged in the business of generation of electricity. It filed its Income Tax Return (Revised) declaring Nil Income under Regular Provisions and ₹ 68,60,35,517/- under MAT Provisions . In the scrutiny assessment, The Ld. Assessing Officer amongst other additions to the income/ disallowances of the claims, has disallowed the claim made for ₹ 319,08,63,958/- investment allowance U/s. 32AC of Income Tax Act. 1961. The Ld. Assessing Officer denied the claim of Investment Allowance u/s 32AC solely on the ground that generation of power cannot be treated as a manufacturing activity and the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de electricity generating companies for benefit U/s 32(1)(1ia). The Appellant placed reliance on the judgement of Hon'ble AC Central Excise, New Delhi Vs Ballarpoor Industries Ltd (1990) 77 STC 282 (SC), to submit that com is a raw material for production of electricity. It further relied on the judgement of Hon'ble Odisha High Court in the ~.1Se of Orient Paper Industries Ltd VS Odisha State Electricity Board (1989) 41ELT 552(ORI). for the proposition that Electricity is a good and generation of electricity involves manufacturing process. In view of the above decisions and the interpretations applied by the judicial authorities, it was submitted before ClT(A) that the contentions of the Assessing Officer that the provisions of section 32(l)(iia) has not granted the additional depreciation allowance to the power generating companies until an amendment to include power generating companies for grant of concession was brought out by Finance Act. 2012 w.e.f 01.04.2013. was a narrow interpretation of the provisions of section 32(l)(iia) and has no justification and lacks any judicial authority support, The Hon'ble ITAT has referred to number of decisions of vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of power does not amount to manufacture or production of goods, in our considered opinion, this issue is no longer res Integra and has been conclusively settled by the Hon'ble Apex Court in the case of Commissioner of Sales Tax, MP Vs. Madhya Pradesh State Electricity Board 2 SCR 939. Wherein it bas been held that Electric energy would be cover under the definition of 'good'. 80. The Hon'ble Jurisdictional High Court of Delhi in the case of NTPC Sail Power Company in ITA No 129012018 had the occasion to consider a similar issue. Relevant finding of the Hon'ble High Court read as under: 6. Section 32(l)(iia) of the Act as it .stood at the relevant time read as follows: '32. Depreciation: (1) ln respect of depreciation of (2) (iia) In the case of any new machinery or plant ( other than ships and craft). Which has been acquired and installed after the 31st day of March, 2005. by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii). 7. Learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition in terms is very wide according to which goods means all kinds of moveable property. The term moveable-property when, considered with reference to goods as defined for the purpose of sales-tax cannot be taken in a narrow sense and merely because electrical energy is not tangible or cannot be moved or touched like, for instance. a piece of wood or a book it cannot cease to be moveable property when it has all the attributes of such property. It is capable of abstraction, consumption and use which if done dishonestly is punishable under-Section 39 of the Indian Electricity Act, 1910. If there can be sale and purchase of electrical energy like any other moveable object, this Court held that there was no difficulty in holding that electric energy was intended to be covered by the def1trltionof goods . However. A.N.G rover, J., speaking; for three-Judge Bench, of this Court went on to observe that electric energy can be transmitted. transferred, delivered, stored, possessed etc. In the same way as any other moveable property . In this observation we agree with Grover. J., on all other characteristics of electric energy except that it can be stored the observation mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no specific for power generation company. IN support of his arguments he placed reliance on the judgment of the Hon ble Supreme Court in the case of N C Budharaja and Co., [1993] 204 ITR 412 (SC) and Commissioner of Customs (Import), Mumbai v. Dilip Kumar Co. and Ors: (2018) 95 Taxmann.com 327 (SC). 6.1. In the rejoinder the AR of the assessee submitted that the case laws relied by the Ld CIT Dr. is not applicable in the present facts of the case. The Hon ble Supreme Court has decided that the electricity is goods then there is no room for further discussion that the assessee is not entitled for Investment Allowance as per U/s 32AC of the Income Tax Act. 1961. 7. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We find that the written submissions cited supra before us by the ld. AR of the assessee were also submitted before the CIT(A), but, the CIT(A) ignoring the written submissions of the assessee, confirmed the order of AO making disallowance on account of investment allowance u/s 32AC. We find force in the written submissions filed by the ld. AR of the assessee. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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