2020 (5) TMI 58 - AT - Income Tax

Tribunal Affirms Additional Depreciation Entitlement for Windmills, Dismisses Challenge on Reassessment Validity.

The Tribunal dismissed the challenge to the reassessment proceedings' validity under Section 147 of the IT Act, finding no change of opinion. However, it ... Reopening of assessment u/s 147 - disallowance of additional depreciation on new wind mills installed in wind power generation unit and on new plant & machinery installed in textile division - mere change of opinion on the same sets of facts as existed and under the knowledge of the ld. AO during the original assessment proceedings - HELD THAT:- The matter relating to claim of additional depreciation was therefore not examined by the Assessing officer. Where the matter has not been examined by the AO, there is no question of change of opinion as there is no formation of opinion at first place. The contentions so advanced by the ld AR that it is a case of change of opinion and reassessment proceedings cannot be sustained on such change of opinion is not accepted. We find that in the reasons so recorded by the Assessing officer, he has stated that by virtue of amendment brought-in by the Finance Act, 2012, the claim of additional depreciation u/s 32(1)(iia) is allowable w.e.f 1.04.2013 relevant to assessment year 2013-14 which ex-facie suggest that such claim has been wrongly claimed and allowed in the original assessment proceedings without examination is clearly a case of excess claim of depreciation and jurisdiction has been rightly invoked by the AO u/s 147. Disallowance of additional depreciation - HELD THAT:- In respect of claim of additional depreciation on energy saving devices which have been acquired and installed during the year, there cannot be any dispute as the same is clearly allowable under section 32(i)(iia) and the amendment brought in by the Finance Act, 2012 doesn’t in any manner impact such a claim of the assessee and thus, the disallowance so made of additional depreciation is hereby directed to be deleted. In respect of additional depreciation on windmills in respect of which the assessee has made additions under the head “ wind mills at wind power generation unit”, we find that the assessee is engaged in the business of manufacturing and sale of textiles (yarn & fabrics) and generation and supply of power and satisfies the necessary condition for claim of additional depreciation as prescribed under section 32(1)(iia) and such windmills have been acquired and installed in the financial year relevant to impunged assessment year 2012-13 much after 31.03.2005. Further, we find that the assessee’s case is squarely covered by the decision of the Coordinate Bench in case of Mangalam Cements [2017 (2) TMI 631 - ITAT JAIPUR] wherein the amendment brought in by the Finance Act 2012 have been duly considered and additional depreciation on windmills for AY. 2008-09 and AY 2009-10 was allowed - Claim of additional depreciation on windmills is allowed and the ground of appeal is thus allowed. Issues Involved:1. Validity of reassessment proceedings under Section 147 of the IT Act.2. Disallowance of additional depreciation on new windmills and plant & machinery.Issue-wise Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147 of the IT Act:The assessee challenged the validity of the reassessment proceedings initiated by the AO under Section 147 of the IT Act. The primary contention was that the issue of additional depreciation had already been examined during the original assessment proceedings under Section 143(3). The assessee argued that the reassessment was based on a mere change of opinion without any new material, making it illegal and bad in law. The assessee cited several judicial precedents to support this argument.The Revenue, on the other hand, argued that the AO had sufficient material to believe that income had escaped assessment due to the excessive claim of additional depreciation. The Revenue contended that this was not a case of change of opinion but rather a case of excessive depreciation allowance, which justified the reassessment under clause (c) of Explanation 2 to Section 147.The Tribunal noted that the notice under Section 148 was issued within four years from the end of the assessment year, making the additional conditions in the proviso to Section 147 irrelevant. The Tribunal examined whether the AO had indeed considered the claim of additional depreciation during the original assessment proceedings. It found that the AO had only examined the claim of normal depreciation and not the additional depreciation on windmills. Therefore, there was no formation of opinion on the additional depreciation claim, and hence, the reassessment proceedings were not based on a change of opinion.2. Disallowance of Additional Depreciation on New Windmills and Plant & Machinery:The assessee claimed additional depreciation on new windmills and plant & machinery installed in its wind power generation unit and textile division. The AO disallowed this claim, citing that the additional depreciation on new machinery and plant used in the business of generation or generation and distribution of power was only allowable from 01.04.2013 as per the amendment in the Finance Act, 2012.The Tribunal examined the facts and found that the assessee was engaged in the business of manufacturing textiles and generating power. The Tribunal referred to several judicial precedents, including the decision of the ITAT Jaipur Bench in the case of ACIT Vs. Mangalam Cement Ltd., which held that the generation of electricity is akin to the manufacture or production of an article or thing. The Tribunal noted that the amendment in the Finance Act, 2012, did not negate the settled legal position that generation of electricity is a manufacturing process.The Tribunal held that the assessee's claim for additional depreciation on windmills was valid, as it satisfied the conditions prescribed under Section 32(1)(iia) of the IT Act. The Tribunal also allowed the additional depreciation on energy-saving devices installed in the textile unit, as it was clearly allowable under the same section.Conclusion:The Tribunal dismissed the grounds challenging the validity of the reassessment proceedings but allowed the appeal regarding the disallowance of additional depreciation on merits. The Tribunal directed the deletion of the disallowance of additional depreciation on windmills and energy-saving devices, affirming the assessee's entitlement to such depreciation. The appeal of the assessee was allowed.