TaxTMI 
TaxTMI 
2017 (3) TMI 189
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....PN/2015, A .Y. 2011-12 (By Assessee): 3. In this appeal, the issue in controversy agitated on behalf of the assessee is disallowance of 'additional depreciation' on windmill quantified at Rs. 12,62,02,718/- relevant to assessment year 2011-12. 4. The relevant facts, in brief, are that the assessee is engaged in the business of water park and trading in goods. The assessee filed return of income declaring total income of Rs. 79,06,340/-. In the course of assessment proceedings, the Assessing Officer noticed that the assessee has purchased certain windmills to the tune of Rs. 1,17,33,88,103/- during the year on which normal depreciation allowance @ 80% was claimed under S. 32(1) of the Act. Besides, the assessee also claimed additional depreciation @ 20% ascribed under section 32(1)(iia) of the Act amounting to Rs. 12,62,02,718/- on the aforesaid acquisitions. The Assessing Officer show-caused the assessee to justify the eligibility of claim of additional depreciation under section 32(1)(iia) of the Act. The assessee canvassed before the Assessing Officer that electricity produced by the windmill is an "article or thing" within the meaning of section 32(1)(iia) of the Act. It w....
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.... impressed with the submissions of the assessee. The CIT(A) referred to the various judicial decisions cited by the assessee and observed that these decisions were rendered prior to amendment carried out in section 32(1)(iia) of the Act w.e.f. 1-4- 2013. The CIT(A) noted that specific amendment in section 32(1)(iia) was brought w.e.f. 1-4-2013 whereby benefit of additional allowance was extended to the business of generation or distribution of power. The CIT(A) also referred to the 'Explanatory Note' to the Finance Act, 2012 explaining the amendment and observed that the amendment carried out w.e.f. 1-4-2013 is not clarificatory or declaratory. The CIT(A) held that the amendment is prospective in nature and therefore the assessee is not eligible for additional depreciation for assessment years prior to assessment year 2013-14. The CIT(A) thereafter observed that accelerated depreciation of 80% is available to those wind mills which are installed before 31-03-2012. The accelerated depreciation allowance on wind mills has been brought down to ordinary rate by an amendment in the IT Rules 2012. Thus the rationale to provide additional deprecation to these wind mills installed after am....
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.... these decisions, the Ld. Counsel claimed that the assessee is eligible to claim additional depreciation for the assessment years even prior to 01.04.2013 i.e. the date from which the amendment was stated to be made effective. In short, Dr. Pathak would submit that even without amendment, the activity of generation of electricity from windmills falls within the scope of existing expression 'manufacture or production of any article or thing'. 8.4 The Ld. Counsel further buttressed his contentions and submitted that in view of various case laws in the context of section 43B or section 40(a)(ia) of the Act, the amendment carried out in the provision of section 32(1)(iia) of the Act should be considered as retrospective in operation on the similar rationale. He, therefore, pleaded that the view taken by the CIT(A) is not in accordance with the provision of the Act. He thus pleaded for reversal of the order of CIT(A) and urged for restoration of additional depreciation as claimed. 9. The Ld. Departmental Representative (DR) appearing for Revenue, on the other hand, relied upon the order of the CIT(A). The Ld. DR referred to para no.8.2.3 of the order of the CIT(A) and submitted th....
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...., being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intanqible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed : Provided............... (a)................... (b)................... Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this subsection in respect of such asset shall be ....
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....tribution 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. [Clause 7]" 14. A bare reading of the Explanatory Memorandum amply spells out the intention of the legislature in no uncertain terms. The Act was amended to grant additional depreciation to an assessee engaged in the business of generation of power which was hitherto not available as understood by legislature. It is also apparent from the Explanatory Note that S. 32(1)(iia) has been prospectively amended by Finance Act, 2012 with effect from 1-4-2013 to include the generation or generation and distribution of power within its ambit. With this amendment, the additional deprecation which was hitherto available on acquisition of plant and machinery engaged in the business of manufacture or production of article or thing as per clause (ii) of section 32(1) is now also extended to generation of power. As a necessary concomitan....
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....ii) in S. 32(1)(iia), it is not possible to overlook that business of generation of power is otherwise catalogued under clause (i) is also taken within the sweep of clause (iia) by virtue of this amendment. 17. Section 32 determines, confers and regulates the right of allowance on account of depreciation to the assessee and is thus a substantive section. The substantive nature is also evident from the fact that deprecation allowance is mandatory and its claim is not left to the option of the assessee. Notably, S. 32(iia) grants vested right to claim depreciation over and above normal depreciation. Thus, general rule of prospective application as applicable to a substantive section should apply. It is a trite that a substantive provision in general has no retrospective effect. The transforming amendments of substantive sections are prima facie prospective in nature except where they are made retrospective in operation by specific statement or by necessary implication. Law of prospective application of amendments in statute as noted above is founded on long line of judicial precedents. Some of the decisions noted are Commissioner of Income-tax I, Ahmedabad v. Gold Coin Health Food....
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....ons to canvass that the generation of power and distribution is equivalent to manufacture or production of any article or thing. He heavily relied upon the decision of the co-ordinate bench of tribunal in the case of NTPC vs. Dy. CIT ITA No. 1438 / Del/ 2009 relevant to assessment year 2005 -06. He submitted that as per the aforesaid decision, the power generation and distribution activity tantamounts to manufacture or production of article or thing. Hence, the assessee is entitled to depreciation even under the existing provisions applicable to the relevant assessment years in question. He submitted that the amendment brought by Finance Act 2012 has only removed the ambiguity. On careful perusal, we find that the ITAT in NTPC case(supra) was called upon to decide the validity of action by Commissioner under S. 263 of the Act wherein the additional deprecation claimed was sought to be withdrawn by exercising revisionary powers by the Commissioner concerned. The scope of determination of issue was thus from a very different perspective. Besides, the coordinate bench was examining the issue with reference to first year of insertion of section 32(iia) of the Act. The ITAT referred to ....
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....e (i) was also not addressed in the decision. In the same vain, other decisions referred to on behalf of the assessee namely ACIT vs. M. Satiskumar and D J Malpani (supra) has arrived at the conclusion having regard to the existing decisions governing the field without examining the issue in the light of categorical Explanatory Note explaining the purport of amendment. In the wake of aforesaid discussion, it is difficult to perpetuate the findings given in these decisions. Reliance placed on the decision of Jurisdictional High Court in United Western Bank case (supra) is totally in a different context. Reference to Supreme Court decision in the case of Madurai Mills was referred to in that case. It was observed in that case that Explanatory clause was clarificatory in the context of that case. It was observed in that case that deletion of certain exclusionary clause is only clarificatory since the substantive section of S. 2(7) of the Interest Tax Act was not amended. The situation is converse here. In the instant case, the substantive section has been amended and with prospective effect. The rationale of amendment is quite clear. Thus, the amendment of substantive section in the w....
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....-13. The facts and issue in this appeal are identical to facts and issue in ITA No.1384/PN/2015. Thus, our decision in ITA No.1384/PN/2015 shall apply mutatis-mutandis to ITA No.1385/PN/2015. 25. In the result, the appeal of the assessee in ITA No.138 5/PN/2015 relevant to assessment year 2012-13 is also dismissed. ITA No.1469/PN/2015, A.Y. 2011 -12 (By Revenue) : 26. The solitary issue raised by the Revenue in its appeal is disallowance of depreciation on costs incurred in relation to installation of windmills to the tune of Rs. 2,78,43,463/- made by the Assessing Officer. 27. Briefly stated, the relevant facts concerning the issue raised by the Revenue are that as per the assessment order the Assessing Officer disallowed depreciation at higher rate on the civil and electrical work done with installation of the windmills. The assessee made the following submissions before the Assessing Officer in this regard :- "4.1] In this year, the assessee had acquired windmills and claimed depreciation @ 80%. The learned A.O. has held that electrical items and other civil work is not part of windmill and therefore, the assessee is not entitled to claim higher depreciation....
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....ectrical items, the assessee submits that items are in the form of transformers, wiring etc. which are necessary to make the windmill functional. Thus, it is submitted that the above items form part and parcel of the windmill and hence, they are an integral part of the windmills. Accordingly, the assessee submits that the cost of these items has been rightly included in the cost of windmills and thus, the depreciation @ 80% is allowable in respect of the said items. The assessee submits that this issue has been decided in favour of the assessee by ITAT Pune in the case of Poonawalla Finvest Pvt. Ltd. Hence, the assessee submits that the disallowance made by the learned A.O. on electrical items may kindly be deleted." 28. The CIT(A) following the decisions of his predecessor in assessee's own case and also the order of the Pune Bench of the Tribunal in the case of Poonawala Finvest & Agro Pvt. Ltd. vs. ACIT, (2008) 118 TTJ 68 (Pune) decided the issue in favour of the assessee and directed the Assessing Officer to delete the impugned disallowance. 29. Aggrieved by the order of the CIT(A), the Revenue is in appeal before the Tribunal. 30. The Ld. Departmental Representative f....
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....ntal expenditure, if it has no other use except for power generation done by the windmill. Our view is also supported by another decision of the Co-ordinate Bench of Pune Tribunal in the case of M/s D.J. Malpani vs. ACIT in ITA Nos.1148 to 1154/PN/2013, order dated 30.10.2015. Accordingly, we hold that the Revenue is misdirected itself in law in making the impugned disallowance of depreciation." 32. We also find that decision of Pune Bench of the Tribunal in the case of Poonawala Finvest and Agro Pvt. Ltd. (supra) relied upon by Assessing Officer infact supports the case of assessee. 33. In the light of the aforesaid precedents on the issue, we find no merit in the Grounds raised by the Revenue. Thus, Revenue fails on its Grounds. 34. In the result, the appeal of the Revenue in ITA No.1469/PN/2015 relevant to assessment year 2011-12 is dismissed. ITA No.1470/PN/2015, A.Y. 2012 -13 (By Revenue) : 35. The Revenue has raised identical grievance in its appeal in ITA No.1470/PN/2015 relevant to assessment year 2012-13. The facts and issue in this appeal are identical to facts and issue in ITA No.1469/PN/2015. Thus, our decision in ITA No.1469/PN/2015 shall apply mutatis-m....
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....assessee by relying on the amendment to section 32(1)(iia) of the Act, which was inserted w.e.f. 01.04.2013. The CIT(A) was of the view that the business of generation of power has been made eligible for additional depreciation w.e.f. 01.04.2013. He further held that the amendment was not clarificatory or declaratory, since it does not say 'for the removal of doubts, it is clarified, etc. that the business of generation of power has been included in the section as new class of business, separate and distinct from the business of manufacture or production of an 'article' or 'thing'. He further pointed out that accelerated depreciation being allowed @ 80% was restricted to windmills installed prior to 31.03.2012 by an amendment in the IT Rules, 2012 and hence, the rationale for the amendment in section 32(1)(iia) of the Act. Since the accelerated depreciation was taken away by the amendment, there was need to holding them as eligible business for claiming additional depreciation, was the rationale of CIT(A) in denying the deduction. 4. The learned Authorized Representative for the assessee has stressed that the issue raised in the present appeal is covered by various decisions of ....
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.... object, the electric energy was intended to be covered by the definition of "goods". Similar proposition was further laid down by the Hon'ble Supreme Court in the case of State of Andhra Pradesh Vs. NTPC reported 2002 (4) TMI 694 (SC) wherein the Hon'ble Supreme Court considered what is an electric energy and held the same to be covered by the definition of "goods" under the Sale of Goods Act, 1930. 6. The Delhi Bench of Tribunal in NTPC Vs. DCIT in ITA No.1438/Del/2009, relating to assessment year 2005-06, order dated 30.04.2012, copy of which is filed on record, while applying the ratio laid down in the aforesaid two decisions by the Hon'ble Supreme Court observed that the expression 'article, thing or goods' was not defined in the Income Tax Act, but in case the above said propositions are applied, then it would suggest that electric energy had all trappings of article or goods. The Tribunal further held that the process of its generation is also akin to manufacture or production of an article or thing. Applying the said ratios, the Delhi Bench of Tribunal held that the admissibility of additional depreciation could not be denied to the assessee merely on the ground that the....
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....ld that electricity falls within the definition of goods as defined under Sale of Goods Act, 1930. Further, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in State of Andhra Pradesh & Ors. Vs. National Thermal Power Corporation (supra). Reliance was also placed on the decision of Delhi Bench of Tribunal in NTPC Vs. DCIT (supra) and it was pointed out that the term 'production and generation' could be used interchangeably in the case of electricity and generation of electricity can also be termed as production of electricity. Further, reference was made to the judgment in the case of India Cine Agencies Vs. CIT (2009) 308 ITR 98 (SC), wherein it is held that the term production and manufacture signifies the same meaning, rather the word 'production' has wider connotation than the word 'manufacture'. The Tribunal vide para 9 in view of the judgments observed that generation of electricity was akin to manufacturing of new product. In line with the other decisions of Tribunal and in view of the propositions laid down by the Hon'ble Supreme Court in CST Vs. Madhya Pradesh Electricity Board (supra), the Tribunal held that the generation of electricity was a manuf....
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....nt previous year i.e. the year in which windmills were installed, the assessee was entitled to depreciation only @ 80%. It was further held that the assessee would not have been entitled to additional depreciation, if the assessee was eligible for 100% depreciation. 10. Another decision relied upon by the learned Authorized Representative for the assessee is of Pune Bench of Tribunal in M/s. D.J. Malpani Vs. ACIT in ITA Nos.1148 to 1154/PN/2013, relating to assessment years 2004-05 to 2010-11 and cross appeals filed by the Revenue in ITA Nos.1183 to 1188/PN/2013, relating to assessment years 2005-06 to 2010-11, order dated 30.10.2015, wherein in ITA No.1184/PN/2013, relating to assessment year 2006-07 in an appeal filed by the Revenue, the issue regarding claim of additional depreciation arose before the Tribunal. The first objection of the assessee was that no such disallowance was warranted since no incriminating material was found during the course of search or post search enquiries. The Tribunal upheld the order of CIT(A) in this regard. Further, the Tribunal also considered the issue on merits and held that the said issue is decided in favour of the assessee by the Hon'ble ....
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....the additional depreciation. The Tribunal further held that the amendment to section 32(1)(iia) by the Finance Act, 2012 was w.e.f. 01.04.2013, but it gave impetus to the view that generation of electricity is a manufacturing process and qualifies for benefits under section 32(1)(iia) of the Act. The Bangalore Bench of Tribunal in DCIT Vs. Hutti Gold Mines Co. Ltd. (supra) had held that the said amendment is clarificatory in nature. 12. Both these decisions of Chennai Bench of Tribunal and Bangalore Bench of Tribunal were pronounced after considering the amendment and merely because they do not refer to Memorandum explaining the clauses of Finance Act, 2012 does not imply that the same has not been considered, where the amendment by the Finance Act, 2012 to section 32(1)(iia) of the Act provides that the aforesaid additional depreciation is available to persons who are engaged in the business of generation or generation and distribution of power in addition to the persons who are engaged in the business of manufacture or production of any 'article' or 'thing'. The insertion made by the Finance Act, 2012 to the existing provisions of section 32(1)(iia) of the Act are clarificator....
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.... an earlier decision on the ground that it is incorrect and/or rendered on misinterpretation. This for the reason that the decision of a co-ordinate bench would continue to be binding till it is corrected by a higher court. This principle laid down in respect of a co-ordinate court would apply with greater force on subordinate courts and Tribunals. We are also conscious of the fact that we are not final and our orders are subject to appeals to the Supreme Court. However, for the purposes of certainty, fairness and uniformity of law, all authorities within the State are bound to follow the orders passed by us in all like matters, which by itself implies that if there are some distinguishing features in the matter before the Tribunal and, therefore, unlike, then the Tribunal is free to decide on the basis of the facts put before it. However till such time as the decision of this court stands it is not open to the Tribunal or any other Authority in the State of Maharashtra to disregard it while considering alike issue. In case we are wrong, the aggrieved party can certainly take it up to the Supreme Court and have it set aside and/or corrected or where the same issue arises in a subse....
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....IT Vs. Atlas Export Enterprises (supra) was not relied upon in the present case and I am drawing the support from the said ratio that even after insertion of the amendment to section 32(1)(iia) of the Act by the Finance Act, 2012, the persons engaged in running windmills are entitled to the claim of additional depreciation. It cannot be said that the Hon'ble High Court was not aware of the amendment and / or Memorandum explaining the amendment by the Finance Act, 2012. Where the issue is covered by the decision of Pune Bench of Tribunal as well as other Benches i.e. Chennai, Bangalore and Delhi, which have been relied upon by the assessee and in the absence of any adverse decisions by the Tribunal or any ratio laid down by any higher forum, the decisions of coordinate Bench are binding and judicial propriety demands that the same is to be followed. Accordingly, I hold that the assessee is entitled to claim additional depreciation under section 32(1)(iia) of the Act. The thrust has been placed on the amendment to clause (ii) of section 32(1)(iia) of the Act, which is misplaced. Accordingly, the grounds of appeal No.1 to 3 raised by the assessee merits to be allowed. 15. Before pa....
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....the transfer, but when the said exclusionary clause was deleted, then the intent of Legislature was to treat the distribution of capital assets on liquidation of the company as a transfer. The said proposition raised by the Revenue was rejected by the Hon'ble Supreme Court and it was held that the said exclusionary clause was in the nature of clarification and its deletion did not affect the main section 12B(1) of Indian Income Tax Act, 1922. The apex court held that the proviso was only introduced by the Parliament by way of abundant caution. Applying the said proposition, the Hon'ble Bombay High Court in CIT Vs. United Western Bank Ltd. (supra) held that under the main section 2(7) of the Interest Tax Act, 1974, the word interest meant interest on loans and advances and not interest on securities / debentures and therefore, deletion of exclusionary clause by the Finance (No.2) Act, 1991 had no consequences on the main section 2(7) of the Interest Tax Act. The exclusionary clause which existed prior to October, 1991 provided that the interest on securities was to be excluded. The case of the Revenue before the Hon'ble Bombay High Court was that once the exclusionary clause was del....
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....mstances of the case, whether the issue of claim of additional depreciation under section 32(1)(iia) of the I.T. Act is settled and covered in favour of the assessee and hence, the same is to be applied for deciding the issue. 2. In order to maintain consistency, whether it is incumbent upon the Tribunal to follow the settled judicial precedents?. 3. In the facts and circumstances of the case, whether the assessee is entitled to the claim of additional depreciation under section 32(1)(iia) of the I.T. Act, in view of amendment by Finance Act, 2012 for assessment years 2011 -12 & 2012-13" Reference under Section 255(4) of the Income Tax Act, 1961 In my humble opinion, following questions are pertinent to be referred to Hon'ble Third Member in terms of S. 255(4) of the Act for esteemed opinion on subject matter of appeals. 1. Whether generation of power through wind mill assets acquired by the Assessee falls within the connotations of expression 'manufacture or production of any article or thing' as provided under S. 32(1)(iia) for the relevant assessment years namely AY 2011-12 & AY 2012 -13 in view of express legislative insertions made by Finance A....
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....liberation on the effect of clause (ii) on allowability of deduction under S. 32(1)(iia) can be viewed as sub-silentio and consequently not a binding precedent ? 9. Whether reduction of depreciation allowance eligible to wind mill assets to bring these assets at par in the realm of normal rate by I T Rules 1962 for assets installed in FY 2012-13 onwards and simultaneous & corresponding grant of additional depreciation to power sector also serves as an indicator of legislative intention to pour benefit of S. 32(1)(iia) hitherto not available with a prospective date. 10. Whether in the totality of facts and the circumstances of the case and in law, the Assessee is entitled to benefit of additional deprecation under S. 32(1)(iia) on the activities concerning generation of power through wind mills for the AY 2011 -12 & AY 2012 -13. Statement under section 255(4) of the Income Tax Act, 1961 "Whether in the facts and circumstances of the case assessee is entitled to the claim of additional depreciation under section 32(1)(iia) of the Income Tax Act, 1961." THIRD MEMBER ORDER: Justice (Retd.) Dev Darshan Sud, President (As Third Member): This r....
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....ntion is required to be gathered from the language employed in Explanatory Memorandum or to be derived from judicial interpretations particularly when none of decisions cited has made any reference to aforesaid 'Explanatory Memorandum' for decision making purposes. 5. Whether in the facts and the circumstances of the case, can it be presumed that co-ordinate benches of Tribunals cited have impliedly considered Explanatory Memorandum when there is no reference made to this effect in the decisions of the co-ordinate benches while adjudicating the issue. 6. Whether judicial interpretations relied upon to include generation of power within the ambit of 'manufacture or production of any article or thing' per se even without the aid of subsequent insertions made to this effect stands contrast to the understanding of legislature in the light of subsequent amendment and if yes, whether legislative intention as spelt in Explanatory Memorandum will take precedence over the judicial interpretation so made without reference to Explanatory Memorandum? 7. Whether benefit of additional depreciation is restricted to assets referred to in clause (ii) of S. 32(1) in exclus....
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....ear 2006-07, the assessee had entered into the business of generation of power and installed one windmill. The assessee maintained separate books of account for export division and the windmill division. Since the claim of additional depreciation has to be seen in the context of generation of power through windmill only and the production of textile and its export has nothing to do with the generation of power for the purpose of considering additional depreciation. Further as rightly held by the Tribunal, the Revenue has not brought in any new or contra material to differ from the view of this Court in the decision reported in [2010] 321 ITR 477 (Mad) (Commissioner of Income-tax v. Hi Tech Arai Ltd.). 7. Accordingly, following the above-said decision of the Court, we find no infirmity in the order passed by the Tribunal. We, therefore, do not find any question of law much less substantial question of law to entertain these appeals." (page 417) 6. The question before the Hon'ble Court was - "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the generation of electricity by windmill amounts to production of an artic....