TaxTMI 
TaxTMI 
2022 (4) TMI 839
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.... unit which are to be allowed depreciation @80%. (ii) On the facts and in the circumstances of the case the learned CIT(A) erred by directing the Assessing Officer to grant additional depreciation on certain assets ignoring the fact that these assets did not fall in the category of assets that are eligible for claiming additional depreciation and also the fact that similar disallowance for AYs 2011-12 & 2012-13 were upheld by Ld. CIT(A). 2. Having heard rival submissions and after going through the orders of lower authorities, our adjudication would be as under. Assessment Proceedings 3. The material facts are that the assessee being resident corporate assessee is stated to be engaged in manufacturing of sugar, alcohol, granite and cogeneration of power. Though the original return was already scrutinized u/s 143(3) on 26-03-2013, however, the case was reopened as per due process of law and notice u/s 148 was issued to the assessee on 21.04.2014. In the notice, it was alleged that additional depreciation of Rs. 844.47 Lacs on Plant & Machinery of Power Generation unit was to be withdrawn since the additional depreciation on such assets was available only from AY 2013-....
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.... that generation of electricity is a manufacturing process and qualifies for deduction u/s 32(1)(iia). The assessee also cited the case laws of decision of Hon'ble Madras High Court in CIT V/s Texmo Precision Castings (321 ITR 481); CIT V/s VTM Ltd. (187 Taxman 319) & CIT V/s Hi Tech Arai Ltd. (321 ITR 477). Considering these decisions, the Ld. CIT(A) also noted that similar favorable view was taken by first appellate authority in the case of Madras Sugars Ltd. which got amalgamated with the assessee and therefore, the additional depreciation would be available to the assessee. Aggrieved, the revenue is in further appeal before us. 5. We find that in terms of the provisions of Sec. 32(1)(iia), in case of any new machinery or plant (other than ships and aircrafts) which has been acquired and installed after 31.03.2005 by an assessee engaged in the business of any article or thing, a further sum equal to 20% of actual cost of such machinery or plant shall be allowed as deduction. However, the benefit of such provisions has been extended to power sector by Finance Act, 2012 by insertion of the words "or in the business of generation or generation and distribution of power" under th....
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....ssee. A perusal of the judgments clearly shows that generation of electricity is akin to manufacturing of a new product. In the instant case, electricity which may not be seen with the eyes, however, its effect can be seen and felt. The electricity can be transmitted, transferred, delivered, stored, possessed, etc. The hon'ble Supreme Court in the case of the Madhya Pradesh Electricity Board, (supra) has held that electricity falls within the definition of goods under the provisions of Sale of Goods Act, 1930. The Delhi Bench of the Tribunal in the case of National Thermal Power Corporation Ltd. (supra) after a detailed examination of several judgments, Acts, Constitution of India, has concluded that the process of generation of electricity is akin to manufacture of an article or thing. 10. In view of the above, we are of the considered opinion that generation of electricity is a manufacturing activity. The assessee is involved in the manufacturing activity and fulfils the conditions as laid down under section 32(1)(iia). The Government vide Finance Act, 2012 has amended the provisions of section 32(1)(iia) to include the business of generation or generation and distri....
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....by observing that these articles were mere accessories and as per entry 8(ix)(D) of New Appendix1 of tables of depreciation, only specified assets were eligible for 80% depreciation. Accordingly, disallowance of Rs. 423.29 Lacs was made. 8.3 The Ld. CIT(A), after considering the manual / literature of all the equipment came to a conclusion that the assets were part and parcel of power generation unit. Each item would not have any function by itself except when it forms part of the whole system. The relevant findings with respect to each of the asset was as under: - a. Chimney In a cogeneration plant, the gases produced are first cooled and then excavated through the chimney. This chimney forms an inseparable accessory of a cogeneration plant and hence it is eligible for 80% depreciation. b. Bagasse handling system Bagasse, being the combustible product is used in the cogeneration plant. A bagasse handling system carries the bagasse from the bagasse yard to the furnace by using conveyor belts. It is also a part of the cogeneration system as the core raw material (bagasse) used for the generation of power is carried through this system. Without ....
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....uld be found in the impugned order, on this issue. The grounds thus raised stands dismissed. 10. Excess Additional Depreciation 10.1 It was alleged by Ld. AO that certain assettotalingto 24 in nos. aggregating to Rs. 2510.79 Lacs would not be eligible for additional depreciation u/s 32(1)(ii). The same has been detailed on page nos. 10- 11 of the assessment order. The assessee submitted that additional depreciation is admissible in terms of the provisions of Sec.32(1)(iia) since the same do not preclude the allowance of the same. However, the same was rejected by Ld. AO and disallowance of Rs. 251.07 Lacs was made in the assessment order. 10.2 The Ld. CIT(A) opined that the assessee was engaged in the manufacturing business. It was also held that machinery utilized in the business of generation of power would be entitled for additional depreciation. The assessee submitted that these assets were used at factory for the business of manufacture or production of any article or thing during its normal course. These assets were not previously used and therefore, the conditions of Sec.32(1)(iia) were duly fulfilled by the assessee. Concurring with same, Ld. AO was directed to all....