Pr. Commissioner Of Income Tax, Delhi-2 v. Bses Rajdhani Power Ltd

$~13 and 14 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 2/2020 PR. COMMISSIONER OF INCOME TAX, DELHI-2, ..... AppellantThrough:Ms. Vibhooti Malhotra, Sr. Standingcounsel with Mr. Shailender Singhand Mr. Sidharth Manocha, Advs.Through:Ms. Vibhooti Malhotra, Sr. Standingcounsel with Mr. Shailender Singhand Mr. Sidharth Manocha, Advs. versus BSES RAJDHANI POWER LTD. ..... RespondentThrough:Ms.KavitaJha,Mr.VaibhavKulkarni and Mr. Udit Naresh, Advs.Kulkarni and Mr. Udit Naresh, Advs. +ITA 3/2020 PR. COMMISSIONER OF INCOME TAX, DELHI-2, ..... Appellant Through:Ms. Vibhooti Malhotra, Sr. Standingcounsel with Mr. Shailender Singhand Mr. Sidharth Manocha, Advs. versus ·M/S BSES RAJDHANI POWER LTD. ..... RespondentThrough:Ms.KavitaJha,Mr.VaibhavKulkarni and Mr. Udit Naresh, Advs. CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAO R D E R%08.01.2020 CM APPL. 248/2020 in ITA2/2020 and CM APPL. 265/2020 in ITA 3/2020 (exemptions) 1. Exemptions allowed, subject to all just exceptions. 2. The applications stand disposed of. CM APPL. 249/2020 in ITA2/2020and CM APPL. 266/2020 in ITA-3/2020 (delay in refiling of 107 days) 3. By both these applications, the applicant seeks condonation of delay of107 days in re-filing the applications. For the reasons stated in theapplications, the delay is condoned. 4. The applications stand disposed of in the aforesaid terms. ITA 2/2020 and ITA 3/2020 5. Issue notice. Learned counsel for the respondent accepts notice. We haveheard learned counsels. 6. The following substantial question of law arises for our consideration: a. Whether the Tribunal, while finding that the Assessing Officerhad gone beyond the remand order dated 05.10.2015 and on thataccount setting aside the order passed by the Assessing Officerdated 31.03.2017, should have directed the Assessing Officer toact strictly in terms of its earlier order of remand dated05.10.2015? 7. The Revenue is in appeal to assail the order dated 25.03.2019 passed byIncome Tax Appellate Tribunal (ITAT), Delhi Bench: ‘A’ New Delhi inITA No. 6225/Del/2018 pertaining to assessment year (AY) 2008-09 andITA No. 6224/Del/2018, pertaining to AY 2007-08. The Tribunal hasallowed the said appeals of the assessee along with several others, holdingthat the Assessing Officer (AO) had gone beyond the scope of remand asdirected by the ITAT in order dated 05.10.2015. 8. On 05.10.2015, the Tribunal had held in favour of the assessee that it wasentitled to depreciation at the rate of 80% on electronic meters/energymeters. The Tribunal also took note of the submission of the Revenue thatmore than 60% of the meters are mechanically advanced meters which didnot have any special feature entitling them to depreciation at the rate of80%. Another aspect before the Tribunal was whether bus bars form anintegral/inextricable part of the electronic meters/energy meters. TheTribunal while passing the order dated 05.10.2015 remanded the matter tothe file of the AO to determine the extent of electronic meters/energy meterswhich were energy saving devices, since the assessee would be entitled to80% depreciation on such meters and not on other meters which could notbe classified as energy saving devices. The Tribunal also remanded theissue-whether the bus bars could be considered as an integral/inextricablepart of the meters since the depreciation at the rate of 80% was claimed onbus bars by the assessee on the ground that it formed an integral/inextricablepart of the meter on that premise only, the high depreciation on meters at therate of 80% was claimed. The Tribunal passed the impugned order holding,that the AO had exceeded his jurisdiction while dealing with the remand,since he returned a finding that the electronic meters/energy meters were notenergy saving devices and were therefore were not entitled to depreciation atthe rate of 80%. So far as the issue of bus bars is concerned, he did notexamine the said issue at all. 9.The submission of Ms. Malhotra is that although the issue thatelectronic meters/energy meters as energy saving devices are entitled to 80%depreciations stands concluded by the Tribunal, in its order dated 05.10.2015 and this Court has also dismissed Revenue’s appeal, vide orderdated 14.09.2019 in ITA 666/2016, the Tribunal should have ensured thatthe matter attains finality by remanding the matter back to the AO with adirection to act strictly in terms of the order of remand dated 05.10.2015.The issue as to what percentage of the meters are energy saving devices,being meters for measures of heat losses, furnace oil flow, steam flow,electric energy and power factor meters was not gone into by the AO interms of the remand order dated 05.10.2015 and therefore the Tribunalshould have ensured that the AO undertakes the said exercise and alsodetermine whether the bus bars form an integral/inextricable part of themeters. 10. Learned counsel for the respondent submits that the issue that theelectronic meters/energy meters, which are energy saving devices, areentitled to high depreciation at the rate of 80% stand included by theTribunal, and as well as, by this Court and therefore the AO cannot bepermitted to re-open the said issue. 11. We agree with the submission of the learned counsel for the respondent.However, we also find that the Tribunal stopped short of redirecting the AOto deal with the real issues, on which the remand was made vide order dated05.10.2015. Thus, those issues remain undetermined till date. In our view,the Tribunal should have ensured that the outstanding issues, in terms of theremand order, attain finality one way or another. 12. We, therefore, answer the question in favour of the Revenue and remandback the matter to AO with a direction to strictly comply with the order of remand dated 05.10.2015 passed by the Tribunal which attained finality withthe dismissal of ITA No. 666/2016 preferred by the appellant. The AO shalllimit his consideration strictly in terms of order of remand and in particularparagraphs Nos. 12 to 12.5 of the order dated 05.10.2015, which read asfollows:- “12. Considering the above submission, we find that the LearnedCIT(Appeals) has agreed with the submissions of the assessee tothis extent that the meters are technologically advanced and arehaving features which can help consumers save energy but withhuman intervention. The contention of the assessee on the otherhand remained that the energy meters acquired by the assesseeare in the nature of energy saving equipment/devices having interalia the following advanced features helping in conservation ofenergy: i) Advanced feature of automatic electric load monitortime of day (TOD) displays, which indicates consumptionat the particular point of time during the day that isrelevant/ helpful in collecting data and devising reliabletechnical solutions; ii) Electricity leakage display (ELD) indicator, whichglowsincase of earthleakage/ faultywiring atcustomer's premises; iii) Feature of indicating the maximum demand whichhelps in regulating total energy load on the distributiontransformers; in case the transformers are overloaded, itwill result in increased technical losses iv) Accurate measurement of energy consumption, whicharrests losses due to power theft; v) Provide load and energy data for proper managementof energy/ power 12.1 Section 32 of the Income-tax Act, 1961 provides forallowance of depreciation in respect of block of assets at suchpercentage of the written down value as may be prescribed.Under Item-111(8) of the table rates of depreciation in "OldAppendix-!" to the Income-tax Rules, 1962 is relevant for theassessment year 2005-06 wherein depreciation @ 80% isavailable in respect .of equipment falling within the category of"energy measuring meters". The specific entries under which thedepreciation was claimed by the assessee during the relevantassessment year reads as under: "III. Machinery and Plant xxxxxx (8) (ix) Energy saving devices, being- A. xxxx iv) Accurate measurement of energy consumption, whicharrests losses due to power theft; v) Provide load and energy data for proper managementof energy/ power 12.1 Section 32 of the Income-tax Act, 1961 provides forallowance of depreciation in respect of block of assets at suchpercentage of the written down value as may be prescribed.Under Item-111(8) of the table rates of depreciation in "OldAppendix-!" to the Income-tax Rules, 1962 is relevant for theassessment year 2005-06 wherein depreciation @ 80% isavailable in respect .of equipment falling within the category of"energy measuring meters". The specific entries under which thedepreciation was claimed by the assessee during the relevantassessment year reads as under: "III. Machinery and Plant xxxxxx (8) (ix) Energy saving devices, being- A. xxxx B.Instrumentationandmonitoringsystem(ormonitoring energy flows: (a) Automatic electrical load monitoring systems; (b) Digital heat loss meters; xxxxxxxxx (e)meter’s for measuringheat losses, furnace oil flow, stream flow, electric energy and power factor meters (f) Maximum demand indicator and clamp on powermeters xxxxxxxxxx” 12.2 The perusal of aforesaid provisions make it clear that itemIII (8)(ix)(B)(e) of the depreciation schedule provides for higherrate of depreciation in respect of "meters' for measuring .........electric energy". 12.3Thesubmissionoftheassesseethatthereisnofurther/additional condition requiring the assessee to actuallyestablish any direct relationship of the meters with the energysaved nor the said schedule also mandate that the energy metersshould be "electrical" or "mechanical" devices and merelyprovides that the meters should be electricity/energy measuringdevices finds substance. In the aforesaid schedule, the electricity measuring meters have been recognized as energy savingdevices. We also find substance in the contention of the assesseethat even if meter does not have any special features, accuratemeasurementofenergyconsumptionbyitselfresultsinconserving energy in as much as it enables regulation of energyconsumption and arrests losses due to power theft. The "NewAppendix-!" to the Income- tax rules, 1962 which is relevant forassessment year 2006-07 and onwards, deprecation at the rate of80% is also available in respect of electrical equipment havingbeen specific features of "time of day", as provided hereunder: "...................................... E. Electrical EquipmentXxxxxxxxxxxxxxxxx(i)Time of Day (TOD) energy metersXxxxxxxxxxxxxxxxxxxxxxxxxxxxx'' 12.4 The submission of the assessee that specifications containedin the energy meters installed by the assessee company alsoincluded the specific features of "Time of Day" has not beenrebutted by the Revenue. We find that in the depreciationschedulefortheassessmentyear2006-07andonwardsspecifically/separately covers feature of "Time of Day" underItem III (8)(ix)–E(i). Under the above facts and circumstancesespecially in view of above referred schedule read with sec. 32 ofthe Income-tax Act, we find that the assessee has beensuccessfully able to demonstrate that it was very much entitled toclaim depreciation on energy meters @ 80% and withoutappreciating the above schedule, the authorities below were notjustified in disallowing the claimed depreciation on these assetson the ground that the energy meters did not facilitate inconservation of energy. The Assessing Officer had, however,pointed out that more than 60% of the meters are mechanicallyadvanced meters which did not have any special feature. To meetout this objection and its submissions before the LearnedCIT (Appeals) that most of the meters are energy saving meters,the Learned AR has referred page No.75 of the supplementarypaper book i.e. copy of the relevant extracts of the tax audit reportoftheassesseefortheassessmentyearunderconsiderationreflectingstatementofparticularsincludingbifurcation of expenses between normal meter and electronicmeters. We thus set aside the matter to the file of the AssessingOfficer to verify and allow the claimed depreciation at the rate of80% on electronic meters/energy meters only after affordingopportunity of being heard to the assessee.12.5 Regarding the claimed higher depreciation on the "bus barchamber", the Learned AR submitted that these are devicesthrough which connection from overhead line/underground cableisprovidedtothemetersandthesaiddeviceformsintegral/inextricable part of the meters without which the metercannot function. The authorities below have denied the claimedhigher depreciation on this instrument on the basis that these arenot energy saving device. We set aside this matter to the file ofthe Assessing Officer to verify the above claim of the assesseethat 'bus bar chamber' forms integral/inextricable part of themeters without which a meter cannot function and allow thedepreciation thereupon accordingly after affording opportunityof being heard to the assessee. The ground No.1 of the appealpreferred by the assessee is accordingly allowed for statisticalpurposes. ” 13. In View of the above, the appeals are disposed of. VIPIN SANGHI, J JANUARY 08, 2020Pallavi SANJEEV NARULA, J