Principal Commissioner Of Incometax-3, Kolkata v. M/S. Damodar Valley Corporation

IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOMETAX-3, KOLKATA -Versus- M/S. DAMODAR VALLEY CORPORATION Appearance:Mr. Tilak Mitra, Adv.Mr. Soumen Bhattacharjee, Adv....for the appellant. Mr. Rahul Tangri, Adv.Mr. Deepro Sen, Adv....for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 17[th] November, 2021. The Court : This appeal of revenue filed under Section260A of the Income Tax Act (the ‘Act’ in brevity) is directedagainst the order dated 15[th] September, 2016 passed by the IncomeTax Appellate Tribunal, B-Bench, Kolkata (the ‘Tribunal’) in ITANo.1458/Kol/2015 for the assessment year 2011-12. The revenue has framed the following substantialquestions of law for consideration : “a)Whether on the facts and in the circumstances ofthe case the Learned Income Tax Appellate Tribunal, “B”Bench, Kolkata, has erred in law in allowing the additionaldepreciation @20% under Section 32(1)(iia) which was allowedby the A.O. without any enquiry? b)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal, “B” Bench,Kolkata, has erred in law in quashing the order passed by theLd. CIT u/s 263 of the I.T. Act, 1961, by disregarding thatthe assessment order of the A.O. was erroneous and prejudicalto the interest of the Revenue in allowing the claim ofdepreciation u/s 32(1)(iia) in A.Y. 2011-12 which came intoeffect from 1[st] April, 2013, i.e. from the A.Y. 2013-14?” We have heard Mr. Tilak Mitra, learned counsel for theappellant assisted by Mr. Soumen Bhattacharjee, learned advocateand Mr. Rahul Tangri, learned counsel for the respondent assistedby Mr. Deepro Sen, learned advocate.The short question involved in this appeal is whether therespondent/assessee which generates electricity from thermal poweris entitled for additional depreciation at the rate of 20% underSection32(1)(iia)of the Act. The substantial question whichneeds to be considered is whether the initiation of proceedingsunder Section 263 of the Act was justified? If we answer thefirst question of law in favour of the assessee, then thenecessity to answer the second question may not arise as it wouldbecome academic. We need not answer the first question of law as there are various decisions of the Hon’ble Supreme Court as wellas other High Courts including this Court. In the State of AndhraPradesh vs. National Thermal Power Corporation (2002)5 SCC 203,the Hon’ble Supreme Court held that electric energy can betransmitted, transferred, delivered, stored, possessed etc. in thesame state as movable property. The Hon’ble Supreme Courtfollowed its earlier decision in Commissioner of Sales Tax, MadhyaPradesh, Indore vs. Madhya Pradesh Electricity Board, Jabalpur1969(1)SCC 200. Therefore, the revenue cannot dispute the factthat the electricity needs to be construed as a movable propertyas it being capable of being transmitted and transferred etc.The next issue is whether the respondent/assessee would beentitled to additional depreciation under Section 32(1)(iia)? Weare guided by the decision of this Court inthe case ofCommissioner of Income Tax, Kolkata-I vs. Ankit Metal and PowerLimited reported in (2016)66 taxmann.com 367(Calcutta). In thesaid decision the Division Bench followed the decision of the HighCourt of Madras in CIT vs. Hi-tech Arai Limited reported (2010)321ITR 477 (Madras) and CIT vs. VTM Ltd. reported in [2009] 319 ITR336 (Mad) and held that the assessee therein which was alsoengaged in the activity of manufacturing of power is entitled foradditional depreciation under Section 32(1)(iia) of the Act. Tothe same effect, there are several other decisions of other HighCourts and the latest being in the case of PCIT, New Delhi vs. NTPC SAIL Power Co.(P.) Ltd. reported in [2019]103 taxmann.com 398(Delhi). NTPC SAIL Power Co.(P.) Ltd. reported in [2019]103 taxmann.com 398(Delhi). In the light of the above, we hold that therespondent/assessee is entitled for additional depreciation underSection 32(1)(iia) of the Act. For the reasons, the appeal filedby the revenue is dismissed and the substantial question of law isanswered against the revenue. As pointed out earlier, since the core issue has beendecided in favour of the respondent/assessee, the question whetherexercise of jurisdiction by the Commissioner under Section 263 ofthe Act is justified or not is not required to be considered.Accordingly, the appeal stands dismissed. The stayapplication also stands closed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)