The Pr. Commissioner Of Income Tax (Central), Nagpur v. Padmesh Gupta

FARAD CONTINUATION SHEET No.IN THE HIGH COURT OF JUDICATURE AT BOMBAYNAGPUR BENCH AT NAGPUR INCOME TAX APPEAL NO. 19/2016 (THE PR. COMMISSIONER OF INCOME TAX (CENTRAL), NAGPUR VERSUS PADMESH GUPTA) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Office Notes, Office Memoranda of Coram, appearances, Court's orders of directionsand Registrar's orders Court's or Judge's orders - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Shri S.N. Bhattad and Shri A.J. Bhoot, counsel for the appellant. CORAM: SMT. VASANTI A NAIK ANDKUM. INDIRA JAIN, JJ.DATE:SEPTEMBER 07, 2016. By this income tax appeal, the appellant-Department challenges the orders of the Commissioner ofIncome Tax (Appeals) and the Income Tax Appellate Tribunalupholding the claim of the assessee for depreciation ofRs.62,59,456/- due to the generation of the electricity by thewindmill. Admittedly, the respondent-Assessee hadpurchased a windmill from Suzlon Energy Limited at the costof Rs.6,25,94,556/- and had started the operation of thewindmill for producing electricity during the assessment yearunder consideration. The assessee claimed additionaldepreciation on the windmill under Section 32(1)(iia).According to the assessee, the electricity generated during theassessment year had been sold by the assessee to theMaharashtra State Electricity Distribution Company Limitedand the said transaction was supported by sale-bills. TheAssessing Officer, however, disallowed the claim of theassessee for additional depreciation. It was observed by theAssessing Officer that the assessee had not acquired a new Plant & Machinery for the purpose of manufacture orproduction of any article or thing. The order of the AssessingOfficer disallowing the claim for the additional depreciationwas challenged by the assessee before the Commissioner ofIncome Tax (Appeals). The appeal filed by the assessee wasallowed by the Commissioner of Income Tax (Appeals), by theorder dated 24.01.2014. The Commissioner of Income Tax(Appeals) held that the assessee was entitled to claimadditional depreciation, in view of the generation ofelectricity through the windmill. While holding so, theCommissioner of Income Tax (Appeals) relied on thejudgment of the Hon'ble Supreme Court in the case of C.S.T.Versus Madhya Pradesh Electricity Board, reported in 1970(25) SCC 188 and the judgment in the case of State ofAndhra Pradesh Versus N.T.P.C., reported in 127 STC 280(SC). The Commissioner of Income Tax (Appeals) held that'electricity' falls within the definition of 'goods' and theprocess involved is manufacturing or production. Beingaggrieved by the order of the Commissioner of Income Tax(Appeals), the department filed an appeal before the IncomeTax Appellate Tribunal. The Income Tax Appellate Tribunal,by the order dated 11.09.2015, dismissed the appeal of thedepartment by upholding the order of the Commissioner ofIncome Tax (Appeals). On hearing the learned counsel for thedepartment and on a perusal of the impugned orders, itappears that there is no scope for interference with theimpugned orders. The Tribunal relied on the decision of aCoordinate Bench of the Tribunal to hold that the process ofgeneration of electricity is akin to manufacture of an article or On hearing the learned counsel for thedepartment and on a perusal of the impugned orders, itappears that there is no scope for interference with theimpugned orders. The Tribunal relied on the decision of aCoordinate Bench of the Tribunal to hold that the process ofgeneration of electricity is akin to manufacture of an article or a thing though electricity may not be seen with the eyes, as itseffect could be seen and felt. It was observed by the Tribunalas also the Commissioner of Income Tax (Appeals) that therewas no dispute that the assessee had purchased the windmilland had generated electricity during the relevant assessmentyear. Since the scope of the word 'production', in Section32(1)(iia) is wide, the authorities held that the generation ofelectricity through the windmill would show that the assesseewas involved in the production of electricity, which is held tobe an article or a thing as per the judgment of the Hon'bleSupreme Court. The authorities held that the assessee hadrelied on the sale-bills depicting that the electricity generatedby the assessee during the relevant assessment year throughthe windmill was sold to the Maharashtra State ElectricityDistribution Company Limited, as per the agreement betweenthe parties. Since additional depreciation under Section32(1)(iia) is allowable in the case of new Plant & Machinerythat is acquired and installed for the purpose of manufactureor production of any article or thing, the authorities held thatthe assessee was entitled to additional depreciation as it wasproved that the assessee had purchased the windmill, hadgenerated the electricity during the relevant assessment yearand had sold the same as per the agreement, to theMaharashtra State Electricity Distribution Company Limited.On the basis of the facts that were not disputed, we find thatall the clauses of Section 32(1)(iia) have been satisfied forseeking the additional depreciation for the generation ofelectricity through the windmill that was admittedlypurchased by the assessee from Suzlon Energy Limited. Thefindings recorded by both the authorities are pure findings of facts and they do not give rise to any substantial question oflaw. The judgment reported in AIR 1993 SC 2529(Commissioner of Income-tax, Orissa, etc. Versus M/s N.C.Budharaja & Company and another) and relied on by thecounsel for the department, cannot be helpful to thedepartment for effectively challenging the orders of theIncome Tax Authorities. In fact, it is observed by the Hon'bleSupreme Court in the said judgment that the word'production' has wider connotation than the word'manufacture' and while every manufacture can becategorized as production, every production need not amountto manufacture. Since the Income Tax Authorities haverecorded a clear finding of fact that the assessee hadproduced electricity during relevant assessment year with thehelp of the windmill that was purchased from Suzlon EnergyLimited and the electricity so generated was sold by theassessee to the Maharashtra State Electricity DistributionCompany Limited, all the ingredients of Section 32(1)(iia)were satisfied, for seeking additional depreciation. Since the orders of the Commissioner andTribunal are just and proper and since no substantial questionof law arises in this income tax appeal, we dismiss the appealwith no order as to costs. JUDGE JUDGE CERTIFICATE I certify that this Order uploaded is a true and correct copy oforiginal signed Order. Uploaded by: Rohit D. Apte. Uploaded on :15.09.2016.