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Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI ANUBHAV SHARMA
ORDER PER SHAMIM YAHYA, AM,
This appeal by the Revenue is directed against the order of the Ld.
CIT(Appeals)-44, New Delhi, dated 22.08.2019 pertaining to Assessment Year 2016-17.
The grounds of appeal reads as under:-
“(i) Whether the CIT(A) has erred in deleting the addition of Rs.5,85,21,043/- which was made by the Assessing Officer by disallowing investment allowance u/s 32AC of the Act without recognizing that the investment allowance u/s is available only to the assessee engaged in the business of manufacture or production of article or thing only, and not allowable to business of generation, transmission or distribution of power.
(ii) Whether the CIT(A) has erred in considering similar issues in the instant case and the cases on which CIT(A) has relied without recognizing that the referred cases are related to claim of additional depreciation u/s 32(1)(iia) whereas the instant case is related to claim of investment allowance u/s 32AC of the Act.” 3. Brief facts of the case are that the assessee company had filed its return of income for A.Y. 2016-17, declaring total income of Rs.4,80,12,060/-. During the previous year, the assessee had acquired and installed new plant and equipment costing Rs.39,01,40,286/- to produce electricity and, on such investment it had claimed deduction under section 32AC(1A) of the income Tax Act, 1961. The Assessing Officer noted that the relevant provision of section 32AC(IA) states as under:
32 AC 14[(1A) Where an assessee, being a company, engaged In the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets 15 [acquired during any previous year exceeds twenty-five crore rupees and such assets are installed on or before the 31st day of March, 2017], then, there shall be allowed a deduction of a sum equal to fifteen percent of actual cost of such new assets for the assessment year relevant to the previous year.
The Assessing Officer was of the view that the assessee was not in the business of manufacture or production of any article or thing. She was of the view that the electricity is neither an article nor a thing. She has relied on the definition of “manufacture” given in section 2(29BA) to argue that in the process of manufacture, inputs are physical objects which undergo change in the manufacturing process, resulting in a new physical object. But in the process of generation of electricity, what is produced is non-physical. For reaching this conclusion, the Assessing Officer had relied on the ruling of ITAT, Pune, in Giriraj Enterprises vs. DC IT. [Appeal No. 1384, 1385, 1469 and 1470 of 2015]. In the assessment order, the A.O. had reproduced paragraph 12 to 25 from this ruling. In these paragraphs, the A.O. has pointed out that 1TAT has referred to the amendment in section 32(I)(iia) w.e.f. 01.04.2013. In this amendment after the expression “engaged in the business or manufacture or production or article or thing” the expression “or in the business of generation, transmission or distribution of power” has been added. Accordingly, the ITAT has reasoned that generation of power was not covered within the meaning of “manufacture or production of any article or thing”. Based on this interpretation of analogous language in section 32(l )(iia), the A.O, has held that generation of power is not included within the meaning of “manufacture or production of any article or' thing”. Accordingly, she has held that deduction under section 32AC(1A) is not available For installation of new assets for generation of power. Hence, she has disallowed deduction of Rs.3,85,21,043/- and has assessed total income at Rs. 10,65,33,103/-.
Upon assessee’s appeal, the Ld. CIT(A) allowed the assessee’s appeal by accepting that the Assessing Officer has not property appreciated the ITAT decisions in case of Giriraj Enterprises (supra). She noted that the said decision the majority/third member view was in favour of the assessee. The concluding portion of the order of the Ld. CIT(A) reads as under:-
“5.5 Perusal of the order of the Hon’ble ITAT, Pune in the case of M/s Giriraj Enterprises v/s DCIT (supra) shows that the majority of the ITAT has held that generation of electricity is a production _of article or thing u/s 32(l)(na) of the Act for claiming additional depreciation. Moreover, ITAT, Indore in the case of Sanwaria Agroils v/s ACIT in /Ind/2013) for AY 2007-08 in its order dated 16.05.2017 has held that if an assessee was engaged in generation or generation and distribution of electricity even prior to amendment brought about by the Finance Act, 2012, then it would be entitled to additional depreciation. The Hon’ble ITAT has: held as follows:- 39. The learned Sr. D.R. has relied in the case of Clover Developer (P ) Lid (supra), which is in favour of the Revenue, However, the assessee has relied on various decisions as referred to above of Mumbai. Delhi and Chennai Tribunals as well as Hon'ble Madras High Court and other coordinated benches, which are favour of the assessee. When two view are possible then view, which is favourable, be adopted. In this regard, we find that it has been held in plethora of judgements that to ease where two possible cm the same issue and there being no judgement on the said issue from the Jurisdictional Hon’ble High Court or the Hon’ble Apex Court, the view that is favourable to the assessee has to be adopted. In other words, the Hon'ble non-jurisdictional High Court’s judgement in favour of the assessee, is to be preferred over the non-Jurisdictional High Court’s judgement not favourable to the assessee. In this connection, we rely on the following judgments: (i) CIT v. Kulu Valley Transport Co. (P.) Ltd. 119701 77 1TR 518 (SC) held that mm if two views are possible the view which is favourable to the assessee must be accepted white construing the provisions of a taxing statute. (ii) CIT v. Vegetables Products Ltd. 11973] 88 SIR 192 (SCI held On the other hand, if two reasonable constructions of taxing provision are possible, that construction which favours the assessee must be adopted. This is well-accepted rule of construction recognized by this court in several of its decisions. (iii) CIT v. Madho Pd. Jatia 119761 105 ITR 179 (SC) held where ambiguous interpretation of statute - admitting two views- views which is favourable to subject should be adopted. (iv) Petron Engg Construction (P.) Ltd. v. CBDT f 19891 175 SIR 523/[1988]41 Taxman 234 (SG) held that principle that when too Interpretations are possible to be made, the interpretation, which is favourable to the assessee, should be adopted is weft settled and there is no doubt about that. (v) CIT (TDS) v. Reliance Engineering Associates (P.) Ltd. [2012] 21 taxmann.com539/209 Taxman 351(Guj.) held that it is well-settled taw that where two interpretations are possible, the one which is favourable to the assessee should be adopted, Appeal dismissed.
In view of above, we find that it is settled law where two interpretations are possible, the one, which is favourable to the assessee should be adopted. Applying the ratio of above decisions to the facts of the ease, it ears safely said that that when two views are possible on the same subject, the view favouring the assessee should be adopted. We find that it is now a settled proposition as held by the Hon’ble Supreme Court and the various Co-ordinate Beaches of the Tribunal that the process of generation of electricity is akin to manufacture of an article or thing, the assessee in the .instant case satisfy the requirement that it is engaged in the business of manufacture or production of an article or thing. Now coining to the amendment which has been brought-to by the Finance Act 2012 w.e.f. A.Y. 2013-14 whereby the assessee engaged in the business of generation or generation & distribution of power have specifically been included antes held eligible for claim of additional depreciation. In our view, the said amendment cannot be held to disentitle the assessee to claim of the additional depreciation. Various Coordinate Benches have held that event prior to the amendment brought in by the Finance Act 2012, that the assessees engaged in generation or generation and distribution of electricity were held eligible for additional depreciation. In this regard, a reference can be drawn to toe decision of NTPC Ltd.(supra) M. Satishkumar (supra) and Damodar Valley Corporation (supra). In our view, the said amendment cannot be read to negate the settled legal position that generation of electricity is akin to manufacture or production of an article or thing. As held by Coordinate Bench in M. Satishkumar (supra) the said amendment by the Finance Act 2012 gives an impetus to the view that generation of electricity is a manufacturing process. In light of above, the assesses is held entitled to the additional claim of depreciation on the power plant and the windmill
installed during the year. Hence, the ground of the assessee is allowed. 5.6 In view of the above orders of the Hon’ble ITAT, Pune in the case of M/s Giriraj Enterprises vs DCIT in and 1470 (Pune/2015) dated 23.02.2017 for AY 2011-12 and 2012-13 & the Hon’ble ITAT, Indore in the case of Sanwana Agroils v/s ACIT in ITA No. 620 (Ind/2013) for AY 2007-08 in its order dated 16.05.2017, it is held that generation of electricity amounts to “manufacture or production of an article or thing” and hence is eligible for investment allowance u/s 32AC of the Act. The AO is accordingly directed to allow investment allowance u/s 32AC of the Act. 5.7 Ground of Appeal
No. 1 is decided in favour of the appellant. 6. For statistical purpose, the appeal is allowed.” 6. Against the above order, the Revenue is in appeal before us.
We have heard both the parties and perused the records. The ld. DR relied upon the order of the Assessing Officer and reiterated the ground taken that the Ld. CIT(A) has relied upon the case laws, with respect to addition u/s 32(1)(iia), whereas the instant case is related to the claim u/s 32AC of the Act.
Per Contra, the Ld. counsel for the assessee relied upon the order of the Ld. CIT(A) and submitted that it is now settled that the generation of power/electricity amounts to the manufacturing and production of any article or not. In this regard, he relied upon the case laws referred by the Ld. CIT(A) and decision of the Hon’ble Madras High Court in the case of CIT vs Atlas Export Enterprises (2015) 57 taxmann.com 285 (Madras).
We have carefully considered the submission. We note that it is now well settled proposition that generation of electricity amounts to manufacture or production of any article or they qualifying for deduction u/s 32AC. The case laws of Tribunal and Hon’ble High Courts above, duly supports this proposition. No contrary decision from Hon’ble jurisdictional High Court was cited before us. Hence, we uphold the well reasoned order of Ld. CIT(A).
In the result, this appeal by the Revenue is dismissed.
Order pronounced in the open court on 15th September, 2022.