DCIT CORPORATE CIRCLE 1, COIMBATORE vs. CHIRANJEEVI WIND ENERGY LIMITED, COIMBATORE

आयकर अपीलीय अिधकरण ’सी’ �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा�� एवं माननीय �ी मनोज कुमार अ�वाल ,लेखा सद� के सम�। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकरअपीलसं./ITA No.2225/Chny/2017 (िनधा�रणवष� / Assessment Year: 2010-11) DCIT M/s. Chiranjeevi Wind Energy Ltd., बनाम/ Corporate Circle-1, 45/3A, Arts College Road Lane, Vs. Coimbatore. Opp. Bala Lodge, Coimbatore – 641 018. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACC-8761-H (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Assessee by : Shri Vikram Vijayaraghavan (Advocate)-Ld. A.R ��थ�कीओरसे/Department by : Shri P. Sajit Kumar (JCIT)-Ld. Sr. DR सुनवाईकीतारीख/ : 11-04-2022 Date of Hearing घोषणाकीतारीख / : 18-04-2022 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax (Appeals)-1,Coimbatore [CIT(A)] dated 30.06.2017 in the matter of assessment framed by the Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147of the Act on 22.03.2016. The grounds taken by the Revenue read as under:

ITA No.2225 /Chny/2017 - 2 - 1. The order of the Id. CIT(A), Coimbatore is against the facts and circumstances of the case and is erroneous by law. 2. The learned CIT(A) erred in allowing the assessee's appeal on the issue of disallowance of additional depreciation fortheAsst. Year 2010-11. 3. The learned CIT(A) failed to consider that the CIT(A) vide his order in 146/14- 15 dated 29.04.2016 for the Asst. year 2011-12 dismissed the assessee's appeal on a similar issue by distinguishing the facts of the High Court's decision in the case of CIT vs. VTM cited in 319 ITR 336 with that of the assessee's case. 4. It is submitted that the order of CIT(A) for the Asst. year 2011-12 on a similar issue was confirmed by the Hon'ble ITAT vide its order in 319, 2324, 442 & 2468/Mds/2016 dt. 10.7.2017. As evident, the sole subject matter of appeal is claim of additional depreciation. 2. The Ld. Sr. DR submitted that similar issue stood covered against the assessee by the decision of this Tribunal in assessee’s own case for AY 2011-12, the copy of which has been placed on record. The Ld. AR, on the other hand, submitted that this issue is covered in assessee’s favor by the decision of Hon’ble High Court of Madras and Hon’ble Supreme Court. The copies of the decisions have been placed on record. Having heard rival submissions, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in assembling and selling of windmills. Assessment Proceedings 3.1 The assessee’s return of income was scrutinized u/s 143(3). However, the case was reopened on the ground that the assessee claimed deduction u/s 80IA in respect of windmill units treating it as a separate unit and the same was allowed. The assessee claimed normal depreciation @80% and also additional depreciation of 20% for Rs.20.20 Lacs. The Ld. AO opined that additional depreciation is allowed only to the assessee who is engaged in manufacturing / producing of any article or thing. Windmill is the power generating unit

ITA No.2225 /Chny/2017 - 3 - and therefore, additional depreciation would not be allowable to the assessee. 3.2 The assessee, drawing attention to the provisions of Sec. 32(1)(iia), submitted that in the case of any new machinery or plant which has been acquired or installed after 31.03.2005, by an assessee engaged in the business of generation and distribution of power, a further sum equal to 20% of actual cost of such machinery or plant shall be allowed as deduction. The assessee placed reliance on the decision of Hon’ble High Court of Madras 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) and the decision of Chennai Tribunal in ACIT V/s M. Satishkumar (33 Taxmann.com 396). The assessee thus submitted that the plant and machinery relating to power generation unit would be eligible for additional depreciation u/s 32(1)(iia). 3.3 However, not convinced, Ld. AO rejected the claim of the assessee on the ground that the words ‘or in the business of generation or generation and distribution of power’ were inserted by Finance Act 2012 w.e.f. 01.04.2013 and therefore, the additional depreciation would be allowable only from AY 2013-14. Therefore, the additional depreciation of Rs.20.20 Lacs was added back to the income of the assessee. Appellate Proceedings 4. During appellate proceedings, the assessee relied on the above cited decisions. The Ld. CIT(A), concurring with the decision of Hon’ble High Court of Madras in CIT V/s VTM Ltd. (187 Taxman 319) as well as in CIT V/s Hi Tech Arai Ltd. (321 ITR 477) allowed the claim. Aggrieved, the revenue is in further appeal before us.

ITA No.2225 /Chny/2017 - 4 - Our findings and Adjudication 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 these provisions with effect from 01.04.2013. The explanatory memorandum to Finance Bill provides as under: - Extending benefit of initial depreciation to the power sector Section 32(1)(iia) provides for allowance of initial depreciation (in addition to normal depreciation) at the rate of 20% of the actual cost on new machinery or plant (other than ships and aircraft) to the assessee engaged in the business of manufacture or production of any article or thing in the year of acquisition and instalment. Under the existing provisions, the benefit of initial depreciation is not available on the new machinery or plant installed by an assessee engaged in the business of generation or generation and distribution of power. In order to encourage new investment by the assessees engaged in the business of generation or generation and distribution of power, it is proposed to amend this section to provide that an assessee engaged in the business of generation or generation and distribution of power shall also be allowed initial depreciation at the rate of 20% of actual cost of new machinery or plant (other than ships and aircraft) acquired and installed in a previous year. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

It is the submission of Ld. DR that the amendment was not clarificatory in nature and it was prospective only. Therefore, the assessee was not entitled for additional depreciation in this year. The Ld. AR, on the other hand, submitted that the assessee was engaged in co-generation of power. It has been held in various decisions that the generation of electricity amounts to production of article or thing and therefore, dehors

ITA No.2225 /Chny/2017 - 5 - the amendment, the assessee engaged in such activities was always entitled for additional depreciation even prior to AY 2013-14. The copies of various decisions favoring the assessee have been placed on record. 6. Upon perusal of the decision of Chennai Tribunal in M. Satishkumar V/s DIT (33 Taxmann.com 396; 28.09.2012), we find that identical question has been decided by coordinate bench in assessee’s favor as under: - 9. We have heard the submissions made by the respective parties and have also examined the judgments orders relied on by the authorised representative of the assessee. 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 distribution of power, eligible for benefit under section 32(1)(iia). Although the said amendment is with effect from April 1, 2013 but it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefits under section 32(1)(iia). In view of the above, the order of the Commissioner of Income-tax (Appeals) is upheld and the appeal of the Revenue is dismissed being devoid of merit.

This decision has been rendered after considering the decision of Hon’ble High Court of Madras 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); the decision of Hon’ble Supreme Court in the case of CST V/s Madhya Pradesh Electricity Board [1970] 25 STC

ITA No.2225 /Chny/2017 - 6 - 188 (SC) & State of Andhra Pradesh v. National Thermal Power Corporation Ltd. 2002 (4) TMI 694 (SC). This decision has subsequently been followed by other benches of the Tribunal including in the decision of Kolkata Tribunal in Damodar Valley Corporation V/s DCIT (72 Taxmann.com 127) which has subsequently been affirmed by Hon’ble High Court of Calcutta which is reported at 134 Taxmann.com 63. 7. The revenue has relied upon the decision of coordinate bench of Tribunal in assessee’s own case for AY 2011-12, ITA Nos.319/Mds/2015 & ors. Order dated 10.07.2017 which has taken a view against the assessee by observing as under: - 7. Assessee’s Appeal in ITA No.2468/Mds/2016, Assessment Year 2011-12 A) Ground-3(i) :- Disallowance of additional depreciation U/s. 32(1)(iia) of the Act for Rs.55,33,000/-:- During the course of scrutiny assessment proceedings, it was observed by the Ld.AO that the assessee had claimed additional depreciation on windmill. The Ld.AO disallowed the claim of additional depreciation because the business of generation, transmission or distribution of power which was made eligible for additional depreciation U/s.32(1)(iia) of the Act, came in to effect from the assessment year 2013-14 as per Finance Act, 2012. On appeal, the Ld.CIT(A) also agreed to the view of the Ld.AO and upheld the order by distinguishing the decision in the case VTM Limited reported in 319 ITR 336. From the facts of the case, it is evident that the assessee had claimed additional depreciation on the windmill erected by it for generating and distribution of power in order to earn revenue. In this situation, we do not find any infirmity in the order of the Ld. Revenue Authorities on this issue. As held by the Ld.AO the business of generation, transmission or distribution of power was brought within the ambit of Section 32(1)(iia) of the Act, by the Finance Act, 2012 w.e.f. 01.04.2013 i.e., from the assessment year 2013-14. Since the case of the assessee is for the assessment year 2011-12, obviously the assessee will not be eligible for the benefit of additional depreciation during the relevant assessment year. Further it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities. Therefore this issue raised by the assessee does not have any merits.

Upon perusal of this decision, we find that the coordinate bench has confirmed the stand of Ld. CIT(A) on the ground that the business of generation, transmission or distribution of power was brought within the

ITA No.2225 /Chny/2017 - 7 - ambit of Section 32(1)(iia) of the Act, by the Finance Act, 2012 w.e.f. 01.04.2013 i.e., from the assessment year 2013-14. Another finding as rendered by the bench is that it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities. 8. We find that so far as the first finding is concerned, the same is not in accordance with the cited decisions of Hon’ble High Court of Madras. However, the second finding is vital one and the same would require concrete findings by the lower authorities. It has been observed by the bench that it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities. If this finding is correct, the assessee would certainly be not eligible to claim additional depreciation in view of the fact that the assessee is engaged in manufacturing and selling of windmills. On the other hand, if the same run contrary, the assessee would be eligible to claim the depreciation in terms of aforesaid decisions. Therefore, we set aside the impugned order and restore the matter back to the file of Ld. AO to render a finding on the aspect that the additional depreciation was with respect to assessee’s manufacturing activities. If this fact is established, the assessee would be eligible to claim the additional depreciation otherwise not. The assessee is directed to file requisite details and substantiate its case. 9. The appeal stand allowed for statistical purposes. Order pronounced on 18th April, 2022.

Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�� /VICE PRESIDENT लेखासद� /ACCOUNTANT MEMBER

ITA No.2225 /Chny/2017 - 8 -

चे�ई/ Chennai; िदनांक/ Dated : 18-04-2022 EDN आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकरआयु�त (अपील)/CIT(A)4. आयकरआयु�त/CIT 5. �वभागीय��त�न�ध/DR 6. गाड�फाईल/GF