DAKSHIN GUJARAT VIJ COMPANY LTD.,,SURAT vs. THE PR. CIT-1,, VADODARA

The assessee, in the present case, is a company which is engaged in the business of distribution of electricity. The return of income for the year under consideration was filed by it on 29.09.2015 declaring total income under the normal provisions of the Act at Rs. Nil after setting off unabsorbed depreciation loss to the extent of Rs.59,86,49,724/-. In the said return, book profit under Section 115JB of the Act was declared by the assessee at Rs.98,48,83,000/-. In the assessment completed under Section 143(3) of the Act vide order dated 17.11.2017, the total income of the

The learned PCIT accordingly issued notice under Section 263(1) of the Act to the assessee on 24.05.2019 pointing out the above error and seeking explanation of the assessee. In reply, the following explanation was offered on behalf of the assessee in the matter:-

The learned PCIT did not find the explanation offered by the assessee in the matter to be acceptable. He noted that the erstwhile Gujarat Electricity Board was split into seven different companies and the assessee- company was one of those seven companies which was engaged only in the distribution of electricity. He referred to the amendment made in Section 32(1)(iia) by the Finance Act, 2012 whereby the assessee engaged in the

The learned PCIT accordingly held that there was an error in the order of the Assessing Officer dated 17.11.2017 passed under Section 143(3) of the Act in allowing additional depreciation of Rs.58,57,95,373/- to the assessee; and, setting aside the said order by exercising the powers conferred upon him under Section 263 of the Act, he directed the Assessing

Learned Counsel for the assessee submitted that the claim of additional depreciation under Section 32(1)(iia) of the Act was earlier available only to the manufacturing concerns and in order to further encourage investment in power sector; the amendment was made in Section 32(1)(iia) by the Finance Act, 2012 with effect from 1st April 2013 by inserting words “generation or generation and distribution of power”. He contended that the legislative intention behind the said amendment was to extend the benefit to the power sector and although the said benefit was initially not given to the assessees engaged only in the business of distribution of power, Section 32(1)(iia) of the Act was again amended by Finance Act, 2016 making the assessee engaged only in the business of distribution of power eligible to claim additional depreciation. He contended that even though the said amendment by the Finance Act, 2016 is made with effect from 1st April 2017, keeping in view the legislative intention behind making the said amendment, it has to be treated as retrospective in nature. He invited our attention to the Memorandum explaining the legislative intention behind the said amendment to point out that the same was made in order to rationalize the incentive for power sector. He contended that the eligibility of claim cannot be decided merely on the basis of words used in the statute and the intention and motive underlining the amendment made in the provision should be considered while interpreting the amended provision.

Learned Counsel for the assessee contended that if the provisions of Section 32(1)(iia) of the Act, as amended from time to time, relating to

Learned Counsel for the assessee also relied on the decision of Hon’ble Supreme Court in the case of CIT Vs. Atom Extrusion Ltd, [2009] 185 Taxman 416 (SC), wherein it was held that the legislative amendment which is curative in nature would operate retrospectively. He also relied on the decision of Hon’ble Madras High Court in the case of CIT vs. Vummudi Amarendran, [2020] 120 taxmann.com 171 (Madras), wherein it was held that the amendment made in the statute which seeks to relieve the assessee from undue hardship should be taken as retrospective. He also cited the decision of Hon’ble Supreme Court in the case of CIT vs. Calcutta Export Company, [2018] 93 taxmann.com 51 (SC), wherein it was held that the amendment made by Finance Act 2010 to provisions of Section 40(a)(ia) being curative in nature should be given retrospective operation. He also relied on the decision of Hon’ble Gujarat High Court in the case of CIT vs. Gujarat Mitra Pvt. Ltd., [2013] 31 taxmann.com 378 (Guj.), wherein it was held that the amendment to Section 234B made for the purpose to remove the ambiguity was required to be held as retrospective in nature.

The learned Counsel for the assessee contended that the claim of the assessee for additional depreciation under Section 32(1)(iia) was correctly allowed by the Assessing Officer by taking into consideration the relevant provisions of Section 32(1)(iia) of the Act as amended from time to time and there being no error in the order of the Assessing Officer passed under Section 143(3) allowing the said claim as alleged by the learned PCIT, the impugned order passed by him revising the said order is liable to be cancelled being not tenable in law or in the facts of the case.

The learned DR, on the other hand, strongly supported the impugned order passed by learned PCIT under Section 263 of the Act. He contended that the assessee, in the present case, is engaged only in the business of distribution of power and it was, therefore, not entitled to claim additional depreciation as per the provisions of Section 32(1)(iia) of the Act as applicable to the year under consideration, i.e. AY 2015-16. He contended that, as per the relevant provisions of Section 32(1)(iia) applicable to the year under consideration, only the assessee engaged in the business of generation or generation and distribution of power was entitled for additional deprecation and this benefit was extended to the assessee engaged only in the business of distribution of power by Finance Act, 2016 only with effect from 1st April 2017. He contended that this amendment made by Finance Act, 2016 is not clarificatory in nature and, as rightly held by the learned PCIT, the same cannot be given retrospective effect. He contended that the relevant provisions of Section 32(1)(iia) as amended from time to time are very clear and there being no ambiguity whatsoever, nothing can be read into the same to give retrospective operation as sought by the learned Counsel for the assessee especially when it is made clear by the legislature that the amendment made by the 2016 Act is effective only from 1st April 2017. He also contended that there is no hardship involved in

It is manifest from the provision of Section 32(1)(iia) as amended by the Finance Act, 2012 with effect from 1st April 2013 that additional depreciation was allowed in respect of cost of new plant or machinery acquired and installed by certain assessees engaged in the business of generation or generation and distribution of power and the assessees engaged only in the business of distribution of power/electricity, like the assessee in the present case, was not allowed the benefit given under Section 32(1)(iia) of the Act. As per the provision of Section 32(1)(iia), as amended by Finance Act, 2012 with effect from 1st April 2013 which is applicable to the year under consideration, i.e. AY 2015-16, the assessee- company engaged only in the business of distribution of electricity thus was not entitled to claim additional depreciation of 20% in respect of the cost of new plant or machinery acquired and installed by it and this position is not even disputed by the learned Counsel for the assessee at the time of hearing before us. He, however, has relied on the amendment again made in Section 32(1)(iia) by the Finance Act, 2016 with effect from 1st April 2017 whereby the benefit of additional depreciation of 20% in respect of cost of new plant or machinery acquired and installed is also extended even to the assessees who are engaged only in the business of distribution of electricity. He has contended that this amendment is made in Section 32(1)(iia) in order to rationalize the incentive for power sector and the same, therefore, is required to be given retrospective effect. In support of this contention, he has relied on various judicial pronouncements.

We have carefully gone through the judicial pronouncements relied upon by the learned Counsel for the assessee in support of his contention. In our opinion, the same are distinguishable on facts and the ratio of the same cannot be applied to the facts of the present case. First of all, the language used in the provision of Section 32(1)(iia), as amended by Finance Act, 2012 and again by Finance Act, 2016, as rightly contended by the learned DR, is very clear and there being no ambiguity whatsoever therein, the decision of Hon’ble Gujarat High Court in the case of CIT vs. Gujarat Mitra Pvt. Ltd. (supra), relied upon by the learned Counsel for the assessee, cannot be of any help to the assessee as in the said case it was held by the Hon’ble jurisdictional High Court that the amendment in question to Section 234B being for the purpose of removal of the ambiguity was required to be held as retrospective in nature.

In our considered opinion, the amendment made by Finance Act, 2016 to the provisions of Section 32(1)(iia) of the Act, going by legislative intention behind making the said amendment as explained in the relevant memorandum, cannot be said to be curative in nature and therefore, the decision of Hon’ble Supreme Court in the case of CIT Vs. Calcutta Export Company (supra) has also no application in the present case as in the said case the relevant amendment made by Finance Act, 2010 to provisions of Section 40(a)(ia) being curative in nature was given retrospective operation with effect from AY 2005-06 by the Hon’ble Supreme Court. Likewise, the decision of Hon’ble Supreme Court in the case of CIT Vs. Alom Extrusion Ltd (supra), cited by the learned Counsel for the assessee will not be of any help to the assessee as the second proviso to Section 43B was deleted by the Finance Act 2003 to bring about uniformity in the first proviso to Section 14B and the same being curative in nature, it was held by Hon’ble Supreme Court that it would operational with effect from 01.04.1988. Moreover, it is

In the last case of CIT vs. Vatika Township Pvt Ltd (supra), relied upon by the learned Counsel for the assessee, it was held by the Hon’ble Supreme Court that if the legislation is for the purpose of supplying an obvious omission in a former legislation or to explain a former legislation, the same can be given a retrospective effect. In the present case, the purpose of amendment made to the provisions of Section 32(1)(iia) by the Finance Act, 2016, as explained in the relevant memorandum, was to extend the benefit of additional depreciation in respect of the cost of new plant or machinery acquired and installed even by the assessees engaged only in the business of distribution of power in order to rationalize the incentive to power sector and the same, therefore, not being of supplying an obvious omission in a former legislation or to explain a former legislation, cannot be given retrospective effect. On the other hand, the decision of Hon’ble Supreme Court in the case of CIT Vs. Vatika Township Pvt Ltd (supra) cited by learned Counsel for the assessee renders support to Revenue’s case inasmuch as it was explained by the Hon’ble Supreme Court therein that of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. Explaining further, it was observed by their Lordships that the idea behind the rule is that the current rule is governed current activities and the law passed today cannot apply to the events of the past. Reference was made by the Hon’ble

In the case of Orissa State Warehousing Corporation Vs. CIT (supra), relied upon by the learned CIT(A) in his impugned order, the Hon’ble Supreme Court has held that it is well settled rule of construction that, in the first instance, the grammatical sense of the words is to be adhered to and only if that is contrary to or inconsistent with any expressed intention, or declared purpose of the statute, or if it would involve any absurdity, repugnancy or inconsistency, the grammatical sense must then be modified, extended or abridged so as to avoid such inconvenience, but no further. It was held that the elementary rule is that the words used in a section must be given their plain grammatical meaning. In another case of IPCA Laboratory Ltd Vs. DCIT (supra), relied upon by the learned CIT(A) in his impugned order, it was held by Hon’ble Supreme Court that when there is no ambiguity in the provisions of the statute, provisions cannot be interpreted to confer benefit on assessee. In his impugned order, learned CIT(A) has also relied on the decision of Hon’ble Supreme Court in the case of Prakash Nath Khanna & Anr Vs. CIT (supra), wherein it was held that the first and primary rule of construction is that the intention of the legislation must be found in the words used by the legislature itself and the Court cannot read anything into a statutory provision which is plain and unambiguous.

As regards the contention of the learned Counsel for the assessee that if the provisions of Section 32(1)(iia) of the Act as amended from time to time are interpreted merely on the basis of words used therein, it will lead to a situation where the electricity companies of only few States will get benefit because of the organizational set up decided by them thereby

Having regard to the language used while making the amendment to the provisions of Section 32(1)(iia) by the Finance Act, 2016 which is plain, clear and unambiguous and keeping in view the legislative intention behind the said amendment as explained in the relevant memorandum to extend the benefit of additional depreciation in respect of the cost of new plant or machinery acquired and installed even by the assessees engaged only in the business of distribution of electricity/power from a certain date, i.e. 1st April 2017, we are of the view that the same cannot be treated as declaratory/curative in nature so as to give retrospective effect to it as sought to be contended by the learned Counsel for the assessee. The said amendment made effective by the legislature clearly from 1st April 2017; thus is applicable in relation to Assessment year 2017-18 and subsequent Assessment Years; and the same, therefore, cannot be applied to the year under consideration, i.e. AY 2015-16, to allow the assessee additional depreciation under Section 32(1)(iia) of the Act. The assessment order passed under Section 143(3) of the Act allowing the said claim of the

In the result, the appeal of the assessee is dismissed.