TMI Blog2016 (7) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... kata-3, Kolkata vide No. Pr.CIT-3/u/s.263/2015-16/8515-17 dated 29/30.10.2015. Assessment was framed by JCIT, Range-9, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2011-12 vide his order dated 28.03.2014. 2. The only issue to be decided in this appeal is as to whether the ld CIT is justified in invoking revisionary jurisdiction u/s 263 of the Act in the context of allowability of additional depreciation u/s 32(1)(iia) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a public sector undertaking engaged in the business of generation and distribution of electricity. The return of income for the Asst Year 2011-12 was filed by the assessee on 28.9.2011 declaring loss of ₹ 247,36,00,558/-. The assessment was completed u/s 143(3) of the Act on 28.3.2014 determining the total loss at ₹ 227,00,22,060/- after making disallowance u/s 14A of the Act in the sum of ₹ 20,35,78,496/-. The ld CIT issued show cause notice dated 31.7.2015 seeking to revise the assessment framed u/s 143(3) of the Act in as much as the ld AO had granted the claim of additional deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 28.03.2014 for the AY 2011-12 is erroneous in so far as it prejudicial to the interest of Revenue. You are therefore given an opportunity to make your submission personally or through your duly Authorized representative on 13/08/2015 at 11:30 A.M. before me at my chamber. RoomNo.4/2A, Aayakar Bhawan, 4th Floor along with your written submission as to why the above assessment made u/s. 143(3) dated 28.03.2014 for 2011-12 should not be revised u/s.263 of the I.T Act, 1961. In case of non compliance on the date noted for hearing, the case would be decided ex-parte without any/further opportunity. 4. The assessee replied to the ld CIT in response to show cause notice that Sec. 32(1)(iia) has come in force with effect from 01.04.2005 provides that any assessee which is engaged in the business of manufacture or production of any article or thing is entitled to claim additional depreciation @ 20% of the actual cost in respect of new machinery or plant acquired and installed in the relevant previous year. On bare perusal of the said section it would be noted that an eligible assessee u/s 32(1)(iia) is the one who manufactures or produces any article or thing . In the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city is akin to production of an article which is separately marketable as a distinct goods. 4.1. The assessee stated before the ld CIT that one of the case involving identical issue was that of NTPC Ltd a public sector undertaking whose principal business is generation of Thermal Power. For AY 2005-06 NTPC in its return claimed additional depreciation of ₹ 187.55 cr. in respect of additions to plant and machineries at its Rama Gundam and Talcher Super Power Plants. In the assessment order for AY 2005-06 the AO allowed the additional depreciation. The CIT however revised the assessment order u/s. 263 of the Act. In the said order the CIT held the AO's order granting additional deprecation to be erroneous on the ground that the assessee was not engaged in the business of manufacture or production of any article or thing. In CIT's opinion the assessee's business of generation of power could not be equated with the connotation of production of an article or thing . According to CIT in common parlance the expression article or thing meant to be something which was tangible or moveable. According to CIT the electricity generated did not have any tangible existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent to understand the question raised before the Hon ble Madras High Court which is reproduced hereunder:- Whether on the facts and in the circumstances of the case the Tribunal was right in holding that generation of power by windmill would amount to manufacture or production of any article or thing ? It was contended that the Hon ble Madras High Court was specifically seized of the question as to whether an assessee engaged in the business of generation of power can be said to be engaged in manufacture or production of an article and hence qualified for claiming additional depreciation u/s 32(1)(iia) of the Act. After due consideration of the facts and the question raised before it, the Hon ble Madras High Court dismissed the revenue s appeal by holding that the assessee engaged in the business of generation of power fulfilled the condition of production of any article or thing as contemplated in section 32(1)(iia) of the Act and accordingly eligible for additional depreciation. Similar views were also expressed in the following decisions :- CIT vs Hi Tech Arai Ltd reported in (2010) 321 ITR 477 (Mad) CIT vs Texmo Precision Castings reported in (2010) 321 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order u/s. 143(3) was neither erroneous nor prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act. 2. For that on the facts and in the circumstances of the case the appellant Corporation being engaged in the business of generation of power; was entitled to additional depreciation u/s. 32(1)(iia) since it was engaged in production of an article or thing and in that view of the matter was entitled to additional depreciation and hence order of assessment granting deduction for additional depreciation was not erroneous. 3. For that on the facts and in the circumstances of the case, various judicial forums like High Court ITAT having held that assessees engaged in generation of power were eligible for additional depreciation u/s. 32 (1)(iia) and these decisions being available in public domain prior to passing of the order u/s. 143(3) for A.Y. 2011-12; the CIT was grossly unjustified in holding the assessment order u/s 143(3) to be erroneous on the ground that additional depreciation was allowed by the AO. 4. For that on the facts and in the circumstances of the case, in the assessment order passed u/s 143(3) while allowing dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the outset, we find that on perusal of section 32(1)(iia) of the Act as it stood upto Asst Year 2012-13, it is evident that the additional depreciation is permissible to all assessees who are engaged in the business of manufacture or production of any article or thing. In the circumstances, the assessee who is desirous of claiming the additional depreciation need only to prove that during the relevant year he was engaged in the business of manufacture or production of any article or thing. Now whether the question to be decided is as to whether the assessee engaged in generation and distribution of electricity could be said to be engaged in the business of manufacture or production of any article or thing so as to be eligible for claiming additional depreciation u/s 32(1)(iia) of the Act. It is well settled that for the purpose of manufacture, an element of transformation is a pre-requisite. A particular item should undergo changes in its colour and character and become a separate and new marketable commodity after the manufacturing process. In the instant case, the assessee had set up hydel power and thermal power plant, wherein the water and coal gets converted into electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der appeal from a different perspective. We are of the view that the ld AO had adjudicated this issue on a right footing in so far as he has followed the judicial discipline in following the various decisions of the Hon ble Apex Court, Madras High Court, Gujarat High Court, Chennai Tribunal, Bangalore Tribunal and the Jurisdictional Kolkata Tribunal and allowed the claim of additional depreciation to the assessee, though not discussed about the same in his assessment order. Hence passing an assessment order by following the various judicial decisions would not in any manner make the assessment order erroneous. 6.1. The Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd vs CIT reported in 243 ITR 83 (SC) at page 88 held as follows:- The phrase prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income tax officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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