TMI Blog2017 (10) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s appeal for A.Y. 2011-12 are accordingly allowed. Disallowance u/s 14A - HELD THAT:- Provision of sub-section (2) of section 14A which stipulates that the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed (Rule 8D) if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the Act. AO thus was required to record his dissatisfaction with the correctness of the claim of the assessee in respect of expenditure incurred in relation to exempt income before invoking Rule 8D and since there was no such dissatisfaction recorded by the AO as agreed even by the Ld. DR, we find merit in the contention of the learned counsel for the assessee that the disallowance under section 14A made by applying Rule 8D is not sustainable. We, therefore, delete the disallowance made by the A.O. under section 14A read with Rule 8D and sustained by the Ld. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt this available power from one voltage to another voltage level at different sub-stations throughout West Bengal with the help of machineries and evacuate the power at consumers and through transmission and distribution lines of different voltage level. From this explanation offered by the assessee, the AO was of the view that the assessee was not actually engaged in manufacturing activity and it was engaged in the transmission of electricity only. He also held that the conversion of available power from one voltage level to another voltage level did not tantamount to either manufacturing or production activity and the assessee therefore was not entitled to claim additional depreciation under section 32(1)(iia) of the Act. Accordingly the claim of the assessee for additional depreciation was disallowed by the AO. 4. The disallowance made by the AO on account of its claim for additional depreciation under section 32(1)(iia) was challenged by the assessee in the appeal filed before the Ld. CIT (A). During the course of appellate proceedings before the Ld. CIT (A), the following submissions were made by the assessee in support of its claim for additional depreciation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs State of Bihar (1961) 12 STC 150 (SC) splitting of mica, Aspinwall Co. Ltd. vs CIT (2001) 251 ITR 323, 327-328 (SC) making coffee beans from raw berries held to be a manufacturing activity, Vijay Ship Breaking Corporation vs CIT (2009) 314 ITR 309 (SC) case of Ship breaking, India Cine Agencies vs CIT (2009) 208 ITR 98 (SC) conversion of Jumbo rolls of photographic films into small flats and rolls of different sizes, CIT vs Oracle Software India Ltd. (2010) 320 ITR 546 (SC) duplication of blank CD into recorded CD, CIT vs Arihant Tiles and Marbles Pvt. Ltd. (2010) 320 ITR 79 (SC) sawing marble blocks into slabs and tiles and polishing CIT vs Emptee Poly Tarn Pvt. Ltd. (2010) 320 ITR 665 (SC) and CIT vs Yashasvi Yarn Ltd. (2013) 350 ITR 208 (SC) twisting and texturising partially oriented yarn through thermo mechanical process held to be manufacture, CIT vs Jansons Co. (2006) 283 ITR 175 (All) welding, soldering and lacquering of brass wares, CIT vs Vinbros Co. (2008) 218 CTR 634 (Mad) blending and bottling of Indian made foreign liquor, CIT vs Premier Tobacco Packers Pvt. Ltd. (2006) 284 ITR 222 (Mad) thrashing and re-drying of tobacco leaves, CIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tha Aiyar, Third Edition, 2005, at page 4680, it has been stated that the word thing is of extensive signification, and in common parlance may intend all matters of substance, in contradistinction to person. Whatever may be possessed or owned or be the object of a right, is a thing. 10 In Black s Law Dictionary, the following meanings are assigned to the expression things : Things. The objects of dominion or property as contradistinguished from persons . Gayer vs Whelan, 59 Cal. App. 2d 255, 138 P.2d 763, 768. The object of a right; i.e. whatever is treated by the law as the object over which one person exercises a right, and with reference to which another person lies under a duty. Such permanent object, not being persons, as re sensible, or perceptible through the senses. Things are distributed into three kinds : (1) Things real of immovable, comprehending lands, tenements, and hereditaments; (2) things personal or movable, comprehending goods and chattels and (3) things mixed, partaking of the characteristics of the two former, as a title deed, a term for years. The civil law divided things into corporal (tangi possunt) and incorpore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Detroit Edison Co. vs Department of Treasury, the judgment delivered 9th January, 2014, relied upon by the appellant. It is also observed that the issue is in that case was different as there the term used was processing and the claim of Detroit Edison Co. was for exemption of Industrial Processing whereas the terms used in the section 32(1)(iia) are manufacture or production , which by definition are different from processing. 4.2.1 It is also seen that this section has been amended by Finance Act, 2012 w.e.f. 01.04.2013 to include the business of generation or generation and distribution of power. In the explanatory notes to the Finance Act also, it has been mentioned that hitherto the claim was not available to power generation distribution companies, thus it would become available w.e.f. 01.04.2013. The section 32(1)(iia) after this amendment is as under: (iia) in the case of any new machinery or plant (other than ships and aircraft) which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, [or in the business of generation or generation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that the said amendment give impetus to the view that the generation of electricity is a manufacturing process eligible for the benefit under section 32(1)(iia). 7. The learned counsel for the assessee has also relied on the decision of Bangalore Bench of this Tribunal in the case of DCIT vs Hutti Gold Mines Co. Ltd. (2013) 26 ITR (Trib.) 600 wherein it was held that the power generated by the windmill was a product by the assessee company and since it was covered under the words article or thing which was tradable or identifiable, the process of generation of electricity was akin to manufacture of article or thing . It was also held that the power generated need not necessarily be used in the production of assessee s own products and the use of electricity in manufacturing activity of the core business of the assesses was not a precondition for the grant of additional depreciation under section 32(1)(iia). It was further held that the amendment brought about in section 32(1)(iia) by the Finance Act 2012 with effect from 01.04.2013 to include the business of generation of distribution of power to give benefit of additional depreciation was only clarificatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of M. Satish Kumar (supra) and Hutti Gold Mines Co. Ltd. (supra) as well as by the decision of Hon ble Madras High Court in the case Hi Tech Arai Ltd. (supra) and that of Hon ble Karnataka High Court Gold Co. Ltd. (supra). The learned DR, on the other hand, has not been able to bring to our notice any judicial pronouncements on this issue either of the Hon ble Jurisdictional High Court or any other High Court which is in favour of the revenue. We, therefore, respectfully follow the aforesaid judicial pronouncements cited by the learned counsel for the assessee which are in favour of the assessee and delete the disallowance made by the AO and confirmed by the Ld. CIT (A) on account of assessee s claim for additional depreciation under section 32(1)(iia). Ground no 1 2 of the assessee s appeal for A.Y. 2011-12 are accordingly allowed. 10. The common issue involved in ground no 3 of the assessee s appeal for A.Y. 2010-11 and ground no 1 of the revenue s appeal for A.Y. 2010-11 relates to the disallowance of ₹ 50,16,000/- made by the AO under section 14A of the Act read with Rule 8D which is sustained by the Ld. CIT (A) to the extent of ₹ 4,87,500/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer thus was required to record his dissatisfaction with the correctness of the claim of the assessee in respect of expenditure incurred in relation to exempt income before invoking Rule 8D and since there was no such dissatisfaction recorded by the AO as agreed even by the Ld. DR, we find merit in the contention of the learned counsel for the assessee that the disallowance under section 14A made by applying Rule 8D is not sustainable. We, therefore, delete the disallowance made by the A.O. under section 14A read with Rule 8D and sustained by the Ld. CIT (A). Ground no 3 of the assessee s appeal is accordingly allowed while ground no 1 of the revenue s appeal for A.Y. 2010-11 is dismissed. 13. As regards the issue involved in ground no 2 of the revenue s appeal for A.Y. 2010-11 relating to the deletion by the Ld. CIT (A) of the disallowance made by the A.O. under section 40(a)(ia) on account of payment of ERPC charges without deduction of tax at source, it is observed that the relief on this issue was allowed by the Ld. CIT (A) to the assessee in the year under consideration i.e. A.Y. 2010-11 by relying on the order of his predecessor in assessee s own case for A.Y. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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