TMI Blog2021 (10) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... is prejudicial to the interest of the revenue - presumption and assumption of the ld. Commissioner is contrary to the facts and hence not tenable in the eyes of law. Claim of 50% of depreciation on wind mill - It is undisputed fact that by raising specific query vide column No. 8 of notice dated 17/12/2012, the AO asked the Assessee that there is huge investments in fixed assets specially plant machinery. Despite this fact your turnover has decreased then what use has been put to new assets. The said query was replied by the Assessee vide column No. 8 of the its reply (Pg no. 47 of PB) wherein it was replied by the Assessee that during the year under consideration the Assessee company started its commercial production in Block Mill since December, 2009 and also set up another Wind Mill installed in the month of March. The said query and its reply goes to show that the AO has made the requisite enquiry, therefore the assumption of the Ld. CIT is wrong and contrary to the facts. From submission of the Assessee before the ld. Commissioner to the effect that in Schedule 20 of the Audited balance sheet under point No. 18, it is clearly mentioned that the installed capacity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined at Rs. (-) 2,22,92,944/- by passing order u/s. 143(3) dated 21/03/2013, which came into scrutiny before the ld. Commissioner, who while examining the assessment record opined that the order passed u/s. 143(3) of the Income Tax Act 1961, on dated 21/03/2013 is erroneous in so far as it is prejudicial to the interest of revenue and issued a detailed notice dated 23/02/2015 u/sec. 263 of the Act to the Assessee. Though, the Assessee replied the said notice by filing written submissions, however the ld. Commissioner, set aside the assessment order and directed the AO to re-frame the assessment by holding as under:- 4.1 I have gone through the submissions made by the Assessee and various case laws relied upon by the Assessee and found it to be not satisfactory. The law prohibits claiming CSR expense as a deduction from income. Under the new Companies Act, certain class of profitable entities is required to shell out at least two per cent of their three year average annual net profit towards Corporate Social Responsibility (CSR) activities. The CSR expense is treated as application of income. As the application of income is not allowed as deduction, amount spent on CSR canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. While the power is not meant to be substitute for the power of the Assessing Officer to make assessment, the same can certainly be exercised when order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In Daga Entrade (P) Ltd.'s case (2010) 327 ITR 467, the Hon'ble Gauhati hg held that if the order of the Assessing officer was passed ignoring relevant material, causing prejudice to the interest of the revenue, suo motu revisional jurisdiction could be exercised by the Commissioner. I, accordingly set aside the assessment order on the limited issues discussed in para 4.1 to 4.3. 3. The Assessee challenged the impugned order passed by the ld. Commissioner which is under consideration before us. 4. The ld. DR vehemently supported the impugned order passed by the ld. Commissioner and submitted that the ld. Commissioner only directed the AO for verification of the issues and, therefore, the order under challenge cannot be attributable to improper and unsustainable. 5. We have heard both the parties and perused the material available on record. In this case three issues are involved. First issue relates to the CSR expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. We find that the CIT(A) has relied on the decision in the case of Modi Industries (supra) and Hon'ble Karnataka High Court in the case of CIT vs. Infosys Technologies Ltd. (supra), wherein, it has been held that the expenditure incurred on social responsibility was laid out or expended wholly and exclusively for purposes of business. The CIT(A) has referred to the amendment made in Finance Act (No. 2) 2014 w.e.f 01/04/2015 in Section 37, wherein it is declared that for the purposes of sub-section (1) any expenditure incurred by an Assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the Assessee for the purposes of the business or profession. The CIT(A) has held that there was no such embargo for the preceding years. In view of the above, the CIT(A) held that the disallowance cannot be sustained. In the instant case, it is submitted that CSR expenses are incurred for the welfare of local community and thereby improve corporate image of the companies incurring such expenditure. We are of the considered opinion that the CIT(A) has rightly consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on wind mill is concerned, the AO has not done any enquiry as to whether the wind mill was put to use before 31/03/2010. At the time of proceedings u/sec. 263, the Assessee has produced certain evidence that the wind mill commissioned before 31/03/2010 but the claim of the Assessee requires verification. Lack of enquiry by the AO renders the assessment order as erroneous. 6.1. We have considered the peculiar facts to the effect that it is undisputed fact that by raising specific query vide column No. 8 of notice dated 17/12/2012, the AO asked the Assessee that there is huge investments in fixed assets specially plant machinery. Despite this fact your turnover has decreased then what use has been put to new assets. The said query was replied by the Assessee vide column No. 8 of the its reply (Pg no. 47 of PB) wherein it was replied by the Assessee that during the year under consideration the Assessee company started its commercial production in Block Mill since December, 2009 and also set up another Wind Mill installed in the month of March. The said query and its reply goes to show that the AO has made the requisite enquiry, therefore the assumption of the Ld. CIT is wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power generation, the Assessee has admitted that the amendment brought out in section 32(1)(iia) by the Finance Act, 2012 to include the business of generation and distribution of power to the benefit of additional depreciation applicable for the next A.Y. 2013-14. In the absence of clear provision in the I.T. Act, a plain reading of section 32(1)(iia) indicated that the benefit of additional depreciation is available to those undertakings which are engaged in the business of manufacture of production of an article or thing. The ld. Commissioner further held that wrongly allowing additional depreciation on power generation has rendered the assessment order as erroneous insofar as it is prejudicial to the interest of the revenue. 7.2. We may observe that the Hon'ble Apex Court in the case of State of Andhra Pradesh vs. National Thermal Power Corporation Ltd. [ (2002) 5 SCC 203] held the electricity as GOODS which can be transmitted, transferred, delivered, possessed. The amendment was brought out in section 32(1)(iia) by Finance Act 2012 to include the business of generation and distribution of power for the benefit of additional depreciation which was held by the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough windmill is second line of business of the assessee company. The power generated by the windmill is a product of the assessee company and it is covered under the words article or thing which is tradable/identifiable. In other words, electricity falls within the definition of sale of Goods Act, 1930 and process of generation of electricity is akin to manufacture or production of an article or thing . The power generated need not necessarily be used in the production of assessee's own products namely mining and extraction of gold. The use of electricity in the manufacturing activity of the core business of the assessee is not a precondition for the grant of additional depreciation under the statue. 7.1 The amendment brought about in section 32(1)(iia) by the Finance Act, 2012 to include the business of generation and distribution of power to the benefit of additional depreciation is only clarificatory. A similar view has been held by the Hon'ble Chennai Bench of the Tribunal in the case of ACIT vs. M Satish Kumar in ITA No. 718/Mds/2012 dated 28th September, 2012. The relevant findings of the Tribunal read as follows: 9. We have heard the submissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en considered as goods and amendment brought out in section 32(1)(iia) by the Finance Act, 2012 to include the business of generation and distribution of power to the benefit of additional depreciation is only clarificatory, hence deserves additional depreciation. Even the AO while allowing the additional depreciation on power generation used his own wisdom and followed the dictum of the Hon'ble Courts, therefore his action cannot be faulted. On the aforesaid analyzations it is clear that the assumption of the ld. Commissioner to the effect that allowing additional depreciation on power generation as rendered the assessment order as erroneous insofar as it is prejudicial to the interest of the revenue, is wrong and contrary to the facts and judgments on the issue. Before coming to the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue, the Ld. Commissioner ought to have conducted some minimal enquiry, which in the instant case qua the issue under consideration also, the ld. Commissioner failed to do and consequently the conclusion drawn by the ld. Commissioner is also unsustainable. 8. On the aforesaid considerations and anal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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