Pr. Commissioner of Income-tax-6, New Delhi v. NTPC Sail Power Co. Pvt. Ltd
[Citation -2019-LL-0218-45]

Citation 2019-LL-0218-45
Appellant Name Pr. Commissioner of Income-tax-6, New Delhi
Respondent Name NTPC Sail Power Co. Pvt. Ltd.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 18/02/2019
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags business of generation and distribution of power • substantial question of law • manufacture or production • additional depreciation • assessment proceedings • manufacturing activity • generation of power • electricity board • new machinery • joint venture • sale of goods • actual cost • sales tax • movable property
Bot Summary: During ITA 1290/2018 Page 1 of 5 the course of assessment proceedings, the Assessing Officer raised a query regarding the assessee's claim for additional depreciation, under Section 32(1)(iia) of the Act contending that such a deduction was permissible only if the assessee was engaged in the production of any article or thing which, it was claimed, does not include the generation of power. Ultimately, the Assessing Officer disallowed the addition holding that, on a plain reading of the statutory provision, additional depreciation could be claimed only by an assessee who produces something tangible or movable which could be handled/touched/stored. Depreciation: In respect of depreciation of - .... ITA 1290/2018 Page 2 of 5 In the case of any new machinery or plant, 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, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause. Learned counsel for the assessee has drawn our attention to the judgment of the Karnataka High Court dated 16.09.2014 in ITA No.08/2014 Commissioner of Income Tax vs. The Hutti Gold Mines Co. Ltd. wherein the question of additional depreciation was considered and it was held as follows: 3. The material on record shows that the assessee is generating electricity through windmill as a second line of business. 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 statute. The benefit of additional depreciation under Section 32(1)(iia) has been rightly granted to the assessee by the concurrent judgments of the CIT(A) and the Tribunal.


IN HIGH COURT OF DELHI AT NEW DELHI Decided on: 18th February, 2019 ITA 1290/2018 PR. COMMISSIONER OF INCOME-TAX-6, NEW DELHI ..... Appellant Through: Mr.Asheesh Jain, Sr.Std.Counsel with Mr.Sanjay Kumar, Advocate versus NTPC SAIL POWER CO. PVT. LTD. ..... Respondent Through: Mr.M.P.Rastogi, Mr.K.N.Ahuja & Mr.Manu K.Giri, Advocates CORAM: HON BLE MR. JUSTICE S. RAVINDRA BHAT HON BLE MR. JUSTICE PRATEEK JALAN PRATEEK JALAN, J. (ORAL) % 1. This appeal by Revenue under Section 260A of Income Tax Act, 1961 [hereinafter referred to as "the Act"] is directed against order of Income Tax Appellate Tribunal [hereinafter referred to as "the Tribunal"], dated 24.07.2018, passed in ITA No.6501/DEL/2014, dismissing Revenue's appeal. In present appeal, notice has been issued only on one question - pertaining to disallowance of additional depreciation claimed by respondent/assessee for Assessment Year 2011- 2012. 2. assessee is joint venture company of two public sector undertakings and is engaged in production of thermal power. For assessment year in question, it declared 'nil' income after setting off current year's profits with brought forward unabsorbed depreciation. During ITA 1290/2018 Page 1 of 5 course of assessment proceedings, Assessing Officer (AO) raised query regarding assessee's claim for "additional depreciation", under Section 32(1)(iia) of Act contending that such deduction was permissible only if assessee was engaged in production of any article or thing which, it was claimed, does not include generation of power. assessee, in reply, claimed to have been granted such deduction from A.Y. 2006-07 onwards. 3. Ultimately, Assessing Officer disallowed addition holding that, on plain reading of statutory provision, additional depreciation could be claimed only by assessee who produces something tangible or movable which could be handled/touched/stored. later amendment to Section 32(1)(iia) of Act, specifically dealing with additional depreciation in respect of entity engaged in business of generation and distribution of power, was held applicable only w.e.f. 01.04.2013, and not prior thereto. 4. CIT(A) by order dated 25.08.2014 allowed assessee's appeal on this point following order of Tribunal dated 30.04.2012 in case of NTPC vs. Deputy Commissioner of Income Tax [ITA No.1438/DEL/2009]. Revenue's appeal has also been dismissed by impugned order of Tribunal on basis of same judgment. 5. We have heard Mr.Asheesh Jain, learned Senior Standing Counsel for Revenue and Mr.M.P.Rastogi, learned counsel for assessee. 6. Section 32(1)(iia) of Act as it stood at relevant time, read as follows: "32. Depreciation: (1) In respect of depreciation of - .... ITA 1290/2018 Page 2 of 5 (iia) In case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after 31st day of March, 2005, by assessee engaged in business of manufacture or production of any article or thing, further sum equal to twenty per cent of actual cost of such machinery or plant shall be allowed as deduction under clause (ii)." 7. Learned counsel for assessee has drawn our attention to judgment of Karnataka High Court dated 16.09.2014 in ITA No.08/2014 [Commissioner of Income Tax vs. Hutti Gold Mines Co. Ltd.] wherein question of additional depreciation was considered and it was held as follows: "3. material on record shows that assessee is generating electricity through windmill as second line of business. It is product of assessee company. It is covered under words "article" or "thing", which is tradable / identifiable. In other words, electricity falls within definition of Sale of Goods Act, 1930, and process of generation of electricity is akin to manufacture or production of "article" or "thing". power generated need not necessarily be used in production of assessee's own products namely mining and extraction of gold. use of electricity in manufacturing activity of core business of assessee is not precondition for grant of additional depreciation under statute. Therefore, we do not see any merit in this appeal. Accordingly, this appeal is rejected. 4. However, we have not gone into question of applicability of Section 32(1)(iia) of Income Tax Act, 1961, and question as to whether clarificatory or not is kept open to be decided at proper time." ITA 1290/2018 Page 3 of 5 Although Karnataka High Court held that it was not going into question of Section 32(1)(iia) and question of whether subsequent amendment was clarificatory, analysis of Court is in our view also applicable to interpretation of said provision for purposes of present dispute. 8. Similarly, it is clear that electricity has been held to be "goods" for purposes of sales tax in Constitution Bench judgment of Supreme Court in State of Andhra Pradesh vs. NTPC Ltd. AIR 2002 SC 1895. Supreme Court, in that judgment held as follows: 20. Before we deal with constitutional aspects let us first state what electricity is, as understood in law, and what are its relevant characteristics. It is settled with pronouncement of this Court in Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh Electricity Board, Jabalpur 1969(2) SCR 939 that electricity is goods. definition of goods as given in Article 366 (12) of Constitution was considered by this Court and it was held that definition in terms is very wide according to which goods means all kinds of moveable property. term moveable property when considered with reference to goods as defined for purpose of sales-tax cannot be taken in narrow sense and merely because electrical energy is not tangible or cannot be moved or touched like, for instance, piece of wood or book it cannot cease to be moveable property when it has all attributes of such property. It is capable of abstraction, consumption and use which if done dishonestly is punishable under Section 39 of Indian Electricity Act, 1910. If there can be sale and purchase of electrical energy like any other moveable object, this Court held that there was no difficulty in holding that electric energy was intended to be covered by definition of goods . However, A.N.Grover, J., speaking for three-Judge Bench of this Court went on to observe that electric energy can be transmitted, transferred, delivered, stored, possessed etc. in same way as any other moveable property . In this observation we agree with Grover. J., on all ITA 1290/2018 Page 4 of 5 other characteristics of electric energy except that it can be stored and to extent that electric energy can be stored , observation must be held to be erroneous or by oversight. science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored. 9. Tribunal's judgment in NTPC vs. DCIT [relied upon in orders of CIT(A) as well as Tribunal in present case] followed this judgment of Supreme Court to hold that electricity has all necessary trappings of articles or things and benefit of additional depreciation cannot be denied. 10. As held by Constitution Bench, electricity is capable of abstraction, transmission, transfer, delivery, possession, consumption and use like any other movable property. Following same logic, to deny benefit of additional depreciation to generating entity on basis that electricity is not article or thing is in our view artificially restrictive meaning of provision. benefit of additional depreciation under Section 32(1)(iia) has, therefore, been rightly granted to assessee by concurrent judgments of CIT(A) and Tribunal. 11. We also note that, w.e.f. from 01.04.2013, provision has been amended by Finance Act, 2012 and assessees engaged in generation of power have expressly been included in ambit thereof. 12. For above reasons, Court is of opinion that no substantial question of law arises. appeal is dismissed. PRATEEK JALAN, J. S. RAVINDRA BHAT, J. FEBRUARY 18, 2019/ hkaur ITA 1290/2018 Page 5 of 5 Pr. Commissioner of Income-tax-6, New Delhi v. NTPC Sail Power Co. Pvt. Ltd
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