The order of the Bench was delivered by
SUNIL KUMAR YADAV, JM.- These appeals are preferred by the Revenue against the respective orders of the Ld. CIT(A) for AYs 2008-09 & 2007-08. These appeals were heard together and are being disposed of through this consolidated order. Accordingly, these appeals are being disposed of one after the other.
ITA No. 514/LKW/2015 (AY 2007-08)
2. In this appeal, the Revenue has assailed the order of Ld. CIT(A) on solitary ground that the CIT(A) has erred in law and on facts in allowing the relief of Rs. 46,39,905/- by way of giving direction to the AO that while computing the tax, first give credit of MAT and thereafter charge the surcharge & education cess without appreciating the facts and merits of the case brought on record by the AO in the order.
3. The facts in brief born out from record are that the assessment was completed vide order dated 09.11.2009 and income was assessed at Rs. 2,69,50,00,991/-, which was subsequently revised u/s 251 and u/s 154 and assessed income was finally computed at Rs. 1,97,27,51,880/-. The tax payable was calculated by the AO after giving MAT credit u/s 115JAA (inclusive surcharge & education cess) and thereafter, on the resultant figure, the surcharge & education cess was levied. However, vide order passed u/s 154/251 dated 13.11.2011, the tax was calculated after giving MAT credit without surcharge & education cess and thereafter, from the resultant figures, the surcharge & education cess was levied. This method of tax calculation was adopted in the subsequent order passed by AO u/s. 154/251 dated 31.01.2014 also.
4. Subsequently, the appellant was served with a notice u/s. 154 dated 24.07.2014 proposing to rectify the following mistake pointed out in the said notice:-
"it has been noticed from the ITNS- 150 that MAT credit has been allowed before charging of surcharge & education cess whereas, the same should have been allowed after charging surcharge & education cess. Therefore, the same have been required to allow as per provisions of the Act."
5. In response to the notice of AO dated 24.07.2014, the appellant had filed its reply dated 04.08.2014 whereby, the appellant had invited the attention of AO regarding calculation of tax payable and credit of MAT, as prescribed in ITR -6 relating to assessment year 2007-08.
6. The Assessing Officer was not convinced with the explanation of the assessee and he revised the order dated 31.01.2014 by giving MAT credit after charging of surcharge and educational cess.
7. Aggrieved the assessee preferred an appeal before the CIT(A) with the submission that the surcharge and educational cess is leviable only after giving credit for MAT and thereafter the tax computation made by the AO in ITNS-7 attached with the impugned order dated 27.11.2014, is not a correct way of tax calculation. In support of this contention, he placed reliance upon the following judgments:-
1. CITVs. Vacment India [ (2014) 369 ITR, 304 (Alld. HC) ]
2. Universal Medicare P, Ltd., Bombay Vs. ACIT - LTU, Mumbai
(ITAT 'F Bench, Mumbai) (In ITA No. 839/Mum/2012 - A.Y. 2007-08)
7.1 He also stated that as per decision of various High courts as well as Supreme Court, he mistake u/s. 154 cannot be rectified on a point where two views are possible and placed reliance on the following cases :-
• Kesarwani Zarda Bhandar Vs. CIT [ 349 ITR, 519 (Alld)]
• T.S. Balaram, Income Tax Officer, Company Circle -IV, Bombay Vs. Volkart Brothers & Others [ 82 iTR, 50 (SC) ]
8. The CIT(A) reexamined the contention of the assessee and having followed the judgment of the Hon’ble Allahabad High Court in the case of CIT Vs. Vocment India (Supra) directed the AO that while computing the tax, first give credit of MAT and thereafter, charge the surcharge & education cess.
9. Aggrieved the Revenue is in appeal before the Tribunal and has placed reliance on the order of the AO.
10. Ld. counsel for the assessee on the other hand submitted that correct mode of computation of tax is to first give credit of MAT and thereafter, charge the surcharge & educational cess.
11. Having carefully examined the order of lower authority, we find that CIT(A) has correctly understood the mode of computation of tax and issued correct direction to the AO that while computing the tax, first give credit of MAT and thereafter, charge the surcharge & education cess. Since we do not find any infirmity in the direction of the CIT(A) we confirm this order.
ITA No.513/Lkw/2015 (AY 2008-09)
12. In this appeal, the Revenue has assailed the order of Ld. CIT(A) on solitary ground that the CIT(A) has erred in law and on facts in allowing the relief of Rs. 31,53,46,771/- on account of additional depreciation u/s 31(1)(iia) of the Income Tax Act, 1961 without appreciating the fact that the power generating plant and machinery installed by the assessee company is not a part of business of manufacturing or producing or any article or thing which increase the installed capacity of production of cement as required for claiming such additional depreciation.
13. The facts in brief born out from the record are that the assessee installed and put to use Power Generating units at Bamania & Nimbahera. The power plants were for captive use and power so generated was mainly in manufacturing of cement at units at Bomania & Nimbahera. Since the Power plants were for captive use and power so generated was used in manufacturing of cement, the assessee claimed additional depreciation under clause (iia) of section 32 of the Act being the additional depreciation attributable to said power generating units and the said additional depreciation was allowed in the assessment proceeding vide order dated 24.12.2010.
14. Subsequently, the assessee was served with a notice dated 18-02-2015 u/s 154 of the Act, through which the assessee was required to show cause as to why additional depreciation allowed earlier vide assessment order dated 24-12- 2010, under clause (iia) of Section 32 of Rs. 31,53,44,771/- attributable to the power Generating be units not withdrawn on the ground that "under section 32(l)(iia) of the Act, additional depreciation on Plant & Machinery has to be granted to the assessee who is engaged in the manufacturing or production of any article or thing. Since the electricity being not an item which has to be termed as manufacturing or production of any article or thing hence, additional depreciation granted on plant and machinery used for generation or distribution of power is not allowable." Further, as per section 32(l)(iia), the word "[or in the business of Generation or generation and distribution of power has been inserted by the Finance Act, 2012 w.e.f. 01-04-2013, therefore, additional depreciation on Power generation units during the year under consideration is not allowable.
15. The assessee filed a reply that the additional depreciation on power units was rightly allowed and it did not call for any interference in u/s 154 of the Act. But, the A.O. was not convinced with it and disallowed the additional depreciation of Rs. 31,53,46,771/-.
16. The assessee preferred an appeal before the CIT(A) with the submission that generation of electricity is akin to manufacturing of a product. The electricity which may not be seen with eyes, but its effect can be seen and feel and electricity can be transferred, delivered, stored, processed etc. He placed reliance upon the judgment of the Hon’ble Supreme Court in the case of CST Vs. Madhya Pradesh Electricity Board reported in (1970) 25 57C 188 (SC). The CIT(A) reexamined the claim of the assessee and being convinced with the explanation, he held that assessee company is entitled for additional depreciation, therefore, it was rightly allowed in the original assessment. The CIT(A) has also held that the additional depreciation cannot be denied u/s 154 of the Act and he accordingly deleted the addition. The relevant observation of the CIT(A) is as under:-
“I have gone through the facts of the case and also perused the order passed by A.O. as well as case lawsreferred by Id. A.R. of the appellant.
The A.O. has disallowed the claim of additional depreciation on power units on the ground that electricity being not an item which has to be termed as manufacture or production of any article or thing. The view taken by the A.O. is not correct. The Hon'ble Supreme Court in the case of CST VS M.P, Electricity Board clearly held that electric energy has all trapping of an article or thing. The process of its generation is also akin to manufacture or production of an article of thing. This view has also been followed by the Hon'ble ITAT, Delhi Bench in the case of N.T.P.C. Ltd. Vs. by. Commissioner of Income Tax. Further, Hon'ble Madras High Court and Gujarat High Court in the judgment as cited above have clearly held that if an assessee is engaged in manufacturing of any article or thing apart from generation of Power, he is entitled for additional depreciation under section 32(l)(iia) of the Act on Power generating units.
In so far as the amendment to the provisions of section 32(l)(iia) to include the business of generation or generation and distribution of power w.e.f. 01-04-2013, the basic concept for claim of additional depreciation remain the same. As far as application of Section 32(l)(iia) of the Act is concerned, what is required to be satisfied in order to claim of additional depreciation is that the assessee engaged in the business of manufacture or production of any "article" or "thing".
Thus, taking into consideration all these aspects and after following above judicial pronouncements, I am of the view that claim of assessee company of additional depreciation is well justified and it was rightly allowed vide assessment order dated 24.12.2010, hence the same cannot be denied u/s. 154, accordingly, the disallowance is hereby deleted. Further, ground no. 4 & 5 relates to the jurisdiction of Section 154 which is clear and obvious that the issue is debatable and requires application of mind, therefore, the issue cannot be decided u/s.154 by the AO. Accordingly, all the grounds of appeal stand adjudicated.”
17. Aggrieved the Revenue is in appeal before the Tribunal and simply placed reliance on the order of the AO.
18. Ld. counsel for the assessee, on the other hand has placed reliance upon the order of the CIT(A). Besides, it was also contended that since the claim of depreciation of the assessee depends upon the interpretation of article or thing and is a debatable issue, it cannot be withdrawn u/s 154 of the Act.
19. Having carefully examined the order of the lower authority in the light of rival submission, we find that in the original assessment the claim of additional depreciation was allowed by the AO and later on u/s 154 of the Act, the Assessing Officer made a rectification in the order by making the withdrawal of additional depreciation earlier allowed to the assessee. We have also carefully examined the judgment of the ITAT Delhi Bench in the Case of NTPC Ltd. Vs. DCIT in which the definition of article, thing or goods was examined in the light of judgment of the Apex Court in the case of Indian Cine Agency, CST Vs. MP Electricity Board (Supra) and State of Madhya Pradesh Vs. NTPC and has taken a view that the additional depreciation cannot be denied to the assessee merely on the ground that electricity is not a article or thing. Since the issue is highly debatable, a view taken by the AO while computing the assessment cannot be revised u/s 154 of the Act. We therefore, find no justification to interfere with the order of Ld. CIT(A) as he has rightly adjudicated the issue. We accordingly confirm the order of Ld. CIT(A).
20. In the result appeals of the Revenue are dismissed.