PCIT Vs Damodar Valley Corporation (Calcutta High Court)
Summary: The Calcutta High Court considered the Revenue’s appeal under Section 260A against the Kolkata ITAT order dated 15 September 2016 for AY 2011–12. The dispute concerned Damodar Valley Corporation’s entitlement to additional depreciation at 20% under Section 32(1)(iia) on assets used for generation of electricity from thermal power. The Revenue also challenged the Tribunal’s decision to quash revisionary proceedings under Section 263.
The Court referred to State of Andhra Pradesh v. National Thermal Power Corporation and Commissioner of Sales Tax v. Madhya Pradesh Electricity Board for the proposition that electricity is movable property capable of transmission and transfer. It then considered whether power generation qualified for additional depreciation under Section 32(1)(iia).
The High Court followed its earlier decision in CIT v. Ankit Metal and Power Limited, which had relied on the Madras High Court rulings in CIT v. Hi-tech Arai Limited and CIT v. VTM Ltd. It also referred to the Delhi High Court decision in PCIT v. NTPC SAIL Power Co. (P.) Ltd. These authorities supported additional depreciation for power generation activities.
The High Court held that Damodar Valley Corporation was entitled to additional depreciation under Section 32(1)(iia). It dismissed the Revenue’s appeal and answered the substantial question against the Revenue. Since the core issue had been decided in favour of the assessee, it did not consider the separate question concerning the Commissioner’s jurisdiction under Section 263. The stay application was closed.
Cases Discussed
- State of Andhra Pradesh vs. National Thermal Power Corporation — (2002) 5 SCC 203 (Supreme Court)
- Commissioner of Sales Tax, Madhya Pradesh, Indore vs. Madhya Pradesh Electricity Board, Jabalpur — (1969) 1 SCC 200 (Supreme Court)
- Commissioner of Income Tax, Kolkata-I vs. Ankit Metal and Power Limited — (2016) 66 taxmann.com 367 (Calcutta)
- CIT vs. Hi-tech Arai Limited — (2010) 321 ITR 477 (Madras)
- CIT vs. VTM Ltd. — [2009] 319 ITR 336 (Madras)
- PCIT, New Delhi vs. NTPC SAIL Power Co. (P.) Ltd. — [2019] 103 taxmann.com 398 (Delhi)
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court : This appeal of revenue filed under Section 260A of the Income Tax Act (the ‘Act’ in brevity) is directed against the order dated 15th September, 2016 passed by the Income Tax Appellate Tribunal, B-Bench, Kolkata (the ‘Tribunal’) in ITA No.1458/Kol/2015 for the assessment year 2011-12.
The revenue has framed the following substantial questions of law for consideration :
“a) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, “B” Bench, Kolkata, has erred in law in allowing the additional depreciation @20% under Section 32(1)(iia) which was allowed by the A.O. without any enquiry?
b) Whether on the facts and circumstances of the case
the Learned Income Tax Appellate Tribunal, “B” Bench, Kolkata, has erred in law in quashing the order passed by the Ld. CIT u/s 263 of the I.T. Act, 1961, by disregarding that the assessment order of the A.O. was erroneous and prejudicial to the interest of the Revenue in allowing the claim of depreciation u/s 32(1)(iia) in A.Y. 2011-12 which came into effect from 1st April, 2013, i.e. from the A.Y. 2013-14?”
We have heard Mr. Tilak Mitra, learned counsel for the appellant assisted by Mr. Soumen Bhattacharjee, learned advocate and Mr. Rahul Tangri, learned counsel for the respondent assisted by Mr. Deepro Sen, learned advocate.
The short question involved in this appeal is whether the respondent/assessee which generates electricity from thermal power is entitled for additional depreciation at the rate of 20% under Section 32(1)(iia) of the Act. The substantial question which needs to be considered is whether the initiation of proceedings
under Section 263 of the Act was justified? If we answer the first question of law in favour of the assessee, then the necessity to answer the second question may not arise as it would become academic. We need not answer the first question of law as there are various decisions of the Hon’ble Supreme Court as well as other High Courts including this Court. In the State of Andhra Pradesh vs. National Thermal Power Corporation (2002)5 SCC 203, the Hon’ble Supreme Court held that electric energy can be transmitted, transferred, delivered, stored, possessed etc. in the
same state as movable property. The Hon’ble Supreme Court followed its earlier decision in Commissioner of Sales Tax, Madhya Pradesh, Indore vs. Madhya Pradesh Electricity Board, Jabalpur 1969(1)SCC 200. Therefore, the revenue cannot dispute the fact that the electricity needs to be construed as a movable property as it being capable of being transmitted and transferred etc.
The next issue is whether the respondent/assessee would be entitled to additional depreciation under Section 32(1)(iia)? We are guided by the decision of this Court in the case of Commissioner of Income Tax, Kolkata-I vs. Ankit Metal and Power Limited reported in (2016)66 taxmann.com 367(Calcutta). In the said decision the Division Bench followed the decision of the High Court of Madras in CIT vs. Hi-tech Arai Limited reported (2010)321 ITR 477 (Madras) and CIT vs. VTM Ltd. reported in [2009] 319 ITR 336 (Mad) and held that the assessee therein which was also engaged in the activity of manufacturing of power is entitled for
additional depreciation under Section 32(1)(iia) of the Act. To the same effect, there are several other decisions of other High Courts and the latest being in the case of PCIT, New Delhi vs. NTPC SAIL Power Co.(P.) Ltd. reported in [2019]103 taxmann.com 398 (Delhi).
In the light of the above, we hold that the respondent/assessee is entitled for additional depreciation under Section 32(1)(iia) of the Act. For the reasons, the appeal filed by the revenue is dismissed and the substantial question of law is answered against the revenue.
As pointed out earlier, since the core issue has been decided in favour of the respondent/assessee, the question whether exercise of jurisdiction by the Commissioner under Section 263 of the Act is justified or not is not required to be considered.
Accordingly, the appeal stands dismissed. The stay application also stands closed.
