Additional depreciation allowable to Company in Generation and distribution of electricity even prior to 1-4-2013

Damodar Valley Corporation Vs. Dy. CIT (ITAT Kolkata)

We find that on perusal of section 32(1)(iia) of the Act as it stood upto assessment year 2012-13, it is evident that the additional depreciation is permissible to all assessees who are engaged in the business of manufacture or production of any article or thing. In the circumstances, the assessee who is desirous of claiming the additional depreciation need only to prove that during the relevant year he was engaged in the business of manufacture or production of any article or thing. Now the question to be decided is as to whether the assessee engaged in generation and distribution of electricity could be said to be engaged in the business of manufacture or production of any article or thing so as to be eligible for claiming additional depreciation under section 32(1)(iia) of the Act. It is well settled that for the purpose of manufacture, an element of transformation is a pre- requisite. A particular item should undergo changes in its colour and character and become a separate and new marketable commodity after the manufacturing process. In the instant case, the assessee had set up hydel power and thermal power plant, wherein the water and coal gets converted into electricity through the manufacturing process. Hence it is undisputed that transformation from mere coal to electricity and from mere water to electricity happens pursuant to the manufacturing process and the electricity so produced or generated becomes a separate marketable commodity. The various apex court decisions relied upon by the assessee before the learned CIT as mentioned supra in the context of levy of sales tax on the sale of electricity had also decided that the generation of electricity amounts to production of article or thing. We also find that the co-ordinate bench decision of this tribunal in the case of ACIT v. Ankit Metal & Power Ltd. [IT Appeal No. 517 (Kol.) of 2012, date 8-1-2014] had also held that assessee is entitled for additional depreciation under section 32(1)(iia) of the Act for its power plant. This matter was further carried by the revenue to the Hon’ble Calcutta High Court which was dismissed by the Hon’ble Calcutta High Court in the case of CIT v. Ankit Metal & Power Ltd. (2015) 972 ITR 660 (Cal.).

Hence, it could be safely concluded that the assessee is entitled for claiming additional depreciation under section 32(1)(iia) of the Act even prior to the amendment brought in by Finance Act, 2012.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal by assessee is arising out of revision order of CIT, Kolkata-3, Kolkata vide No. Pr.CIT-3/under section 263/2015-16/8515-17, date 29-10-2015/30-10-2015. Assessment was framed by JCIT, Range-9, Kolkata under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for assessment year 2011-12 vide his order dated 28-3-2014.

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