A two-judge bench of the Delhi High Court has held that additional depreciation under section 32(1)(iia) of the Income Tax Act, 1961 is allowable to Company engaged in generation of electricity.
The assessee, a joint venture company of two public sector undertakings and is engaged in the production of thermal power claimed additional depreciation under Section 32(1)(iia) of the Income Tax Act. The Assessing Officer rejected the claim holding 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. The assessee claimed to have been granted such deduction from A.Y. 2006-07 onwards.
Section 32(1)(iia) of the Act was amended in 2013 wherein additional depreciation was specifically granted to an entity engaged in the business of generation and distribution of power w.e.f. 01.04.2013.
The bench comprising Justice Prateek Jalan and Justice S Ravindra Bhatt noted that the electricity has been held to be “goods” for the purposes of sales tax in the Constitution Bench judgment of the Supreme Court in State of Andhra Pradesh vs. NTPC Ltd.
“As held by the Constitution Bench, electricity is capable of abstraction, transmission, transfer, delivery, possession, consumption and use like any other movable property. Following the same logic, to deny the benefit of additional depreciation to a generating entity on the basis that electricity is not an “article” or “thing” is in our view an artificially restrictive meaning of the provision. The benefit of additional depreciation under Section 32(1)(iia) has, therefore, been rightly granted to the assessee by the concurrent judgments of the CIT(A) and the Tribunal,” the bench said.
The bench also noted that w.e.f. from 01.04.2013, the provision has been amended by the Finance Act, 2012 and assessees engaged in the generation of power have expressly been included in the ambit thereof.
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