Generation of Electricity is Manufacture, eligible for Income Tax Deduction u/s 32AC: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench held that generation of electricity is manufacture, eligible for deduction under Section 32AC of the Income Tax Act, 1961.

The assessee company, M/s Interocean Shipping (India) Pvt. Ltd had filed its return of income for A.Y. 2016-17, declaring total income of Rs.4,80,12,060/-. During the previous year, the assessee had acquired and installed new plant and equipment costing Rs.39,01,40,286/- to produce electricity and, on such investment, it had claimed deduction under section 32AC(1A) of the Income Tax Act, 1961.

The Assessing Officer was of the view that the assessee was not in the business of manufacture or production of any article or thing and was of the view that the electricity is neither an article nor a thing. The AO relied on the definition of “manufacture” given in section 2(29BA) to argue that in the process of manufacture, inputs are physical objects which undergo change in the manufacturing process, resulting in a new physical object. But in the process of generation of electricity, what is produced is non-physical.

Accordingly, the AO held that deduction under section 32AC(1A) is not available for installation of new assets for generation of power. Hence, disallowed the deduction of Rs.3,85,21,043 and assessed total income at Rs. 10,65,33,103. The CIT(A), allowed the appeal of the assessee and held that the AO has not properly appreciated the facts. Aggrieved, the Revenue is in appeal before the Tribunal.

A Division Bench consisting of Anubhav Sharma, Judicial Member and Shamim Yahya, Accountant Member held that “We note that it is now well settled proposition that generation of electricity amounts to manufacture or production of any article or they qualifying for deduction u/s 32AC.”

Anuj Garg, appeared for the Revenue and Sanjiv Rai Mehra, appeared for the Assessee.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates