Asst. Commissioner of Income Tax, Circle-1(1), Tirupathi V. M/s. Sagar Sugars & Allied Products Pvt.Ltd, Chittoor

ITA 1087/HYD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7695 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D SUDHAKAR RAO
• Keywords: Depreciation
• Section: 143(3); 115JB; 32; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1087 & 1088/HYD/2012 ASSESSMENT YEARS : 2004-05 & 2009-10 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 1(1), TIRUPATHI M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD., CHITTOOR PAN AAECS1680D (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI D. SUDHAKAR RAO REVENUE BY SHRI VIKRAM VIJAYARAGHAVAN DATE OF HEARING 03-11-2014 DATE OF PRONOUNCEMENT 12-11-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINS T A COMMON ORDER DATED 09/05/11 PASSED BY THE COMMISSI ONER OF INCOME-TAX(A), GUNTUR, FOR THE ASSESSMENT YEARS 20 04-05 AND 2009- 10. 2. THE ONLY ISSUE WHICH IS COMMON IN BOTH THE APPEA LS IS IN RESPECT OF ALLOWANCE OF ASSESSEES CLAIM OF DEPRECI ATION BY LEARNED CIT(A). 3. AS FACTS ARE IDENTICAL IN BOTH THE APPEALS, FOR THE SAKE OF CONVENIENCE, WE WILL DEAL WITH THE FACTS AS INVOLVE D IN AY 2004-05 IN ITA NO. 1087/HYD/2011. 2 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. 4. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPAN Y IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF WHITE CRYSTAL SUGAR, ALCOHOL AND GENERATION OF POWER. FOR THE AY UNDER DISPUTE, ASSE SSEE FILED ITS RETURN OF INCOME ON 01/11/2004 DECLARING LOSS OF RS . 17,14,49,958 UNDER NORMAL PROVISIONS AND BOOK PROFIT OF RS. 4,21 ,47,467 U/S 115JB OF THE ACT. INITIALLY, THE RETURN FILED BY ASSESSE E WAS PROCESSED U/S 143(1) OF THE ACT, ACCEPTING THE BOOK PROFIT DISCLO SED. SUBSEQUENTLY ON THE BASIS OF INFORMATION AVAILABLE, AO HAD REASO N TO BELIEVE THAT ASSESSEE HAS CLAIMED EXCESS DEPRECIATION RESULTING IN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION1 47 OF THE ACT AND ACCORDINGLY HE ISSUED A NOTICE U/S 148 TO ASSESSEE CALLING FOR RETURN OF INCOME. IN RESPONSE TO THE SAID NOTICE, ASSESSEE FILED RETURN OF INCOME. DURING THE ASSESSMENT PROCEEDING, IN RESPONSE TO THE QUERY RAISED BY AO, ASSESSEE FURNISHED ALL THE INFORMATIONS CALLED FOR IN RESPECT OF CLAIM OF DEPRECIATION AND IT WAS SUBMITTED BY ASSESSEE TH AT IT HAS CLAIMED DEPRECIATION IN THE RETURN OF INCOME FILED AS PER T HE PROVISIONS OF RULE 5(1) OF INCOME-TAX RULES, BY ADOPTING WDV METHOD. A O, HOWEVER, REFERRING TO THE OBSERVATION MADE IN THE ASSESSMENT ORDER PASSED FOR THE AY 2003-04 CONCLUDED THAT ASSESSEE CANNOT CLAIM DEPRECIATION AS PER THE PROVISIONS OF RULE 5(1) OF THE RULES AS ASSESSEE HAS NOT EXERCISED OPTION UNDER SECOND PROVISO TO RULE 5(1A) . ACCORDINGLY, AO WORKED OUT THE DEPRECIATION IN TERMS OF RULE 5(1 A) @ 8.24%, WHICH AMOUNTED TO RS. 4,54,75,158. AS A RESULT OF R ESTRICTION OF DEPRECIATION TO THE AFORESAID AMOUNT, THE TOTAL INC OME WAS DETERMINED AT RS. 4,75,24,434. BEING AGGRIEVED OF T HE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE T HE LEARNED CIT(A). 5. IN COURSE OF HEARING BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED BY ASSESSEE THAT PLANT AND MACHINERY TO T HE TUNE OF RS. 53,54,49,544 WAS PURCHASED AFTER SEPTEMBER, 2002 AN D COMMERCIAL OPERATIONS STARTED DURING THE AY 2003-04. IT WAS SU BMITTED THAT AS THE PLANT AND MACHINERY ARE IN THE NATURE OF ENERGY SAVING DEVICES, 3 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. ASSESSEE CLAIMED DEPRECIATION @ 80% AS PER APPENDIX 1 OF RULE 5 OF IT RULES. IT WAS SUBMITTED THAT AO WHILE COMPLETING THE ASSESSMENT FOR AY 2003-04, GRANTED DEPRECIATION @ 8.25% ON PLA NT AND MACHINERY BY APPLYING RULE 5(1A) AND APPENDIX 1A. THE REASON FOR DOING SO, ACCORDING TO THE AO WAS ASSESSEE HAS NOT EXERCISED ITS OPTION UNDER SECOND PROVISO TO RULE 5(1A) FOR CLAIM ING DEPRECIATION UNDER RULE 5(1) AND APPENDIX 1 BEFORE FILING THE RETURN OF INCOME U/S 139(1). FURTHER, IT WAS SUBMITTED BY ASSESSEE T HAT CLAIMING DEPRECIATION UNDER RULE 5(1) AND APPENDIX 1 IN TH E RETURN OF INCOME FILED AS PER 139(1) WOULD ITSELF AMOUNT TO HAVING E XERCISED THE OPTION UNDER SECOND PROVISO TO RULE 5(1A), HENCE, DEPRECIA TION CLAIMED BY ASSESSEE CANNOT BE DISALLOWED. IN THIS CONTEXT, ASS ESSEE RELIED UPON A DECISION OF THE ITAT, CHENNAI BENCH IN CASE OF K KSK LEATHER PROCESSORS (P) LTD. VS. ITO 130 TTJ 184. ASSESSEE A LSO BROUGHT IT TO THE NOTICE OF LEARNED CIT(A) THAT APPEAL PREFERRED BY ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED BY AO DISALLOWI NG ASSESSEES CLAIM OF DEPRECIATION FOR AY 2003-04 IN THE MEANWHI LE HAS BEEN DISPOSED OF BY THE LEARNED CIT(A), GUNTUR BY ACCEPT ING ASSESSEES CLAIM OF DEPRECIATION. THE LEARNED CIT(A) AFTER CON SIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF DECISION OF THE TRIBUNAL IN KKSK LEATHER PROCESSORS (P) LTD. VS. ITO, ALLOWED T HE APPEAL BY ACCEPTING ASSESSEES CLAIM OF DEPRECIATION ON PLANT AND MACHINERY AT 80%. BEING AGGRIEVED OF THE AFORESAID ORDER, DEPART MENT IS IN APPEAL BEFORE US. 6. THE LEARNED DR SUBMITTED BEFORE US THAT AS PER T HE PROVISION CONTAINED IN SECOND PROVISO TO RULE 5(1A) FOR CLAIM ING DEPRECIATION UNDER RULE 5(1) AND APPENDIX 1, ASSESSEE HAS TO E XERCISE ITS OPTION BEFORE DUE DATE OF FILING OF RETURN OF INCOME PRESC RIBED U/S 139(1). THE LEARNED DR SUBMITTED THAT AS ASSESSEE HAS NOT E XERCISED ANY SUCH OPTION, AO WAS CORRECT IN COMPUTING THE DEPREC IATION AS PER RULE 5(1A) AND APPENDIX 1A. 4 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. 7. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T ASSESSEE HAS BEEN CLAIMING DEPRECIATION FROM INCEPTION BY A PPLYING WDV METHOD. LEARNED AR SUBMITTED THAT SECTION 32 READ W ITH RULE 5 WOULD MAKE IT CLEAR THAT ASSESSEE CAN CLAIM DEPRECIATION EITHER UNDER RULE 5(1) AND APPENDIX 1 OR 5(1A) AND APPENDIX 1A AS PER ITS OWN OPTION AND THE AO CANNOT DEBAR THE ASSESSEE FROM DO ING SO. LEARNED AR SUBMITTED THAT THOUGH SECOND PROVISO TO RULE 5(1 A) REQUIRES ASSESSEE TO EXERCISE SUCH OPTION, BUT, NO SPECIFIC MODE OR MANNER HAS BEEN PROVIDED FOR EXERCISING SUCH OPTION. THERE FORE, WHEN ASSESSEE IN ITS BOOKS OF ACCOUNT AS WELL AS IN THE RETURN OF INCOME HAS EXERCISED ITS OPTION BY CLAIMING DEPRECIATION U NDER RULE 5(1) AND APPENDIX -1, IT HAS TO BE TREATED AS IN COMPLIANCE WITH THE SECOND PROVISO TO RULE 5(1A). IN THIS CONTEXT, LEARNED AR RELIED UPON THE DECISION OF ITAT CHENNAI BENCH IN CASE OF KKSK LEAT HER PROCESSORS (P) LTD. (SUPRA), WHICH WAS CONFIRMED BY THE HONBL E MADRAS HIGH COURT IN THE JUDGMENT DATED 09/09/2014 IN TAX CASE NOS. 330 AND OTHERS OF 2013. FURTHER, LEARNED AR SUBMITTED ONCE ASSESSEE EXERCISES ITS OPTION IN TERMS WITH SECOND PROVISO T O RULE 5(1A), THE SAME WILL APPLY TO THE SUBSEQUENT ASSESSMENT YEARS ALSO. THUS, IT WAS SUBMITTED BY LEARNED AR, ASSESSEE HAVING EXERCI SED ITS OPTION IN AY 2003-04, THE SAME WILL ALSO APPLY TO THE IMPUGNE D ASSESSMENT YEARS ALSO. HE FURTHER SUBMITTED THAT ASSESSEES CL AIM FOR THE AY 2003-04 HAS ALSO BEEN ACCEPTED BY CIT(A) AND THE DE PARTMENTS APPEAL AGAINST THE SAID ORDER OF THE CIT(A) IS PEND ING BEFORE THE ITAT. LEARNED AR FURTHER SUBMITTED THAT EVEN IN THE SUBSEQUENT ASSESSMENT YEARS ALSO, DEPARTMENT HAS ACCEPTED ASSE SSEES CLAIM OF DEPRECIATION. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELI ED UPON BY THE PARTIES. SO FAR AS THE FACTUAL ASPECT IS CONCERNED , THERE IS NO DISPUTE THAT IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR, 5 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. ASSESSEE HAS CLAIMED DEPRECIATION AS PER RULE 5(1) AND APPENDIX 1, WHICH IS NOT ONLY REFLECTED IN THE ACCOUNTS BUT ALSO IN THE RETURN FILED BY ASSESSEE U/S 139(1) OF THE ACT. THEREFORE, THE ONLY ISSUE WHICH ARISES FOR CONSIDERATION IS WHETHER THE DEPRE CIATION CLAIMED UNDER RULE 5 AND APPENDIX 1 IN THE RETURN OF INCO ME FILED CAN BE SAID TO BE IN COMPLIANCE TO THE SECOND PROVISO TO R ULE 5(1A). WHILE, AO HAS DISALLOWED ASSESSEES CLAIM BY OBSERVING THA T ASSESSEE HAS NOT EXERCISED ANY OPTION, ASSESSEE ON THE OTHER HAN D HAS STRONGLY REFUTED SUCH ALLEGATION OF AO BY STATING THAT THE C LAIM MADE IN THE ACCOUNTS AS WELL AS IN THE RETURN OF INCOME FILED B Y ASSESSEE WILL ITSELF AMOUNT TO EXERCISING OPTION IN TERMS OF SEC OND PROVISO TO RULE 5(1A) AS THERE IS NO PRESCRIBED MODE OR METHOD AVAI LABLE UNDER THE STATUTE FOR EXERCISING SUCH OPTION. 9. BEFORE DECIDING THIS CORE ISSUE, IT IS NECESSARY TO LOOK INTO THE RELEVANT STATUTORY PROVISION. SECTION 32(1)(I) OF T HE ACT PROVIDES FOR ALLOWANCE OF DEPRECIATION ON ASSETS OF AN UNDERTAK ING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER. RULE 5(1A) PROVIDES FOR ALLOWANCE OF DEPRECIATION ON ASSETS AS SPECIFIED U/S 32(1)(I) AT THE PERCENTAGE SPECIFIED IN APPENDIX 1A. HOWEVER, SECOND PROVISO TO RULE 5(1A) CARVES OUT AN EXCEPTIO N BY ALLOWING THE ASSESSEE TO CLAIM DEPRECIATION AS PER APPENDIX 1 AT ITS OWN OPTION, PROVIDED SUCH OPTION IS EXERCISED BEFORE THE DUE DA TE OF FURNISHING THE RETURN OF INCOME U/S 139(1). FURTHER, IT IS PER TINENT TO NOTE, THOUGH THE SECOND PROVISO TO RULE 5(1A) SPEAKS OF EXERCISE OF OPTION BY THE ASSESSEE BUT IT DOES NOT PRESCRIBE ANY MODE AND MAN NER FOR EXERCISING SUCH OPTION. NEITHER LEARNED DR COULD P OINT OUT NOR WE ARE ABLE TO LOCATE ANY OTHER PROVISION EITHER IN TH E ACT OR IN RULES LAYING DOWN THE MODE AND MANNER OF EXERCISING OPTIO N IN TERMS OF SECOND PROVISO TO RULE 5(1A). THEREFORE, IN THE ABS ENCE OF ANY MODE OR MANNER FOR EXERCISING OPTION, THE ONLY WAY AVAIL ABLE TO ASSESSEE TO EXERCISE OPTION IS TO COMPUTE DEPRECIATION IN ACCOR DANCE WITH APPENDIX 1 IN THE ACCOUNTS AND CLAIM IT IN THE RE TURN OF INCOME FILED 6 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. U/S 139(1). . IT IS NOT IN DISPUTE THAT ASSESSEE, I N FACT, HAS EXERCISED OPTION IN CLAIMING DEPRECIATION AS PER APPENDIX 1 NOT ONLY IN AY 2003-04, BUT, ALSO IN SUBSEQUENT ASSESSMENT YEARS I NCLUDING THE IMPUGNED ASSESSMENT YEAR. THIRD PROVISO TO RULE 5(1 A) ALSO MAKES IT CLEAR THAT ONCE ASSESSEE EXERCISES ITS OPTION IN TE RMS OF SECOND PROVISO TO RULE 5(1A) THE SAME WILL APPLY EVEN TO T HE SUBSEQUENT AYS. THE ITAT, CHENNAI BENCH IN CASE OF KKSK LEATHE R PROCESSORS (P) LTD. VS. ITO (SUPRA), WHILE CONSIDERING IDENTIC AL NATURE OF DISPUTE RELATING TO EXERCISE OF OPTION UNDER SECOND PROVISO TO RULE 5(1A), HELD AS UNDER: FROM THE PROVISIONS OF SUB-S. (1) OF S. 32 ALONG WI TH THE EXPLN. 5, IT IS CLEAR THAT THE AO IS DUTY-BOUND AND UNDER OBLIGATIO N TO ALLOW THE DEDUCTION OF DEPRECIATION AS PER THE PROVISIONS OF SUB-S. (1) OF S. 32. SINCE TWO RATES OF DEPRECIATION ARE PRESCRIBED AS P ER APPENDIX 1 AS WELL AS APPENDIX 1A TO R. 5 OF IT RULES IN RESPECT OF AS SETS OF THE UNDERTAKING ENGAGED FOR GENERATION AND DISTRIBUTION OF POWER, T HUS TO MAKE IT CLEAR AND TO FACILITATE THE AO HAS TO SEE WHICH OF THE RA TES PROVIDED UNDER TWO DIFFERENT APPENDICES OF DEPRECIATION SHALL BE ALLOW ED, SECOND PROVISO TO R. 5(1A) REQUIRES THE ASSESSEE TO EXERCISE ITS OPTI ON THAT DEPRECIATION BE ALLOWED AS PER APPENDIX 1. THOUGH THE PROVISO STIPU LATES THAT IF SUCH OPTION IS EXERCISED BEFORE THE DUE DATE OF FURNISHI NG THE RETURN OF INCOME UNDER SUB-S. (1) OF S. 139 OF THE IT ACT, IN OUR VI EW THE SECOND PROVISO TO R. 5(1A) IS ONLY TO FACILITATE THE AO IN DISCHARGIN G OF ITS OBLIGATION AS PER EXPLN. 5 TO SUB-S. (1) OF S. 32 OF IT ACT SO THAT T HE DEPRECIATION SHALL BE ALLOWED AS PER THE OPTION OF THE ASSESSEE AND NOT O N THE DISCRETION OF THE AO. THE AO IS OTHERWISE UNDER OBLIGATION TO ALL OW THE DEPRECIATION BUT BECAUSE THE DEPRECIATION SPECIFIED UNDER TWO DI FFERENT APPENDICES 1 AND 1A AND THE CHOICE IS GIVEN TO THE ASSESSEE IN R ESPECT OF THE ASSETS SPECIFIED UNDER CL. (I) OF SUB-S. (1) OF S. 139 [SI C-S. 32] OF THE ACT, THEREFORE THE PROVISIONS CONTAINED IN THE RULES CAN NOT OVERRIDE THE PROVISIONS CONTAINED IN THE STATUTE AND THE REQUIRE MENT OF OPTION UNDER PROVISO TO R. 5(1A) CANNOT BE HELD IN THE NATURE TH AT ON FAILURE OF THE SAME WOULD BE SO FATAL THAT THE VERY OBJECT OF THE PROVISION FOR PROVIDING HIGHER RATE OF DEPRECIATION IS DEFEATED. WHEN THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISING THE SAID OPTION TH EN THE CLAIM MADE IN THE RETURN OF INCOME AS WELL AS REFLECTED FROM THE BOOKS OF ACCOUNT AND AUDIT REPORT FILED ALONG WITH RETURN OF INCOME IS M ORE THAN THE EXERCISE OF THE OPTION AS REQUIRED UNDER SECOND PROVISO TO R. 5 (1A). IN OUR VIEW, THE REQUIREMENT OF SECOND PROVISO TO R . 5(1A) IS SATISFIED IF THE OPTION IS EXERCISED BEFORE THE EXPIRY OF DUE DA TE OF FILING OF RETURN OF INCOME UNDER S. 139(1) OF THE IT ACT. THE MEANING O F THE TERM BEFORE DUE DATE SHALL BE UNDERSTOOD AS IT IS UNDERSTOOD B Y A MAN OF ORDINARY 7 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. PRUDENCE. BEFORE DUE DATE SIMPLY REFERS AND MEANS T HAT NOT AFTER THE EXPIRY OF DUE DATE. IF THE REQUISITE ACT IS DONE BE FORE THE LAST DAY EXPIRES THEN IT WILL SIMPLY BE SAID THAT BEFORE DUE DATE. W HEN THE TIME OF FILING THE RETURN IS AVAILABLE TO THE ASSESSEE TILL THE LA ST MOMENT OF THE DUE DATE THEN THE WHOLE OF THAT DAY IS AVAILABLE TO THE ASSESSEE AND DUE DATE EXPIRES ONLY WHEN THE LAST DAY IS EXPIRED. AS SUCH THE OPTION EXERCISED ON THE DUE DATE IS NOTHING BUT BEFORE THE DUE DATE AS THE SAME IS NOT AFTER THE DUE DATE. IN THE CASE OF CIT VS. VIJAYA H IRASA KALAMKAR (HUF) (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS HELD AT PP. 774 AND 775 AS UNDER : 'HAVING REGARD TO THE OBJECT OF THE ORDINANCE AND T HE WORDS USED IN S. 3(1), IT SEEMS TO US THAT THE DECLARATION RECEIVED ON 1ST JAN., 1976, WAS WELL WITHIN TIME. IN THE WHOLE CONTEXT, THE WORD 'B EFORE' WILL HAVE TO BE CONSTRUED AS 'UPTO' OR AS 'NOT AFTER'. THERE ARE VA RIOUS PROVISIONS IN THE IT ACT, WHEREIN THE EXPRESSION 'BEFORE' HAS BEEN USED [SS. 139(1)(A)(I), S. 139(1)(B); S. 184, S. 212]. THE EXPRESSION HAS ALWA YS BEEN TAKEN TO MEAN 'UPTO'. SEC. 3 SPECIFIED THE PERIOD BEFORE WHI CH A DECLARATION IN RESPECT OF INCOME HAS TO BE MADE FOR THE PURPOSES O F GETTING A BENEFIT UNDER THE ORDINANCE. IT PROVIDES A PERIOD OF LIMITA TION WITHIN WHICH CERTAIN BENEFITS ARE AVAILABLE. IN CASE OF AMBIGUIT Y THE CONSTRUCTION WHICH PRESERVES THE RIGHT TO THE ONE WHICH DEFEATS IT, HAS TO BE PREFERRED. AFTER ALL, THIS IS A TAXING STATUTE WHICH IN CASE O F DOUBT SHOULD BE INTERPRETED IN FAVOUR OF A TAXPAYER. HAD THE LEGISL ATIVE INTENTION BEEN TO MAKE 31ST DEC., 1975, THE LAST DAY FOR MAKING THE D ECLARATION, IT COULD HAVE CLEARLY SAID SO IN THE PROVISO. THE VERY FACT THAT THE DATE 1ST JAN., 1976, IS IN TERMS MENTIONED INDICATES THAT THE TIME -LIMIT WAS UP TO THAT DATE. THAT IN A GIVEN CASE THE WORD 'BEFORE' IN THE CONTEXT OF THE TIME CAN BE CONSTRUED AS 'NOT AFTER' IS WELL-SETTLED. [R VS. ARKWRIGHT, (1848) 12 QB 960]. THIS COURT IN THE CASE OF PREMCHAND NATHMAL K OTHARI VS. KISANLAL BACHHARAJ VYAS AIR 1976 BOM 82, HAD READ THE WORD ' BEFORE' IN S. 3 OF THE MAHARASHTRA (VIDARBHA REGION) AGRICULTURAL DEBT ORS' RELIEF ACT, 1969, AS 'UPTO'.' FROM THE ABOVE-MENTIONED DECISIONS, IT IS CLEAR THA T THE WORD 'BEFORE' WOULD HAVE TO BE CONSTRUED AS UPTO OR NOT AFTER. TH E HON'BLE BOMBAY HIGH COURT HAS SPECIFICALLY REFERRED TO PROVISIONS OF S. 139 OF THE ACT WHILE EXPLAINING THE EXPRESSION OF THE WORD 'BEFORE '. THEREFORE WE HOLD THAT THE OPTION EXERCISED BY THE ASSESSEES ON DUE D ATE BY WAY OF MAKING CLAIMS OF DEPRECIATION IN THE RETURN OF INCO ME ALONG WITH AUDIT REPORT AND BOOKS OF ACCOUNT WHEREIN THE ASSESSEES H AVE ADOPTED THE RATE AS CLAIMED IS WITHIN TIME-LIMIT PRESCRIBED UND ER SECOND PROVISO TO R. 5(1A) OF IT RULES. EVEN OTHERWISE AS HELD BY THE BO MBAY HIGH COURT IN THE CASE OF CIT VS. SHIVANAND ELECTRONICS (SUPRA) T HE PROVISION CAN BE UNDERSTOOD WITH REFERENCE TO THE INTENT OF LEGISLAT URE AND NOT UPON THE LANGUAGE IN WHICH THE INTENT IS CLOTHED. IF THE OBJ ECT OF ENACTMENT WILL BE DEFEATED BY HOLDING IT AS DIRECTORY IT SHOULD BE CO NSTRUED AS MANDATORY. WHEREAS IF BY HOLDING IT MANDATORY, SERIOUS GENERAL INCONVENIENCE WILL BE CREATED TO INNOCENT PERSONS WITHOUT VERY MUCH FU RTHERING THE OBJECT OF 8 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. THE ENACTMENT, IT SHOULD BE CONSTRUED AS DIRECTORY. THE LIMIT PROVIDED UNDER THE SECOND PROVISO TO R. 5(1A) IS ONLY TO FAC ILITATE THE AO IN DISCHARGING ITS OBLIGATIONS AND DUTIES AS PER THE P ROVISIONS OF SUB-S. (1) OF S. 32 OF THE IT ACT. THEREFORE THE SAID REQUIREM ENT CANNOT BE CONSIDERED AS MANDATORY. MOREOVER THE AO CANNOT ACT ON THE OPTION EXERCISED BEFORE THE RETURN IS FILED AND THEREFORE NO FRUITFUL PURPOSE OR OBJECT CAN BE ACHIEVED BY MANDATING EXERCISE OF OPT ION PRIOR TO FILING OF RETURN ON DUE DATE. 10. WHILE AFFIRMING THE AFORESAID VIEW EXPRESSED BY ITAT, THE HONBLE MADRAS HIGH COURT, IN JUDGMENT DATED 09/09/ 14 IN CASE OF CIT VS. M/S KIKANI EXPORTS PVT. LTD. AND OTHERS HE LD AS UNDER: 20. A READING OF THE ABOVE SAID DECISION OF THE BOM BAY HIGH COURT MAKES IT CLEAR THAT IF THE ASSESSEE EXERCISED THE OPTION IN TERMS OF SECOND PROVISO TO RULE 5(1A) OF THE INCOME TAX RULES AT THE TIME OF FURNISHING OF RETURN OF INCOME, IT W ILL SUFFICE AND NO SEPARATE LETTER OR REQUEST OR INTIMATION WITH RE GARD TO EXERCISE OF OPTION IS REQUIRED. SINCE THE RETURNS A RE FILED IN ACCORDANCE WITH SECTION 139(1) OF THE INCOME TAX AC T AND THE FORM PRESCRIBED THEREIN MAKE A PROVISION FOR EXERCI SING AN OPTION IN RESPECT OF THE CLAIM OF DEPRECIATION, NO SEPARATE PROCEDURE IS REQUIRED, AS CONTENDED BY THE DEPARTME NT. WE ARE IN AGREEMENT WITH THE REASONING OF THE TRIBUNAL . 11. THE RATIO LAID DOWN BY THE ITAT CHENNAI BENCH, WHICH WAS CONFIRMED BY THE HONBLE MADRAS HIGH COURT SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. AS CAN BE SEEN, THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE IN THE RETURN OF INCOME FILED FO R AY 2003-04 HAS ALREADY EXERCISED ITS OPTION OF AVAILING DEPRECIATI ON AS PER APPENDIX 1. ASSESSEE HAS ADOPTED THE SAME METHOD IN THE RE TURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR AS WELL AS I N THE RETURNS FOR THE SUBSEQUENT ASSESSMENT YEARS ALSO. THEREFORE, AS SESSEE HAVING EXERCISED ITS OPTION IN TERMS OF SECOND PROVISO TO RULE 5(1A), AO IS DUTY BOUND TO ALLOW ASSESSEES CLAIM OF DEPRECIATIO N. ONE MORE ASPECT WHICH NEEDS TO BE MENTIONED IS AS PER THE FA CTS BROUGHT TO OUR NOTICE, WE FIND THAT ASSESSEES CLAIM OF DEPRECIATI ON BY ADOPTING WDV METHOD AND RATE PRESCRIBED UNDER APPENDIX 1 H AS BEEN ACCEPTED BY THE DEPARTMENT IN SOME OF THE SUBSEQUEN T ASSESSMENT 9 ITA NOS. 1087 & 1088/HYD/2012 M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. YEARS ALSO. FOR EXAMPLE, SUCH CLAIM WAS ACCEPTED I N THE ASSESSMENTS COMPLETED U/S 143(3) FOR AYS 2006-07 AN D 2008-09. FROM THIS IT IS QUITE EVIDENT THAT DEPARTMENT IS NO T CONSISTENT WITH REGARD TO ASSESSEES CLAIM OF DEPRECIATION. BE THAT AS IT MAY, AS DEPRECIATION CLAIMED BY ASSESSEE IS IN TERMS WITH T HE STATUTORY PROVISIONS, AO WAS NOT JUSTIFIED IN INTERFERING WIT H THE SAME. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF LEARNED CIT(A), WHICH IS ACCORDINGLY UPHELD. GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 12. AS FACTS IN ITA NO. 1088/HYD/12 ARE MATERIALLY IDENTICAL AND ISSUE IS COMMON TO THAT OF ITA NO. 1087/HYD/12, FOL LOWING OUR DECISION IN THE SAID APPEAL, WE UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS THE GROUNDS RAISED BY DEPARTMENT. 13. IN THE RESULT, BOTH THE APPEALS OF THE DEPARTME NT ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12/11/2014. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 12 TH NOVEMBER, 2014 KV COPY TO:- 1) ACIT, CIRCLE 1(1), TIRUPATHI 2) M/S SAGAR SUGARS & ALLIED PRODUCTS P. LTD. NEL AVOY VILLAGE, SRI RANGARAJAPURAM MANDAL, CHITTOR DISTRICT. 3) CIT(A), GUNTUR 4) CIT, TIRUPATHI 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.