ACIT, CHENNAI V. M/s. P.ORR & SONS P. Ltd., CHENNAI

ITA 1597/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58064 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 21-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 29-09-2011
• Court: TRIBUNAL
• Department Lawyers: NAGENDRAPRASADC I T
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENN AI BEFORE SHRI ABARAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER .. ITA NO.1597/MDS./2011 ASSESSMENT YEAR:2005-06 ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE V(2), CHENNAI -34. VS. M/S.P.ORR & SONS PVT LTD., NO.22,ANNA SALAI, CHENNAI 600 002. PAN AAACP 3504 B (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI NAGENDRAPRASAD,C.I.T. DR ASSESSEE BY : NONE DATE OF HEARING : 21.03.12 DATE OF PRONOUNCEMENT : 21. 03.12 O R D E R PER ABARAHAM P GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE AGAINST AN ORDER DATED 29.07.2011 OF COMMISSIONER OF INCOME TAX (A) -V, CH ENNAI, ITS GRIEVANCE IS THAT THE CIT(A) UPHELD THE CLAIM O F THE ASSESSEE FOR APPLYING THE RATE OF DEPRECIATION ON W IND MILL AS PER APPENDIX 1 PRESCRIBED IN RULE-5 OF INCOME TAX R ULES, 1962 (IN SHORT THE RULE). AS PER THE REVENUE, AS SESSEE HAD ITA. 1597/MDS/11 2 NOT FILED AN OPTION TO CLAIM DEPRECIATION IN ACCORD ANCE WITH THE SECOND PROVISO TO RULE 5(1A) BEFORE THE DUE DATE O F FILING THE RETURN OF INCOME AND THEREFORE, IT WAS ELIGIBLE FOR SUCH CLAIM AS PER APPENDIX 1A PRESCRIBED IN UNDER RULE 5(1A), ONL Y. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD CLAIM ED DEPRECIATION ON THE WIND MILL MACHINERY INSTALLED B Y IT AFTER 30.09.04 AT 50% OF THE RATE OF 80% MENTIONED IN APP ENDIX 1 OF THE RULES. THE CLAIM WAS RESTRICTED BY THE ASSESSE E WAS 60% SINCE THE MACHINERY WAS PUT TO USE FOR LESS THAN 18 2 DAYS. ASSESSEE WAS REQUIRED TO EXPLAIN HOW THIS CLAIM WAS ADMISSIBLE. REPLY OF THE ASSESSEE WAS THAT IT HAD AN OPTION TO CLAIM HIGHER RATE OF DEPRECIATION PRESCRIBED IN APP ENDIX-I. THERE BEING NO SPECIFIC FORM FOR SELECTING SUCH OPT ION, DEPRECIATION STATEMENT FILED ALONG WITH THE RETURN WAS SUFFICIENT, RETURN HAVING BEEN FILED WITHIN THE TI ME ALLOWED U/S.139(1) OF THE ACT. THE ASSESSING OFFICER WAS O F THE OPINION THAT RULE-5(1A) OF THE RULES CLEARLY STIPUL ATED THAT THE DEPRECIATION OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER WAS TO BE COMPUTED AT THE PERCENTAGE SPECIFIED IN SECOND COLU MN OF THE TABLE IN APPENDIX 1A. AS PER THE ASSESSING OFFICER , THIS WAS ITA. 1597/MDS/11 3 7.69% ON THE COST OF THE ASSET. ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD AN OPTION OF CLAIMING HIGHER RATE OF DEPRECIATION IN ACCORDANCE WITH THE RULE 5(1) PROVI DED, IT HAD EXERCISED AN OPTION FOR SUCH HIGHER RATE OF DEPRECI ATION, BEFORE THE DUE DATE OF FILING THE RETURN. SINCE NO OPTION WAS AVAILED BY THE ASSESSEE, ASSESSING OFFICER RESTRICTED THE CLAIM TO THE RATE OF 7.69% MENTIONED IN APPENDIX 1A PRESCRIBED UNDER RULE 5(1A), WHICH ADOPTED UNDER THE STRAIGHT LINE METHOD. 3. IN ITS APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A), ARGUMENT OF THE ASSESSEE WAS THAT THERE WAS NO SPEC IFIC FORM PRESCRIBED IN THE ACT OR THE RULES FOR EXERCISING T HE OPTION AND THE ASSESSEE HAVING MADE A CLAIM FOR HIGHER DEPREC IATION IN THE COMPUTATION OF INCOME AND THE DEPRECIATION STAT EMENT HAVING BEEN FILED ALONG WITH THE RETURN OF INCOME, THIS OUGHT HAVE BEEN CONSIDERED SUFFICIENT FOR THE PURPOSE. RELIANCE WAS PLACED ON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF K.S.K.LEATHER PROCESSORS P . LTD. VS. ITO [2011] 9 ITR (TRIB) 758. COMMISSIONER OF INCO ME TAX(A) WAS APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, THE DECISION IN THE CASE OF K.S.K.LEATHER PROCESSORS P . LTD. (SUPRA), SQUARELY SUPPORTED THE CASE OF THE ASSESSE E. ITA. 1597/MDS/11 4 4. NOW BEFORE US, LD. DR ASSAILING THE ORDER OF TH E COMMISSIONER OF INCOME TAX(A) SUBMITTED THAT WITHO UT THE OPTION BEING EXERCISED, ASSESSEE COULD NOT HAVE CLA IMED HIGHER DEPRECIATION. HENCE, DEPRECIATION WAS ALLOWA BLE UNDER THE STRAIGHT LINE METHOD ONLY. 5. WE HAVE HEARD THE CONTENTIONS OF THE LD. DR AND HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES BELOW. COMMISSIONER OF INCOME TAX(A) HAD RELIED ON THE DEC ISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF K.S.K.LEATHER PROCESSORS P. LTD. FOR RULING IN FAVO UR OF THE ASSESSEE. RELEVANT PART OF SAID DECISION HAS BEEN R EPRODUCED BY THE C.I.T.(A) AT PARA-12 OF ITS ORDER AND IS ON CE AGAIN REPRODUCED BY US HERE FOR BREVITY:- UNDER EXPLANATION 5 TO SECTION 32 OF THE INCOME TA X ACT, 1961, THE ASSESSING OFFICER IS DUTY BOUND AND UNDER AN OBLIGATION TO ALLOW DEDUCTION OF DEPRECIAT ION. TWO RATES OF DEPRECIATION ARE PRESCRIBED UNDER APPENDIX 1 AS WELL AS APPENDIX 1A TO RULE 5 OF THE INCOME-TAX RULES, 1962. THE ASSESSING OFFICER HAS T O EXAMINE WHICH OF THE RATES OF DEPRECIATION PROVIDED UNDER TWO APPENDIXES SHALL BE ALLOWED. THE SECOND PROVISO TO RULE 5(1A) OF THE RULES REQUIRES THE ASS ESSEE ITA. 1597/MDS/11 5 TO EXERCISE ITS OPTION THAT DEPRECIATION BE ALLOWED IN ACCORDANCE WITH APPENDIX1. THE PROVISO STIPULATES THAT SUCH OPTION IS TO BE BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME U/S.139(1) OF THE A CT AND IS INTENDED TO FACILITATE THE ASSESSING OFFICER IN DISCHARGING HIS OBLIGATION IN ACCORDANCE WITH EXPLANATION 5 TO SECTION 32(1) OF THE ACT SO THAT T HE DEPRECIATION SHALL BE ALLOWED ACCORDING TO THE OPT ION OF THE ASSESSEE AND NOT AT THE DISCRETION OF THE ASSESSING OFFICER. SINCE THE DEPRECIATION IS SPECI FIED UNDER TWO DIFFERENT APPENDICES 1 AND 1A TO RULE 5 O F THE RULES AND THE CHOICE IS PROVIDED TO THE ASSESSE E IN RESPECT OF THE ASSETS U/S.139(1) OF THE ACT, THE ASSESSING OFFICER IS NOT UNDER AN OBLIGATION TO AL LOW DEPRECIATION. THEREFORE, THE PROVISION UNDER THE R ULES CANNOT OVERRIDE THE PROVISIONS IN THE STATUTE AND T HE REQUIREMENT OF OPTION UNDER PROVISO TO RULE 5(1A) CANNOT BE HELD TO BE SUCH THAT FAILURE TO EXERCISE THE OPTION WOULD DEFEAT THE VERY OBJECT OF THE PROVISIO N FOR PROVIDING HIGHER RATE OF DEPRECIATION. WHEN THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISIN G THE OPTION THE CLAIM MADE IN THE RETURN OF INCOME A S WELL AS REFLECTED FROM THE BOOKS OF ACCOUNT AND AUD IT REPORT FILED WITH THE RETURN OF INCOME IS MORE THAN THE EXERCISE OF THE OPTION UNDER THE SECOND PROVISO TO RULE 5(1A) OF THE RULES. IT HAS THUS, BEEN CLEARLY HELD BY THE CO-ORDINATE B ENCH OF THIS TRIBUNAL THAT THERE IS NO SPECIFIC FORM OR METHOD P RESCRIBED FOR ITA. 1597/MDS/11 6 EXERCISING THE OPTION AND THE CLAIM MADE IN THE RET URN OF INCOME BASED ON BOOKS OF ACCOUNTS WAS SUFFICIENT. THERE IS NO CASE FOR THE REVENUE THAT THE CLAIM OF DEPRECIAT ION OF THE ASSESSEE WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT OR THAT NO AUDIT REPORT PRESCRIBED UNDER THE ACT WAS FILED BY IT ALONG WITH THE RETURN OF INCOME. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR BEFORE THE LAST DATE PRESCRIBED U/S.139(1) OF THE ACT. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE COMMISSIONER OF INCOME TAX(A) WAS JUSTIFIED IN DIRE CTING THE ASSESSING OFFICER TO ALLOW THE HIGHER CLAIM OF DEPR ECIATION TO THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTERFE RE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 21 ST MARCH, 2012. SD/- SD/- ( VIKAS AWASTHY ) (ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST MARCH, 2012. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 1597/MDS/11 7