DCIT, Coimbatore V. M/s. Coimbatore Anamallais Agencies Private Limited, Coimbatore

ITA 2162/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0859 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A ARJUNARAJ
• Keywords: Depreciation; Additional depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 32; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE , ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.2162/MDS/2012 (ASSESSMENT YEAR : 2004-05) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), 63A, RACE COURSE ROAD, COIMBATORE-641 018. VS. M/S. COIMBATORE ANAMALLAIS AGENCIES PVT. LTD., 172, DR. RAJENDRA PRASAD ROAD, COIMBATORE-641 012. PAN:AABCC2462L (APPELLANT) (RESPONDENT) APPELLANT BY : MR.SHAJI P.JACOB, ADDL. CIT RESPONDENT BY : MR. A.A RJUNARAJ, C.A., DATE OF HEARING : 19 TH FEBRUARY, 2013 DATE OF PRONOUNCEMENT : 19 TH FEBRUARY, 2013 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-I, COIMBATORE DATED 10.09. 201 2. 2. THE ASSESSEE IS A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 ON 28.10.2004 DECLARING ITS NEGATIVE INCOME OF ` 40,75,900/-. THE INCOME OF THE ASSESSEE WAS COMPUTED UNDER THE PROVISIONS OF SECTION 115JB. DURING THE ASSESSMENT YEAR ITA NO.2162/MDS/2012 2 2004-05, THE ASSESSEE HAD INSTALLED ONE ADDITIONAL WINDMILL AT THE COST OF ` 1,24,30,168/- AND HAD CLAIMED DEPRECIATION @ 40% AND ALSO ADDITIONAL DEPRECIATION @ 7.5%. THE CA SE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSI NG OFFICER VIDE ASSESSMENT ORDER DATED 31.7.2006 HAD DISALLOWED ADDITIONAL DEPRECIATION OF 7.5%. THE CAS E OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 BY ISSUING NOTICE UNDER SECTION 148 ON 28.3.2011. THE REASON FOR REO PENING GIVEN BY THE ASSESSING OFFICER WAS THAT THE ASSESSE E COMPANY HAD INSTALLED WIND ELECTRIC GENERATOR AT ` 1,24,30,168/- AND CLAIMED HIGHER DEPRECIATION @ 40 % AS PER APPENDIX-I, WHEREAS THE ASSESSEE HAD NOT EXERCI SED THE OPTION TO CLAIM HIGHER DEPRECIATION IN ACCORDANCE W ITH THE PROVISIONS OF SECTION 32 READ WITH RULE 5(1A). THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 22.12.2011 PASS ED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE A CT, HELD THAT SINCE THE ASSESSEE COMPANY HAD NOT EXERCISED T HE OPTION ON OR BEFORE THE DUE DATE OF FILING OF THE R ETURN OF INCOME TO CLAIM HIGHER DEPRECIATION, THE ASSESSEE I S NOT ELIGIBLE TO CLAIM HIGHER DEPRECIATION. THE ASSESSI NG OFFICER ITA NO.2162/MDS/2012 3 ALLOWED DEPRECIATION @ 7.69% ONLY AND RESTRICTED TH E CLAIM OF DEPRECIATION ON WINDMILL TO ` 4,77,940/- INSTEAD OF ` 49,72,067/- CLAIMED BY THE ASSESSEE. 3. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ASSAILING REO PENING OF THE ASSESSMENT UNDER SECTION 147 AS WELL AS RESTRIC TING THE RATE OF DEPRECIATION TO 7.69% . THE CIT(A) WHILE AL LOWING THE APPEAL OF THE ASSESSEE HELD THAT THE REOPENING PROC EEDINGS ARE NOTHING BUT MERELY CHANGE OF OPINION, THEREFORE , IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT OF I NDIA IN THE CASE OF KELVINATOR OF INDIA LTD. REPORTED AS 32 0 ITR 561(SC), THE CIT(A) HELD THAT REOPENING OF ASSESSME NT WAS BAD IN LAW. WITH REGARD TO THE CLAIM OF HIGHER RAT E OF DEPRECIATION ON WINDMILL, THE CIT(A) HAS FOLLOWED T HE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F KKSK LEATHER PROCESSORS PVT. LTD., VS. ITO REPORTED AS 126 ITD 215. 4. SHRI SHAJI P.JACOB APPEARING ON BEHALF OF THE RE VENUE SUBMITTED THAT IT IS MANDATORY FOR THE ASSESSEE TO EXERCISE OPTION BEFORE FILING RETURN OF INCOME TO CLAIM HIGH ER RATE OF ITA NO.2162/MDS/2012 4 DEPRECIATION. MERE FILING OF RETURN WITHIN THE DUE DATE WOULD NOT AMOUNT TO EXERCISING OPTION FOR CLAIMING DEPREC IATION AT A HIGHER RATE. 5. ON THE OTHER HAND, SHRI A.ARJUNARAJ REPRESENTING THE ASSESSEE SUBMITTED THAT THE ORDER OF THE CIT(A) IS A WELL REASONED AND SPEAKING ORDER. THE LEARNED AR STRONGL Y SUPPORTED THE ORDER OF THE CIT(A) AND THE REASONS G IVEN THEREIN TO ALLOW DEPRECIATION AT HIGHER RATE. 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BE LOW. THE CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN TH E CASE OF KKSK LEATHER PROCESSORS PVT. LTD. (SUPRA) TO ALLOW THE CLAIM OF ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF T HE TRIBUNAL IS REPRODUCED HEREIN BELOW:- THE TWO QUESTIONS ARISING FOR CONSIDERATION AND DETERMINATION IN THE FACTS OF THESE CASES ARE : '(I) WHETHER THE CLAIM MADE IN THE RETURN OF INCOME ALONG WITH AUDIT REPORT SHOWING THE CLAIM OF THE ASSESSEE REGARDING DEPRECIATION OF WINDMILL WOULD AMOUNT TO EXERCISING OPTION AS REQUIRED UNDER SECOND PROVISO TO R. 5(1A) OF IT RULES ? (II) WHETHER THE RETURN FILED ON THE DUE DATE OF FILING THE RETURN OF INCOME UNDER S. 139(1) WOULD BE CONSIDERED AS EXERCISING OF OPTION BEFORE DUE ITA NO.2162/MDS/2012 5 DATE AS PRESCRIBED IN THE SECOND PROVISO OF R. 5 (1A) ?' BEFORE DISCUSSING THESE TWO QUESTIONS, IT IS APPROPRIATE TO DISCUSS THE RELEVANT PROVISIONS FOR DEPRECIATION PROVIDED UNDER S. 32 OF IT ACT AS WELL AS APPENDIX 1 AND APPENDIX 1A TO R. 5(1A) OF IT RULES. FOR BETTER UNDERSTANDING WE QUOTE SUB-CLS. (I) AND (II) OF S. 32(1) WHICH ARE AS UNDER : 32(1) . IN RESPECT OF DEPRECIATION OF (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED; (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WDV THEREOF AS MAY BE PRESCRIBED.' AS PER CL. (I) OF SUB-S. (1) OF S. 32 THE DEPRECIATION ON THE ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS AT A PERCENTAGE AS PRESCRIBED AS PER RATES ON THE ACTUAL COST THEREOF. THUS SUB-CL. (I) OF SUB-S. (1) OF S. 32 PROVIDES TH E DEPRECIATION AT A PRESCRIBED RATE ON THE ASSETS OF SPECIFIED UNDERTAKING ON THE ACTUAL COST INSTEAD OF WDV. EXPLANATION 5 TO SUB-S. (1) OF S. 32 MAKES IT CLEAR THAT THE PROVISIONS OF SUB-S. (1) TO S. 32 OF IT ACT SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. WE QUOTE EXPLN. 5 WHICH IS AS UNDER : 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME;' ITA NO.2162/MDS/2012 6 FROM THE PROVISIONS OF SUB-S. (1) OF S. 32 ALONG WITH THE EXPLN. 5, IT IS CLEAR THAT THE AO IS DUTY- BOUND AND UNDER OBLIGATION 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 PER APPENDIX 1 AS WELL AS APPENDIX 1A TO R. 5 OF IT RULES IN RESPECT OF ASSETS OF THE UNDERTAKING ENGAGED FOR GENERATION AND DISTRIBUTION OF POWER, THUS TO MAKE IT CLEAR AND TO FACILITATE THE AO HAS TO SEE WHICH OF THE RATES PROVIDED UNDER TWO DIFFERENT APPENDICES OF DEPRECIATION SHALL BE ALLOWED, SECOND PROVISO TO R. 5 (1A) REQUIRES THE ASSESSEE TO EXERCISE ITS OPTION THAT DEPRECIATION BE ALLOWED AS PER APPENDIX 1. THOUGH THE PROVISO STIPULATES THAT IF SUCH OPTION I S EXERCISED BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-S. (1) OF S. 139 OF THE IT ACT, IN OUR VIEW THE SECOND PROVISO TO R. 5(1A) IS ONLY TO FACILITATE THE AO IN DISCHARGING OF ITS OBLIGATION AS PER EXPLN. 5 TO SUB-S. (1) OF S. 32 O F IT ACT SO THAT THE DEPRECIATION SHALL BE ALLOWED AS PER THE OPTION OF THE ASSESSEE AND NOT ON THE DISCRETION OF THE AO. THE AO IS OTHERWISE UNDER OBLIGATION TO ALLOW THE DEPRECIATION BUT BECAUSE THE DEPRECIATION SPECIFIED UNDER TWO DIFFERENT APPENDICES 1 AND 1A AND THE CHOICE IS GIVEN TO THE ASSESSEE IN RESPECT OF THE ASSETS SPECIFIED UNDER CL. (I) OF SUB-S. (1) OF S. 139 [SIC-S. 32] O F THE ACT, THEREFORE THE PROVISIONS CONTAINED IN THE RULES CANNOT OVERRIDE THE PROVISIONS CONTAINED IN THE STATUTE AND THE REQUIREMENT OF OPTION UNDER PROVISO TO R. 5(1A) CANNOT BE HELD IN THE NATURE THAT ON FAILURE OF THE SAME WOULD BE SO FATAL THAT THE VERY OBJECT OF THE PROVISION FOR PROVIDING ITA NO.2162/MDS/2012 7 HIGHER RATE OF DEPRECIATION IS DEFEATED. WHEN THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISING THE SAID OPTION THEN 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 MORE THAN THE EXERCISE OF THE OPTION AS REQUIRED UNDER SECOND PROVISO TO R. 5(1A). 8. IN THE CASE OF CIT VS. SHIVANAND ELECTRONICS (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS HELD AT P. 71 AS UNDER : 'THE REQUIREMENT OF FILING THE AUDIT REPORT 'ALONG WITH THE RETURN OF INCOME' IS DIRECTORY AND IF THE ASSESSEE COMPLIES WITH THE SAME BEFORE COMPLETION OF THE ASSESSMENT AND OFFERS A SATISFACTORY EXPLANATION FOR HIS FAILURE T O SUBMIT THE SAME IN TIME, THE ITO MAY CONSIDER THE SAME AND EXAMINE THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S. 80J ON THE BASIS OF SUCH REPORT, WE, HOWEVER, DO NOT SUBSCRIBE TO THE VIEW TAKEN BY THE TRIBUNAL THAT IT IS THE DUTY OF THE IT O TO TELL THE ASSESSEE THAT AS HE HAD NOT SUBMITTED THE REPORT OF AUDIT REQUIRED BY SUB-S. (6A), HIS CLAIM WOULD NOT BE ALLOWED AND TO GIVE HIM AN OPPORTUNITY TO FILE THE SAME.' THEREFORE EVEN IF OPTION IS NOT EXERCISED WITHIN THE STIPULATED TIME AS PER SECOND PROVISO TO R. 5 (1A), THE SAME CANNOT HAVE A SERIOUS CONSEQUENCE OF TOTAL DENIAL OF THE CLAIM OF THE ASSESSEE. THERE IS NO DOUBT IN OUR MIND THAT WHEN THERE IS NO PRESCRIBED PROCEDURE OR MODE OF EXERCISING OPTION PRESCRIBED IN THE RULES THEN THE OPTION EXERCISED BY THE ASSESSEE BY WAY OF MAKING A CLAIM IN THE RETURN OF INCOME ALONG WITH THE AUDIT REPORT IS ITA NO.2162/MDS/2012 8 DEFINITELY MORE THAN THE REQUIREMENT OF THE SECOND PROVISO. 7. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE ORDER OF THE TRIBUNAL. THE D.R. HA S FAILED TO SHOW ANY JUDGEMENT/ORDER CONTRARY TO THE ONE FOLLOW ED BY THE CIT(A). THE D.R. HAS ALSO FAILED TO CONTROVERT THE REASONINGS GIVEN BY THE CIT(A). WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CIT(A). THEREFORE, WE UPHOLD THE ORDER OF TH E CIT(A) AND DISMISS THE APPEAL OF THE REVENUE BEING DEVOID OF MERIT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 19 TH DAY OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 19 TH FEBRUARY, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.