ACIT, CHENNAI V. Ransar Industries Ltd., Coimbatore

ITA 2675/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86297 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 24-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Depreciation; Period of limitation
• Section: 32; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2675/MDS/2014 ( / ASSESSMENT YEAR: 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(2) 63, RACE COURSE ROAD, COIMBATORE-641 018 . VS M/S. RANSAR INDUSTRIES LTD. 17, AVARAMPALAYAM ROAD, GANAPATHY, COIMBATORE-641 006. PAN:AABCR2862H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.MADHAVAN, JCIT /RESPONDENT BY : DR. ANITA SUMANTH, ADVOCATE /DATE OF HEARING : 11 TH FEBRUARY, 2015 /DATE OF PRONOUNCEMENT : 20 TH FEBRUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIMBA TORE DATED 06.08.2014 FOR THE ASSESSMENT YEAR 2005-06. T HE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING HIGHER R ATE OF DEPRECIATION FOR THE WINDMILL AT 80% OF WRITTEN DOW N VALUE AS AGAINST DEPRECIATION ON STRAIGHT LINE METHOD ALLOWE D BY THE ASSESSING OFFICER AT 7.69%. 2 ITA NO.2675 /MDS/2014 2. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE IDENTICAL ISSUE IN APPEAL HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KIKANI EXPORTS P.LTD. (369 ITR 500) WHEREIN IT WAS HELD TH AT CLAIMING HIGHER DEPRECIATION IN THE RETURNS FILED B Y THE ASSESSEE AMOUNTS TO EXERCISE OF OPTION FOR HIGHER DEPRECIATION. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE FACTS AND CIRCUMSTANCES ARE BEING IDENTICAL, REVENU ES APPEAL IS LIABLE TO BE DISMISSED. 3. DEPARTMENTAL REPRESENTATIVE RELIES ON THE GROUND S OF APPEAL AND THE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KIKANI EXPORTS P.LTD (SUPRA). T HE ASSESSING OFFICER RESTRICTED DEPRECIATION ON WINDMI LL TO ` 23,60,984/- AS AGAINST ` 2,45,61,600/- CLAIMED BY THE ASSESSEE STATING THAT ASSESSEE HAS NOT EXERCISED OP TION FOR CLAIMING HIGHER DEPRECIATION BEFORE THE DUE DATE FO R FURNISHING OF RETURN OF INCOME AS PER THE SECOND PR OVISO TO RULE 5(1A) OF INCOME-TAX RULES. ON APPEAL, COMMIS SIONER 3 ITA NO.2675 /MDS/2014 OF INCOME TAX (APPEALS) FOLLOWING THE CO-ORDINATE B ENCH DECISION OF THIS TRIBUNAL IN THE CASE OF K.K.S.K.LE ATHER PROCESSORS (P) LTD. VS. ITO (126 ITD 215) HELD THAT ASSESSEE IS ENTITLED FOR HIGHER DEPRECIATION FOR THE REASON THAT ASSESSEE HAS CLAIMED DEPRECIATION IN ITS RETURN OF INCOME FILED AND IT AMOUNTS TO EXERCISING OPTION FOR HIGHE R RATE OF DEPRECIATION. WE FIND THAT THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS.KIKANI EXPORTS P.LTD., (SUPRA) WHILE AFFIRMING THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF K.K.S.K. LEATHER PROCESSORS (P) LTD. (SUPRA) OBSERVED AS UNDER:- 16. SHORT OF REPETITION, THE ISSUE THAT ARISES FOR CONSIDERATION IS FOR THE PURPOSE OF CLAIMING DEPREC IATION, WHETHER THE ASSESSEE SHOULD EXERCISE AN OPTION BEFO RE THE DUE DATE IN THE MANNER OTHER THAN BY FILING RET URN OF INCOME IN TERMS OF SUB-SECTION (1) OF SECTION 139 O F THE INCOME-TAX ACT. ACCORDING TO THE REVENUE, EACH ONE OF THE ASSESSEES SHOULD FILE A SEPARATE APPLICATION OR A LETTER INDICATING THEIR INTENTION TO AVAIL OF DEPRE CIATION IN TERMS OF SECTION 32 READ WITH RULE 5(1) OF THE INCO ME-TAX RULES AND SINCE THE ASSESSEE IN EACH CASE HAS NOT EXERCISED SUCH AN OPTION BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME, THEY WILL NOT BE E NTITLED TO THE BENEFIT OF RULE 5(1) APPENDIX I BUT DEPRECIATIO N ONLY UNDER RULE 5(LA) APPENDIX LA. 17. IT IS RELEVANT TO NOTE THAT WHILE FILING THE RETURN OF INCOME, A PROCEDURE HAS BEEN PRESCRIBED FOR CLAIMING DEPRECIATION AS POINTED OUT ABOVE. THE ASSESSEE HA S TO SET OUT THE MANNER IN WHICH DEPRECIATION IS CLAIMED FOR THE ASSESSMENT YEARS IN QUESTION. ALL THE DETAILS R EQUIRED FOR CLAIMING DEPREDATION UNDER VARIOUS HEADS ARE SE T OUT THEREUNDER. RULE 5 OF THE INCOME-TAX RULES IS IN RE LATION TO DETERMINATION OF PROFITS AND GAINS OF BUSINESS O R PROFESSION AND DEPRECIATION FORMS PART OF SUCH 4 ITA NO.2675 /MDS/2014 DETERMINATION. THEREFORE, THERE CANNOT BE AN OPTION EXERCISED IN ISOLATION (I.E.) DEPRECIATION WITH REG ARD TO DETERMINATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION IN THE MANNER OTHER THAN THE PROCEDURE PRESCRIBED UNDER SECTION 139(1) OF THE INCOME- TAX ACT. THE ASSESSEE IS LIABLE TO FILE THE RETURN OF INCOME AND CLAIM DEPRECIATION IN ACCORDANCE WITH THE VARIO US PROVISIONS AND STATE IN EXACTITUDE WHAT HE CLAIMS U NDER DIFFERENT HEADS OF DEPRECIATION. SCHEDULES DOA AND DEP IN FORM TIR- 6 CONTAIN THE BREAK-UP OF VARIOUS HEADS UNDER WHICH DEPRECIATION CAN BE CLAIMED. ALL THAT T HE SECOND PROVISO TO RULE 5(LA) OF THE INCOME-TAX RULE S STATES IS THAT THE ASSESSEE HAS TO EXERCISE THE OPT ION BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF IN COME. IN OTHER WORDS, IF THE OPTION IS EXERCISED AFTER FURNI SHING OF THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTI ON 139, IT IS OF NO AVAIL. THIS ASSUMES IMPORTANCE, AS NO PROCEDURE IS PRESCRIBED FOR EXERCISING THE OPTION. FORM TIR- 6 GIVES THE METHODOLOGY ON WHICH DEPRECIATION CAN BE CLAIMED AND, THEREFORE, THE STATUTE DID NOT PROV IDE FOR ANY OTHER METHOD TO EXERCISE THE OPTION EXCEPT THRO UGH FILING OF RETURN. THEREFORE, TO READ SOMETHING MORE INTO THE SECOND PROVISO TO RULE 5(LA), THAT AN OPTION SH OULD BE EXERCISED SEPARATELY WOULD MAKE THE RETURNS FILED MEANINGLESS. 18. OUR VIEW AS ABOVE IS FORTIFIED BY THE REASONING IN THE REPORTED IN CIT V. VIJAYA HIRASA KALAMKAR (RUF) [1998] 229 TIR 772 (BORN), THE BOMBAY HIGH COURT, WHILE DEALING WITH THE WORD 'BEFORE', HELD AS FOLLOWS (PAGE 774) : 'HAVING REGARD TO THE OBJECT OF THE ORDINANCE AND T HE WORDS USED IN SECTION 3(1), IT SEEMS TO US THAT THE DECLARATION RECEIVED ON JANUARY 1, 1976, WAS WELL WITHIN TIME. IN THE WHOLE CONTEXT, THE WORD 'BEFORE ' WILL HAVE TO BE CONSTRUED AS 'UP TO' OR AS 'NOT AFT ER'. THERE ARE VARIOUS PROVISIONS IN THE INCOME-TAX ACT, WHEREIN THE EXPRESSION 'BEFORE' HAS BEEN USED (SECT IONS 139(1)(A)(I), SECTION 139(1)(B) ; SECTION 184 ; SEC TION 212). THE EXPRESSION HAS ALWAYS BEEN TAKEN TO MEAN 'UP TO'. SECTION 3 SPECIFIED THE PERIOD BEFORE WHIC H A DECLARATION IN RESPECT OF INCOME HAS TO BE MADE FO R THE PURPOSES OF GETTING A BENEFIT UNDER THE ORDINANCE. IT PROVIDES A PERIOD OF LIMITATION WITHIN WHICH CERTAI N BENEFITS ARE AVAILABLE. IN CASE OF AMBIGUITY THE CONSTRUCTION WHICH PRESERVES THE RIGHT TO THE ONE W HICH DEFEATS IT, HAS TO BE PREFERRED. AFTER ALL, THIS IS A TAXING STATUTE WHICH IN CASE OF DOUBT SHOULD BE INTERPRETE D IN FAVOUR OF A TAXPAYER. HAD THE LEGISLATIVE INTENTION BEEN 5 ITA NO.2675 /MDS/2014 TO MAKE DECEMBER 31, 1975, THE LAST DAY FOR MAKING THE DECLARATION, IT COULD HAVE CLEARLY SAID SO IN THE P ROVISO. THE VERY FACT THAT THE DATE JANUARY 1, 1976, IS IN TERMS MENTIONED INDICATES THAT THE TIME LIMIT WAS UP TO T HAT DATE. THAT IN A GIVEN CASE THE WORD 'BEFORE' IN THE CON- TEXT OF THE TIME CAN BE CONSTRUED AS 'NOT AFTER' IS WELL SETTLED (R V. ARKWRIGHT [1848] 12 QB 960). THIS COURT IN THE CASE OF PREMCHAND NATHMAL KOTHARI V. KISANLAL BACHHARAJ VYAS, AIR 1976 BORN 82, HAD READ THE WORD 'BEFORE' IN SECTION 3 OF THE MAHARASHTRA (VIDARBHA REGION) AGRICULTURAL DEBTORS' RELIEF ACT, 1969, AS 'UP TO'.' 19. THE TRIBUNAL IN THE CASE OF K. K. S. K. LEATHER PROCESSORS (P.) LTD. V. ITO (I. T. A. NOS. 826 AND 827 OF 2009, DATED NOVEMBER 20, 2009 [2011] 9 TIR (TRIB) 758 (CHENNAI) (SUBJECT MATTER OF APPEAL IN T. C. (A.) NOS. 1011 A ND 1012 OF 2010) FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT REPORTED IN CIT V. VIJAYA HIRASA KALAMKAR (RUF) [1998] 229 ITR 772 (BOM) HELD AS FOLLOWS (PAGE 771 OF 9 ITR-TR IB) : 'FROM THE ABOVEMENTIONED DECISIONS, IT IS CLEAR THA T THE WORD 'BEFORE' WOULD HAVE TO BE CONSTRUED AS UP TO OR NOT AFTER. THE HON 'BLE BOMBAY HIGH COURT HAS SPECIFICALLY REFERRE D TO PROVISIONS OF SECTION 139 OF THE ACT WHILE EXPLAINI NG THE EXPRESSION OF THE WORD 'BEFORE'. THEREFORE, WE HOLD THAT THE OPTION EXERCISED BY THE ASSESSEE ON DUE DATE BY WAY OF MAKING CLAIMS OF DEPRECIATION IN THE RETURN OF INCO ME ALONG WITH AUDIT REPORT AND BOOKS OF ACCOUNT WHEREI N THE ASSESSEE HAS ADOPTED THE RATE AS CLAIMED IS WITHIN TIME LIMIT PRESCRIBED UNDER SECOND PROVISO TO RULE 5(LA) OF TH E INCOME- TAX RULES. EVEN OTHERWISE AS HELD BY THE BOMBAY HIG H COURT IN THE CASE OF CIR V. SHIVANAND ELECTRONICS [1994] 209 ITR 63 (BORN) THE PROVISION CAN BE UNDERSTOOD WITH REFEREN CE TO THE INTENT OF THE LEGISLATURE AND NOT UPON THE LANGUAG E IN WHICH THE INTENT IS CLOTHED. IF THE OBJECT OF ENACTMENT W ILL 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 P ERSONS WITHOUT VERY MUCH FURTHERING THE OBJECT OF THE ENAC TMENT, IT SHOULD BE CONSTRUED AS DIRECTORY. THE LIMIT PROVID ED UNDER THE SECOND PROVISO TO RULE 5(LA) IS ONLY TO FACILIT ATE THE ASSESSING OFFICER IN DISCHARGING ITS OBLIGATIONS AND DUTIES AS PER THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32 OF THE INCOME-TAX ACT. THEREFORE, THE SAID REQUI REMENT CANNOT BE CONSIDERED AS MANDATORY. MOREOVER, THE ASSESSING OFFICER CANNOT ACT ON THE OPTION EXERCISE D BEFORE THE RETURN IS FILED AND THEREFORE NO FRUITFUL PURPO SE OR OBJECT CAN BE ACHIEVED BY MANDATING EXERCISE OF OPTION PRI OR TO FILING OF RETURN ON DUE DATE.' 20. A READING OF THE ABOVE SAID DECISION OF THE BOMBAY HI GH 6 ITA NO.2675 /MDS/2014 COURT MAKES IT CLEAR THAT IF THE ASSESSEE EXERCISED THE OPTION IN TERMS OF THE SECOND PROVISO TO RULE 5(1A) OF THE INCOME-TAX RULES AT THE TIME OF FURNISHING OF RETURN OF INCOME , IT WILL SUFFICE AND NO SEPARATE LETTER OR REQUEST OR INTI MATION WITH REGARD TO OF EXERCISE OF OPTION IS REQUIRED. SINCE THE RETURNS ARE FILED IN ACCORDANCE WITH SECTION 139(1) OF THE INCOME-TAX ACT AND THE FORM PRE- SCRIBED THEREIN MAKE A PROVIS ION FOR EXERCISING AN OPTION IN RESPECT OF THE CLAIM OF DEP RECIATION, NO SEPARATE PROCEDURE IS REQUIRED, AS CONTENDED BY THE DEPARTMENT. WE ARE IN AGREEMENT WITH THE REASONING OF THE TRIBUNAL. 5. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS. ABT LTD., (370 IT R 159). RESPECTFULLY FOLLOWING THE SAID DECISIONS, WE AFFIR M THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALLO WING THE CLAIM OF THE ASSESSEE FOR HIGHER DEPRECIATION ON WR ITTEN DOWN VALUE OF WINDMILLS AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 20 TH FEBRUARY, 2015 SOMU 7 ITA NO.2675 /MDS/2014 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .