ACIT, CHENNAI V. M/s. Soundararaja Sasha Industries Pvt.Ltd., CHENNAI

ITA 923/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61334 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Keywords: Depreciation
• Section: 32; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER .. ITA NO.923/MDS/2012 ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(3), CHENNAI. V. M/S. SOUNDARARAJA SASHA INDUSTRIES PVT. LTD., #8, ABM AVENUE, RAJA ANNAMALAIPURAM, CHENNAI-600 028. (PAN :AAACS9543F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY : NONE DATE OF HEARING : 11.07.2012 DATE OF PRONOUNCEMENT : 11.0 7.2012 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEA R 2006-07 IS AGAINST THE ORDER PASSED BY THE CIT(APPE ALS)-V, CHENNAI DATED 30-01-2012. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE FILED A RETURN OF INCOME DECLARING NIL INCOME. THE RETURN WAS PROCES SED ITA NO.923 /MDS2012 2 INITIALLY U/S 143(1) OF THE INCOME TAX ACT, 1961. THEREAFTER A NOTICE U/S 1243(2) WAS ISSUED AND AFTER DUE PROCESS THE ASSESSMENT WAS COMPLETED DISALLOWING THE ASSESSEES CLAIM OF DEPRECIATION OF RS 18,21,309/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO HAS OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION @ 80% ON OPENING VALUE AND THE VALUE ADDED RESPECTIVELY AS S PECIFIED IN THE SECOND COLUMN OF THE TABLE IN APPENDIX I TO THE INCOME TAX RULES. ACCORDING TO RULE 5(1A) OF THE I.T. RUL ES, DEPRECIATION ON THE ASSETS OF AN UNDERTAKING ENGAGE D IN THE GENERATION OR GENERATION & DISTRIBUTION OF POWER WA S TO BE COMPUTED AT THE PERCENTAGE SPECIFIED IN SECOND COLU MN OF THE TABLE IN APPENDIX IA OF THE INCOME TAX RULES. BUT T HE PROVISO UNDER RULE 5(IA) PERMITS THE ASSESSEE TO CL AIM HIGHER RATE OF DEPRECIATION AS PROVIDED IN APPENDIX I, IF THE ASSESSEE EXERCISES AN OPTION BEFORE THE DUE DATE FOR FURNISH ING THE RETURN OF INCOME UNDER SUB SECTION (1) OF SECTION 1 39 OF THE INCOME TAX ACT, 1961. RULE 5(IA) SPECIFICALLY PROV IDES STRAIGHT LINE METHOD OF COMPUTING DEPRECIATION. IN THE CASE OF WIND MILLS (ENERGY DIVISION), THE ADMISSIBLE RATE OF DEP RECIATION IS ITA NO.923 /MDS2012 3 ONLY 7.69%. IN VIEW OF THE ABOVE, THE CLAIM MADE B Y THE ASSESSEE WAS DISALLOWED. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE CIT(A). THE LEARNED CIT(A) BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF K.K.S.K. LE ATHER PROCESSORS P. LTD. V. ITO REPORTED IN (2011) 9 I.T. R. (TRIB) 758 (CHENNAI) DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. THE RELEVANT PORTION AS EXTRACTED BY THE LEARNED CIT(A) IN HIS ORDER IS REPRODUCED HEREUNDER : AS PER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 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, CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32 PROVIDES THE DEPRECIATION AT A PRESCRIBED RATE ON THE ASSETS OF SPECIFIED UNDERTAKING ON THE ACTUAL COST INSTEAD OF WRITTEN DOWN VALUE. THE EXPLANATION 5 TO SUB-SECTION (1) OF SECTION 32 MAKES IT CLEAR THAT THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32 SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. FROM THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32 ALONG WITH THE EXPLANATION 5, IT IS CLEAR THAT THE ITA NO.923 /MDS2012 4 ASSESSING OFFICER IS DUTY-BOUND AND UNDER OBLIGATION TO ALLOW THE DEDUCTION OF DEPRECIATION AS PER THE PROVISIONS OF SUB-SECTION (1) OF SECTION 32. SINCE TWO RATES OF DEPRECIATION ARE PRESCRIBED AS PER APPENDIX I AS WELL AS APPENDIX IA TO RULE 5 OF 1962 RULES IN RESPECT OF ASSETS OF THE UNDERTAKING ENGAGED FOR GENERATION AND DISTRIBUTION OF POWER, THUS, TO MAKE IT CLEAR THAT TO FACILITATE THE ASSESSING OFFICER HAS TO SEE WHICH O F THE RATES PROVIDED UNDER TWO DIFFERENT APPENDICES OF DEPRECIATION SHALL BE ALLOWED, SECOND PROVISO TO RULE 5(1A) REQUIRES THE ASSESSEE TO EXERCISE ITS OPTION THAT DEPRECIATION BE ALLOWED AS PER APPENDIX I. THOUGH THE PROVISO STIPULATES THAT IF SUCH OPTION IS EXERCISED BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139, IT CAN BE SAID THAT THE SECOND PROVISO TO RULE 5(1A) IS ONLY TO FACILITATE THE ASSESSING OFFICER IN DISCHARGING ITS OBLIGATION AS PER THE EXPLANATION 5 TO SUB-SECTION (1) OF SECTION 32 SO THAT THE DEPRECIATION SHALL BE ALLOWED AS PER THE OPTION OF THE ASSESSEE AND NOT ON THE DISCRETION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS OTHERWISE UNDER OBLIGATION TO ALLOW THE DEPRECIATION BUT BECAUSE THE DEPRECIATION IS SPECIFIED UNDER TWO DIFFERENT APPENDICES I AND IA, THE CHOICE IS GIVEN TO THE ASSESSEE IN RESPECT OF THE ASSETS SPECIFIED UNDER CLAUSE (I) OF SUB-SECTIO N ITA NO.923 /MDS2012 5 (1) OF SECTION 32. THEREFORE, THE PROVISIONS CONTAINED IN THE RULES CANNOT OVERRIDE THE PROVISIONS CONTAINED IN THE STATUTE AND THE REQUIREMENT OF OPTION UNDER PROVISO TO RULE 5(1A) CANNOT BE HELD IN THE NATURE THAT THE FAILURE OF TH E SAME WOULD BE SO FATAL THAT THE VERY OBJECT OF THE PROVISION FOR PROVIDING HIGHER RATE OF DEPRECIATION IS DEFEATED. WHERE THERE IS NO SPECIFIC FORM OR METHOD PRESCRIBED FOR EXERCISING THE SAID OPTION, THEN THE CLAIM MADE IN THE RETURN OF IN COME 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 RULE 5(1A). (PARA 7). THEREFORE, EVEN IF OPTION IS NOT EXERCISED WITHIN THE STIPULATED TIME AS PER SECOND PROVISO TO RULE 5(1A), THE SAME CANNOT HAVE A SERIOUS CONSEQUENCE OF TOTAL DENIAL OF THE CLAIM OF THE ASSESSEE. THERE IS NO DOUBT THAT WHEN THERE IS NO PRESCRIBED PROCEDURE OR MODE OF EXERCISING OPTION PRESCRIBED IN THE RULE, THEN THE OPTION EXERCISED BY THE ASSESSEE BY WAY OF MAKING A CLAIM IN THE RETURN OF INCOME ALONG WITH THE AUDIT REPORT IS DEFINITELY MORE THAN THE REQUIREMENT OF THE SECOND PROVISO. EVEN OTHERWISE THE QUESTION OF EXERCISING THE OPTION IN THE RETURN OF INCOME WAS NOT SERIOUSLY AGITATED BY THE REVENUE. AS PER THE ITA NO.923 /MDS2012 6 ORDER OF THE LOWER AUTHORITIES, THE DEPRECIATION CLAIMED HAD BEEN REJECTED ON THE GROUND THAT OPTION HAD NOT BEEN EXERCISED BEFORE THE DUE DATE. THEREFORE, THE SECOND QUESTION WHETHER THE FILING OF THE RETURN ON DUE DATE WAS EXERCISING OF OPTION BEFORE DUE DATE OR NOT, WAS OF IMPORTANCE. THE REQUIREMENT OF SECOND PROVISO TO RULE 5(1A) IS SATISFIED IF THE OPTION IS EXERCISED BEFORE THE EXPIRY OF DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1). THE MEANING OF THE TERM BEFORE DUE DATE SHALL BE UNDERSTOOD AS IT IS UNDERSTOOD BY A MAN OF ORDINARY PRUDENCE. BEFORE DUE DATE SIMPLY REFERS AND MEANS THAT NOT AFTER THE EXPIRY OF DUE DATE. IF THE REQUISITE ACT IS DONE BEFORE THE LAST DAY EXPIRES, THEN IT WILL BE SIMPLY SAID THAT BEFORE DUE DATE. WHEN THE TIME OF FILING THE RETURN IS AVAILABLE TO THE ASSESSEE T ILL THE LAST 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. THEREFORE, IT CAN BE SAID THAT THE OPTION EXERCISED BY THE ASSESSEE ON DUE DATE BY WAY OF MAKING CLAIMS OF DEPRECIATION IN THE RETURN OF INCOME ALONG WITH AUDIT REPORT AND BOOKS OF ACCOUNT WHEREIN THE ASSESSEE HAS ADOPTED THE RATE AS CLAIMED IS WITHIN TIME-LIMIT ITA NO.923 /MDS2012 7 PRESCRIBED UNDER SECOND PROVISO TO RULE 5(1A). THE LIMIT PROVIDED UNDER THE SECOND PROVISO TO RULE 5(1A) IS ONLY TO FACILITATE THE ASSESSING OFFI CER IN DISCHARGING ITS OBLIGATIONS AND DUTIES AS PER TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 32. THEREFORE, THE SAID REQUIREMENT CANNOT BE CONSIDERED AS MANDATORY. MOREOVER, THE ASSESSING OFFICER 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 OPTION PRIOR TO FILING OF RETURN ON DUE DATE. (PARA 8).' THE LEARNED CIT(A) HAS CONCLUDED AS UNDER: 3.3 RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF K.K.S.K. LEATHER PROCESSORS (P) LTD. (SUPRA) I HOLD THAT THE APPELLANT IS ENTITLED TO ENHANCED RATE OF DEPRECIATION AND THE AO HAS INCORRECTLY RESTRICTED IT TO 7.69%. THE AO IS THEREFORE DIRECTED TO ALLOW THE ENHANCED RATE OF DEPRECIATION TO THE APPELLANT. THE APPEAL OF THE APPELLANT IS THEREFOR E ALLOWED. NO MATERIAL WAS BROUGHT TO OUR NOTICE BY THE LEARNE D JR. STANDING COUNSEL THAT THE DECISION OF THE TRIBUNAL HAS BEEN MODIFIED OR REVERSED BY THE HONBLE HIGH COURT. TH EREFORE, ITA NO.923 /MDS2012 8 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA), WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNE D CIT(A). ACCORDINGLY, WE DISMISS THE REVENUES APPEAL. 4. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TI ME OF HEARING ON WEDNESDAY, THE 11 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) ( V.DURGA RAO ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 11 TH JULY, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE