The Commissioner of Income-tax, Coimbatore v. Indo Shell Mould Ltd
[Citation -2020-LL-0615-37]

Citation 2020-LL-0615-37
Appellant Name The Commissioner of Income-tax, Coimbatore
Respondent Name Indo Shell Mould Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 15/06/2020
Assessment Year 2006-07
Judgment View Judgment
Keyword Tags higher rate of depreciation • period of limitation • written down value • depreciation on wind mill
Bot Summary: The appeal has been admitted on 20.12.2013 on the following substantial questions of law : i. Whether, under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in not upholding the order of the Commissioner of Income Tax setting aside the assessment made by the Assessing Officer and directing the Assessing Officer to examine the aspect that the assessee did not exercise option to claim depreciation at the rate of 80 under Appendix I before the due date for filing of the return while making fresh assessment ii. Whether, under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee has satisfied the requirement of Second Proviso to Rule 5(1A) of the Income Tax Rules and they are entitled for depreciation on windmills as per Appendix I is valid iii. Whether, under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in granting depreciation at 80 on windmills even though the assessee is entitled at the rate of 7.69 of the cost and this rate has correctly been allowed by the Assessing Officer And v. Whether, under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the assessee is entitled for higher rate of depreciation even though the assessee had filed return of income within the due date and has also not exercised its option separately 4. 528 of 2013 arise for consideration is for the purpose of claiming depreciation, whether the assessee should exercise an option before the due date in the manner other than by filing return of income in terms of sub-section of Section 139 of the Income Tax Act. According to the Revenue, each one of the assessee should file a separate application or a letter indicating their intention to avail depreciation in terms of Section 32 read with Rule 5(1) of the Income 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 entitled to the benefit of Rule 5(1) Appendix I, but depreciation only under Rule 5(1A) Appendix 1A. 17. A reading of the above-said decision of the Bombay 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 will suffice and no separate letter or request or intimation with regard to of exercise of option is required. The assessee in these cases filed return of income for the previous assessment year claiming depreciation within the time in accordance with Section 32(1) of the Income Tax Act and the Rules and that will enure to the benefit of the assessee for the subsequent years in view of the third proviso to Rule 5(1A) of the Income Tax Rules, which reads as follows: 5.


TCA.No.528 of 2013 In High Court of Judicature at Madras Dated : 15.6.2020 Coram : Honourable Mr.Justice T.S.SIVAGNANAM and Honourable Mrs.Justice PUSHPA SATHYANARAYANA Tax Case Appeal No.528 of 2013 Commissioner of Income Tax, Coimbatore ...Appellant Vs M/s.Indo Shell Mould Ltd., Coimbatore-18 ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 13.9.2011 made in ITA.No.981/Mds/2011 on file of Income Tax Appellate Tribunal, Chennai 'C' Bench for assessment year 2006-07. For Appellant: Mr.T.R.Senthilkumar, SSC & Ms.K.G.Usharani, SC For Respondent: Mr.A.S.Sriraman Judgment was delivered by T.S.Sivagnanam,J We have heard Mr.T.R.Senthilkumar, learned Senior Standing Counsel and Ms.K.G.Usharani, learned Standing Counsel appearing for appellant Revenue and Mr.A.S.Sriraman, learned counsel appearing for respondent. 1/12 http://www.judis.nic.in TCA.No.528 of 2013 2. This appeal, filed by Revenue under Section 260A of Income Tax Act, 1961 (for short, Act) is directed against order dated 13.9.2011 made in ITA.No.981/Mds/2011 on file of Income Tax Appellate Tribunal, Chennai 'C' Bench (for brevity, Tribunal) for assessment year 2006-07. 3. appeal has been admitted on 20.12.2013 on following substantial questions of law : i. Whether, under facts and circumstances of case, Income Tax Appellate Tribunal was right in not upholding order of Commissioner of Income Tax setting aside assessment made by Assessing Officer and directing Assessing Officer to examine aspect that assessee did not exercise option to claim depreciation at rate of 80% under Appendix I before due date for filing of return while making fresh assessment ? ii. Whether, under facts and circumstances of case, Income Tax Appellate Tribunal was right in holding that assessee has satisfied requirement of Second Proviso to Rule 5(1A) of Income Tax Rules and they are entitled for depreciation on windmills as per Appendix I is valid ? iii. Whether, under facts and circumstances of case, Income Tax 2/12 http://www.judis.nic.in TCA.No.528 of 2013 Appellate Tribunal was right in law in granting depreciation at 80% on windmills even though Proviso to Section 32(1)(i) and Rule 5(1A) clearly stipulate that only rate of depreciation on method as provided for in Appendix IA will be relevant for power generating machinery ? iv. Whether, under facts and circumstances of case, Income Tax Appellate Tribunal was right in law in granting depreciation at 80% on windmills even though assessee is entitled at rate of 7.69% of cost and this rate has correctly been allowed by Assessing Officer ? And v. Whether, under facts and circumstances of case, Income Tax Appellate Tribunal was right in law in holding that assessee is entitled for higher rate of depreciation even though assessee had filed return of income within due date and has also not exercised its option separately? 4. substantial questions of law framed for consideration have to be answered in favour of assessee in light of decision of Hon'ble Division Bench of this Court in case of CIT Vs. Kikani Exports (P) Ltd. [reported in (2015) 369 ITR 500] wherein identical question was considered and appeal filed by Revenue was dismissed. relevant portions of said judgment read thus : 16. Short of repetition, issue that 3/12 http://www.judis.nic.in TCA.No.528 of 2013 arise for consideration is for purpose of claiming depreciation, whether assessee should exercise option before due date in manner other than by filing return of income in terms of sub-section (1) of Section 139 of Income Tax Act. According to Revenue, each one of assessee should file separate application or letter indicating their intention to avail depreciation in terms of Section 32 read with Rule 5(1) of Income Tax Rules and since assessee in each case has not exercised such option before due date for furnishing return of income, they will not be entitled to benefit of Rule 5(1) Appendix I, but depreciation only under Rule 5(1A) Appendix 1A. 17. It is relevant to note that while filing return of income, procedure has been prescribed for claiming depreciation as pointed out above. assessee has to set out manner in which depreciation is claimed for assessment years in question. All details required for claiming depreciation under various heads are set out thereunder. Rule 5 of Income Tax Rules is in relation to determination of profits and gains of business or profession and depreciation forms part of 4/12 http://www.judis.nic.in TCA.No.528 of 2013 such determination. Therefore, there cannot be option exercised in isolation (i.e.,) depreciation with regard to determination of profits and gains of business or profession in manner other than procedure prescribed under Section 139(1) of Income Tax Act. assessee is liable to file return of income and claim depreciation in accordance with various provisions and state in exactitude what he claims under different heads of depreciation. Schedules DOA and DEP in Form ITR - 6 contain break up of various heads under which depreciation can be claimed. All that second proviso to Rule 5(1A) of Income Tax Rules states is that assessee has to exercise option before due date for furnishing return of income. In otherwords, if option is exercised after furnishing of return of income under sub-section (1) of Section 139, it is of no avail. This assumes importance, as no procedure is prescribed for exercising option. Form ITR- 6 gives methodology on which depreciation can be claimed and therefore, statue did not provide for any other method to exercise option except through filing of return. Therefore, to read 5/12 http://www.judis.nic.in TCA.No.528 of 2013 something more into second proviso to Rule 5(1A), that option should be exercised separately would make returns filed meaningless. 18. Our view as above is fortified by reasoning in decision (CIT v. Vijaya Hirasa Kalamkar (HUF) [1998] 229 ITR 772 Bombay High Court while dealing with word "before", held as follows: 'Having regard to object of Ordinance and words used in section 3(1), it seems to us that declaration received on January 1,1976, was well within time. In whole context, word "before" will have to be construed as "up to" or as "not after". There are various pro-visions in Income- tax Act, wherein expression "before" has been used (sections 139(1)(a)(i), section 139(1)(b) ; section 184 ; section 212). expression has always been taken to mean "up to". Section 3 specified period before which declaration in respect of income has to be made for purposes of getting benefit under Ordinance. It provides period of limitation within which certain benefits are available. In case of ambiguity construction which preserves right to one which 6/12 http://www.judis.nic.in TCA.No.528 of 2013 defeats it, has to be preferred. After all, this is taxing statute which in case of doubt should be interpreted in favour of taxpayer. Had legis-lative intention been to make December 31, 1975, last day for making declaration, it could have clearly said so in proviso. very fact that date January 1, 1976, is in terms mentioned indicates that time limit was up to that date. That in given case word "before"in context of time can be construed as "not after" is well settled.(R v. Arkwright, [1848] 12 QB 960). This court in case of PremchandNathmal Kothari v. Kisanlal Bachharaj Vyas, AIR 1976 Bom 82, had read word "before" in section 3 of Maharashtra (Vidarbha Region) Agricul-tural Debtors' Relief Act, 1969, as "up to'. 19. Tribunal in case of K.K.S.K. Leather Processors (P.) Ltd. (supra) following decision of Bombay High Court reported in Vijaya Hirasa Kalamkar (HUF) (Supra) held as follows: "From above mentioned decisions, it is clear that word 'before' would have to be construed as upto or not after. Hon'ble Bombay High Court has specifically referred to 7/12 http://www.judis.nic.in TCA.No.528 of 2013 provisions of Section 139 of Act while explaining expression of word 'before'. Therefore, we hold that option exercised by assessee on due date by way of making claims of depreciation in return of income along with audit report and books of account wherein assessee has adopted rate as claimed is within time limit prescribed under second proviso to Rule 5(1A) of Income-tax Rules. Even otherwise as held by Bombay High Court in case of CIT vs. Shivanand Electronics (supra) provision can be understood with reference to intent of legislature and not upon language in which intent is clothed. If object of enactment will be defeated by holding it as directory it should be construed as mandatory. Whereas if by holding it mandatory, serious general inconvenience will be created to innocent persons without very much furthering object of enactment, it should be construed as directory. limit provided under second proviso to Rule 5(1A) is only to facilitate Assessing Officer in discharging its obligations and duties as per provisions of sub-section (1) of section 32 of Income- tax Act. Therefore said requirement cannot 8/12 http://www.judis.nic.in TCA.No.528 of 2013 be considered as mandatory. Moreover Assessing Officer cannot act on option exercised before 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." 20. reading of above-said decision of Bombay High Court makes it clear that if assessee exercised option in terms of second proviso to Rule 5(1A) of Income Tax Rules at time of furnishing of return of income, it will suffice and no separate letter or request or intimation with regard to of exercise of option is required. Since returns are filed in accordance with Section 139(1) of Income Tax Act and form prescribed therein make provision for exercising option in respect of claim of depreciation, no separate procedure is required, as contended by Department. We are in agreement with reasoning of Tribunal. 21. Accordingly, question of law is answered in favour of assessee and against Revenue. 22. In so far as T.C.(A)No.509 of 2013 is concerned, as contended by learned counsel appearing for assessee, on 9/12 http://www.judis.nic.in TCA.No.528 of 2013 quantum appeal, Commissioner of Income Tax (Appeals) as well as Tribunal held in favour of assessee and there is no appeal on that issue before this Court. Therefore, question of law raised in this appeal becomes academic, in any event, not required to be answered. 23. In T.C.(A)Nos.1012, 1014 of 2010 and 272 of 2014, assessee therein filed return of income belatedly for subsequent years and claimed benefit of depreciation. assessee in these cases filed return of income for previous assessment year claiming depreciation within time in accordance with Section 32(1) of Income Tax Act and Rules and that will enure to benefit of assessee for subsequent years in view of third proviso to Rule 5(1A) of Income Tax Rules, which reads as follows: "5. Depreciation(1) Subject to provisions of sub-rule (2), allowance under clause (ii) of subsection (I) of section 32 in respect of depreciation of any block of assets shall be calculated at percentages specified in second column of Table in Appendix I to these rules on written down value of 10/12 http://www.judis.nic.in TCA.No.528 of 2013 such block of assets as are used for purposes of business or profession of assessee at any time during previous year. Provided also that any such option once exercised shall be final and shall apply to all subsequent assessment years." 24. As third proviso clearly states that option once exercised will continue to all subsequent years, assessee is not required to exercise such option each and every year separately. 25. In view of foregoing discussions, we pass following order: We answer substantial question of law in favour of assessee and against Revenue. Consequently, order of Tribunal stands confirmed. In result, all above Tax Case (Appeals) are dismissed. 5. Following said decision, above tax case appeal filed by Revenue is dismissed and substantial questions of law framed are answered in favour of assessee. No costs. 15.6.2020 RS 11/12 http://www.judis.nic.in TCA.No.528 of 2013 T.S.SIVAGNANAM,J AND PUSHPA SATHYANARAYANA,J RS To Income Tax Appellate Tribunal, Chennai 'C' Bench. TCA.No.528 of 2013 15.6.2020 12/12 http://www.judis.nic.in Commissioner of Income-tax, Coimbatore v. Indo Shell Mould Ltd
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