TMI Blog2014 (11) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... terms with the statutory provisions, AO was not justified in interfering with the same – thus, the order of the CIT(A) is upheld – Decided against revenue. - ITA Nos. 1087 & 1088/Hyd/2012 - - - Dated:- 12-11-2014 - Shri P. M. Jagtap And Shri Saktijit Dey,JJ. For the Petitioner : Shri D. Sudhakar Rao For the Respondent : Shri Vikram Vijayaraghavan ORDER Per Saktijit Dey, J. M. These appeals by the department are directed against a common order dated 09/05/11 passed by the Commissioner of Income-tax(A), Guntur, for the assessment years 2004-05 and 2009- 10. 2. The only issue which is common in both the appeals is in respect of allowance of assessee s claim of depreciation by learned CIT(A). 3. As facts are identical in both the appeals, for the sake of convenience, we will deal with the facts as involved in AY 2004-05 in ITA No. 1087/Hyd/2011. 4. Briefly the facts are, assessee an Indian company is engaged in the business of manufacture of white crystal sugar, alcohol and generation of power. For the AY under dispute, assessee filed its return of income on 01/11/2004 declaring loss of ₹ 17,14,49,958 under normal provisions and book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per 139(1) would itself amount to having exercised the option under second proviso to Rule 5(1A), hence, depreciation claimed by assessee cannot be disallowed. In this context, assessee relied upon a decision of the ITAT, Chennai Bench in case of KKSK Leather Processors (P) Ltd. Vs. ITO 130 TTJ 184. Assessee also brought it to the notice of learned CIT(A) that appeal preferred by assessee against the assessment order passed by AO disallowing assessee s claim of depreciation for AY 2003-04 in the meanwhile has been disposed of by the learned CIT(A), Guntur by accepting assessee s claim of depreciation. The learned CIT(A) after considering the submissions of assessee in the context of decision of the Tribunal in KKSK Leather Processors (P) Ltd. Vs. ITO, allowed the appeal by accepting assessee s claim of depreciation on plant and machinery at 80%. Being aggrieved of the aforesaid order, department is in appeal before us. 6. The learned DR submitted before us that as per the provision contained in second proviso to Rule 5(1A) for claiming depreciation under Rule 5(1) and appendix 1, assessee has to exercise its option before due date of filing of return of income prescribed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Therefore, the only issue which arises for consideration is whether the depreciation claimed under rule 5 and Appendix 1 in the return of income filed can be said to be in compliance to the second proviso to Rule 5(1A). While, AO has disallowed assessee s claim by observing that assessee has not exercised any option, assessee on the other hand has strongly refuted such allegation of AO by stating that the claim made in the accounts as well as in the return of income filed by assessee will itself amount to exercising option in terms of second proviso to Rule 5(1A) as there is no prescribed mode or method available under the statute for exercising such option. 9. Before deciding this core issue, it is necessary to look into the relevant statutory provision. Section 32(1)(i) of the Act provides for allowance of depreciation on assets of an undertaking engaged in generation or generation and distribution of power. Rule 5(1A) provides for allowance of depreciation on assets as specified u/s 32(1)(i) at the percentage specified in Appendix 1A. However, second proviso to Rule 5(1A) carves out an exception by allowing the assessee to claim depreciation as per Appendix 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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] of 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 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). In our view, the requirement of second proviso to r. 5(1A) is satisfied if the option is exercised before the expiry of due date of filing of return of income under s. 139(1) of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove-mentioned decisions, it is clear that the word 'before' would have to be construed as upto or not after. The Hon'ble Bombay High Court has specifically referred to provisions of s. 139 of the Act while explaining the expression of the word 'before'. Therefore we hold that the option exercised by the assessees 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 assessees have adopted the rate as claimed is within time-limit prescribed under second proviso to r. 5(1A) of IT Rules. Even otherwise as held by the Bombay High Court in the case of CIT vs. Shivanand Electronics (supra) the provision can be understood with reference to the intent of legislature and not upon the language in which the intent is clothed. If the 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 the object of the enactment, it should be construed as directory. The limit provided under the second proviso to r. 5(1A) is only to fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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