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TMI Blog2014 (11) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 4,21,47,467 u/s 115JB of the Act. Initially, the return filed by assessee was processed u/s 143(1) of the Act, accepting the book profit disclosed. Subsequently on the basis of information available, AO had reason to believe that assessee has claimed excess depreciation resulting in escapement of income within the meaning of section1 47 of the Act and accordingly he issued a notice u/s 148 to assessee calling for return of income. In response to the said notice, assessee filed return of income. During the assessment proceeding, in response to the query raised by AO, assessee furnished all the informations called for in respect of claim of depreciation and it was submitted by assessee that it has claimed depreciation in the return of income filed as per the provisions of Rule 5(1) of Income-tax Rules, by adopting WDV method. AO, however, referring to the observation made in the assessment order passed for the AY 2003-04 concluded that assessee cannot claim depreciation as per the provisions of Rule 5(1) of the Rules as assessee has not exercised option under second proviso to Rule 5(1A). Accordingly, AO worked out the depreciation in terms of Rule 5(1A) @ 8.24%, which amounted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that as assessee has not exercised any such option, AO was correct in computing the depreciation as per Rule 5(1A) and appendix - 1A. 7. The learned AR, on the other hand, submitted that assessee has been claiming depreciation from inception by applying WDV method. Learned AR submitted that section 32 read with Rule 5 would make it clear that assessee can claim depreciation either under Rule 5(1) and appendix - 1 or 5(1A) and appendix - 1A as per its own option and the AO cannot debar the assessee from doing so. Learned AR submitted that though second proviso to Rule 5(1A) requires assessee to exercise such option, but, no specific mode or manner has been provided for exercising such option. Therefore, when assessee in its books of account as well as in the return of income has exercised its option by claiming depreciation under Rule 5(1) and Appendix -1, it has to be treated as in compliance with the second proviso to Rule 5(1A). In this context, learned AR relied upon the decision of ITAT Chennai Bench in case of KKSK Leather Processors (P) Ltd. (supra), which was confirmed by the Hon'ble Madras High Court in the judgment dated 09/09/2014 in Tax Case Nos. 330 and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch option is exercised before the due date of furnishing the return of income u/s 139(1). Further, it is pertinent to note, though the second proviso to Rule 5(1A) speaks of exercise of option by the assessee but it does not prescribe any mode and manner for exercising such option. Neither learned DR could point out nor we are able to locate any other provision either in the Act or in Rules laying down the mode and manner of exercising option in terms of second proviso to Rule 5(1A). Therefore, in the absence of any mode or manner for exercising option, the only way available to assessee to exercise option is to compute depreciation in accordance with Appendix - 1 in the accounts and claim it in the return of income filed u/s 139(1). . It is not in dispute that assessee, in fact, has exercised option in claiming depreciation as per Appendix - 1 not only in AY 2003-04, but, also in subsequent assessment years including the impugned assessment year. Third proviso to Rule 5(1A) also makes it clear that once assessee exercises its option in terms of second proviso to Rule 5(1A) the same will apply even to the subsequent AYs. The ITAT, Chennai Bench in case of KKSK Leather Processors ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 simply be said that before due date. When the time of filing the return is available to the assessee till 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. In the case of CIT vs. Vijaya Hirasa Kalamkar (HUF) (supra), the Hon'ble Bombay High Court has held at pp. 774 and 775 as under : "Having regard to the object of the Ordinance and the words used in s. 3(1), it seems to us that the declaration received on 1st Jan., 1976, was well within time. In the whole context, the word 'before' will have to be construed as 'upto' or as 'not after'. There are various provisions in the IT Act, wherein the expression 'before' has been used [ss. 139(1)(a)(i), s. 139(1)(b); s. 184, s. 212]. The expression has always been ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations and duties as per the provisions of sub-s. (1) of s. 32 of the IT Act. Therefore the said requirement cannot be considered as mandatory. Moreover the AO 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." 10. While affirming the aforesaid view expressed by ITAT, the Hon'ble Madras High Court, in judgment dated 09/09/14 in case of CIT Vs. M/s Kikani Exports Pvt. Ltd. and others held as under: "20. 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 exercise of option is required. Since the returns are filed in accordance with section 139(1) of the Income Tax Act and the form prescribed therein make a provision for exercising an option in respect of the claim of depreciation, no separate procedure is required, as contended by the Department. We are in agreement with the reasoning o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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