TMI Blog2015 (2) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee. - Tax Case (A) Nos.330, 333, 509, 510, 511, 512, 516, 529, 583 of 2013, 89, 107, 272, 373, 422, 511, 488 of 2014 and 1011 to 1017 of 2010 & connected M.Ps. - - - Dated:- 9-9-2014 - MR. R.SUDHAKAR AND MR. G.M.AKBAR ALI, JJ. For the Appellant : Mr. T. R. Senthil Kumar, Mr. M. Swaminathan, Mr. K. Suresh Kumar Standing Counsel for Income Tax For the Respondent : Mr. S.Sridhar, Dr. Anita Sumanth, Mr. Karthik Raja, Mr.R. Vijayaraghavan Mr.Venkat Narayanan, Mr. J. Balachander, Mr. K. Ravi JUDGEMENT R. Sudhakar J.- This batch of tax case (appeals) are filed by the Revenue challenging the orders of the Income-tax Appellate Tribunal on the ground that the assessees in the above tax case (appeals) have not exercised their option to claim depreciation under section 32 of the Income-tax Act, 1961, in the manner prescribed under the second proviso to rule 5(1A) of the Income-tax Rules, 1962, before filing their return of income. 2. Since the issue involved in all the above tax case (appeals) are one and the same, common order is passed in the above matters. 3. The brief facts common to all the above tax case (appeals) are as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso to rule 5(1A) of the Income-tax Rules and the benefit will flow therefrom. 7. As against the orders of the Income-tax Appellate Tribunal, the Revenue is before this court by filing the above tax case (appeals). 8. Learned standing counsel appearing for the Revenue submits that as per the provisions of section 32(1)(i) of the Income-tax Act the undertakings engaged in the generation/generation and distribution of power, the rate of depreciation on machineries engaged for such purposes are to be allowed on such percentage on the actual cost thereof as may be prescribed. The prescribed rates under rule 5(1A) of the Income-tax Rules are set out in Appendix IA Schedule. However, the second proviso to rule 5(1A) provides that the undertaking may be permitted to avail of depreciation at the normal rates under sub-rule (1) read with Appendix I, at the option of the assessee, provided such option has to be exercised before the due date for furnishing the return of income under section 139(1) of the Income-tax Act. He further submits that the rule prescribes that the assessee should have to exercise their option before furnishing the return of income. Since the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd proviso to rule 5(1A) of the Income-tax Rules. 12. Before going into the merits of the case, it is appropriate to extract the relevant provisions, which are as follows : Section 139(1) provides filing of return of income : 139. Return of income.-(1) Every person, if his total income or the total income of any other person in respect of which he is assess able under this Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. 13. Section 32 of the Income-tax Act deals with depreciation, which reads as follows : 32. Depreciation.-(1) In respect of depreciation of buildings, machinery, plant or furniture owned wholly or partly by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed- (i) in the case of assets of an undertaking engaged in generatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming depreciation on other assets and Schedule DEP is for summary of depreciation on assets. 17 Schedule DOA Depreciation on other assets (other than assets on which full capital expenditure is allowable as deduction) DEPRECIATION ON OTHER ASSETS 1 Block of assets Building Furniture and fittings Intangible assets Ships 2 Rate (%) 5 10 100 10 25 20 (i) (ii) (iii) (iv) (v) (vi) 3 Written down value on the first day of previous year 4 Additions for a period of 180 days or more in the previous year 5 Consideration or other realization d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the last day of previous year* (6+9-14) (enter 0, if result is negative) Schedule DEP Summary of depreciation on assets (other than on assets on which full capital expenditure is allowable as deduction under any other section) SUMMARY OF DEPRECIATION ON ASSETS 1 Plant and machinery a Block entitled for depreciation @ 15 per cent. (Schedule DPM-14i) 1a b Block entitled for depreciation @ 30 per cent. (Schedule DPM-14ii) 1b c Block entitled for depreciation @ 40 per cent. (Schedule DPM-14iii) 1c d Block entitled for depreciation @ 50 per cent. (Schedule DPM-14iv) 1d e Block entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation is claimed for the assessment years in question. All the details required for claiming depreciation under various heads are set out thereunder. Rule 5 of the Income-tax Rules is in relation to determination of profits and gains of business or profession and depreciation forms part of such determination. Therefore, there cannot be an option exercised in isolation (i.e.) depreciation with regard 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 various provisions and state in exactitude what he claims under different heads of depreciation. Schedules DOA and DEP in Form ITR- 6 contain the break up of various heads under which depreciation can be claimed. All that the second proviso to rule 5(1A) of the Income-tax Rules states is that the assessee has to exercise the option before the due date for furnishing the return of income. In other words, if the option is exercised after furnishing of the return of income under sub- section (1) of section 139, it is of no avail. This a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. v. ITO (I. T. A. Nos. 826 and 827 of 2009, dated November 20, 2009 [2011] 9 ITR (Trib) 758 (Chennai) (subject matter of appeal in T. C. (A.) Nos. 1011 and 1012 of 2010) following the decision of the Bombay High Court reported in CIT v. Vijaya Hirasa Kalamkar (HUF) [1998] 229 ITR 772 (Bom)), held as follows (page 771 of 9 ITR-Trib) : From the abovementioned decisions, it is clear that the word 'before' would have to be construed as up to or not after. The hon'ble Bombay High Court has specifically referred to provisions of section 139 of the Act while explaining 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 income along with audit report and books of account wherein the assessee has adopted the rate as claimed is within time limit prescribed under second proviso to rule 5(1A) of the Income-tax Rules. Even otherwise as held by the Bombay High Court in the case of CIT v. Shivanand Electronics [1994] 209 ITR 63 (Bom) the provision can be understood with reference to the intent of the Legislature and not upon the language in which the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Depreciation.-(1) Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the per centages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. . . Provided also that any such option once exercised shall be final and shall apply to all the subsequent assessment years. 24. As the third proviso clearly states that the option once exercised will continue to all the subsequent years, the assessee is not required to exercise such option each and every year separately. 25. In view of the foregoing discussions, we pass the following order : (i) We answer the substantial question of law in favour of the asses sees and against the Revenue ; (ii) Consequently, ..... 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