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2015 (10) TMI 314 - ITAT HYDERABAD

2015 (10) TMI 314 - ITAT HYDERABAD - TMI - Depreciation on energy saving devices - CIT(A)reversed the order of the AO on this issue and allowed the claim of assessee for depreciation @ 80% - Held that:- The issue involved in the appeal of revenue is squarely covered in favour of assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case for AY 2004-05 and 2009-10 [2014 (11) TMI 407 - ITAT HYDERABAD ] wherein held The meaning of the term ‘before due date’ shall be un .....

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is nothing but before the due date as the same is not after the due date – revenue is not consistent with regard to assessee’s claim of depreciation - Be that as it may, as depreciation claimed by assessee is in terms with the statutory provisions, AO was not justified in interfering with the same. Assessee having exercised its option in terms of second proviso to Rule 5(1A), AO is duty bound to allow assessee’s claim of depreciation– thus, the order of the CIT(A) is upheld – Decided against rev .....

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Assessee, in the present case, is a company engaged in the business of generation of power. The return of income for the year under consideration was originally filed by it on 27/11/2003 declaring loss of ₹ 17,67,12,569 and book profit of ₹ 1,90,89,412 u/s 115JB of the Act. The income/loss, as returned by assessee, was accepted by the AO. Subsequently, the said assessment was reopened by the AO on the ground that the claim of assessee for depreciation at higher rate of 80% on energy .....

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d not exercised option under the second proviso to Rule 5(1A). Accordingly, he restricted the claim of assessee for depreciation on energy saving devices at 8.24% (Rs. 2,20,60,521) as against 80% (20,53,82,364) claimed by assessee. 3. On appeal, ld. CIT(A) reversed the order of the AO on this issue and allowed the claim of assessee for depreciation @ 80% on energy saving devices following, inter-alia, the decision of Chennai Bench of ITAT in case of KKSK Leather Processors (P) Ltd. Vs. ITO, 130 .....

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. A copy of the said order is placed on record before us and perusal of the same shows that similar issue, as involved in the present case, has been decided by the Tribunal in favour of assessee for the following reasons given in paragraph 8 to 11 of its order: 8. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. We have also applied our mind to the decisions relied upon by the parties. So far as the factual aspe .....

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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 necess .....

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ch 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, .....

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s 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 (P) Ltd. Vs. ITO (supra), while considering identical nature of dispute relating to exercise of option under second proviso to Rule 5(1A), held as under: From the provisions of sub-s. (1) of s. 32 along with the Expln. 5, it is clear that the AO is duty-bound and under obligation to allow the deducti .....

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ion be allowed as per Appendix 1. Though the proviso stipulates that if such option is exercised before the due date of furnishing the return of income under sub-s. (1) of s. 139 of the IT Act, in our view the second proviso to r. 5(1A) is only to facilitate the AO in discharging of its obligation as per Expln. 5 to sub-s. (1) of s. 32 of IT Act so that the depreciation 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 .....

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he 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 d .....

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ilable 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. .....

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f limitation within which certain benefits are available. In case of ambiguity the construction which preserves the right to the one which defeats it, has to be preferred. After all, this is a taxing statute which in case of doubt should be interpreted in favour of a taxpayer. Had the legislative intention been to make 31st Dec., 1975, the last day for making the declaration, it could have clearly said so in the proviso. The very fact that the date 1st Jan., 1976, is in terms mentioned indicates .....

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lear 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 .....

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s 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 facilitate the AO in discharging its obligations 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 .....

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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 of the Tribunal . 11. The ratio laid down by the ITAT Chennai Bench, which was confirmed by the Hon .....

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