SIDH Management Corporate Services Ltd. Vs ITO (ITAT Delhi)
Delhi ITAT: Genuine Depreciation Claim Cannot Be Denied Due to Omission in Schedule DPM; Officers Cannot Blame the System
The Delhi ITAT allowed the assessee’s appeal, holding that a genuine claim for depreciation under section 32 cannot be denied merely because the assessee inadvertently failed to fill Schedule DPM while filing the return, particularly when the depreciation claim was otherwise disclosed in the return and the omission was later rectified.
The assessee-company had filed its return claiming depreciation in Schedule BP, but inadvertently omitted to populate Schedule DPM, resulting in the CPC disallowing depreciation of ₹2,62,860 while processing the return. Although the assessee repeatedly filed rectification applications under section 154 and furnished the complete depreciation schedules, the CPC rejected them on the ground that the system did not permit rectification where Schedule DPM had not originally been filled.
The Tribunal noted that the depreciation claim was clearly reflected in Schedule BP, and during the rectification proceedings the assessee had furnished all the necessary particulars in Schedule DPM and Schedule DEP. The omission was therefore a genuine and inadvertent procedural error, not an attempt to make an impermissible claim.
Referring to Explanation 5 to section 32(1), CBDT Circular No. 14 (XL-35) of 1955 and various judicial precedents, the ITAT reiterated that depreciation is a statutory allowance and that the Department has a duty to ensure that lawful reliefs are granted instead of taking advantage of procedural lapses.
Making strong observations on the functioning of the tax administration, the Tribunal held that while a computer system may reject a claim because of coding limitations, the rectification mechanism exists precisely to enable human officers to correct genuine mistakes. It remarked that the claim of depreciation cannot be denied merely by transferring the blame to the machine, adding that “the machine is dumb” and that tax officers should not act “as dumb like the machine” when considering genuine rectification requests.
Accordingly, the ITAT directed the Jurisdictional Assessing Officer to allow the depreciation claim of ₹2,62,860, holding that a substantive statutory deduction cannot be defeated by a technical omission in the return. The assessee’s appeal was allowed.
Cases Discussed
- S&P Capital IQ (India) (P.) Ltd. v. Assistant Commissioner of Income-Tax (ITAT Hyderabad),[2024] 158 taxmann.com 12 (Hyderabad – Trib.) / [2024] 205 ITD 217 (Hyderabad – Trib.)
- Vedanta Limited (Successor To Cairn …) vs Principal Commissioner Of Income … (Delhi High Court),on 19 March, 2018
- DCIT v. Prithvi Insurance Brokers (P.) Ltd. (Mumbai – Trib.),[2016] 160 ITD 400 (Mumbai – Trib.)
- CIT v. Infosys Technologies Ltd. (Kar.),[2012] 341 ITR 293 (Kar.)
- Goetze (India) Ltd. v. CIT (SC),[2006] 284 ITR 323 (SC)
- CIT v. Shelly Products (SC),[2003] 261 ITR 367 (SC)
- CIT v. Mahalaxmi Sugar Mills Co. Ltd. (SC),[1986] 160 ITR 920 (SC)
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal filed by the assessee is directed against the order of ld. Addl./JCIT (Appeals), Mysore [for short ‘ld. CIT (A)] dated 17.11.2025 for the Assessment Year 2012-13 raising following grounds of appeal :-
“1. That on the facts and circumstances of the appellant’s case, the learned Commissioner of Income Tax (Appeals) erred in law in upholding the addition of Rs,2,62,860/- on account of disallowance of depreciation as per Income Tax Act. 1961, which is completely technical in nature as error has not been generated while generating xml file for uploading the return of income, by rejecting the detailed submission of the appellant and without considering the fact that option to revise the return of income has been lapsed and appellant had filed rectification under section 154 of the Income Tax Act. 1961.
2. That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.”
2. At the time of hearing, ld. AR of the assessee brought to our notice relevant facts and submitted his submissions as under. Brief facts of the case are, the assessee is a company incorporated under the provisions of Companies Act, 1956 having its registered office at E – 253, Saraswati Kunj Apartments 25, I.P. Extension, Patparganj, Delhi – 110 092 has e-filed its return of income for the Assessment Year 2012-13 on 14.10.2023 declaring total income of Rs.1,93,510/- under the head ‘Profits and gains from business or profession’ which has been processed on 15.11.2023 in which total income has been assessed at Rs.4,56,370/- against the returned income of Rs.1,93,510/-, thereby making addition of Rs.2,62,860/- on account of disallowance of depreciation as per Companies Act, 1956 and accordingly, demand has been raised amounting to Rs.1,12,200/-. Ld. AR submitted that it is pertinent to note that the assessee filed rectification applications under Section 154 of the Income Tax Act, 1961 on the following dates:
- 20.01.2014 (Rectification Ref. No. 865255521200114)
- 15.01.2019 (Rectification Ref. No. 409005641150119)
- 28.10.2020 (Rectification Ref. No. 681384561281020)
3. He submitted that all of the above rectification applications were rejected by CPC, Bengaluru, and no relief in respect of depreciation was granted. He further submitted that assessee had filed physical application with the jurisdictional assessing officer on 05.12.2019 whose copy of the letter has been placed on record, however, the Assessing Officer did not bother to consider the rectification application till date.
4. He submitted that while filing the original return of income for Assessment Year 2012-13, Schedule DPM (Depreciation on Plant and Machinery) was inadvertently omitted. However, Schedule BP (Details of Business Income) was properly filled, specifically Row No. 12(ii) of Point A, which clearly reflected the depreciation allowable under Section 32(1)(i) of the Income Tax Act, 1961 (for short ‘the Act’). He submitted a relevant screenshot of this entry which is reproduced below for reference :-
5. Further, he submitted that subsequently, in the rectification applications filed under Section 154, the appellant duly filled Schedule DPMwith all requisite details and annexures, thereby correcting the inadvertent omission. However, despite submitting complete and accurate data during rectification, the CPC passed orders dated 24.07.2020 and 02.11.2020, rejecting the rectification applications on the ground that rectification could not be carried out. For the sake of brevity, Schedule DPM and Schedule DEP is reproduced below :-
6. Further he submitted that however, even after filing the complete details in the relevant schedule, rectification order has been passed wherein rectification applic ation has been rejected vide order d ated 24.07.2020 and 02.11.2020 by stating that rectification cannot be made and hence application is reje ted. Rectification order extract is att ached below for perusal: –
7. Ld. AR further submitted that the CBDT Circular No . 14 (XL-35) of 1955, dated 11-4- 955, reinforces this obligation in un equivocal terms, stating that the de artment must not take advantage of ignorance of any assessee as to his rights and it is one of the duties of t e department to assist a taxpayer i n every reasonable way, particularly in the matter of claiming and securing reliefs, by taking initiative in guiding the taxpayer where the proceedings are before them that some reli ef is due to the taxpayer.
8. He submitted that when one reads Explanation5 to secti on 32(1) and the above circular issued by the CBDT in the context of rticle365 of the Constitution of In dia, one finds it difficult to uphold the action of the authorities below i n depriving the assessee of the claim for deduction of depreciation.
- The omission of Schedule DPM was a genuine, inadvertent, and human error during return filing, which was subsequently rectified in the rectification applications.
- The depreciation claimed under Section 32 of the Income Tax Act, 1961, was clearly disclosed in Schedule BP and forms an integral part of the return.
- The mere procedural lapse of not originally populating Schedule DPM should not result in denial of a legitimate claim under law, especially when the depreciation was already accounted for and supported by calculations in Schedule BP.
- Depreciation under Section 32 is a statutory allowance, and once the conditions under that section are satisfied and adequate details are furnished (as done subsequently), disallowance solely due to non-filing of a supporting schedule cannot be justified. The relevant provisions of the Act read as follows:
“Depreciation.
32. (1) In respect of depreciation of–
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trademarks, licences, franchises or any otherbusinessor commercial rights of similar nature, being intangible assets acquired onor after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall beallowed–
(i) ….
(ii) in the case of any block of assets, such percentage on the written down valuethereof as may be prescribed:
Provided that
Explanation 5.–For the removal of doubts, it is hereby declared that the provisions ofthis sub-section shall apply whether or not the assessee has claimed the deduction inrespect of depreciation in computing his total income; (iia) in the case of any newmachinery or plant (other than ships and aircraft), which has been acquired andinstalled after the 31st day of March, 2005, by an assessee engaged in the business ofmanufacture or production of any article or thing or in the business of generation orgeneration and distribution of power, a further sum equal to twenty per cent of theactual cost of such machinery or plant shall be allowed as deduction under clause (ii)
:………………….”
- The Courts have consistently held that procedural technicalities should not override substantive rights, and that rectification under Section 154 is permissible when there is a mistake apparent from the record, as in this case.
- Denial of depreciation, despite all details being subsequently submitted, results in unjust enrichment of the revenue and causes undue hardship to the appellant.
9. Ld. AR of the assessee placed reliance on the following case laws:-
- Vedanta Limited (Successor To Cairn … vs PrincipalCommissioner Of Income … on 19 March, 2018 [ High Court of Delhi at New Delhi]
“6. This court is of opinion that the plain text of the explanation leaves no room for admitting theinterpretive gloss that the assessee wishes to place over it. There can be a multitude ofcircumstances where, but for the provision, the incentive, available to all those for whom the benefitof additional depreciation was intended, could have been deprived of it. Undoubtedly, the amount of the assessee’s claim for Section 80IB deduction increased, when it sought to withdraw the additionaldepreciation claim. However, that single circumstance should not influence this court to ignore theplain intendment of the statute, since Parliament clearly stated that the provisions of “thissub-section” would apply, “whether or not the assessee has claimed the deduction in respect ofdepreciation in computing his total income”.This court cannot re-write the statute, as is sought to beurged. For thesereasons, the Court is of the opinion that no question of law arises on this aspect.”
- [2024] 158 taxmann.com12 (Hyderabad – Trib.)/[2024] 205 ITD 217 (Hyderabad -Trib.)[26-12-2023]IN THE ITAT HYDERABAD BENCH ‘A’S&P Capital IQ (India) (P.) Ltd.v.Assistant Commissioner of Income-Tax
“15. Explanation 5 to Section 32(1) of the Act clearly lays down that the provisions of such sub-section shallapply whether or not the assessee has claimed the deduction in respect of the depreciation in computing thetotal income. It, therefore, goes without saying that irrespective of the fact of assessee claiming or not, thedepreciation shall be allowed while computing the total income of the assessee. Then it becomes theobligation on the part of the Revenue to allow depreciation on goodwill even if it is not claimed by the assessee. At the same time, the CBDT Circular No. 14 (XL – 35) of 1955, date 11/04/1955, reinforces thisobligation in unequivocal terms, stating that the department must not take advantage of ignorance of any assessee as to his rights and it is one of the duties of the department to assist a taxpayer in every reasonableway, particularly in the matter of claiming and securing reliefs, by taking initiative in guiding the taxpayerwhere the proceedings are before them indicate that some relief is due to the taxpayer. When we readExplanation 5 to Section 32(1) of the Act and the above circular issued by the CBDT in the context of Article365 of the Constitution of India, we find it difficult to uphold the action of the authorities below in depriving the assessee of the claim for deduction of depreciation on goodwill.
16. For the reasons set forth in the foregoing paragraphs, we are of the considered opinion that disallowanceof the claim for deduction of depreciation on goodwill by the authorities below cannot be sustained and thesame is liable to be deleted. We hold and order so. Grounds of appeal are accordingly allowed.
17. In the result, appeal of the assessee is allowed.”
- CIT v. Mahalaxmi Sugar Mills Co. Ltd. [1986] 160 ITR 920 (SC)
“It is well-settled that a claim, if allowable under law, cannot be disallowed merely because a wrong section has been quoted or wrong form has been filed, so long as the necessary facts are on record.”
- Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC)
While the Supreme Court restricted the AO’s power to entertain new claims without revised return, it clarified that the appellate authorities are not barred from entertaining such claims if the supporting facts are already on record.
- CIT v. Shelly Products [2003] 261 ITR 367 (SC)
“Where an assessee’s legal right is denied merely on technical grounds, such denial would be unjustified.
- CIT v. Infosys Technologies Ltd. [2012] 341 ITR 293 (Kar.)
The Karnataka High Court held that a statutory deduction cannot be denied solely due to a technical or clerical error in the return if the assessee is otherwise eligible.
- DCIT v. Prithvi Insurance Brokers (P.) Ltd. [2016] 160 ITD 400 (Mumbai – Trib.)
Held that depreciation under Section 32 cannot be denied merely due to non-filing or defective filing of Schedule DPM, where sufficient supporting evidence is available on record.
Depreciation is a statutory allowance under Section 32 of the Income Tax Act, and once the eligibility conditions are met and details have been provided—even if through rectification—the same cannot be denied merely due to a procedural omission like the non-filing of Schedule DPM.
The rejection of the rectification applications under Section 154 is not sustainable in law, as the mistake was apparent and rectifiable, and the depreciation claim was substantiated through Schedule BP and further rectified by furnishing full details.
10. In light of the above, it is respectfully requested that the disallowance of depreciation amountof Rs. 2,62,860/- be deleted, the total income be revised accordingly, and the resultant demand of Rs.1,12,200/- be withdrawn. It is further requested that appropriate relief be granted under the provisions of the Income Tax Act, 1961.
11. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
12. Considered the rival submissions and material placed on record. We observed from the record that the assessee inadvertently omitted to fill the schedule DPM but filled the schedule BP properly. The claim of the depreciation as per section 32 was claimed in the schedule BP and the above claim is properly matching to the schedule BP submitted by the assessee while filing the rectification application. However, the same was rejected by the tax authorities with the observation that at the time of processing, system do not allowclaim in absence of figures mentioned in schedule DPM. After considering the submissions of both parties, the system may not accept the claim due to absence of figures, but at the time of rectification, the humans are being tasked to rectify the genuine mistake. The officers are not inclined to look at the genuine hardship of the assessee and also it is the duty of the officers to make sure that genuine claims of the assessee should be entertained. In the given case, the claim of the assessee is genuine as per law, the claim of the depreciation is automatic and the same cannot be declined merely transferring the blame to the machine or system. We are aware that the machine is dumb, it carries on its activities as per set coded system. That is the reason, human interface was introduced in the rectification process, even then the officers areintend to work as dumb like the machine. In our considered view, claim of the assessee is genuine as per law, we direct the JAO to allow the claim of depreciation in this case. In the result, grounds raised by the assessee in this regard are allowed.
13. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on this 5th day of August, 2026.
