IN THE ITAT CHENNAI BENCH ‘D’
Income Tax Officer, Ward-II(2)
Sri Balaji Sago and Starch Products
IT Appeal No. 2081 (Mds.) of 2010
c.o. no. 20 (mds.) of 2011
[assessment year 2007-08]
March 8, 2012
Dr. O.K. Narayanan, Vice-President – The appeal is filed by the Revenue. The cross objection is filed by the assessee. The relevant assessment year is 2007-08. The appeal and the cross objection are directed against the order passed by the Commissioner of Income-tax(Appeals) at Salem on 20.09.2010 and arise out of the assessment completed under sec.143(3) of the Income-tax Act, 1961.
2. The assessee had installed a windmill in Maruthur Village of Tharapuram Taluk in the later half of the previous year 2005-06. The first assessment year for claiming depreciation on windmill was assessment year 2006-07. The assessee claimed depreciation on written down value (WDV) basis. The rate applied was 15% and the quantum deduction claimed was half of the amount, as the asset was put to use for a period of less than 180 days. Following the earlier course of action for the assessment year 2006-07, the assessee claimed the depreciation for the impugned assessment year as well on WDV basis. The rate adopted in computing the income reflected in the return was 15%. But later, the assessee found that the rate of 15% claimed by the assessee was not the correct rate prescribed in the rules. The assessee, therefore, filed a letter before the assessing authority to rectify the rate of depreciation and apply the prescribed rate of 80%. The Assessing Officer rejected the subsequent claim made by the assessee in the course of assessment on the ground that the assessee had not in fact, exercised its option to claim depreciation either on WDV method or on straight-line method and so also has not applied the correct rate of depreciation provided in the rules. The prayer for rectification in adopting the correct rate of depreciation was not acted upon by the assessing authority.
3. The rule provides an option to the assessee to claim depreciation on windmill either on WDV method or on straight-line method.
4. In first appeal, the Commissioner of Income-tax(Appeals) observed that the relevant rule does not specify that the option has to be exercised by the assessee by filing a separate format before the assessing authority. The option has to be exercised before due date of filing of the return. The Commissioner of Income-tax(Appeals) found that the assessee had filed its return of income before due date in which the income was computed on the basis of claiming depreciation on WDV method. The rate applied by the assessee alone was incorrect. Instead of 80%, the assessee had claimed 15%. Apart from this mistake in the rate of depreciation, there is no case against the assessee that it has not exercised the option of choosing between WDV method and straight-line method. Regarding the correct rate of depreciation, the Commissioner of Income-tax(Appeals) held that as the prayer was only to apply the correct rate of depreciation, the same has to be accepted. Accordingly, the Commissioner of Income-tax(Appeals) adjudicated the matter in favour of the assessee by giving a direction to the Assessing Officer to grant the assessee depreciation at the rate of 80% on WDV method.
5. The Revenue is aggrieved, and, therefore, the second appeal before us.
6. The relevant grounds raised by the Revenue are extracted below :
“2. The CIT(A) has failed to appreciate the fact that neither for the current assessment year 2007-08, nor for the earlier assessment year 2006-07 in which the windmill in question had been installed, the assessee had exercised the option, in some way or other, to indicate that they wanted the benefit of WDV rate of depreciation and not under the straight line method.
3. The CIT(A) has erred in stating in Page No.11, Para 8 of his order that ‘The appellant has claimed wrong rate of depreciation and in the return filed for the A.Y. 2007-08 rectified the mistake of rate of depreciation….’ It is not correct that the assessee rectified the mistake of rate of depreciation in the return. The correct fact is that during the assessment proceedings assessee filed merely a letter rectifying the said mistake.
4. The Income-tax Act, 1961 or the Income-tax Rules, 1962 do not lay down any prescribed format for exercising the option in question, nor is there any stipulation that they have to be filed in any particular manner. However the law clearly says that such option should be filed within the due date for filing the return of income contemplated u/s.139(1). The law attaches sanctity to the option being exercised within the due date for filing the return of income and not at any point of time. Certain benefits contemplated by the statue are linked to the return of income being filed within the due date laid down in section 139(1) [like the tax holiday benefits contemplated by section 80-I, 80-IA etc.] or the option being exercised before the due date laid down in section 139(1), like the benefit currently agitated upon. In this case the “revised claim” of the assessee was made for the first time on 13-11-2009, which is well after the due date.
5. The Assessing Officer had clearly opined that the ratio of the decision of the Hon’ble Apex Court in the case of Shelly Products 261 ITR 367 is not applicable to the facts of the assessee’s case (in page 6 of the assessment order). This was not accepted by the CIT(Appeals). The facts in the case of Shelly Products (supra) were totally different and a paragraph in the judgment cannot be quoted in isolation, to emphasize a point in another case whose facts are totally different. In the case of CIT v. Sun Engineering Works Ltd. 198 ITR 297(SC) has frowned upon such an approach, stating clearly that a judgment is being rendered on the facts and circumstances, as applicable to the said case. A para or sentence in a judgment is not be quoted in support of a conclusion. Reference may be made to para 25 of the said judgment, wherein their Lordships have referred to their earlier decision reported in AIR 1971 (SC) 530.
6. The following aspects deserve attention :
(i) The revised claim was made through a mere letter and not revised return;
(ii) As assessee cannot make a revised claim for the earlier assessment year in the current year;
(iii) This letter was filed well after the due date for filing the return.
7. The Commissioner of Income-tax(Appeals) ought to have considered that the Supreme Court in the case of Goetze (India) Ltd. v. CIT 284 ITR 323, on the issue ‘whether the appellant could make a claim for deduction other than by filing a revised return?’. It has been held that ‘there was no provision under the Income-tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return’. In this case the assessee has not made any claim by way of revised return.”
7. The grounds in the cross objection filed by the assessee in fact, do support the order of the Commissioner of Income-tax(Appeals) and the ultimate prayer was only to dismiss the appeal preferred by the Revenue.
8. Shri KEB Rengarajan, the learned Standing Counsel appearing for the Revenue contended that even if no format is prescribed for exercising the option of choosing the method of depreciation available on the windmill, it is incumbent upon the assessee to demonstrate that the assessee has opted for a particular method which should be communicated before due date of filing of the return. In the present case, as the assessee had claimed depreciation for the earlier assessment year on straight-line method, the same method and rate were followed for the subsequent impugned assessment year and in such circumstances, it is very evident that the assessee has opted for straight-line method. Therefore, the assessing authority is justified in following the straight-line method, opted for by the assessee in a consistent manner, as the law provides that once a method is chosen, the same has to be followed for all the assessment years to come.
9. The learned Standing Counsel further argued, in the alternative, that a claim of deduction cannot be made by the assessee in the course of assessment by filing a letter. The provided course of action is to file a revised return of income as held by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (284 ITR 323).
10. The learned Standing Counsel further contended that both on merit on the question of opting the method of depreciation and also on the question of jurisdiction on considering a claim in the course of assessment in the absence of a revised return, the assessee has no case and the Commissioner of Income-tax(Appeals) has grossly erred in setting aside the order of the assessing authority on this point and in allowing the appeal filed by the assessee.
11. Shri M. Narayanan, the learned authorized representative appearing for the assessee, on the other hand, explained that the windmill was commissioned in the second half of the previous year, relevant to the assessment year 2006-07 and thus, the assessment year 2006-07 was the first year in which the assessee had claimed depreciation on windmill. Therefore, the quantum of depreciation, whether under straight-line method or under WDV method, will be the same for the assessment year 2006-07, as it was the first assessment year in respect of depreciation. The mistake committed for the assessment year 2006-07 was only in respect of adopting the rate of depreciation. The assessee had claimed depreciation at 15% instead of 80%. There is no other indication to hold that the assessee had opted for straight-line method.
12. The learned authorized representative further explained that the test of opting for a particular method is clearly discernible from the impugned assessment year 2007-08 which is the second year of assessment as far as the question of depreciation on windmill is concerned. It is categorically found that the assessee had claimed depreciation on WDV brought down from the earlier assessment year. Thus, if the claim made for both the assessment years put together, it is clear that the assessee has opted for depreciation on WDV method.
13. Regarding the correct rate of depreciation, the learned authorized representative submitted that the assessee has not made any claim for any fresh deduction in the course of assessment proceedings. The assessee has already made its claim for the statutory allowance of depreciation, but, the assessee applied incorrect rate. By pointing out the correct rate of depreciation, the assessee was in fact, requesting the Assessing Officer to rectify a mistake apparent on record and the assessee was not praying for any deduction for the first time.
14. He, therefore, submitted that the Commissioner of Income-tax(Appeals) is right in giving direction to the Assessing Officer to grant depreciation on WDV at the appropriate rate of 80%.
15. He has also relied on the decision of the Hon’ble Punjab & Haryana High Court rendered in the case of CIT v. Ramco International (332 ITR 306); the decision of the Hon’ble Gujarat High Court in the case of Chokshi Metal Refinery v. CIT (107 ITR 63) and the decision of the ITAT, Chennai Bench ‘D’ in the case of K.K.S.K. Leather Processors (P) Ltd. v ITO (126 ITD 215).
16. We heard both sides and considered the matter in detail.
17. The Commissioner of Income-tax(Appeals) has examined in detail the sequences of furnishing of reports and particulars by the assessee along with the return of income to come to a factual finding that the assessee had in fact, opted for choosing the claim of depreciation on WDV method. The impugned assessment year being the second assessment year for claiming depreciation on the windmill, the value on which the assessee had claimed depreciation is an apparent testimony to show that what is the course of action opted for by the assessee. In the immediately preceding assessment year, the claim of depreciation was for the first year, the depreciation was claimed on the original cost even though at a wrong rate. In the impugned assessment year, the depreciation was claimed again at wrong rate but on WDV method. Therefore, it is very clear that the assessee has exercised its option for choosing the method of providing for depreciation as prescribed in the statute. We agree with the factual finding of the Commissioner of Income-tax(Appeals) on this point.
18. Regarding the question, whether a claim made by the assessee in the course of assessment proceedings by way of other than filing a revised return, we have to state that exactly similar issue was considered by the Punjab & Haryana High Court in the case of CIT v. Ramco International (332 ITR 306). In that case, the assessee had claimed deduction under sec.80IB. Though the assessee had furnished Form 10CCB and other requisite documents, the Assessing Officer made the assessment without referring to those documents. In first appeal, the Commissioner of Income-tax(Appeals) allowed the claim of the assessee which was the second appeal before the Tribunal. When the matter was again taken before the Hon’ble High Court, their Lord-ships held that as per Form 10CCB filed by the assessee in the assessment proceedings, the claim of deduction made by the assessee was admissible. The court held that the assessee was not making any fresh claim and had duly furnished and submitted the Form for claiming deduction under sec.80IB and in such circumstances, there was no requirement of filing any revised return. In the present case also, the assessee has made a claim for depreciation on WDV method but the rate chosen was not a correct one. The assessee asked for adopting the correct rate which is in fact, was only a prayer to rectify a mistake apparent on record. The assessee was not claiming any fresh claim before the assessing authority. Therefore, the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (284 ITR 323) does not apply to the present case.
19. The above position is fortified by the order of the ITAT, Chennai Bench ‘D’ rendered in the case of K.K.S.K. Leather Processors (P.) Ltd. (126 ITD 215). The Tribunal, after examining the Explanation 5 to sub-sec. (1) of sec.32, held that the provisions of sub-sec.(1) of sec.32 was applied whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. The Tribunal held that the Assessing Officer is duty bound and under obligation to allow the deduction of depreciation as per the provisions of sec.32(1). When such a statutory obligation is cast on the assessing authority, it is incumbent on him to apply the correct rate of depreciation, especially in the present case where the option exercised by the assessee is manifestly clear.
20. In the present case, the assessee has not made any fresh claim, as far as depreciation is concerned. It has already made a claim for statutory allowance of depreciation, subject to the mistake occurred in choosing the correct rate. The ratio of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (284 ITR 323) needs to be carefully applied in the matters of statutory allowances available to an assessee. There is a genetic difference in the concept of deduction by way of statutory allowance and deduction by way of other expenditure.
21. In the facts and circumstances of the case, we find that the order passed by the Commissioner of Income-tax(Appeals) is sustainable in law and the appeal filed by the Revenue is liable to be dismissed.
22. So much so, the cross objection filed by the assessee has become infructuous and liable to be dismissed in limine. There is a delay of 5 days in filing the cross objection. For the purpose of considering the cross objection, the delay is excused and the cross objection is admitted but the same is dismissed as infructuous.
23. In result, the appeal filed by the Revenue as well as the cross objection filed by the assessee are dismissed.