2014 (5) TMI 72 - AT - Income Tax

Restriction of depreciation on windmills Disallowance of claim of higher depreciation Held that - The decision in KKSK Leather Processors (P.) Ltd. v. ITO 2009 (11) TMI 556 - ITAT MADRAS-D followed - filing of audit report within the due date amounts to exercising option as required under the second proviso to Rule 5(1A) of Income-tax Rules for claiming higher depreciation - when there is no specific form or method prescribed for exercising the said option for claiming higher depreciation, then the claim made in the return of income as well as reflected in the books of account and audit report filed along with the return of income is more than the exercise of option as required under the second proviso to Rule 5(1A) of Income Tax Rules - exercising option by filing audit report before the due date for filing of return for claiming higher depreciation on the windmills, the assessee is entitled for higher depreciation even though the return was filed belatedly thus, the matter is remitted back to the AO for verification - Decided in faovur of Assessee.

Summary

Issues:
Claim for higher depreciation on windmills installed in different assessment years.

Analysis:
The main issue in this case revolves around the claim for higher depreciation on windmills installed in different assessment years. The appellant contested the restriction of depreciation on windmills installed in the financial year 2003-04 to 7.69% and the disallowance of the claim for higher depreciation. The Assessing Officer disallowed higher depreciation claimed on windmills installed during the assessment years 2000-01 and 2004-05 due to the belated filing of the return for the assessment year 2004-05 and the failure to exercise the option of claiming higher depreciation as per Rule 5(1A) of the Income-tax Rules.

Upon appeal, the Commissioner of Income Tax (Appeals) allowed the claim for higher depreciation on windmills installed in the assessment year 2000-01, stating that the option for higher depreciation had been exercised in the initial assessment year. However, for windmills erected during the assessment year 2004-05, the Commissioner held that the option had not been exercised before the due date for filing the return, as the return was filed belatedly. Thus, the disallowance of higher depreciation for windmills installed in 2004-05 was upheld.

The appellant argued that despite the belated filing of the return, the audit report exercising the option for higher depreciation was filed before the due date for filing the return for the assessment year 2004-05. The counsel contended that no specific requirement in the Income-tax Act mandates filing the return within the due date to claim higher depreciation, as long as the option is exercised before the due date for filing the return.

After considering the arguments, the Tribunal held that exercising the option by filing the audit report before the due date for filing the return qualifies as claiming higher depreciation. Following a precedent set by a co-ordinate Bench, the Tribunal ruled that the appellant is entitled to higher depreciation on windmills erected in the assessment year 2004-05, even though the return was filed belatedly. The Assessing Officer was directed to verify the filing date of the audit report to ensure compliance with the rules. If the audit report was indeed filed before the due date, the appellant should be allowed higher depreciation on the windmills for the said assessment year.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the decision was pronounced in an open court on a specified date in Chennai.