2014 (12) TMI 182 - HC - Income Tax

Claim of depreciation on installation of windmill Claim contrary to Rule 5(1A) of the Income Tax Rules and Appendix 1A or not - Held that - Following the decision in CIT V. Vijaya Hirasa Kalamkar (HUF), 1992 (9) TMI 4 - BOMBAY High Court wherein it has been held that if the assessee exercised the option in terms of second proviso to Rule 5(1A) of the Income Tax Rules at the time of furnishing of return of income, it will suffice and no separate letter or request or intimation with regard to of 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 make a provision for exercising an option in respect of the claim of depreciation, no separate procedure is required, as contended by the Department Decided against revenue.

Summary

Issues:
1. Claim of depreciation on windmills contrary to Rule 5(1A) of Income Tax Rules and Appendix 1A.

Analysis:
The Revenue filed an appeal challenging the order of the Income Tax Appellate Tribunal regarding the claim of depreciation by the assessee on windmills for the assessment year 2005-2006. The questions of law raised by the Revenue questioned the Tribunal's decision on the satisfaction of the second proviso to Rule 5(1A) of the Income Tax Rules, granting depreciation at 80% on windmills, and the entitlement to a higher rate of depreciation. The issue revolved around whether the assessee met the requirements for depreciation as per the relevant provisions.

The learned standing counsel for the Revenue argued that the issue was settled by a previous decision of the Court in a batch of cases. Referring to a decision of the Bombay High Court, the Court held that if the assessee exercised the option in terms of the second proviso to Rule 5(1A) at the time of filing the return of income, no separate intimation was required. The Court agreed with the Tribunal's reasoning that no separate procedure was necessary if the option was exercised while filing returns under Section 139(1) of the Income Tax Act. Consequently, the Court answered the questions of law in favor of the assessee based on the precedent set by the Bombay High Court decision.

In conclusion, following the precedent established by the Court's previous decision and the interpretation of the relevant provisions, the substantial questions of law raised by the Revenue were resolved in favor of the assessee. As a result, the appeal was dismissed, affirming the entitlement of the assessee to claim depreciation on windmills as per the provisions of the Income Tax Rules.