2016 (2) TMI 377 - AT - Income Tax

Disallowance of deprecation on windmills on WDV Method - methodology of claim of deprecation - assessee claimed deprecation at 80% on written down value method instead of straight line method at 7.69% - Held that - Since the assessee company claimed depreciation on straight line method for the assessment year 2009-2010 and cannot have different methodology of deprecation for the subsequent years. We rely on the decision in the case of CIT vs. Kikani Exports P. Ltd 2015 (2) TMI 680 - MADRAS HIGH COURT where it was held that All the second proviso to Rule 5(1A) states is that the assessee has to exercise option before the due date for furnishing return of income. If option is exercised after furnishing of return of income under sub-section (1) of Section 139 it is of no avail. Form ITR-6 gives methodology on which deprecation can be claimed. Statue did not provide for any other method to exercise option except through filing of return. To read something more into second proviso to Rule 5(1A) that an option should be exercised separately would make returns filed meaningless. Thus if assessee exercised option in terms of second proviso to Rule 5(1A) at 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. Further option once exercised will continue to all subsequent years assessee is not required to exercise such option each and every year separately. Revenues appeal dismissed . We find the facts and circumstances of the present case are similar to the case decided by the Jurisdictional High Court and accordingly - Decided against assessee.

Summary

Issues:
- Disallowance of depreciation on windmills on WDV Method for assessment years 2010-2011 and 2011-2012.
- Validity of reopening of assessment under section 147 of the Income Tax Act.

Analysis:
1. Depreciation Disallowance on Windmills on WDV Method:
- The assessee claimed depreciation on windmills at 80% on WDV method, contrary to the straight-line method at 7.69%.
- The Assessing Officer disallowed the claim and allowed depreciation at 7.69% for both assessment years.
- The assessee argued that the return of income was filed within the due date, making the claim valid under the WDV method.
- The Commissioner of Income Tax (Appeals) upheld the disallowance, stating that since windmills were first installed in 2008-2009, subsequent years' depreciation should be on the SLM basis.
- The Tribunal reviewed the legal provisions under Section 32(1)(i) of the Income Tax Act and Rule 5(1A) of the Income Tax Rules.
- It was noted that the assessee did not exercise the option for claiming depreciation under the WDV method before the due date for the assessment year 2009-2010.
- Relying on the decision in CIT vs. Kikani Exports P. Ltd, the Tribunal held that once the option is exercised, it applies to subsequent years, and separate intimation is not required.
- As the assessee did not exercise the option in the first year, the subsequent years' depreciation could not be claimed under the WDV method.
- The Tribunal dismissed the appeals, upholding the disallowance of depreciation on windmills at 80% for the assessment years in question.

2. Validity of Reopening of Assessment under Section 147:
- The assessee challenged the validity of the reopening of assessment under Section 147 of the Income Tax Act.
- The Tribunal did not address this issue explicitly in the judgment, focusing primarily on the depreciation claim on windmills.

In conclusion, the Tribunal dismissed the assessee's appeals regarding the disallowance of depreciation on windmills at 80% on the WDV method for the assessment years 2010-2011 and 2011-2012. The decision was based on the failure to exercise the option for claiming depreciation under the WDV method before the due date for the initial assessment year, as required by the relevant legal provisions and judicial precedents.