2010 (1) TMI 970

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..... reason the assessee has not exercised the option in time as per rule 5(1A) of the Income-tax Rules. During the assessment, the Assessing Officer found that the assessee has not filed his return of income in time for the assessment year 2005-06 wherein the assessee claimed depreciation at 80 per cent. on wind mill. In the said order, the depreciation was restricted to 7.69 per cent. Accordingly, the Assessing Officer has restricted the depreciation on wind mill at 7.69 per cent. for this assessment year. On appeal, the Commissioner of Income-tax (Appeals) has confirmed the disallowance of depreciation made by the Assessing Officer on the ground that the Assessing Officer has rightly restricted the depreciation on wind mill in accordance w .....

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..... dix I and Appendix IA to the Income-tax Rules in respect of assets of the undertaking engaged for generation and distribution of power. Thus, to make it clear and facilitate the Assessing Officer as to which of the rates provided under two different appendixes of depreciation shall be applicable, the second proviso to rule 5(1A) requires the assessee to exercise its option that the depreciation be allowed as per Appendix I. Therefore, the option exercised as per rule 5(1A) is only to facilitate the Assessing Officer in discharging his obligation as per Explanation 5 to sub-section (1) of section 32 of the Income-tax Act, so that the depreciation shall be allowed as per the option of the assessee and not at the discretion of the Assessing Of .....

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..... ement of exercising any separate option. Once the assessee has exercised his option for the assessment year 2005-06, that may be belated for that assessment year but once it is exercised then there is no requirement for further exercising the option in the subsequent year. Even otherwise the option exercised for the assessment year 2005-06 becomes final and applicable to the assessment year 2006-07, which is under consideration and the same is well within time for this year. In view of the above discussion, we hold that the assessee, for the year under consideration, has satisfied the requirement of the second proviso to rule 5(1A) and therefore, is entitled to depreciation on wind mill as per Appendix I. The lower authorities have not ta .....

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