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TMI Blog2015 (3) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation to the Assessee in accordance with Appendix-1 on the items which are mentioned under column 8(ix)(d) as per the rate specified therein. - Decided in favour of assessee. Claim of deduction u/s 43B in respect of Purchase Tax payable - Held that:- In the present case even though the Assessee has filed abstract of the Industrial Policy but has not adduced any evidence or material which may prove that the purchase tax payable by the Assessee has been converted into loan and therefore the liability towards the purchase tax stand discharged before the due date of filing of the return. In the interest of justice and fair play to both the parties, we set aside the order of CIT(A) and restore this issue to the file of the AO with the direction that the AO shall look into the evidence filed by the Assessee whether the said purchase tax payable by the Assessee got converted into loan as per the Industrial Policy before the date of filing of the return by the Assessee for the impugned assessment year. In case the AO finds that the purchase tax payable by the Assessee was converted into loan under the Karnataka Government scheme before the due date of filing of the return, the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as due compliance with the requirements of the said second proviso for the purpose of exercising option. 7. Hence depreciation ought to have been allowed not on the straight line method but on the WDV method. 2. In addition to the above grounds, in the A.Y 2010-11 the Assessee has taken the following three more grounds : 8. The Hon‟ble Commissioner of Income-tax (Appeals) erred in upholding the disallowance of ₹ 4,62,04,825/- relaying on the provisions of Section 43B of the Act. 9. The Hon‟ble Commissioner of Income-tax (Appeals) ought to have appreciated that the purchase tax payable under the provisions of sales tax is converted into loan by the scheme of the Karnataka Government under the Industrial policy. Hence, the provisions of Section 43B are not applicable. 10. The levy of interest u/s 234B and 234C are not in accordance with law. 3. Both the parties agreed that ground nos. 1 to 7 in both the years being common be decided on the basis of the facts relating to A.Y 2009-10. 4. The brief facts for A.Y 2009-10 are that the company is engaged in the production of sugar from sugarcane crushing. It has filed its return for A.Y 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same basis depreciation was allowed during the A.Y 2010-11. When the matter went before CIT(A), CIT(A) upheld the disallowance. 5. Before us, the ld. AR drew our attention towards Rule 5(1A) which states that the allowance u/s 32(1)(i) in respect of depreciation of the assets acquired on/after 1.4.1997 shall be calculated at the percentage specified in the second column of the table in Appendix-1A on the actual cost thereof to the Assessee as are used for the purpose of business of the Assessee at any time during the previous year and vehemently contended that as per the second proviso it was provided that undertaking specified u/s 32(1)(i) instead of claiming depreciation as specified in the Appendix-1A, at its option can claim depreciation under sub-rule (1) read with Appendix-1 if such option is exercised before the due date of furnishing of return of income u/s 139(1) for the assessment year relevant to previous year in which it begins to generate power. In case of any other undertaking it was also pointed out that once the option is exercised, it will be final and shall apply to all the subsequent assessment years. Our attention was also drawn towards provisions of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teel and Power Ltd. vs. CIT (2007) 106 TTJ Delhi 943 6. The ld. DR on the other hand relied on the order of the tax authorities below. 7. We heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. We noted that in A.Y 2009-10 the only issue involved in the case of the Assessee relates to claim of depreciation on the plant and machinery used for the purpose of power generation as detailed in the assessment order on a capital expenditure of ₹ 41,98,83,440/-. The AO under para 4.2 of his order accepted that the Assessee will be entitled to claim 80% of the depreciation as enumerated under the new Appendix-1 as provided under item 8(ix)(d) if it has exercised the option as envisaged u/s 32(1)(i) r.w.r 5(1A) before the due date of filing of the return. The AO did not allow the said depreciation as according to the AO the Assessee is not found to have exercised the option for filing the return of income/letter to that extent on/before the due date of filing the return. Similarly, in the subsequent year the depreciation was also not allowed at that rate in view of the third proviso that such option once exercised shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r prior to 1st day of April, 1997; and (b) for the assessment year relevant to the previous year in which it begins to generate power, in case of any other undertaking : Provided also that any such option once exercised shall be final and shall apply to all the subsequent assessment years. From the perusal of Sec. 32(1)(i) it is apparent that the Assessee shall be entitled to depreciation on the assets as mentioned u/s 32(1)(i) and (ii) if the assets are owned, wholly or partly, by the Assessee and used for the purpose of business or profession in case of the assets of an undertaking engaged in generation or generation and distribution of power at such percentage on the actual cost thereof to the Assessee as may be prescribed. It is not denied by the Revenue that the Assessee s business activity includes generation of power and the Assessee feeds surplus power to the grid of KPTCL and admits receipt of ₹ 7,64,93,490/- on sale of power to KPTCL. Rule 5(1A) has been inserted w.r.e.f. 2.4.1997. This rule states that depreciation of assets acquired on/after 1.4.1997 shall be calculated at the percentage specified in the second column of the table in Appendix-1A of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation in accordance with Appendix-1 but while giving this option the rule making authority has prescribed a condition that such option must be exercised by the Assessee before the due date of furnishing the return u/s 139(1). Putting a condition of exercising the option by an Assessee within a certain time, in our opinion, will tantamount to prescribing the percentage of deprecation along with certain conditions. In our opinion, this will tantamount to superseding the provisions of the Act. We noted that u/s 32 the legislature has not prescribed any such condition. Had that been an intention of the legislature, they would have provided the condition that in case the depreciation has to be allowed as per Appendix-1 the Assessee should have exercised the option before the due date of filing the return. We noted that wherever the legislature wants that such a condition has to be imposed, the legislature has specifically brought it under the specific provision as has been prescribed u/s 10A, 10(1A), 10A(8), 10B(8), 10AC and explanation to Sec. 11(1). The rule making authority cannot prescribe such condition of exercising the option before due date of filing return. The rule making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y capital gain tax. The Sec.139(4) declares that the assessee should file returns within the time prescribed, if he fails to file returns, he may file returns for any previous year at any time before expiry of one year from the end of relevant assessment year. In the instant case, the due date for filing of return is 30.7.88. U/S 139(4) the assessee was entitled to file returns in the extended time, which is within 31.3.1990. The extended due date u/s 139(4) would be 31.3.1990. The assessee did not file the returns within the extended due date, but filed the returns on 27.2.2000. However, the assesee had utilised the entire capital gains by purchase of a house property within the stipulated periods of Sec. 54(2) ie., before the extended due date for returns U/s 139. The Assessee technically may have defaulted in not filing the returns u/s 139(4). But however, utilised the capital gains for purchase of property before the extended due date u/s 139(4). The contention of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention. The Gauhati High Court in Commissioner of Income Tax V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were filed in accordance with section 139(1) and the form prescribed therein makes a provision for exercising an option in respect of the claim of depreciation, no separate procedure is required. The option once exercised will continue to all the subsequent years, the assesses are not required to exercise such option each and every year separately. 13. The Chennai Bench of the Tribunal in ITA No. 2064/Mad/2008 in the case of K. Ravi vs. ACIT, (2010) 2 ITR (Trib) 752 (Chennai) has held as under: 4. We have heard the learned Departmental representative as well as the learned authorised representative and considered the relevant record. As per the provisions of section 32(1)(i), the depreciation on asset of an undertaking engaged in generation or generation and distribution of power is at a percentage as prescribed as per the rates on the actual cost thereof. Thus, sub-clause (i) of sub-section (1) of section 32 of the Income-tax Act makes it clear that the depreciation at a prescribed rate on the asset as specified in clause (i) would be on actual cost instead of written down value (WDV). Further Explanation 5 to sub-section (1) of section 32 of the Income-tax Act stipulates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the second proviso to rule 5(1A). It is an undisputed fact that the assessee exercised the option for the assessment year 2005-06 but the return was filed after the due date of filing return as per section 139(1) of the Income-tax Act. It may be an issue of exercising the option after due date for the assessment year 2005-06 but it cannot be an issue in dispute for the subsequent year. As per the third proviso to rule 5(1A) when an option once exercised shall be final and shall apply to all the subsequent assessment years ; then for the subsequent years, there is no requirement 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. 7. In view of the above discussion, we hold that the assessee, for the year under consideration, has satisfied the requirement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is that it began to generate power during the previous year relevant to asst. yr. 1999-2000. As per Annex. D annexed to the computation of income chargeable to tax filed along with the return of income for asst. yr. 1999-2000, the assessee had claimed depreciation in accordance with sub-r. (1) r/w Appen. I. Thereafter the assessee‟s return of income was processed under Section 143(1) on 29th Sept., 2000 and no adjustment in that behalf was made by the AO. According to the learned counsel for the assessee the return of income filed before the due date of furnishing the return under Section 139(1) for asst. yr. 1999-2000, made proper compliance to the requirements of the second proviso to r. 5(1A) of IT Rules. On consideration of the matter we accept this argument. As noticed earlier the provisions of IT Rules, 1962 have not laid down any particular procedure for exercise of option by the assessee. That being so the assessee could find the occasion to exercise his option while filing the return of income for asst. yr. 1999-2000. We do not appreciate the logic of the contention of the learned counsel CIT(A) that even after having claimed depreciation under the general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for conversion of can purchase tax into loan as per the scheme of Karnataka Govt. as per 2009 to 2014 Industrial Policy, no disallowance is called for. The AO in the absence of any clear order disallowed the same. CIT(A) also sustained the disallowance. 17. We heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. We noted that the liability has arisen vide order dt. 13.1.2011 for F.Y 2009-10 for purchase tax payable amounting to ₹ 4,78,14,963/-. A sum of ₹ 4,62,04,825/- since remains disallowed u/s 43B as per ground of appeal taken before us, we, therefore, restrict the ground to sum of ₹ 4,62,04,825/-. We noted as per the government order of the State Government of Karnataka dt. 29.2.2009 there was a provision under the Industrial policy 2009-10 for conversion of sugar cane purchase tax into interest free loans. Para 19 of this policy states as under : New Sugar factories and existing sugar factories who have not availed purchase tax deferment having co-generation facilities and ethanol production would be considered for conversion of purchase tax on sugarcane as interest free loan on case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 674 dt. 29.12.1993 relates to sales tax deferment scheme brought out by the various State Governments. In this regard, the Board in this Circular has decided when the amount of sales tax liability converted into loan may be allowed as deduction in the assessment for the previous year in which such conversion has been permitted by or under the Government order. In the case before us, even though the Assessee has filed abstract of the Industrial Policy as reproduced by us hereinabove, but has not adduced any evidence or material before us which may prove that the purchase tax payable by the Assessee has been converted into loan and therefore the liability towards the purchase tax stand discharged before the due date of filing of the return. In the interest of justice and fair play to both the parties, we set aside the order of CIT(A) and restore this issue to the file of the AO with the direction that the AO shall look into the evidence filed by the Assessee whether the said purchase tax payable by the Assessee got converted into loan as per the Industrial Policy before the date of filing of the return by the Assessee for the impugned assessment year. In case the AO finds that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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