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TMI Blog2016 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... while completing the assessment restricted the depreciation on windmill to 7.69 per cent. as against the claim of the assessee at 80 per cent. holding that the assessee has not exercised option for claiming higher depreciation - Held that:- Going through the decision of jurisdictional High Court in the case of CIT v. ABT Ltd. [2014 (10) TMI 788 - MADRAS HIGH COURT ] we find that the issue is squarely covered in favour of the assessee as the hon'ble High Court held that if the assessee exercised 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 no further letter of request or intimation with regard to exercise of option is required. Since the returns were filed in accordance with section 139(1) of the Act and the form prescribed therein make a provision for exercising option in respect of the claim of depreciation, no separate procedure is required. In the case on hand before us, the assessee has claimed higher depreciation in the return filed under section 139(1) of the Act claiming higher depreciation at 80 per cent. on windmill which amounts to exercise of option for higher claim. Thus, respectfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of 133 days. Inadvertently, by oversight, this was wrongly mentioned as 92 days in the condonation petition filed originally along with appeal papers. The reasons for the delay are as follows : 'The relevant appellate order was sent by the office of Commissioner of Income-tax (Appeals)-VI to the Office of Commissioner of Income-tax, Puducherry, who was holding jurisdiction at the time of institution of the appeal before the Commissioner of Income-tax (Appeals). Later the case was centralised and the Commissioner of Income-tax, Central-1 became the jurisdictional Commissioner of Income-tax. And since the Commissioner of Income-tax, Central-1 received the order of Commissioner of Income-tax (Appeals)-VI only on November 3, 2014, the limitation date for filing appeal was reckoned from this date to be January 1, 2015 and judicial notes put up to Commissioner of Income-tax, Central-1 on December 24, 2014. But the file got mixed up with other files at the Office of Commissioner of Income-tax Central-1 and was handed over to the Assessing Officer on February 3, 2015, only. Immediately on receipt of the authorisation from the Commissioner of Income-tax, Central-1, the appeal pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly in error in disallowing trade discount under section 40A(2)(a) of the Act since trade discount allowed to sister concerns cannot be considered as an item of expenditure incurred by the assessee. 6. The Departmental representative vehemently supports the order of the Assessing Officer and submits that there is shifting of profits by the assessee to its sister concerns by way of trade discount and therefore the Assessing Officer has correctly disallowed the trade discount invoking the provisions of section 40A(2)(a) of the Act. 7. Counsel for the assessee strongly places reliance on the order of the Commissioner of Income-tax (Appeals) and the decision of the jurisdictional High Court in the case of CIT v. A. K. Subbaraya Chetty and Sons [1980] 123 ITR 592 (Mad) and submits that the provisions of section 40A(2)(a) have no application to the facts of the assessee's case as trade discount allowed by the assessee is not an expenditure for disallowance within the scope of section 40A(2)(a) of the Act. 8. Heard both sides. Perused orders of the lower authorities and the decision relied on. The Assessing Officer while completing the assessment disallowed trade discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is not, expenditure paid and in any case, when it was lesser sales realization . The above question was answered by the honourable court in paragraphs 12 and 13 of their order, which is reproduced below (page 555) : '12. Lastly, we fail to understand how the provisions of section 40A(2)(b) are, at all, applicable in the facts of the present case. Section 40A(2)(a) runs as under : (2)(a). Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. 13. This provision in the Act pertains to disallowance to an expenditure which is made by the assessee, i.e, an amount actually spent by the assessee as an expenditure. The expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar lines came before the Punjab and Haryana High Court recently in CIT v. Rajnish Ahuja [2013] 85 CCH 4 (P H) ; [2013] 219 Taxman 85 (P H) (Mag.). It was held that, 'section 40A(2) contemplates an assessee incurring any expenditure in respect of which payment has been made or is to be made to any person referred to in clause (b) of section 40A(2). If there were any such expenditure and if the Income-tax Officer was of the opinion that such expenditure was excessive or unreasonable, then so much of the expenditure as was considered by him as excessive or unreasonable was not to be allowed as deduction. We therefore have to consider whether there was any expenditure in this case. It was held by the Tribunal that the Assessing Officer made the addition solely on the ground that the assessee had charged less sale price from the sister concerns. The provisions of section 40A could not be invoked as no payment has been made to the sister concerns for any item of expenditure which the assessee might have been claimed as revenue expenditure'. The Tribunal found that the taxpayer can manage his affairs to reduce tax liability within the frame work of law and that the sale of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings. The Revenue has not filed any evidence to rebut the findings of the Commissioner of Income-tax (Appeals), therefore we sustain the order of the Commissioner of Income-tax (Appeals) and dismiss the grounds raised by the Revenue on this issue. 10. The next ground of appeal of the Revenue is that the Commissioner of Income-tax (Appeals) erred in holding that the assessee opted to claim depreciation as per Appendix-I at 80 per cent. on the windmill by way of claiming depreciation in the return of income and that such claim amounts to exercising option envisaged under second proviso to rule 5(1A). Consequently the assessee is not entitled to depreciation as per Appendix-I. The Assessing Officer while completing the assessment restricted the depreciation on windmill to 7.69 per cent. as against the claim of the assessee at 80 per cent. holding that the assessee has not exercised option for claiming higher depreciation. The assessee contended that it had already been opted to claim depreciation from the assessment year 2005-06 onwards for the windmill installed earlier. Hence, there is no need to exercise fresh option for the windmill installed in the previous year 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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