Before due date simply refers and means that not after the expiry of due date; if the requisite act is done before the last day expires then it will be simply said that before due date; when the time of filing the return is available to the assessee till the last moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired; as such the option exercised on the due date is nothing but before the due date as the same is not after the due date.
CASE LAWS DETAILS
DECIDED BY: ITAT, BENCH `D', CHENNAI, IN THE CASE OF: K. K. S. K. Leather Processors (P.) Ltd. v. ITO, APPEAL NO: ITA No. 826 & 827/Mds./2009, DECIDED ON: November 20, 2009
RELEVANT PARAGRAPH
7. We have considered the rival contentions, relevant record and various decisions relied upon by both the parties. The undisputed factual position emerging out of the record is that in the case of first assessee in ITA Nos.826 & 827/09 the return of income for the assessment year 2003-04 was filed on due date but the return of income for 2005-06 was filed after the due date as prescribed under section 139(1) of Income-tax Act. Similarly in the case of the second assessee in ITA Nos.828 & 829/09 the return of income for the assessment year 2003-04 was filed on due date and for the assessment year 2005-06 was filed after due date. In the case of third assessee in ITA No.832/09 the return of income was filed on due date. In the case of the fourth assessee in ITA Nos.833 to 836/09 all the returns for the four assessment years were filed on due dates. As far as the entitlement of higher rate of depreciation on windmill as per Appendix I to Rule 5(1A) is concerned, there is no dispute that the assessee is entitled because the Revenue has not disputed the entitlement on merits. But the claim was disallowed by the Assessing Officer1 on the ground that the assessee did not exercise the option as prescribed under Second Proviso to Rule 5(1A). The two questions arising for consideration and determination in the facts of ihese cases are.
(i) whether the claim made in the return of income along with audit report showing the claim of the assessee regarding depreciation of windmill would amount to exercising option as required under Second Proviso to Rule 5(1 A) of Income-tax Rules?
(ii) whether the return filed on the due date of Tiling the return of income under section 139(1) would be considered as exercising of option before due date as prescribed in the Second Proviso of Rule 5(1 A)
Before discussing these two questions, it is appropriate to discuss the relevant provisions for depreciation provided under Section 32 of Income- • tax Act as well as Appendix (I) & Appendix (1A) to Rule 5(1A) of Income- tax Rules. For better understanding we quote sub-dause (i) & {it);..'$ftSection 32(1) which is as under:
32. (1) In respect of depreciation of-
(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may beprescribed;
(ii) – (in the case of- any block of assets, such percentage on the written down value thereof
as may be prescribed:
As per clause (i) of sub-section (1) of Section 32 the depreciation on the assets of an undertaking engaged in generation or generation and distribution of power is at a percentage as prescribed as per rates on the actual cost thereof. Thus sub-clause (i) of sub-section (1) of Section 32 provides the depreciation at a prescribed rate on the assets of specified undertaking on the actual cost instead of written down value. Explanation 5 to sub-section (1) ofSection 32 makes it clear that the provisions of sub-section (1) to section 32 of Income-tax Act shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. We quoit? Explanation 5 winch is as under:
"For the removal of doubts, it is hereby declared that the provisions of this subjection shall apply whether or not the assessee has claimed the deduction in respect ofdepreciation in computing his total income; "
From the provisions of sub-section (1) of Section 32 along with the Explanation 5, it is dear that "the Assessing Officer is duty beyond and under obligation to allow the deduction ofdepreciation as per the provisions of sub-section (1) of Section 32. Since two rates of depreciation are prescribed as per Appendix (1) as well as Appendix (1A) to Rule 5 of Income-tax Rules in respect of assets of the undertaking engaged for generation and distribution of power. Thus to make it dear and to facilitate the Assessing Officer has to see which of the rates provided
under two different Appendixes of ..depredation shall be allowed, second proviso to Rule 5(1A) requires the assessee to exercise its option thatdepreciation be allowed as per Appendix 1. Though the proviso of that if such option is exercised before the due date of furnishing the 'return of income under sub-section (1) of Section 139 of the Income-tax Act, in our view the second proviso to Rule 5(1A) is only to facilitate the Assessing Officer in discharging of its obligationas per Explanation 5 to sub-section (1) of Section 32 of Income-tax Act so that the depreciation shall be allowed as per the option of the assessee and not on the discretion of the Assessing Officer. The Assessing Officer is otherwise under obligation to allow thedepreciation but because the depreciation specified under two different Appendixes (1) & (1A) and the choice is given to the assessee in respect of the assets specified under clause (1) of sub-section (1) of
"Section 139 of the Act" Therefore the provisions contained in the Rules cannot override the provisions contained in the statute and the requirement of option under proviso to Rule 5(1A) cannot be held in the nature that on failure of the same would be so fatal that the very object c' the provision for providing higher rate ofdepreciation is defeated. When there is no specific form or method prescribed for exercising the said option then the claim made in the return of income as well as reflected from the books of account and audit report filed along with return of income is more than the exercise of the option as required under second proviso to Rule 5(1A).
8. In the case of CIT vs. Shivanand Electronics (209 1TR 63), the Hon'ble Bombay High Court has held at page 71 as under: "The requirement of filing theaudit report "along with the return of income" is directory and if the assesses complies with the same before completion of the assessment and offers a satisfactory explanation for his failure to submit the same in time, the Income Tax Officer may consider the same and examinethe claim of the assessee for deduction under section 80] on the basis of such report, We, however, do not subscribe to the view taken by the Tribunal-that it is the duty of the Income Tax Officer to the assessee that as, he had not submitted the report of audit required by sub-sect/on (6A), his claim would not be allowed and to give him an opportunity to file the same."
Therefore even if option is not exercised within the stipulated time as per second proviso to Rule 5(1A), the same cannot have a serious consequence of total denial of the claim of the assessee. There is ho doubt in our mind that when there is no prescribed procedure or mode of exercising option prescribed in the Rules then the option exercised by the assessee by way of making a claim in the return of income along with the audit report is definitely more than the requirement of the second proviso.
Even otherwise the question of exercising the option in the return of income is not seriously agitated by the Revenue, As per the order of the lower authorities the depreciation claimed has been rejected on the ground that option has not been exercised before the due date. Therefore the second question whether the filing of the return on due date is exercising of option before due date or not is of importance. In the case of CIT vs. G.R.Govindarajulu 'and Sons Charities (271 ITR 145), the Hon'ble Junsidictional High Court has held as under at page 152;
"The other 'contention raised by learned counsel for the appellant is that the assessee failed to exercise the option as contemplated under section 11(2) of the Act In a prescribed form, namely, Form No. 10. But the said contention was rightly rejected by both the Commissioner (Appeals) and the Tribunal There is no mandatory requirement under section 11(1) of the Act requiring the assessee to exercise the option when he seeks relief under section 11(1) of the Act, as It is enough for the assessee to submit a statement along with the return to exercise such option. "
Further in the case of CTT vs. Adar Tea Products Company (314 ITR 38), the Hon'ble Jurisdictional High Court has held at page 46 as under:
"The Supreme Court has held that if a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute -vide CIT k Straw Board Manufacturing Co. Ltd. (1989) 5upp 2 SCC523.
The items in an exemption notification are to be strictly construed, but once the goods in question fall even narrowly in one of the exempted categories, then the exemption notification has to be construed broadly and widely – vide Bombay Chemical Pvt. Ltd. v. CCE, AIR 1995 SC1469.
The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures. While it was possible, in the context. of, encouraging industrial activity, to bring within' the net of exemption, manufacture of products which may even be remotely considered as "paper"; we cannot adopt the same reasoning here, since the table indicates its intention to afford depreciation at the rotes mentioned only to the specifically listed equipments. It is not even proved that a drier of the kind mentioned herein is an energy saving device. "
In our view, the requirement of second proviso to Rule 5(1A) is satisfied if the option is exercised before the expiry of due date of filing of return of income under -section 139(1) of the Income-tax Act. The meaning of the term before due date shall be understood as it is understood by a man of ordinary prudence. Before due date simply refers and means that not after the expiry of due date. If the requisite act is done before the last day expires then it will be simply said that before due date; when the time of filing the return is available to the assessee till the test moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired; as such the option exercised on the due date is nothing but before the due date as the same is not after the due date, In the case of CIT vs. Vijaya Hirasa Kalamkar (HUF), (229 ITR 772), the Hon'ble Bombay High Court has held at pages 774 & 775 as under:
"Having regard to the obtect of the Ordinance and the words used in section 3(1), it seems to as that the declaration received on January 1, 1976, was well within time. In the whole context, the word "before" will have to be construed as "upto" or as "not after". There are various provisions in the Income-tax Act. wherein the expression "before" has been used (sections 139(l)(a)(i) , section 139(l)(b); section 184, section 212). The expression has always been taken to mean "upto Section 3 spec/fi^d^ the period before which a declaration in respect of income has to be made for the purposes of getting a benefit under the Ordinance It provides a period of limitation within which certain benefits are available. In case of ambiguity the construction which preserves the right to the one which defeats it, has to be preferred. After alt, this is a taxing statute which m case of doubt should be interpreted in favour of a taxpayer. Had the legislative intention been to make December 31. 1975. the last day for making the declaration, it could have clearly-said so in the proviso. The very fact that the date January 1, 1&76. is in terms mentioned indicates that the time limit was up to that date. That in a given case the word "before" in the context of the time can be construed as "not after" is well settled ( R.v
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