M/S. Ambika Cotton Mills Ltd v. Deputy Commissioner Of Income Tax,Company Circle – I (3),Income Tax Office

M/s. Ambika Cotton Mills Ltd.,Represented by its Chairman & Managing Director,Sri. P.V. Chandran,9A, Valluvar Street,Sivanandha Colony, Coimbatore – 641 012. ... Petitioner Vs Deputy Commissioner of Income Tax,Company Circle – I (3),Income Tax Office,No.67A, Race Course Road,Coimbatore – 641 018.... Respondent Prayer: Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Certiorari, calling for the records inPAN No.AABCA8985E dated 11.11.2011 on the file of the Respondentrelating to the Assessment Year 2004-2005 and quash the same. For Petitioner : Mr. M.P. Senthil Kumar for Mr. N. Muthu kumarFor Respondent : Mr. A.N.R. Jayaprathap Government Advocate ORDER The Petitioner has filed this writ petition, seekingfor issuance of a Writ of Certiorari, calling for the records inPAN No.AABCA8985E dated 11.11.2011 on the file of the Respondentrelating to the Assessment Year 2004-2005. 1/5 https://hcservices.ecourts.gov.in/hcservices/ 2. The Petitioner is aggrieved by the impugned order dated11/11/11 of the Respondent. By the impugned order, theRespondent has conveyed its decision overruling the objectionfiled by the Petitioner against the invocation of Section 148read with Section 147 of the Income Tax Act, 1961 by theRespondent to re-open the assessment. 3. The Petitioner had filed a return under Section 139 ofthe Income Tax Act, 1961 on 21.10.2004 for the assessment year2004-2005. Thereafter, an order of assessment also came to bepassed on 29.09.2006 under Section 143 (3) of the Income TaxAct, 1961. The last date of the said financial year would havebeen 31.03.2005. Therefore, a notice to re-open theassessment within the normal period of limitation of 4 yearsunder Section 148 read with Section 147 of the Income Tax Act,1961 for income escaping assessment would have been issuedbefore 31.03.2009. 4. However, at the fag end of the period of limitation of 6years for invoking larger period of limitation, a notice wasissued on 28.03.2011 to the Petitioner. Under thesecircumstances, the Petitioner sent a representation on11.04.2011. 5. Thereafter, the notice under section 143 (2) of theIncome Tax Act, 1961 was issued to the Petitioner fixing thehearing on 27.06.2011. Under these circumstances the Petitionerrequested the Respondent to furnish reasons for invoking noticeunder section 148 of the Income Tax Act, 1961 in terms of thedecision of the Honourable Supreme Court in GKN Drive Shafts(India) Ltd Vs Income Tax Officer, 2003 SCC 259/259 ITR 19. 6. The operative portion of the impugned order reads asunder:- “(a) It is mandatory for the assessee toexercise option to claim higher depreciation under WDVmethod before filing the return of income under Section139 (1). Even in the return of income filed in responseto notice under Section 148 also, the assessee fails toexercise his option to claim higher depreciation. Theintention of the lawmaker is clear that exercise ofoption means only an option in writing. 2/5 https://hcservices.ecourts.gov.in/hcservices/ (b) If assessee is allowed to claim higherdepreciation under WDV, then insertion of Section 32(1)and Rule 5 (1A) will not have any meaning. Theinsertion of this provision provides various options tothe assessee to claim depreciation, out of which, theassessee has to exercise his option. In the instantcase, the assessee has not exercised his option and mereinclusion of wind mills in 80% block of assets cannot betreated as exercise of option for claim of depreciationas per appendix I. This can be best be treated asmisreading of the provisions rather than exercising theoption as prescribed in the second proviso to Rule 5(1A) of the Income-tax Rules. 2/5 https://hcservices.ecourts.gov.in/hcservices/ (b) If assessee is allowed to claim higherdepreciation under WDV, then insertion of Section 32(1)and Rule 5 (1A) will not have any meaning. Theinsertion of this provision provides various options tothe assessee to claim depreciation, out of which, theassessee has to exercise his option. In the instantcase, the assessee has not exercised his option and mereinclusion of wind mills in 80% block of assets cannot betreated as exercise of option for claim of depreciationas per appendix I. This can be best be treated asmisreading of the provisions rather than exercising theoption as prescribed in the second proviso to Rule 5(1A) of the Income-tax Rules. (c) The above provisions are specific for powergeneration and distribution units. In general allassesses claims installation of wind mill as a seperateentity and also claims 80IA deductions stating it asbusiness. Further, on perusal of agreement withTamilnadu Electricity Board, it is noticed that thesewind mills are also bound by the various provisions ofthe Electricity Act, 2003. Further, Board CircularNo.772 dated 23.12.1998 clarifies that the depreciationon straight line basis under Appendix IA is meant onlyfor those covered by the Electricity Act. Hence,installation of wind mills is also comes under thecategory of electricity companies only, so as theassessee has to exercise his option in writing to claimhigher depreciation. In view of the above, you are required to showcause your objections, if any, on or before 23.11.2011,why the additional depreciation claimed should not bewithdrawn and added back to the total income.” 7. Both the counsel fairly submitted that the issue squarelycovered by the decision of the division bench of this courtrendered in Commissioner of Income Tax Vs ABT Ltd, (2015) 370ITR 159 (Mad) on merits. The Division Bench followed thedecision of the Bombay High Court in Commissioner of Income TaxVs Vijaya Hirasa Kalamkar (HUF), 229 ITR 772 wherein it wasobserved as follows:- “3. Learned Standing Counsel appearing for theRevenue submits that the above-said issue iscovered by a decision of this Court dated09.09.2014 made in T.C.A. Nos. 330 of 2013 etcbatch. 3/5 https://hcservices.ecourts.gov.in/hcservices/ 4. In the above-said decision, this Court,following the decision of the Bombay High Courtreported in 229 ITR 772 (CIT Vs. Vijaya HirasaKalamkar (HUF), held as follows:- “20. A reading of the above-said decision ofthe Bombay High Court makes it clear that if theassessee exercised the option in terms of secondproviso to Rule 5(1A) of the Income Tax Rules atthe time of furnishing of return of income, it willsuffice and no separate letter or request orintimation with regard to of exercise of option isrequired. Since the returns are filed inaccordance with Section 139(1) of the Income TaxAct and the form prescribed therein makes aprovision for exercising an option in respect ofthe claim of the depreciation, no separateprocedure is required, as contended by thedepartment. We are in agreement with the reasoningof the Tribunal. 21. Accordingly, the question of law isanswered in favour of the assessee and against theRevenue.” ”8. If an assessee has exercised option in terms of Rule 5(1A) of the Income Tax Rules, 1961 while filing the return’sunder section 139 of the Income Tax Act, 1961, it will sufficeand no separate letter of request or intimation with regard tothe exercise of option is required. 9. Since in this case the return was filed in accordancewith Section 139 (1) of the Income Tax Act, 1961 exercising theoption invocation of Section 148 read with 147 was withoutjurisdiction. Further, the issue is also covered by thedecisions of the Courts referred to supra. Therefore, this writpetition deserves to be allowed in the light of the abovedecision. Accordingly, this writ petition is allowed. No cost.Consequently, connected miscellaneous petition is closed. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar 4/5 To Deputy Commissioner of Income Tax,Company Circle – I (3),Income Tax Office, No.67A, Race Course Road, Coimbatore – 641 018. +1cc to M/s.A.P.Srinivas, Advocate sr.103526+1cc to Mr. N. Muthu kumar, Advocate sr.103381 W.P. No. 28288 of 2011and M.P. No. 1 of 2011 rp(co)nr 21/02/2020 5/5