2019 (11) TMI 876 - HC - Income Tax

Court overturns Tribunal ruling on Rule 5(1A) proviso, denies Revenue relief, following Supreme Court precedent.

THE PRINCIPAL COMMISSIONER OF INCOME TAX, THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 Versus M/s. NIRANI SUGARS LTD.

THE PRINCIPAL COMMISSIONER OF INCOME TAX, THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 Versus M/s. NIRANI SUGARS LTD. - TMI Issues:- Interpretation of Section 32 of the Income Tax Act and Rule 5(1A) of the Income Tax Rules- Validity of the condition imposed under Rule 5(1A) proviso (ii)- Exercise of option for depreciation within a particular time limitAnalysis:Issue 1: Interpretation of Section 32 of the Income Tax Act and Rule 5(1A) of the Income Tax RulesThe case involved appeals under Section 260A of the Income Tax Act, 1961, pertaining to Assessment Years 2009-10 and 2010-11. The primary dispute revolved around the allowance of depreciation under Section 32 of the Act and Rule 5(1A) of the Rules. The Tribunal had allowed the appeal of the assessee, setting aside the disallowance of depreciation by the Commissioner of Income Tax (Appeals). The Tribunal held that the rule-making authority could prescribe the percentage for depreciation but could not impose additional conditions beyond what was provided in the Act. The Tribunal found the second proviso to Rule 5(1A) of the Rules invalid, leading to the Revenue filing the present appeals.Issue 2: Validity of the condition imposed under Rule 5(1A) proviso (ii)The Revenue contended that the Tribunal erred in allowing the assessee's claim for depreciation since the return of income was not filed within the prescribed time limit under Section 139(1) of the Act. The Revenue argued that the second proviso to Rule 5(1A) required the option for depreciation to be exercised at the time of filing the return, which the assessee failed to comply with. On the contrary, the assessee relied on the Tribunal's decision and cited relevant provisions to support their position.Issue 3: Exercise of option for depreciation within a particular time limitThe Court examined the relevant provisions of Section 32 of the Act, Rule 5(1A) of the Rules, and Rule 17(1) of the Rules to determine the validity of the condition regarding the exercise of the option for depreciation. It referred to a Supreme Court decision regarding the necessity of furnishing required information before the completion of assessment. The Court held that the Tribunal cannot declare provisions of the Act or Rules invalid and ruled in favor of the Revenue, stating that the condition mentioned in the second proviso to Rule 5(1A) was not invalid. However, due to the Supreme Court's decision in a similar case, no relief was granted to the Revenue despite the substantial question of law being answered in their favor.In conclusion, the Court set aside the Tribunal's finding on the validity of the second proviso to Rule 5(1A) but did not grant relief to the Revenue based on the Supreme Court precedent. Both appeals filed by the Revenue were disposed of accordingly.