2022 (11) TMI 185 - AT - Income Tax

ITAT grants depreciation claim under Income-tax Act, stresses duty of AO.

Indauto Filters Versus The Assistant Director of Income Tax, CPC, Bengaluru

The ITAT allowed the appeal, granting the claim of depreciation u/s.32 of the Income-tax Act. The decision emphasized the importance of allowing ... Non-granting of deduction in respect of depreciation u/s.32 in the intimation order passed u/s. 143(1) - depreciation as omitted to be fed into while filing the ITR - HELD THAT:- In assessee’s case, the return of income is filed before the due date u/s.139(1) and as per e-filing report submitted before us, the assessee has filed a rectification on 11.06.2018 which as per the report is not processed. So the CIT(A)’s claim that the assessee the assessee has filed a revised return belatedly and hence not eligible to claim depreciation is factually not correct. The fact that depreciation is correctly fed in the “Part A - P&L' and also in the relevant clause of Tax Audit supports the contention that the depreciation is unintentionally omitted to be fed into while filing the ITR and that it is a clerical error. Considering the decision of the coordinate bench of the Tribunal in the case of Rakesh Singh [2012 (11) TMI 503 - ITAT BANGALORE] we are of the considered view that the assessee should be allowed the claim of depreciation u/s.32. Appeal by the assessee is allowed. Issues:Non-granting of deduction in respect of depreciation u/s.32 of the Income-tax Act, 1961 in the intimation order passed u/s. 143(1).Detailed Analysis:Issue 1: Non-granting of depreciation deductionThe appeal was against the order of the CIT(Appeals) for the assessment year 2016-17. The only issue raised by the assessee was the non-granting of deduction in respect of depreciation u/s.32 of the Income-tax Act, 1961 in the intimation order passed u/s. 143(1). The assessee, a partnership firm, inadvertently did not include the details of depreciation in the return of income filed for the assessment year, although the depreciation figure was correctly mentioned in 'Part A- P&L.' The intimation received u/s. 143(1) did not allow the deduction for depreciation, even though it was added to the income from business or profession.Issue 2: CIT(A)'s DecisionThe CIT(A) dismissed the appeal, stating that the appellant failed to claim the deduction allowance in the original income tax return and did not suo motu file the claim for depreciation allowance. The CIT(A) also noted that the appellant did not file a revised income tax return within the stipulated time period. The CIT(A) rejected the appellant's reliance on a case law and a circular, stating that they were not applicable in this scenario.Issue 3: Arguments Before ITATBefore the ITAT, the appellant argued that the omission to include the depreciation figure was an inadvertent clerical error and that the depreciation details were provided in the Tax Audit report. The appellant cited Explanation 5 to section 32, emphasizing that depreciation should be allowed even if not claimed. The appellant also referred to a circular stating that the department should assist taxpayers in claiming their entitled refunds or reliefs.Issue 4: ITAT's DecisionThe ITAT observed that the depreciation amount was correctly mentioned in the Profit and Loss A/c but not in the relevant sections of the income tax return. The ITAT referred to Explanation 5 to section 32, which mandates allowing depreciation even if not claimed. Citing a previous tribunal decision, the ITAT held that the appellant should be allowed the deduction for depreciation. The ITAT rejected the CIT(A)'s argument that the appellant filed a revised return belatedly, as the rectification was filed before the due date.In conclusion, the ITAT allowed the appeal, stating that the appellant should be granted the claim of depreciation u/s.32 of the Act. The decision highlighted the importance of allowing deductions even if not claimed by the assessee and the duty of the AO to bring any omissions to the notice of the assessee.