Gujarat High Court
Commissioner Of Income Tax Gandhinagar vs Gujarat State Energy Generation Ltd on 9 April, 2026
Author: A. S. Supehia
Bench: A.S. Supehia
NEUTRAL CITATION
C/TAXAP/1973/2009 CAV JUDGMENT DATED: 09/04/2026
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Reserved On : 30/03/2026
Pronounced On : 09/04/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1973 of 2009
With
R/TAX APPEAL NO. 1972 of 2009
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI Sd/-
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Approved for Reporting Yes No

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COMMISSIONER OF INCOME TAX GANDHINAGAR
Versus
GUJARAT STATE ENERGY GENERATION LTD
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Appearance:
MS MAITHILI D MEHTA, WITH MR. KARAN SANGHANI, SENIOR
STANDING COUNSEL for the Appellant(s) No. 1
MR. B.S.SOPARKAR, ADVOCATE WITH MRS SWATI SOPARKAR(870) for
the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
COMMON CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. By the order dated 20.06.2011, the Coordinate Bench of
this Court had admitted Tax Appeal No.1973 of 2009 for
answering the following substantial questions of law:
“[A] “Whether the Appellate Tribunal was justified in
upholding the revised return as a valid return and in
directing the Assessing Officer to allow the assessee’s claim
as per the revised return on the basis of the revised claim
made under WDV method?”
[B] “Whether the Appellate Tribunal was justified in directing
the Assessing Officer to allow claim made by the GEB as the
same was found to be incurred by the assessee during the
course of business?”
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[C] “Whether the Appellate Tribunal was justified in directing
the Assessing Officer not to charge interest under Section
234D of the IT Act for A.Y 2002-2003?”
1.1 The proposed substantial question of law [B] was
rejected by the Coordinate Bench of this Court. The same is as
under:
“[B] Whether the Appellate Tribunal was justified in directing
the Assessing Officer to allow claim made by the GEB as the
same was found to be incurred by the assessee during the
course of business?”
1.2 In Tax Appeal No. 1972 of 2009, by the order of the even
date, the tax appeal was admitted for the following substantial
question of law:
“Whether the Appellate Tribunal is right in law and on facts
in holding that the revised return was a valid return.?”
1.3 Thus, the substantial question of law [A] in Tax Appeal
No. 1973 of 2009 will encompass the sole substantial question
of law in Tax Appeal No. 1972 of 2009.
BRIEF FACTS
2. The respondent is a Company promoted by Central and
State PSUs and is engaged in the business of generation and
distribution of power. The Company commenced its business
operations during the previous year relevant to the
Assessment Year 2002-03 by starting first phase of its project
on 01.12.2001. The Company filed its Return of Income on
31.10.2002 declaring total income of Rs.3,29,21,310/-. While
computing income from business, it claimed depreciation at
Rs.11,51,34,221/- on Straight Line Method (for short “SLM”)
basis as per Appendix-IA to Rule 5 of the Income Tax Rules,
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1962 (for short “the Rules”). The Company being engaged in
the generation of power, is entitled to have an option of
claiming depreciation either as per Written Down Value (for
short “WDV”) method under Rule 5 of the Rules and
Appendix-IA or as per the SLM basis.
2.1 The return of income was processed under Section
143(1) of the Income Tax Act, 1961 (for short “the Act”) and a
refund of Rs.11,53,840/- was issued. Subsequently, the
Company filed a revised return on 31.03.2003 declaring net
loss of Rs.21,65,72,270/- and total income was admitted at
Rs.31,52,683/- as per Section 115JB of the Act.
2.2 The revised return was filed for the claims to the extent
that in the previous year relevant to the Assessment Year
2002-03, the Gujarat Electricity Board (for short “the GEB”)
did not confirm sale of power by the Company to the extent of
Rs.2,85,37,373/- out of Bill No.4. There was a charge of
Rs.14,00,291/- raised by the GEB against the Company for the
power consumed by it which was supplied by the GEB. The
Company had originally preferred its claim of depreciation
inadvertently on the rate applicable under Appendix-IA at the
time of its filing original return of income and now the
depreciation was claimed on the basis of WDV rates.
2.3 The assessment was scrutinized by the Assessing Officer
by issuing notice under Section 143(2) of the Act on
20.10.2003. The Assessing Officer did not accept the revised
return and the assessment was completed on the basis of
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original return by the order dated 30.03.2005 and further
made disallowance of Rs.6 lakhs under Section 14A of the Act.
2.4 The Commissioner of Income-Tax (Appeals) (for short
‘CIT (Appeals)’), by order dated 02.02.2006, accepted the
revised Return of Income, but on merits, did not accept the
change in method of depreciation, reduction of income by
Rs.2.99 crores, claim of expenses of Rs.14 lakhs and CIT
(Appeals) also confirmed the disallowance of Rs.6 lakhs under
Section 14A of the Act.
2.5 Both i.e. the revenue and the assessee challenged the
order of CIT(Appeals). The revenue filed appeal being ITA No.
1221 of 2006 on the acceptance of the revised return while
the assessee filed appeal being ITA No. 1271 of 2006
challenging the additions/disallowance on merits. The Income
Tax Appellate Tribunal (for short “the Tribunal”) dismissed
the revenue’s appeal confirming the order of accepting
revised return of income, whereas the Tribunal partly allowed
the assesse’s appeal by accepting change in method of
depreciation, accepted reduction in income of Rs.2.99 crores,
and claim of expenditure of Rs.14 lakhs and remanded the
issue on Section 14A of the Act to the assessee and had also
held that interest under Section 234D of the Act is not
chargeable for the Assessment Year 2002-03.
3. Being aggrieved by the judgement and order passed by
the Tribunal, the revenue has filed the captioned appeals
being Tax Appeal Nos.1972 and 1973 of 2009.
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SUBMISSIONS ON BEHALF OF REVENUE
4. Learned Senior Standing Counsels Ms.Maithili Mehta
and Mr.Karan Sanghani for the appellant – revenue, have
submitted that the Appellate Tribunal fell in error in accepting
the revised return. It is submitted that the Assessing Officer
has precisely held that the assessee did not fulfill all the
conditions as mentioned in Section 139(5) of the Act and
hence rejected the revised return which was premised on the
change of methodology as per WDV method for claiming the
depreciation which is impermissible in view of Rule 5 read
with Appendix-IA of the Income-Tax Rules.
4.1 It is submitted that in the original return of income filed
on 31.10.2002, the assessee claimed depreciation on SLM
under Rule 5 and Appendix-IA of the Rules and the same could
not have been allowed to be modified by the assessee by filing
the revised return dated 31.03.2003 by adopting the
depreciation on WDV method. It is submitted that the
judgement and order of the Tribunal is erroneous as there was
no omission or wrong statement made in the original return
dated 31.10.2002 by the assessee and since the note of
Rs.74,08,70,284/- had also been considered in the books and
the unutilized sale proceeds were shown as debt in the
balance-sheet and as such there were no fresh or new points
which could be said to be an omission or wrong statement
justifying the filing of revised return.
4.2 It is submitted that even if the issue of revised claim of
depreciation is held to be valid, the provision of Section
139(1) of the Act did not intend to give any fresh option which
is barred by the provision of Rule 5 (1A) of the Rules. It is
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submitted that the rules provide a special privilege of
claiming depreciation on the basis of SLM, and having
exercised the option once, as per the provision of Rule 5(1A)
of the Rules, the said option becomes final and applies to all
the subsequent assessment years. It is submitted that as such,
there was no conflict between the relevant Income Tax Rules
and the provision of the Act, and hence, the Appellate
Tribunal was not justified in directing the Assessing Officer to
allow the assessee’s claim as per its revised claim of
depreciation.
4.3 While referring to the decision of the Supreme Court in
the case of Principal Commissioner of Income-tax vs. Wipro
Ltd., [2022] 140 taxmann.com 223 (SC), learned Senior
Standing Counsel Mr.Sanghani has urged that since the view
expressed by the Tribunal runs contrary to the decision of the
Supreme Court, the same is required to be quashed and set
aside.
4.4 It is submitted that in a similarly worded Section 10B(8)
of the Act, the Supreme Court, while examining the effect of a
revised return filed under Section 139(5) of the Act read with
Section 139(1) of the Act, has categorically held that by filing
the revised return of income, the assessee cannot be
permitted to substitute the return of income filed under
Section 139(1) of the Act and any benefit which is to be
claimed which requires furnishing of a declaration or an
option at the time of filing of the original return, before the
due date, the same is impermissible by filing the revised
return under Section 139(5) of the Act after the due date.
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4.5 It is submitted that in the present case, the assessee,
initially had opted for SLM in its original return of income
dated 31.10.2002 which was the due date under Rule 5(1A) of
the Rules and the revised return which was filed on
31.03.2003 under Section 139(5) of the Act, the due date
would be extended to 31.03.2004 and hence, the methodology
of SLM which was initially adopted by the assessee before the
due date of 31.10.2002 cannot be extended to 31.03.2004. It
is submitted that there was no discovery of any omission by
the assessee which enables him to file the revised return
under Section 139(5) of the Act, which further also enables
him to change the methodology from SLM to WDV method.
4.6 Thus, it is urged that since the issue is squarely covered
by the decision of the Supreme Court in the case of Wipro
Ltd. (supra), the substantial question of law as formulated in
these tax appeals may be allowed in favour of the revenue.
SUBMISSIONS ON BEHALF OF ASSESSEE:
5. Opposing the aforesaid submissions, learned advocate
Mr.Soparkar for the respondent, at the outset, has submitted
that the Coordinate Bench of this Court, vide order dated
20.06.2011, has upheld the decision of the Tribunal for
accepting the revised return and hence once the revised
return becomes valid, it partakes the colour of the original
return filed under Section 139(1) of the Act and hence it is
always permissible for the assessee to again adopt for a fresh
methodology.
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5.1 It is submitted that in the present case, the revised
return dated 31.03.2003 was not filed only for the change of
methodology of claiming depreciation on WDV method, but
has been premised on three factors. It is submitted that the
Tribunal has precisely accepted the revised return filed by the
assessee by holding that it was an omission by the assessee as
the assessee had subsequently noted that the GEB to whom
the assessee had sold the power and, had not confirmed the
part of sales made through Bill No.4. It is submitted that there
was a dispute with regard to number of units supplied by the
GEB and the GEB did not confirm the sale of power by the
assessee which was noted after furnishing of original return
which would amount to discovery of an omission or wrong
statement in the original return.
5.2 It is contended that the GEB raised a bill on the assessee
for the power supplied by them. Though, the assessee had
consumed such power in the course of carrying on their
business, the expenses were not counted for and hence the
discovery of such fact would always permit the assessee to file
a revised return. It is submitted that though the assessee
incurred the expenditure in the course of business but were
not claimed due to the sales made through Bill No.4 to the
GEB, the same would amount to omission and by filing the
revised return, the assessee has claimed such reduction
through revised return. It is submitted that thus the Tribunal,
by observing the effect of the revised return and the omission
of the assessee, has held the revised return as valid which has
been confirmed by the Coordinate Bench that there cannot be
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two returns one under Section 139(1) of the Act and another
under Section 139(5) of the Act.
5.3 Mr.Soparkar, learned advocate for the respondent –
assessee, has submitted that under the settled legal fiction
governing Section 139(5) of the Act, a revised return does not
create a new filing event. It relates back to and substitutes the
original return, taking effect from the date of the original
filing. It is submitted that second proviso to Rule 5(1A) of the
Rules prescribes a condition of eligibility, not a condition of
irrevocability. It says that the assessee “may be allowed
depreciation under Rule 5(1) / Appendix-I if such option is
exercised before the due date.” The condition “before the due
date” goes to who is eligible to exercise the option, i.e. only
those who have filed timely return. It does not say that the
choice made in the timely return is permanent and cannot be
changed by a valid revised return under Section 139(5) of the
Act.
5.4 It is further submitted that the eligibility condition is met
at the stage of the original return. The assessee had filed its
return on 31.10.2022 within time. This establishes the
assessee as an eligible assessee under the second proviso.
Section 139(5) of the Act then permits the revision of that
return in entirety. The choice of depreciation method is part
of the return (reflected in Schedule DOA/DEP). A valid reason
of that matter under Section 139(5) of the Act is not cut down
by the second proviso because the proviso’s eligibility
condition is already satisfied.
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5.5 Mr.Soparkar, learned advocate, would further submit
that the second proviso selects who gets the option, Section
139(5) of the Act governs how that eligible assessee may
correct its return, and thus, the two operates in different
spheres and do not conflict. It is submitted that finality of
choice is qua subsequent assessment years only and not qua
the change in the first year itself. Mr.Soparkar, would further
submit that method of depreciation in Rule 5(1A) of the Rules
is a machinery provision which gives a choice, beneficial to
the taxpayer. Benevolent provisions must be interpreted
liberally. It is further submitted that if two reasonable
constructions of a taxing provision are possible, the
construction which favours the assessee must be adopted.
5.6 In support of his submissions, Mr.Soparkar, learned
advocate has placed reliance on the following judgements:
(i) Association of Indian Panelboard Manufacturer vs. Deputy
Commissioner of Income-tax [2025] 482 ITR 54 (Gujarat.).
(ii) Director of Income-tax (Exemption) vs. Divyajyot
Foundation, [2010] 321 ITR 53 (Gujarat.)
(iii) Duraiswamy Kumarswamy vs. Principal Commissioner of
Income-tax, [2024] 460 ITR 615 (Madras.)5.7 While distinguishing the judgement of the Supreme
Court in the case of Wipro Ltd. (supra), he has placed
reliance on paragraph No.11 of the judgement. It is submitted
that in case before the Supreme Court, the assessee did not
file any declaration under Section 10B(8) of the Act while
filing the original return under Section 139(1) of the Act andPage 10 of 30
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he did not file the return under Section 139(3) of the Act. In
these facts, it is submitted that the Supreme Court has held
that while filing revised return, the assessee cannot take a
contrary stand or claim an exemption which was specifically
not claimed earlier while filing the original return of income.
5.8 It is submitted that in the present case, the assessee
while filing the original return had claimed depreciation
within the due date and hence the valid revised return under
Section 139(5) of the Act permits the assessee to adopt a
different methodology as it will support the original return
under Section 139(1) of the Act. Thus, it is urged that the tax
appeals may be dismissed.
ANALYSIS AND CONCLUSION:
6. We have heard the learned advocates appearing for the
respective parties at length. The case of the respective parties
i.e. the revenue and the assessee hinges on the following
aspects:
i) The interpretation of the judgement of the Supreme Court
in the case of Wipro Ltd. (supra);
ii) The effect of filing the revised return under Section139(5)
of the Act and;
iii) The change of methodology i.e. from SLM (Rule 5(1A)-
Appendix IA to WDV under Rule 5 and Appendix-I of the
Rules while filling the revised return.
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ASPECT OF VALIDITY OF REVISED RETURN
6.1 We may not reiterate the facts. The appeals emanate
from the judgement of the Tribunal holding against the
revenue. We may, first, answer the common question of law
formulated by the Coordinate Bench in both the appeals which
is as under:
“Whether the Appellate Tribunal is right in law and on facts
in holding that the revised return was a valid return?”
6.2 We may, at this stage, refer to the order dated
20.06.2011, whereby, the Coordinate Bench of this Court has
rejected to accept the proposed question of law ‘B’ as
mentioned hereinabove. The relevant observations of the said
order are as under:
“On this limited question, we are of the opinion that the
Tribunal has committed no error. From the record, it
emerges that though previously, the return filed by the
assessee did not take into account such stand of GEB with
respect to the hills raised by the assessee and the assessee
had in fact showed such figure as the income for the year in
question, subsequently by filing a revised return, such error
was corrected and the income was deleted claiming that the
GEB did not admit to the bills raised by the assessee. In the
subsequent year also, accounts were reconciled by showing
the amount as the prior period expenditure. There is nothing
to suggest that the assessee disputed the stand of the GEB
with respect to this claim or had, at any stage, desired to
thresh it out legally. That being the position, in view of the
decision of the Apex Court in the case of Godhra Electricity
Company Limited [Supra] and the decision cited therein, it
cannot be said that the income ever accrued to the assessee.
Merely because at one point of time the assessee erroneously
claimed it to be accrued income would not permit the
Department to levy tax on the same. We are of the opinion
that this Question is not required to be considered.”
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6.3 Thus, the Coordinate Bench of this Court, after
considering the revised return filed by the assessee claiming
the sum of Rs.14,10,795/- which was not shown as
expenditure, the total amount of Rs.2,99,37,665/- which the
Assessing Officer had disallowed such claims, has held that
the revised return was filed by the assessee when such error
had come to its notice and assessee corrected. The Coordinate
Bench of this Court has rejected the question No.’B’. Thus, so
far as the revised return filed by the assessee on the ground
that GEB had not admitted the bills raised by the assessee for
the sale of power to the assessee company has held the same
to be valid and it is held to be an error on the part of the
assessee which prompted him to file the revised return.
6.4 The assessee had filed its original return under Section
139(1) of the Act on 31.10.2002 by claiming depreciation at
SLM method under Rule 5 and Appendix-IA of the Rules.
Thereafter, on 31.03.2003, the assessee filed the revised
return on three aspects which are recorded and not denied by
the revenue. Three claims which were filed in the revised
return are as under:
“i) Unconfirmed sale of power to be reduced from the
receipts of Rs.2,85,37,374/-
ii) Claim of additional expenditure in respect of power
consumed of Rs.14,00,291/-.
iii) Depreciation on the basis of Written Down Value rates at
Rs.33,93,64,837/- as against depreciation claimed on Straight
Line Method.”
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6.5 The Assessing Officer rejected the revised return by
holding that the same was not valid as there was no omission
or wrong statement found in the original return. The
Assessing Officer has mainly discussed the claim relating to
depreciation on the basis of WDV method, which the assessee
has opted. The CIT (Appeals) accepted the revision of return,
but did not accept the change in method of depreciation,
reduction of income by Rs.2.99 crores and claim of expenses
of Rs.14 lakhs and further also confirmed disallowance of Rs.6
lakhs under Section 14A of the Act. The said order of CIT
(Appeals) was challenged by the revenue before the Tribunal
by confirming the observations of the CIT (Appeals) relating to
the acceptance of the revised return of income.
6.6 Thus, the two authorities below had concurrently
accepted the validity of the revised return of income filed by
the assessee under Section 139(5) of the Act. It is established
thus that the revised return of income did not only confine to
the claim of depreciation on the basis of WDV method as
against the original claim on SLM. Along with this facet, the
revised return was also premised on two other aspects which
have been favoured by the Tribunal as well as the CIT
(Appeals).
6.7 We may, at this stage, refer to the provisions of Section
139(5) of the Act. The same read as under:
“139. Return of Income:-
(1) to (4) *** *** ***
(5) If any person, having furnished a return under sub-section
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of section 142, discovers any omission or any wrong
statement therein, he may furnish a revised return at any
time before the expiry of one year from the end of the
relevant assessment year or before the completion of the
assessment, whichever is earlier:
6.8 The provision of Section 139(5) of the Act allows the
assessee to furnish a return upon discovery of any omission or
any wrong statement which he had filed in the original return.
The revised return filed under Section 139(5) of the Act is a
return which stems out of the provision of Section 139 of the
Act. It is no more res integra that a revised return filed under
section 139(5) of the Act if is accepted, the same supplants
the return under section 139(1) of the Act. The original return
filed under Section 139(1) of the Act can further open an
avenue of filing a revised return under Section 139(5) of the
Act if an assessee discovers any omission or any wrong
statement. Thus, any fact which was omitted or a wrong
statement which was made in the original returns,
subsequently comes to the knowledge of the assessee, can
enable him to file a revised return under Section 139(5) of the
Act. Such knowledge or discovery of the omission or a wrong
statement cannot be deliberately used. The statute enables
the assessee to file the revised return only if he or she
discovers the omission or the wrong statement which were
missing in the original return by way of any bona fide reasons
and it should not be deliberate or concocted. The giving
provision of Section 139 (5) of the Act will only come to the
rescue of an assessee who has acted bona fidely and due to
such omission or wrong statement in his original return he
had failed himself to avail any advantage or claim.
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6.9 Thus, the provisions of Section 139(5) of the Act cannot
be invoked by an assessee if he has deliberately or with a
mala fide intention has left an omission or made a wrong
statement in his original return. In the present case, the facts
which are established from the assessment order and also
findings from the CIT (Appeals) and the Tribunal, prove that
in the original Assessment Order, the assessee had incurred
expenses in the course of business, but was unable to claim
since despite having consumed the power in the course of
carrying on the business from GEB, the expenses were not
accounted only for the reason that the bills were not received
prior to the completion of financial year. We do not find any
oblique motive behind filing the revised return. The revised
return was filed for three claims, which we find as bona fide.
Thus, the findings recorded by the CIT (Appeals) and
confirmed by the Tribunal confirming the validity of the
revised return under Section 139(5) of the Act, do not require
any interference in the present tax appeals.
ACCEPTABILITY OF CHANGE IN SLM TO WDV
METHOD IN REVISED RETURN
7. Having held that the revised return filed under Section
139(5) of the Act supersedes the original return under Section
139(1) of the Act, the issue which falls for further deliberation
is that whether it is permissible for the assessee to adopt a
new methodology other than the one which was adopted in
the original return or not.
7.1 At this stage, we may incorporate the provisions of Rule
5 of the Rules:
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“Depreciation
(1) Subject to the provisions of sub-rule (2), the allowance
under clause(ii) of sub-section (1) of section 32 in respect of
depreciation of any block of assets shall be calculated at the
percentages specified in the second column of the Table in
Appendix I to these rules on the written down value of such
block of assets as are used for the purposes of the business of
profession of the assessee at any time during the previous
year:
Provided that the allowance under clause (ii) of sub-section
(1) of section 32 in respect of depreciation of any block of
assets shall not exceed forty percent of the written down
value of such block of assets in case of-
(i) a domestic company which has exercised option under
sub-section (4) of section 115BAA, or under sub-section (7) of
sub-section 115AB; or
(ii) an individual or a Hindu undivided family, which has
exercised option under sub-section (5) of section 115BAC; or(iia) an individual or a Hindu undivided family, or an
association of persons (other than a co operative society) or a
body of individuals, whether incorporated or not, or an
artificial judicial person referred to in sub-clause (vii) of
clause (31) of section 2 whose income is chargeable to tax
under sub-section (1A) of section 115BAC; or
(iii) a co-operative society resident in India which has
exercised option under sub-section (5) of section 115BAD; or
(iv) a co-operative society resident in India which has
exercised option under sub-section (5) of section 115BAE:]Provided further that, for the purposes of section 115BAA, if
the following conditions are satisfied, namely:-
(i) option under sub-section (5) thereof is exercised for a
previous year relevant to the assessment year beginning on
the 1st day of April, 2020;
(ii) there is a depreciation allowance, in respect of a block of
asset, from any earlier assessment year or allowance of
unabsorbed depreciation deemed so under section 72A,Page 17 of 30
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which is attributable to the provisions in clause (iia) of sub-
section (1) of section 32; and
(iii) such depreciation or allowance for unabsorbed
depreciation is not allowed to be set off under clause (ii) or
clause (iii) of sub-section (2) thereof, the written down value
of the block of asset as on the 1st day of April, 2019 shall be
increased by such depreciation or allowance for unabsorbed
depreciation not allowed to be set off:
Provided also that, [for the purposes of section 115BAC [as it
stood immediately before its amendment by the Finance Act,
2023] and section 115BAD, if the following conditions are
satisfied, namely:-
(i) the option under sub-section (5) of the respective section
is exercised for a previous year relevant to the assessment
year beginning on the 1st day of April, 2021;
(ii) there is a depreciation allowance, in respect of a block of
asset, from any earlier assessment year which is attributable
to the provisions in clause (iia) of sub-section (1) of section
32; and
(iii) such depreciation is not allowed to be set off under sub-
clause (a) of clause (ii) of sub-section (2) of section 115BAC
or clause (ii) of sub-section (2) of section 115BAD,
The written down value of the block of asset as on the 1st day
of April. 2020 shall be increased by such depreciation not
allowed to be set off]
[Provided also that, where income is chargeable to tax under
sub-section (1A) of section 115BAC, the written down value of
the block of asset as on the 1st day of April, 2023 shall be
increased by such depreciation which is attributable to clause
(iia) of sub-section (1) of section 32 and which is not allowed
to be set off under sub-clause (a) of clause (ii) of sub-section
(2) of section 115BAC if both the following conditions are
satisfied, namely:-
(i) the assessee has not exercised option under sub-section
(5) for any previous year relevant to the assessment year
beginning on or before the 1st day of April, 2023; and
(ii) there is a depreciation allowance in respect of a block of
assets which has not been given full effect to prior to the
assessment year beginning on the 1st day of April, 2024, andPage 18 of 30
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is attributable to the provisions of clause (iia) of sub-section
(1) of section 32.](1A) The allowance under clause (i) of sub-section (1) of
section 32 of the Act in respect of depreciation of assets
acquired on or after 1st day of April, 1997 shall be calculated
at the percentage specified in the second column of the Table
in Appendix IA of these rules on the actual cost thereof to the
assessee as are used for the purpose of the business of the
assessee at any time during the previous year;
Provided that the aggregate depreciation allowed in respect
of any asset for different assessment years shall not exceed
the actual cost of the said asset:
Provided further that the undertaking specified in clause (I)
of sub-section (1) of section 32 of the Act may, instead of the
depreciation specified in Appendix IA, at its option, be
allowed depreciation under sub-rule (1) read with Appendix-I,
if such option is exercised before the due date for furnishing
the return of income under sub-section (1) of section 139 of
the Act,
(a) for the assessment year 1998-99, in the case of an
undertaking which began to generate power prior to 1 st day
of April, 1997; and
(b) for the assessment year relevant to the previous year in
which it begins to generate power, in case of any other
undertaking:
Provided also that any such option once exercised shall be
final and shall apply to all the subsequent assessment years.”
7.2 Rule 5(1) of the Rules mentions calculation of
depreciation at the percentage specified in second column of
the Table in Appendix-I of the Rules on the WDV method of
block assets. Rule 5(1A) of the Rules refers to calculation of
percentage specified in the second column of Table of
Appendix 1A of the Rules. The second proviso further provides
of exercising an option between Appendix 1A and Appendix I
of the Rules. It further specifies that such an option has to be
exercised before the due date for furnishing the return ofPage 19 of 30
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income under Sub-section (1) of section 139 of the Act.
Further Proviso also directs that if any of the option once
having exercised, the same shall be final and shall apply to all
the subsequent assessment years. In fact the scheme of Rule
5(1A) of the Rules does not stricto sensu convey of giving an
option, but it gives the right to the assessee to adopt a
particular methodology/computation for depreciation. The
difference between SLM and WDV method lies in how the
depreciation is charged. SLM reduces an asset’s value by a
fixed amount yearly, while WDV method uses a fixed
percentage on the reducing asset’s value each year. This
method is adopted generally for those assets, whose value
quickly reduce.
7.3 Appendix-IA under Rule 5 of the Rules prescribes the
rate at which the depreciation is admissible. While filing the
original return of income on 31.10.2002, the assessee claimed
depreciation on SLM as provided under Appendix- IA to Rule
5(IA) of the Rules. In the revised returns filed on 31.03.2003,
the assessee modified the methodology from SLM to WDV
method under Appendix-I to Rule 5 of the Rules. The due date
as prescribed in the proviso to Rule 5(1A) of the Rules was
31.10.2002 relates to the original return filed under Section
139(1) of the Act. It is not disputed that the assessee opted for
SLM under Appendix-IA to Rule 5(1A) of the Rules on the due
date i.e. 31.10.2002. The provision of Section 139(5) of the
Act authorizes the assessee to file the revised return and
accordingly, he filed his revised return on 31.03.2003
changing the methodology to WDV under Rule 5 Appendix-IA
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of the Rules. We have upheld the validity of revised return.
Thus, if the original return under section 139(1) of the Act
gets substituted by the revised return under section 139(5) of
the Act, the relevant method of computation filed in the
original return seeking depreciation becomes redundant, and
cannot be used for any purpose.
7.4 If the case of the revenue is accepted, then the return of
income of the assessee would fall under two provisions, i.e
under section 139(1) of the Act and revised return under
Section 139(5) of the Act. As far as the claim of depreciation
is concerned, it is contended before us that the same has to be
considered under the provision of Section 139(1) of the Act.
Thus, as suggested by the revenue, the part of the return
would be under Section 139(1) of the Act so far as claim of
depreciation is concerned, whereas for other two claims the
same would fall under revised return under Section 139(5) of
the Act. This can never be the intention of the statute as, the
Act does not permit the existence of two returns i.e. one under
Section 139(1) of the Act and the other under Section 139(5)
of the Act for varied claims.
DETERMINATION OF DUE DATE
8. Having held as above, we are called upon to answer the
status or the fate of new date which finds place in the
provision of Rule 5(1A) of the Rules. Rule 5(1A) of the Rules
specifically refers to the due date as prescribed under Section
139(1) of the Act, and not under Section 139(5) of the Act.
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9. The due date for option as per Section 139(1) was
31.10.2002. In our considered opinion, if the validity of the
revised return filed on 31.03.2003 is upheld, then it replaces
the original return under Section 139(1) of the Act, however,
the “due date” of option as envisaged under Section 139(1) of
the Act though cannot be extended further for the purpose of
claiming the depreciation by WDV method on the filing of the
revised return, however, the computation on WDV method in
claiming the depreciation is always permissible, only in the
circumstance, if the original option of filing the depreciation
by adopting SLM is within the due date of the original return,
since, the proviso to Rule 5(1A) permitting option for altering
the computation to WDV method can be said to be directory in
nature. In this context, we may rely on the decision of Bombay
High Court in the case of Commissioner of Income Tax vs
Shivanand Electronics, (1994) 209 ITR 63(Bom), wherein the
law relating to the determining the nature of statue has been
culled out. It is held thus:
” …….It is well-settled that the question whether a statute is mandatory
or directory depends upon the intent of the Legislature and not upon the
language in which the intent is clothed. The intent of the Legislature also
has to be gathered not merely from the words used by the Legislature
but from a variety of other circumstances and conditions. One of the
tests often adopted is to ascertain whether the object of the Legislature
will be defeated or furthered by holding it directory. If the object of the
enactment will be defeated by holding it directory, it should be construed
as mandatory whereas if by holding it mandatory, serious general
inconvenience will be created to innocent persons without very much
furthering the object of the enactment, it should be construed as
directory. In other words, a balance has to be struck between the
inconvenience of rigidly adhering to the requirements and the
convenience of sometimes departing from its terms. There are also
cases where two or more requirements are lumped together at one place
in the same provision. In such a case, it would have to be decided whichPage 22 of 30
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of the conditions is mandatory and which is directory. If one of the two
conditions is found to be mandatory and the other directory, strict
compliance with the mandatory requirement would amount to
compliance with the provision notwithstanding the non-compliance with
the directory requirement in the particular manner or form or within the
specified time, provided, however, that there is substantial compliance
therewith. It is not possible to lay down any rule of universal application
to decide such a controversy. It will have to be decided in each case by
looking at the subject-matter, the importance of the provision that has
not been strictly complied with and the relation of that provision to the
general object intended to be secured by the Act.”
The aforesaid judgement has been considered by the Supreme
Court in case of Commissioner of Income Tax,Maharashtra vs
G.M.Knitting Industries(P) Ltd, (2016)71 taxmann.com35(SC).
Thus, for ascertaining the statute as mandatory or directory,
the test often adopted is to ascertain whether the object of the
Legislature will be defeated or furthered by holding it
directory, and in case the object of the enactment is defeated
by holding it directory, it should be construed as mandatory
whereas if by holding it mandatory, serious general
inconvenience will be created to innocent persons without
very much furthering the object of the enactment, it should be
construed as directory. It is also held that, a balance has to be
struck between the inconvenience of rigidly adhering to the
requirements and the convenience of sometimes departing
from its terms. In the instant case, the assessee claimed
depreciation by adopting the SLM on the due date i.e.
31.10.2002 and not thereafter. It is not the case of the
revenue that the claim of depreciation is not valid. The statute
provides the assessee to opt for change in computation, and
such option is to be exercised before the due date as
envisaged under section 139(1). It is true that the Rule 5(1A)
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of the Rules does not refer to Section 139(5) of the Act
however, the intention of Rule 5(1A) of the Rules cannot be so
stringent, which restricts the assessee to change his
computation if he carves out a case for filing a valid revised
return, and his claim of depreciation is genuine. In case, the
revenue does not accept the revised return and finds that it is
not premised on any omission or any wrong statement, the
question of accepting the change in option does not arise.
Hence, while filing the revised return for various claims, the
assessee can always change to WDV method. However, the
quintessential condition is that the assessee should have
claimed the depreciation by exercising the first option as per
Appendix IA as required under Rule 5(1A) of the Rules, on or
before the due date at the time of filing the original return
under Section 139(1) of the Act. The requirement of
prescribed calculation for claiming allowance under clause(i)
of sub-section (1) of Section 32 of the Act in respect of
depreciation of assets is mandatory. Without the requisite
computation method as envisaged under the Rule 5(1A) of the
Rules, the assessee cannot claim the depreciation. The
exercise of opting for a calculation from SLM to WDV method
while filing a valid revised return can be said to be substantial
compliance of Rule 5(1A) of the Rules, more particularly,
when the claim is not doubted. The second proviso to Rule
5(1A) cannot operate in rigidity by restricting to SLM only as
per the return of income filed under Section 139(1) of the Act,
albeit the revised return under Section 139(5) of the Act is
treated as valid return, and it supersedes the original return.
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10. The further proviso to Rule 5(1A) of the Rules also takes
care of the situation. The last proviso to Rule 5(1A) of the
Rules categorically mandates that if any option once
exercised, shall be final and shall apply to all the subsequent
assessment years. Thus, an option which is exercised by an
assessee for a particular assessment year, cannot be altered
subsequently in another assessment years, and travel to
extended dates on filing of raised return. Hence, once the
revised return falls within the assessment year of the original
return, the due date cannot be extended to another
assessment year as it is impermissible to opt for other option
to that which was already exercised while filing the original
return under Section 139(1) of the Act. In this regard, we
have noticed, and not denied by the revenue is that the
Assessing Officer from AY 2009-2010 onwards has granted
depreciation as per WDV method, and the assessment orders
have become final, hence any change of computation for AY
2002-2003 to AY 2008-09 will lead to incongruous
consequences.
DISCUSSION ON THE DECISION OF WIPRO LTD
(SUPRA)
11. The case of the revenue entirely hinges on the decision
of the Supreme Court rendered in the case of Wipro Ltd.
(supra). The facts as mentioned in the said judgement would
indicate that the assessee which was a 100% Export Oriented
Unit (EOU) filed its return claiming exemption under Section
10B of the Act and noted “no loss would be carried forward”.
However, it later withdrew its claim via declaration on
24.10.2002 i.e. “after the due date” and sought to carry
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forward losses in the revised return dated 23.12.2002,
wherein, exemption under Section 10B of the Act was
withdrawn in terms of Section 10B(8) of the Act. The
Assessing Officer rejected the claim on the ground of late
submission of declaration in writing after the due date of filing
the return on 31.10.2001. The Supreme Court in such facts
held that the assessee filed its return under Section 139(5) of
the Act on 23.12.2002 with a declaration under Section
10B(8) of the Act after the due date of original return under
Section 139(1) i.e. 31.10.2001 which was not valid for
claiming carried forward loss or set off and the assessee did
not file return under Section 139(3) of the Act, but filed return
under Section 139(1) of the Act. The declaration under sub-
section(8) of 10(B) of the Act will have an ineradicable affect
on the assessment on the return of income, hence the
Supreme Court has held the same to be mandatory, which is
not the case of claiming deduction such as depreciation under
section 32 of the Act.
12. In such circumstances, the Supreme Court has held that
for claiming benefit under Section 10B(8) of the Act, the twin
conditions requiring submitting written declaration to the
Assessing Officer before the due date for filing the original
return under Section 139(1) of the Act is mandatory and
cannot be considered directly and a revised return under
Section 139(5) of the Act cannot convert Section 139(1) of the
Act return into a loss return under Section 139(3) of the Act.
The Supreme Court has held that filing a revised return under
Section 139(5) of the Act and taking a contrary stand and/or
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claiming exemption which was specifically not claimed earlier
while filing the original return of income is not permissible.
13. In the present case, the assessee has in fact claimed the
depreciation in his original return and thereafter in his
revised return he has only changed its methodology of
claiming the depreciation. Hence, the claim of depreciation is
maintained by the assessee in both the returns. Thus, the case
of the assessee cannot be compared to the case of the
assessee before the Supreme Court in case of Wipro Ltd
(supra). In the case before the Supreme Court, there was no
declaration at the first place as mandated by the provisions of
Section 10B(8) of the Act, whereas in the present case, the
depreciation is claimed on the due date.
14. In the present case, the assessee has already filed an
option of claiming the depreciation at the first instance in the
original return, but subsequently, he has only changed the
method of computation or methodology to WDV method
instead of SLM method. The Supreme Court in paragraph 11,
while distinguishing the case of G.M.Knitting Industries (P)
Ltd., (supra) has held that the exemption provision under
Section 10B(8) of the Act cannot be compared with claiming
an additional depreciation under Section 32 (1)(ii-a) of the Act
and the assessee claiming the exemption has to strictly and
literally comply with the exemption provisions. The relevant
paragraphs No.9 and 11 of the said decision read as under:
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“9. In such a situation, filing a revised return under section
139(5) of the IT Act claiming carrying forward of losses
subsequently would not help the assessee. In the present
case, the assessee filed its original return under section
139(1) and not under section 139(3) Therefore, the Revenue
is right in submitting that the revised return filed by the
assessee under section 139(5) can only substitute its original
return under sections 139(1) and cannot transform it into a
return under section 139(3) in order to avail the benefit of
carrying forward or set off of any loss under section 80 of the
IT Act. The assessee can file a revised return in a case where
there is an omission or a wrong statement. But a revised
return of income, under section 139(5) cannot be filed, to
withdraw the claim and subsequently claiming the carried
forward or set-off of any loss. Filing a revised return under
section 139(5) of the IT Act and taking a contrary stand
and/or claiming the exemption, which was specifically not
claimed earlier while filing the original return of income is
not permissible. By filing the revised return of income, the
assessee cannot be permitted to substitute the original return
of income filed under section 139(1) of the IT Act. Therefore,
claiming benefit under section 10B(8) and furnishing the
declaration as required under section 10B(8) in the revised
return of income which was much after the due date of filing
the original return of income under section 139(1) of the IT
Act, cannot mean that the assessee has complied with the
condition of furnishing the declaration before the due date of
filing the original return of income under section 139(1) of
the Act. As observed hereinabove, for claiming the benefit
under section 10B(8), both the conditions of furnishing the
declaration and to file the same before the due date of filing
the original return of income are mandatory in nature.
xxx xxx xxx
11. Now so far as the reliance placed upon the decision of
this Court in the case of GM Kung Industries (P) Ltd (supra),
relied upon by the learned counsel appearing on behalf of the
assessee is concerned, section 10B(8) is an exemption
provision which cannot be compared with claiming an
additional depreciation under section 32(1) (-a) of the Act. As
per the settled position of law an assessee claiming
exemption has to strictly and literally comply with the
exemption provisions Therefore, the said decision shall not be
applicable to the facts of the case on hand, while /considering
the exemption provisions. Even otherwise. Chapter III and
Chapter VIA of the Act operate in different realms and
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principles of Chapter III which deals with “incomes which do
not form a part of total income cannot be equated with
mechanism provided for deductions in Chapter VIA, which
deals with “deductions to be made in computing total income.
Therefore none of the decisions which are relied upon on
behalf of the assessee on interpretation of Chapter VIA shall
be applicable while considering the claim under section
108(8) of the IT Act.”
15. It is further held that Chapter III and Chapter VIA of the
Act operates in different realm and principles of Chapter III of
the Act, which deals with “incomes which do not form a part
of total income” cannot be equated with mechanism provided
for deductions in Chapter VIA of the Act, which deals with
deductions to be made in computing the total income.
16. Thus, on overall appreciation of the facts, the case of the
assessee as examined by the Tribunal confirm that the revised
return filed by the assessee is valid. Having held the same as
valid return, the same gets replaced with that of the original
return filed under Section 139(1) of the Act for all purposes of
the Act. The claim of depreciation in the original return and
the revised return is maintained by the assessee. The
depreciation has been claimed by SLM before the due date
and in these circumstances, the assessee cannot be restrained
from availing the benefit of WDV methodology which is in its
favour and the constructions of Rule 5(1A) of the Rules, which
is a machinery provision and gives choice to a tax payer, has
to be interpreted in a manner which is favourable to the
assessee.
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17. Thus, the substantial question of law, as formulated in
the present tax appeals are answered against the Revenue
and in favour of the assessee. The tax appeals stand dismissed
accordingly.
Sd/- .
(A. S. SUPEHIA, J)
Sd/- .
(PRANAV TRIVEDI,J)
BIMAL/1
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