AJAY TEWARI, J. - (1.) THIS is an appeal under s. 260A of the IT Act, 1961 (hereinafter referred to as 'the Act') by the Revenue against the asst. yr. 2000 -01, proposing following substantial questions of law : "(i) Whether on the facts and circumstances of the case, the Hon'ble Tribunal can ignore the compliance to statutory provisions of exercising option to adopt WDV method in place of straight line method prescribed under the statutory provisions on the assets used for power generation ? (ii) Whether on the facts and circumstances of the case, the examination of the claim of deduction claimed by the assessee -company by the AO is fettered with the finding of the auditor of the company ? (iii) Whether on the facts and circumstances of the case, the Hon'ble Tribunal is correct in deleting the disallowance made by the AO pertaining to the exaggerated profit of captive power generating unit by claiming higher rate than the cost price or the market price charged by it on the supply of power made by it to 3rd party i.e., State Electricity Board -
(2.) AT the very outset we may record that the counsel for the Revenue has very fairly stated that question No. 3 stands covered against the Revenue and we hold as such accordingly.
(3.) AS regards the other issues it may be noticed that the assessee claimed depreciation on WDV which was disallowed by the AO on the ground that the assessee had not opted for the same as per proviso to sub -r. (1A) of r. 5 of the IT Rules, 1962 which is quoted herein below : "Provided further that the undertaking specified in cl. (i) of sub -s. (1) of s. 32 of the Act may, instead of the depreciation specified in Appendix 1A, at his option, be allowed depreciation under sub -r. (1) r/w Appendix I, if such option is exercised before the due date for furnishing the return of income under sub -s. (1) of s. 139 of the Act...." In appeal the learned appellate authority upheld the same. In second appeal the learned Tribunal accepted the appeal on the question of permission to claim depreciation on WDV basis holding as follows : "'It is seen that no particular format or procedure has been laid down in the second proviso in relation to exercise of option by an assessee. Second proviso only says that option is to be exercised before the due date for furnishing the return of income under s. 139(1) for the asst. yr. 1998 -99 in respect of power generating undertaking then existing and for the assessment year in which a new undertaking begins to generate power. The case of the assessee is that it began to generate power during the previous year relevant to asst. yr. 1999 -2000. As per Annex. D annexed to the computation of income chargeable to tax filed along with the return of income for asst. yr. 1999 -2000, the assessee had claimed depreciation in accordance with sub -r. (1) r/w Appendix I. Thereafter the assessee's return of income was learned counsel for the assessee the return of income filed before the due date of furnishing the return under s. 139(1) for asst. yr. 1999 -2000. made proper compliance to the requirements of the second proviso to r. 5(1A) of IT Rules. On consideration of the matter we accept this argument.";