Valid revised return under Section 139(5) permits change of depreciation methodology from SLM to WDV.

The respondent-assessee, a power generation company, filed its original return of income for AY 2002-03 on October 31, 2002, claiming depreciation via the Straight Line Method (SLM) under Rule 5(1A) of the Income Tax Rules.

On March 31, 2003, the assessee filed a revised return under Section 139(5) of the Income Tax Act, 1961, seeking to change the depreciation method to the Written Down Value (WDV) method.

The revision was also based on newly discovered facts regarding unconfirmed power sales to the Gujarat Electricity Board (GEB) and additional power consumption expenses.

The Assessing Officer (AO) rejected the revised return, asserting there was no "omission or wrong statement" in the original filing.

While the CIT(Appeals) accepted the validity of the revised return, it rejected the change in the depreciation method on merits.

The ITAT subsequently ruled in favor of the assessee, upholding both the validity of the revised return and the switch to the WDV method.

1. Whether the Appellate Tribunal was justified in upholding the revised return as a valid return and directing the Assessing Officer to allow the depreciation claim based on the WDV method.

2. Whether the Appellate Tribunal was justified in directing the Assessing Officer not to charge interest under Section 234D for AY 2002-2003.

The court applied Section 139(5) of the Income Tax Act, which permits an assessee to file a revised return upon the discovery of a bona fide "omission or any wrong statement" in the original return.

It further examined Rule 5(1A) of the Income Tax Rules, 1962, which provides power generation undertakings the option to choose between SLM (Appendix-IA) and WDV (Appendix-I) depreciation, provided the option is exercised before the due date under Section 139(1).

The court relied on CIT v. Shivanand Electronics, establishing that the mandatory or directory nature of a statute depends on legislative intent and whether rigid adherence creates general inconvenience.

It distinguished the Supreme Court’s ruling in PCIT v. Wipro Ltd., which held that mandatory statutory declarations for exemptions (Section 10B) cannot be filed via revised returns.

The Court first affirmed the validity of the revised return, noting that the assessee’s discovery of billing disputes with GEB and unaccounted expenses constituted a bona fide omission under Section 139(5).

Regarding the change in depreciation methodology, the Court held that once a revised return is validly filed, it supplants the original return for all purposes.

The Court distinguished Wipro Ltd. on the grounds that depreciation under Section 32 is a deduction already claimed in the original return, unlike the specific "exemption" in Wipro which required a fresh mandatory declaration after the deadline.

The Court interpreted the "due date" requirement in the second proviso of Rule 5(1A) as directory rather than mandatory for validly revised returns, provided the initial claim for depreciation was made timely.

The Court reasoned that Rule 5(1A) is a machinery provision intended to benefit taxpayers; thus, since the assessee had already opted for depreciation in the original filing, refining the computation method (SLM to WDV) in a valid revised return was permissible.

It held that the ITAT was justified in validating the revised return and allowing the shift to the WDV method for depreciation, as the revised return effectively replaced the original return under Section 139(1).

The Court further noted that the Revenue had already accepted the WDV method for subsequent years (AY 2009-10 onwards), and denying it for the initial period would create "incongruous consequences".

Both tax appeals were dismissed.