2004 (11) TMI 70 - HC - Income Tax

Rate of depreciation - 1. Whether Tribunal was justified in law in holding that the assessee is entitled to depreciation on truck at 40 per cent, as against 30 per cent? 2. Whether Tribunal was justified in law in holding that the notification dated July 24, 1980, is applicable for the assessment year 1980-81, when the relevant previous year expired before the issue of the said notification? - It is well settled that in the Income-tax Act the law as stands on the first day of the assessment year is applicable unless and until any amendment made in the Act or the notification issued therein is specifically made applicable from an anterior date. In this view of the matter, the notification dated July 24, 1980 providing for higher depreciation on the truck used on hire was not applicable for the assessment year 1980-81. The Tribunal has clearly erred in law in granting depreciation at 40 per cent, on the basis of the said notification

Summary

Issues:
1. Entitlement to depreciation on a truck at 40% instead of 30%.
2. Applicability of a notification for a specific assessment year.

Issue 1: Entitlement to Depreciation

The case involved a dispute regarding the entitlement to depreciation on a truck at a rate of 40% instead of the 30% allowed by the Income-tax Officer and upheld by the Appellate Assistant Commissioner. The respondent-assessee claimed depreciation at 40%, but the lower authorities had allowed it at 30%. The Appellate Assistant Commissioner held that a specific notification providing for higher depreciation was applicable in this case, entitling the assessee to claim depreciation at 40%. The Tribunal had to determine whether the assessee was justified in claiming the higher rate of depreciation.

Issue 2: Applicability of Notification

The second issue in this case revolved around the applicability of a notification dated July 24, 1980, for the assessment year 1980-81. The Tribunal had to decide whether the notification, providing for higher depreciation on a truck used on hire, could be applied to the assessment year in question when the relevant previous year had ended before the issuance of the notification. The High Court analyzed the legal principle that the law as of the first day of the assessment year is applicable unless specifically amended retroactively. The Court found that the notification in question was not applicable for the assessment year 1980-81, and the Tribunal had erred in granting depreciation at 40% based on that notification.

In conclusion, the High Court answered the questions referred to it in favor of the Revenue and against the assessee. The Court held that the notification providing for higher depreciation was not applicable for the relevant assessment year, and therefore, the assessee was not entitled to claim depreciation at the increased rate. The judgment emphasized the principle that the law at the beginning of the assessment year governs unless there is a specific retroactive amendment.