2003 (4) TMI 39 - HC - Income Tax

Retrospective amendment to section 143(1A) - additional tax under section 143(1A) - depreciation governed by the provisions of section 32(2) - 1. Whether, on the facts and in the circumstances of the case, additional tax under section 143(1A) was leviable especially since the levy has been made with respect to redetermination of depreciation governed by the provisions of section 32(2) of the Act? - 2. Whether additional tax under section 143(1A) was attracted having regard to the retrospective amendment to section 143(1A) of the Act?

Summary

Issues:
1. Whether additional tax under section 143(1A) was leviable due to the redetermination of depreciation governed by the provisions of section 32(2) of the Income-tax Act, 1961?
2. Whether additional tax under section 143(1A) was attracted considering the retrospective amendment to section 143(1A) of the Act?

Analysis:

Issue 1:
The appellant, a government undertaking, challenged the levy of additional tax under section 143(1A) for the assessment year 1991-92 based on the adjustment made by the Assessing Officer regarding depreciation claimed. The appellant argued that the levy of additional tax was not justified as it did not result in a reduction of loss after the prima facie adjustment. The appellant contended that depreciation and loss are distinct concepts under the Act and are dealt with separately. The court noted that the adjustment was only in respect of depreciation and not loss. However, the court observed that the provisions of section 143(1A) are attracted when the total income declared in the return is increased, or the loss declared is reduced or converted into income. The court directed the Assessing Officer to reconsider the issue in light of the arguments presented by the appellant and make a decision in accordance with the law.

Issue 2:
The court examined the provisions of section 143(1A) both before and after the amendment by the Finance Act, 1993. It was highlighted that the amended provision of section 143(1A) applies when there is an increase in income declared in the return or when the loss declared is reduced or converted into income due to adjustments. The court emphasized that the amended provisions are applicable if the adjustment affects the total income returned, whether it is a case of income or loss. The court acknowledged the appellant's argument that the reduction in depreciation claimed does not impact the total income declared. The court set aside the previous orders and directed the Assessing Officer to reevaluate the appellant's liability to additional tax under section 143(1A) based on the arguments presented.

In conclusion, the court disposed of the appeal by directing the Assessing Officer to reconsider the issue of additional tax under section 143(1A) in light of the arguments raised by the appellant and in accordance with the provisions of the Income-tax Act, 1961.