1993 (10) TMI 39 - HC - Income Tax

Appeal To Supreme Court, Application For Rectification, Factory Building, High Court, Higher Rate, Original Order, Question Of Law, Rate Of Depreciation, Rectification Of Mistakes, Substantial Question

Summary

Issues:
1. Certification of fitness for appeal to the Supreme Court under section 261 of the Income-tax Act, 1961.
2. Questions of law regarding the merger of orders under section 154 for rectification of depreciation allowance.
3. Computation of limitation for rectifying mistakes in depreciation allowance.

Analysis:

The judgment deals with an application under section 261 of the Income-tax Act, 1961, where the applicant-assessee sought a certificate of fitness for appeal to the Supreme Court based on questions of law arising from a Division Bench judgment. The questions revolved around the merger of orders under section 154 for rectification of depreciation allowance. Specifically, the issues were whether there is a complete merger of the original assessment order with the rectification order, and how the limitation for rectifying mistakes in depreciation allowance should be computed.

The facts leading to the reference involved the assessee claiming depreciation at a lower rate for certain assessment years. The rectification for extra shift depreciation was done in 1982, but rectification for factory buildings' depreciation was sought in 1986. The dispute arose regarding the computation of the limitation period for rectification, with the Income-tax Officer contending it should be from the original assessment date, while the assessee argued it should be from the date of the rectification order under section 154.

The Tribunal held that once depreciation was rectified, the entire allowance of depreciation merged in the rectification order, irrespective of whether a specific aspect was rectified or not. It emphasized that depreciation is a single item of allowance, and rectification of any part would be deemed a recomputation containing the original mistake. The Tribunal's decision was based on the understanding that if rectification orders dealt with aspects other than depreciation, the situation would be different.

The High Court, in response to the reference, opined that the doctrine of partial merger applies even in rectification cases related to depreciation allowance. It clarified that the merger of orders applies only to the specific point being rectified, not to all aspects of depreciation. The court held that the limitation period for rectification should run from the date of the original order containing the mistake unless that mistake was recomputed.

Ultimately, the High Court rejected the application for certification of appeal to the Supreme Court, stating that the issues decided were clear and did not warrant further appeal. The judgment highlighted the recognition of partial merger in taxation law under section 154(1A) and concluded that no question fit for appeal had arisen, thus dismissing the application.

In agreement with the lead judge, the application was rejected, and no costs were awarded.