1989 (10) TMI 45 - HC - Income Tax

Summary

Issues involved:
The issues involved in this case are:
1. Whether the assessee is entitled to depreciation at the rate of 40%?
2. Whether the claim based on a rule that came into force on July 24, 1980, for the assessment year 1980-81 is not a debatable issue?
3. Whether the Tribunal was right in allowing the application of the assessee under section 154 of the Income-tax Act?

Issue 1: Depreciation Rate
The assessee, a bus operator, claimed depreciation at 40% under section 154 of the Income-tax Act for the assessment year 1980-81, which was initially allowed at 30% by the Income-tax Officer. The amendment to the Income-tax Rules in 1980 allowed for 40% depreciation on motor vehicles from July 24, 1980. The Commissioner of Income-tax (Appeals) held that the amendment could only have prospective operation and that the assessment should be based on the law as of April 1, 1980, resulting in 30% depreciation. However, the Tribunal ruled in favor of the assessee, stating that the amended rules should apply to assessments completed after July 24, 1980, allowing for 40% depreciation on the stage carriages owned by the assessee.

Issue 2: Debatable Claim
The Tribunal held that the intention of the amendment regarding depreciation rate cannot be debated by income-tax authorities, making it a non-debatable issue. It further stated that relief to the assessee cannot be denied when applying for rectification under section 154 of the Income-tax Act. The Tribunal's decision was based on the principle that where a provision expressly states the date from which it is effective, it must be given effect accordingly, in this case, from July 24, 1980.

Issue 3: Application of Law
The High Court emphasized that the law to be applied for assessment is the law in force during the assessment year unless changed. Amendments after April 1 of a financial year do not apply to assessments for that year, as clarified by the Supreme Court in previous cases. The Court rejected the Tribunal's decision, stating that the rules cannot have retrospective operation and that the law relating to depreciation as of April 1, 1980, should be applied. Consequently, the questions were answered against the assessee and in favor of the Revenue, disposing of the income-tax reference accordingly.