1995 (1) TMI 415 - SC - Income Tax

Summary

Issues Involved:

1. Interpretation of Section 154(7) of the Income Tax Act.
2. Calculation of the limitation period for rectification applications under Section 154.
3. Entitlement to depreciation allowance on factory building.

Issue 1: Interpretation of Section 154(7) of the Income Tax Act

The primary issue in this case is the interpretation of the expression "from the date of the order sought to be amended" in Sub-section (7) of Section 154 of the Income Tax Act. The court noted that the word 'order' is not qualified and can refer to any order, including an amended or rectified order. This interpretation aligns with previous judgments, such as in the case of Intimation Cotton Corporation v. C.T.O., where the court held that a rectified order is also "any order" which can be rectified under the relevant rules. The court reiterated that once an assessment is reopened, the initial order ceases to be operative, and a fresh order takes its place.

Issue 2: Calculation of the Limitation Period for Rectification Applications

The court examined whether the period of four years for filing a rectification application should be calculated from the original assessment order or from the rectified order. The Tribunal had allowed the application, holding that the four-year period should be calculated from the rectified order dated 12th July 1982. However, the High Court reversed this decision, stating that the period should be calculated from the original order dated 21st September 1979. The Supreme Court concluded that the period of limitation should indeed be calculated from the date of the rectified order, following precedents like Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu and Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali H.M. Abdulali, which established that a reassessment or rectified order replaces the original assessment order.

Issue 3: Entitlement to Depreciation Allowance on Factory Building

There was no dispute regarding the assessee's entitlement to a 10% depreciation allowance on the factory building. The court emphasized that this entitlement must be granted if the rectification application is within the permissible time frame. Given the court's interpretation that the limitation period should be calculated from the rectified order, the assessee's application was deemed timely.

Conclusion

The Supreme Court set aside the High Court's order and restored the Tribunal's decision, confirming that the rectification application filed on 4th July 1986 was within the four-year limitation period from the rectified order dated 12th July 1982. The appeals were allowed with no order as to costs.