1986 (7) TMI 132 - AT - Income Tax

Summary

Issues:
Imposition of conditions by the ITO for changing the accounting period, disallowance of depreciation for a specific period, allowance of certain expenses under section 80VV, treatment of unpaid bonus as a statutory liability.

Analysis:
The judgment revolves around the imposition of conditions by the Income Tax Officer (ITO) for changing the accounting period of the assessee. The assessee requested a change in its accounting period, which was granted by the ITO subject to a condition that depreciation would not be allowed for a specific period. The assessee later demanded depreciation for that period, arguing the condition was illegal. The Commissioner (Appeals) upheld the ITO's decision, stating that if the condition was unacceptable, the assessee could have challenged it under section 264 of the Income-tax Act or through a writ petition. The Commissioner also directed the ITO to allow the depreciation for the disputed period in the following assessment year.

The Appellate Tribunal held that if a condition imposed by the ITO is beyond their powers, it cannot bind the assessee. The Tribunal emphasized that conditions imposed must be valid and legal, in line with the provisions of the Income-tax Act. The Tribunal cited a legal principle that conditions can only be imposed for the purpose of the Act. It noted that the ownership of the industrial undertaking had not changed, only the shares were transferred, so the condition regarding depreciation was unfounded. Therefore, the Tribunal ruled in favor of the assessee, allowing depreciation for the disputed period in the relevant assessment year.

Regarding the assessment year 1983-84, two additional grounds were raised related to expenses under section 80VV and unpaid bonus. The Commissioner (Appeals) allowed a portion of the expenses under section 80VV, which the Tribunal agreed with. In the case of the unpaid bonus, the Tribunal held that it should be allowed to the extent it has been paid, and the matter was remanded to the ITO for further consideration. Consequently, the appeal for the assessment year 1982-83 was allowed, and the appeal for the assessment year 1983-84 was partly allowed based on the specific grounds discussed.