1982 (2) TMI 95 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the Commissioner's assumption of jurisdiction u/s 263.
2. Legality of the Commissioner's directions for making a protective assessment.
3. Merits of the depreciation claim on the consideration for buses.

Summary:

1. Validity of the Commissioner's assumption of jurisdiction u/s 263:
The Commissioner assumed jurisdiction u/s 263 on the basis that the ITO's order was erroneous and prejudicial to the interests of revenue. The Commissioner argued that the ITO should have considered the vendor-company's contention and reduced the depreciation allowance accordingly. The assessee contended that the ITO's original order was consistent and based on the agreement showing the consideration of Rs. 14,50,000 for the buses. The Tribunal found that the ITO's order was not erroneous at the time it was passed and that the Commissioner could not invoke u/s 263 based on a subsequent appellate decision in another case. The Tribunal held that the order must be erroneous as on the date of passing and not due to a future appellate decision.

2. Legality of the Commissioner's directions for making a protective assessment:
The Commissioner directed the ITO to make a protective assessment by allowing depreciation on a lower value until the matter was finally decided in the vendor-company's case. The Tribunal found this direction invalid, stating that the ITO's order was based on his interpretation of the agreement and consistent with his view in the vendor-company's case. The Tribunal held that the ITO could not be expected to take a protective measure based on a possible future appellate decision. The Tribunal also noted that there is no provision in law for protective allowance or disallowance of claims like depreciation.

3. Merits of the depreciation claim on the consideration for buses:
The assessee argued that even if part of the consideration was for route rights, depreciation should be allowed on it. The Tribunal did not find it necessary to address this issue in detail, noting that the decision of the Madras High Court in G. Vijayaranga Mudaliar v. CIT [1963] 47 ITR 853 was contrary to the assessee's claim.

Conclusion:
The Tribunal set aside the Commissioner's order, finding that the assumption of jurisdiction u/s 263 was wrong and the directions for a protective assessment were invalid. The appeal was allowed.