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Issues:
Appeal against Commissioner (Appeals) granting depreciation claim for assessment year 1979-80, validity of conditions imposed by the Income Tax Officer (ITO) regarding depreciation claim. Analysis: The appeal was filed by the department against the order of the Commissioner (Appeals) granting depreciation claim to the assessee for the assessment year 1979-80. The ITO had allowed the change of accounting year for the assessee from 31-3-1978 to 30-6-1978, subject to certain conditions. The main contention was regarding the condition imposed by the ITO on granting proportionate depreciation for the accounting year relevant to the assessment year 1979-80. The Commissioner (Appeals) held that the assessee was entitled to full normal depreciation without any restriction based on the number of days the concern worked. The departmental representative argued that the assessee had accepted the condition by filing a return accordingly and claiming depreciation at 25%, estopping them from challenging the condition. The departmental representative further contended that the condition of proportionate depreciation was valid as per the proviso to rule 5(1) of the Income-tax Rules, 1962. The authorized representative for the assessee argued that the condition was invalid as it was not imposed under section 154 of the Income-tax Act, 1961. The Tribunal noted that the condition of proportionate depreciation imposed by the ITO was an additional condition and not in accordance with the law. The Tribunal referenced a case to emphasize that conditions imposed by the ITO must be valid, legal, and reasonable, in line with the provisions of the Income-tax Act. The Tribunal analyzed the proviso to rule 5(1) and concluded that the assessee was entitled to full depreciation at the specified rate, even if the machinery was used for part of the year. The ITO had no authority to reduce the depreciation allowance to one-fourth, making the condition invalid. The Tribunal further stated that compliance with an invalid condition does not validate it, and the assessee cannot be estopped from challenging its validity. Therefore, the Tribunal upheld the Commissioner (Appeals) order, confirming that the assessee was entitled to full normal depreciation without any restrictions. Consequently, the appeal by the department was dismissed.
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