1992 (11) TMI 147 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the withdrawal of depreciation on livestock.
2. Legality of the withdrawal of terminal allowance on livestock.
3. Jurisdiction and authority of the Deputy Commissioner in passing rectificatory orders.
4. Application of previous Tribunal decisions and principles of rectification under Section 154 of the Income-tax Act.

Detailed Analysis:

1. Legality of the Withdrawal of Depreciation on Livestock:

The primary issue in this appeal is whether the withdrawal of depreciation on livestock amounting to Rs. 2,47,032 by the Deputy Commissioner through his rectificatory order dated 19-3-1991 is legal and proper. Initially, the Income-tax Officer rejected the claim of depreciation on livestock, asserting that livestock cannot be considered as plants and that depreciation is only allowable on fixed assets, not on stock-in-trade. This decision was not contested by the assessee in the appeal before the Commissioner of Income-tax (Appeals). The Commissioner (Appeals) allowed investment allowance on parent stock, following an earlier Tribunal decision for the assessment year 1981-82, which considered parent birds as plants. Consequently, the Deputy Commissioner allowed depreciation in his first modificatory order dated 10-9-1990. However, this was later withdrawn in the second modificatory order dated 19-3-1991, stating that the Commissioner (Appeals) did not direct any such relief.

2. Legality of the Withdrawal of Terminal Allowance on Livestock:

The second issue is the withdrawal of terminal allowance on livestock amounting to Rs. 23,26,443. Similar to the depreciation issue, the terminal allowance was initially granted by the Deputy Commissioner in his first modificatory order dated 10-9-1990, but was later withdrawn in the second modificatory order dated 19-3-1991. The Deputy Commissioner justified this withdrawal by stating that the Commissioner (Appeals) did not direct any such relief in his appellate order.

3. Jurisdiction and Authority of the Deputy Commissioner in Passing Rectificatory Orders:

The Tribunal examined whether the Deputy Commissioner had the jurisdiction to pass the first modificatory order dated 10-9-1990, which granted depreciation and terminal allowance. The Tribunal referred to Section 154(1A) of the Income-tax Act, which allows rectification of matters not considered and decided by the appellate authority. Since the disallowance of depreciation and terminal allowance was not contested in the appeal before the Commissioner (Appeals), these matters remained within the jurisdiction of the Deputy Commissioner for rectification. The Tribunal also cited previous decisions, including the Karnataka High Court's ruling in Addl. CIT v. India Tin Industries (P.) Ltd., which supported the Deputy Commissioner's authority to rectify such matters.

4. Application of Previous Tribunal Decisions and Principles of Rectification under Section 154:

The Tribunal emphasized that the earlier decision of the Income-tax Appellate Tribunal in the assessee's own case for assessment years 1978-79, 1979-80, and 1980-81, which allowed depletion allowance, should have been followed. The Deputy Commissioner, realizing his mistake in the original assessment order, corrected it in the first modificatory order dated 10-9-1990. The Tribunal held that disregarding the Tribunal's earlier decision constituted a mistake apparent on the record, justifying rectification under Section 154(1). The Tribunal also referred to the Gujarat High Court's decision in Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO, which supported rectification based on previous Tribunal decisions.

Conclusion:

The Tribunal concluded that the assessee should succeed in this appeal. It held that the Deputy Commissioner had the jurisdiction and authority to pass the first modificatory order dated 10-9-1990, granting depreciation and terminal allowance. The Tribunal found the second modificatory order dated 19-3-1991, which withdrew these allowances, to be illegal. Consequently, the Tribunal set aside the impugned orders of the Commissioner of Income-tax (Appeals) and the second modificatory order, restoring the first modificatory order. The appeal of the assessee was allowed.