1986 (4) TMI 147 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of depreciation rates as per Income-tax (Fourth Amendment) Rules, 1983.
2. Whether the amended depreciation rates apply to all pending assessments or only to assessments from the assessment year 1984-85 onwards.

Detailed Analysis:

1. Applicability of Depreciation Rates as per Income-tax (Fourth Amendment) Rules, 1983:

The primary issue was whether the depreciation rates as per the Income-tax (Fourth Amendment) Rules, 1983, should be applied to all cases pending on 2-4-1983, irrespective of the assessment year involved, or only to the assessment year 1984-85 and subsequent years. The Tribunal had divergent views in the cases of Rayalaseema Passenger and Goods Transports (P.) Ltd. v. IAC and ITO v. Bharat Roadways.

The assessee argued that the amended rules should apply to all assessments made after 2-4-1983, regardless of the assessment year. The department contended that the new rates should apply only to the assessment years following 2-4-1983, i.e., from the assessment year 1984-85 onwards.

2. Whether the Amended Depreciation Rates Apply to All Pending Assessments or Only to Assessments from the Assessment Year 1984-85 Onwards:

The Tribunal examined whether the changes in depreciation rates introduced by the Income-tax (Fourth Amendment) Rules were procedural or substantive. The assessee argued that section 32 of the Income-tax Act, which grants depreciation, is procedural. They cited various cases, including Biju Patnaik v. WTO, where procedural changes were applied to pending assessments.

The department argued that the depreciation rates are part of the substantive law, as they affect the computation of income. They cited the Supreme Court's decision in Karimtharuvi Tea Estate Ltd. v. State of Kerala, which held that the law as it stood on the first day of the assessment year governs the assessment for that year.

The Tribunal agreed with the department, stating that the provisions regarding depreciation rates are substantive. Section 32 allows depreciation at prescribed rates, and these rates are part of the substantive law. Therefore, changes to these rates should apply only to the assessment years following the date of the amendment.

The Tribunal also considered the implications of the Income-tax (Third Amendment) Rules, 1983, which introduced depreciation rates for energy-saving devices. If the assessee's interpretation were accepted, it would lead to different rates for the same assets within a short period, which the Tribunal found illogical.

The Tribunal concluded that the changes in depreciation rates introduced by the Income-tax (Fourth Amendment) Rules, 1983, should apply only to the assessment years from 1984-85 onwards. The orders of the Commissioner (Appeals) were confirmed, and the appeals were dismissed.

Conclusion:
The Tribunal held that the changes in depreciation rates introduced by the Income-tax (Fourth Amendment) Rules, 1983, are substantive and should apply only to the assessment years from 1984-85 onwards. The appeals were dismissed, and the orders of the Commissioner (Appeals) were confirmed.