1991 (9) TMI 149 - AT - Income Tax

Accounting Year, Additional Depreciation, Assessing Officer, Assessment Order, Mistake Apparent From Record, Previous Year

Summary

Issues:
Extent of additional depreciation admissible under section 32(1)(iiia) of the Income-tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT MADRAS-D involved the issue of the extent of additional depreciation admissible under section 32(1)(iiia) of the Income-tax Act, 1961. The assessee, a resident company, had claimed depreciation for the assessment year 1983-84, which consisted of a 14-month accounting year. Initially, the Assessing Officer granted depreciation based on a 12-month period, leading to disallowance of excess depreciation in a rectified order. However, on appeal, the Commissioner (Appeals) held that the additional depreciation admissible is half of the normal depreciation, which is proportionately higher for a 14-month period by virtue of the proviso to rule 5 of the Income-tax Rules. The Commissioner (Appeals) also emphasized the debatable nature of the issue, citing the Supreme Court judgment in T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50.

The Commissioner (Appeals) maintained that the issue involved multiple possible interpretations, making it a debatable point of law, and hence not a mistake apparent from record. The Assessing Officer's position differed from that of the Commissioner (Appeals), indicating the existence of two plausible views on the matter. Referring to the Supreme Court's ruling in Volkart Bros., the Tribunal concluded that for a mistake to be apparent from the record, it must be obvious and patent, rather than requiring an extensive process of reasoning to establish. Given the presence of conflicting opinions, the Tribunal upheld the Commissioner (Appeals)'s decision as valid and justified, as it did not warrant interference.

In its analysis, the Tribunal considered the application of the proviso to rule 5 of the Income-tax Rules, 1962, which governs the computation of normal depreciation under section 32(1). The proviso stipulates that normal depreciation increases proportionately with the number of months in the previous year. As the assessee's income was based on a 14-month period, the proviso to rule 5 applied, adjusting the normal depreciation calculation accordingly. Section 32(1)(iia) of the Income-tax Act provides for additional depreciation equal to half of the amount admissible under clause (ii), which pertains to the prescribed rate of depreciation. Consequently, the Tribunal found no grounds to interfere with the Commissioner (Appeals)'s decision on the merits of the case, given the statutory provisions and the debatable nature of the issue.

Ultimately, the Tribunal dismissed the appeal, affirming the Commissioner (Appeals)'s decision regarding the admissibility of additional depreciation under section 32(1)(iiia) of the Income-tax Act, 1961.