1986 (3) TMI 158 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of the appellant's claim for depreciation at a higher rate of 15%.
2. Levy of interest under section 217(1)(a) of the Income-tax Act, 1961.

Detailed Analysis:

1. Disallowance of the Appellant's Claim for Depreciation at a Higher Rate of 15%:

Relevant Facts:
The appellant, a public limited company engaged in the manufacture of metal alloys, castings, and stampings, claimed depreciation at a higher rate of 15% on its plant and machinery for the assessment year 1981-82. This claim was based on the Income-tax (Fourth Amendment) Rules, 1983, which amended the general rate of depreciation from 10% to 15% effective from 2-4-1983.

Lower Authorities' Decisions:
- The Income Tax Officer (ITO) disallowed the claim, stating that the amendment was substantive and applicable only from the financial year commencing after 2-4-1983, not retrospectively.
- The Commissioner (Appeals) upheld the ITO's decision, citing that the revised rule 5 was effective from 2-4-1983 and applicable only to assessments from 1984-85 onwards. The Commissioner also referenced a Board's letter and the Kerala High Court decision in Peria Karamalai Tea & Produce Co. Ltd. v. CIT [1980] 124 ITR 899, which supported the non-retrospective application of such amendments.

Appellant's Arguments:
The appellant's counsel argued that since the assessment was pending when the rule was amended, the higher depreciation rate should apply. The counsel cited three Tribunal decisions: Rayalaseema Passenger & Goods Transports (P.) Ltd. v. IAC [1984] 7 ITD 111 (Mad.), South India Road Transport v. ITO [1983] 4 ITD 176 (Hyd.), and P.M. Raghavendra Rao [IT Appeal No. 2235 (Mad.) of 1983].

Tribunal's Analysis and Conclusion:
The Tribunal concluded that the appellant was not entitled to the higher depreciation rate for the assessment year under appeal. The notification explicitly stated that the amendment would take effect from 2-4-1983, indicating its applicability only from the assessment year 1984-85 onwards. The Tribunal also noted that the decisions cited by the appellant were inapplicable as they involved notifications with immediate effect, unlike the present case. Consequently, the Tribunal confirmed the orders of the lower authorities and rejected the appellant's ground.

2. Levy of Interest under Section 217(1)(a) of the Income-tax Act, 1961:

Relevant Facts:
The ITO levied interest of Rs. 1,31,844 under section 217(1)(a) of the Act, which was upheld by the Commissioner (Appeals). The Commissioner reasoned that the appellant was liable under section 209A of the Act and had failed to file an estimate, thus attracting interest under section 217(1)(a).

Appellant's Arguments:
The appellant's counsel argued that the ITO had incorrectly charged interest under section 217(1)(a), as the appellant did not fall within the provisions of section 209A(1)(a) on the crucial date (15-9-1980). The counsel pointed out that the latest completed assessment as of that date was for the year 1979-80, which resulted in a nil assessment, thus negating any liability to file a statement under section 209A(1)(a). The counsel also referenced a Tribunal decision in the appellant's own case for the assessment year 1980-81, where interest under section 217(1A) was deleted.

Tribunal's Analysis and Conclusion:
The Tribunal agreed with the appellant's arguments, noting that the latest completed assessment as of 15-9-1980 was a nil assessment, and thus, there was no liability to file a statement under section 209A(1)(a). The Tribunal also referenced its earlier decision in the appellant's case for the assessment year 1980-81, which supported the appellant's position. Consequently, the Tribunal held that the appellant was not liable to pay interest under section 217(1)(a) and deleted the interest charged by the ITO. The Tribunal also stated that even if the interest was charged under section 217(1A), the appellant would still succeed based on the earlier Tribunal decision.

Conclusion:
The appeal was partly allowed, with the Tribunal rejecting the appellant's claim for higher depreciation but deleting the interest levied under section 217(1)(a). The ground relating to the levy of interest under section 139(8) was not pressed by the appellant.