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TMI Blog1986 (3) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... ion according to the Income-tax (Fourth Amendment) Rules, 1983 which came into force form 2-4-1983. The amount of depreciation claimed in the revised return was Rs. 1,89,05,488. The difference between the depreciation claimed in the original return and the depreciation claimed in the revised return was Rs. 59,55,898. 3. For the assessment year 1983-84, the assessee filed it income-tax return on 29-7-1983. In the said return itself depreciation was claimed at enhanced rates as per the provisions of the Income-tax (Fourth Amendment) Rules on its plant and machinery and buildings. The claim of depreciation amounted to Rs. 3,31,86,837. However, the ITO while completing the assessment for the assessment year 1983-84 granted depreciation at the old rates only but not at the rates envisaged in the above said Rules. The amount of depreciation, thus, granted by the ITO in his assessment order dated 15-4-1985 was stated to be Rs. 2,59,16,291. Thus, the difference between the amount of depreciation claimed in the income-tax return for 1983-84 and the actual depreciation granted by the ITO is Rs. 72,70,546. 4. The grounds on which both the lower authorities negatived the additional claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs dated 15-1-1985 disallowed the higher claim of depreciation claimed by the assessee under the impugned Rules. As already noted the claim, thus, disallowed for the assessment year 1983-84, was Rs. 72,70,546. 5. Aggrieved against the short grant of depreciation in the hands of the ITO for the assessment years 1982-83 and 1983-84, the assessee-company took the matters in appeals before the Commissioner (Appeals). The learned Commissioner (Appeals) disposed of the appeals before him for the assessment years 1982-83 and 1983-84 by a common order dated 30-8-1985. It was argued before the learned Commissioner (Appeals) that the rates of depreciation are only rules of procedure or represents a branch which dealt with procedural law and, therefore, the rates prescribed under the impugned Rules would have to be applied in computation of income in all pending assessments. The assessee-company on the strength of the decision of the Hon'ble Supreme Court in Mathra Parshad Sons v. State of Punjab AIR 1962 SC 745 argued that as held similarly in the said decision that though the impugned Rules came into effect only from 2-4-1983, the benefit of higher rates of depreciation available under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 052 and also Sampath Iyengar's Commentary on Law of Income-tax, Seventh edn., p. 452 and ultimately held that the change brought about in the rates of depreciation is only in the realm of substantive law and not procedural law, because it affects the computation of income and the total tax liability. Thus the learned Commissioner (Appeals) by his common order dated 30-8-1984 dismissed the claim of enhanced rates of depreciation for the assessment year 1982-83 as well as 1983-84 and dismissed the appeals filed before him by the assessee-company. 6. Further aggrieved by the impugned order of the learned Commissioner (Appeals) dated 30-8-1985, the assessee-company came up in second appeals and, thus, the matters are now before us. All the contentions which are raised before the learned Commissioner (Appeals) on behalf of the assessee-company are also raised before us. Firstly, it is contended that the impugned Rules are rules of procedure and, hence, retrospective in character and, consequently, they apply to all the pending assessments. Shri C. V. K. Prasad, the learned counsel for the assessee, relied upon the Special Bench decision of the Delhi Tribunal in Biju Patnaik v. WTO [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the table in Part I of Appendix I. Thus, it would appear to us that whatever percentage of rates are prescribed as rates of depreciation, in the second column of the table of Part 1 of Appendix I automatically become part of rule 5. Therefore, we are one with the.Calcutta Tribunal Bharat Roadways' case when they held that any change in the rates of depreciation constitutes substantive law and does not remain merely as procedural law. Therefore, inasmuch as the rates of depreciation prescribed under the Rules are substantive rules in nature, they can be enhanced or reduced only by a prospective legislation and any rules either enhancing the rates of depreciation should be held to be a substantive law and so prospective in nature and not retrospective. There is no question of all the pending assessments being governed by them. 8. In this case, the impugned Rules. As can be seen from the said notification, the Notification No. S. O. 151(E) dated 28-2-1983 was published in the Gazette of India, Extraordinary, Part II, Section 3(ii) but they were directed to come into force on 2-4-1983. The previous year relevant to the assessment year 1982-83 is from 1-4-1981 to 31-3-1982 and the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said notification would apply for the assessment year 1980-81 also. When a notification of similar Rules affecting depreciation dated 24-7-1980, which is at least four months after the first day of the assessment year, was held applicable to the assessment year 1980-81, there is no reason why the impugned Rules which came into effect from 2-4-1983 should not be applied for the assessment year 1983-84 especially when there is plausible explanation as to why 1-4-1983 was not prescribed as coming into force of the said Rules. Shri C. V. K. Prasad also contended that similarly in Rayalaseema Passenger Goods Transports (P.) Ltd.'s case the Madras Tribunal held that the same Rules affecting depreciation on motor vehicles dated 24-7-1980 were held applicable for the assessment year 1980-81 and in that case the Tribunal even rejected the contention of the revenue that applying Rules dated 24-7-1980 for the assessment year 1980-81 is not a mistake apparent from record. Rejecting the said argument, the Madras Tribunal held that not granting depreciation at 40 per cent but conceding only 30 per cent on lorries, which is the old rate prior to 27-4-1980 is a clear mistake on record warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the year and the taxable turnover into different parts are to make easy the collection of tax, and form part of the machinery sections. If the tax is yearly and is to be paid on the taxable turnover of a dealer, then the exemption, whenever it comes in, in the year for which the tax is payable, would exempt sales of those goods throughout the year, unless the Act said that the Notification was not to have this effect, or the Notification fixed the date for the commencement of the exemption. In the present case, the Notification did not fix the date from which the exemption was to operate, probably because the Act omitted to make such provision, enabling the State to do so, and the exemption must, therefore, operate for the whole year, during which it was granted." Similarly, in this case though the notification was ordered to have effect from 2-4-1983, in fact it was intended to apply for the assessment year 1983-84 especially when there is an adequate explanation for not prescribing 1-4-1983 as the beginning of operation of those Rules. He invited our attention to the Supreme Court's decision in CIT v. J. H. Gotla [1985] 156 ITR 323, where it is held that in a taxing stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint of controversy is whether the above amount of Rs. 9,26,532 is liable to be included in the total income of the assessee-company for the assessment year 1946-47. The liability of the assessee-company to be taxed fell to be determined as on 1-4-1946, but the proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922, under which the charge was made had been introduced by the Income-tax (Amendment) Act, 1946 which came into force on 4-5-1946. The Bombay High Court held that the above said proviso was not retrospective in its operation and the amount in question was not liable to be included in the taxable income of the assessee and answered the question in the negative. The Supreme Court upheld the decision of the Bombay High Court on the ground that the amounts of compensation were received by the.assessee in the month of July 1944, whereas the proviso to section 10(2)(vii) came into force on 4-5-1946 and it was not in force on 1-4-1946, the day on which the liability to pay tax for the assessment year 1946-47 crystallised. He also quoted before us the decision of the Supreme Court in Kesoram industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 in which it is held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24-7-1980. Therefore, the rate of depreciation brought into effect from 24-7-1980 would not govern trucks and buses used prior to 24-7-1980. Accordingly, the Commissioner (Appeals) in the present case was not right in allowing the depreciation at the rate of 40 per cent." The learned departmental representative also relied upon the CBDT's view on the impugned Rules quoted at page 1.390 supra wherefrom the learned Commissioner quoted in his impugned orders at pages 5 and 6. On the strength of these decisions as well as the view expressed by the CBDT, it was argued that the fact that 1-4-1983 was a Sunday does not have any significance whatsoever. The impugned Rules, as held by the Calcutta Bench of the Tribunal should be considered to be part and parcel of the provisions of section 32(1) and it constituted substantive law. For the assessment year 1983-84 the income of the previous year is to be assessed. The previous year is from 1-4-1982 to 31-3-1983. For the said income of the previous year, the law as it stood on 1-4-1983 should be applied. If the law is changed subsequent to 1-4-1983, the changed law is not applicable for the assessment of the previous year as the impugned Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty do not automatically become part of the statue. For this reason, we disagree with the Calcutta Tribunal and we wish to follow our own previous decision in South India Road Transport's case and the Madras Tribunal decision in Rayalaseema Passenger Goods Transports (P.) Ltd's case in preference to the Calcutta Tribunal decision in Bharat Roadways' case. It is no doubt true that the learned departmental representative vehemently contended that the law to be applied to the income of the previous year is that which is in force on the first day of the assessment year relevant to the previous year. In this case, he argued that the law in force as on 1-4-1983 should be applied. In support of this proposition he relied upon several Supreme Court's decisions which included Isthmian Steamship Lines' case and Karimtharuvi Tea Estate Ltd.'s case, etc., but they are all cases which deal with the Finance Acts but none of them deal with the Rules framed by the CBDT. Thus, the ratio laid down by the Hon'ble Supreme Court in all the decisions relied upon by the learned departmental representative in our opinion does not apply. While considering the applicability of the Rules framed by the CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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