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TMI Blog1990 (1) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... s and prejudicial to the interests of the Revenue. He found that the Income-tax Officer had allowed depreciation at a higher rate of 15% without ascertaining the fact whether the above items of machinery are automatic or semi-automatic precision tools as claimed by the assessee. During the course of hearing, the assessee contended before the Commissioner that the machinery under consideration was entitled to higher depreciation. It was also claimed that there was an appeal against the order of the assessment and the CIT(A) passed an order on 29-3-1985. As such it was claimed that the order passed by the ITO merged with that of the CIT(A) and so the provisions of sec. 263 cannot be invoked. The Commissioner, however, held that the order of the ITO merges only in respect of the matters which were subject matters of appeal before the CIT(A), on which he had given a decision. In respect of the other matters, he held that there will be no merger of the ITO's order with that of the CIT(A). He pointed out that the dispute before the CIT(A) was regarding the depreciation allowable on the additions of machinery during the course of the year and not in respect of depreciation allowable on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81] 132 ITR 897 to claim that a statute dealing with procedure is retrospective and its provisions apply to the proceedings pending at the time of its enactment, but where the provisions of the statute affect vested rights, the provisions are prospective in operation unless there is an indication in the statute to the contrary. Reliance was also placed on the decisions of the Appellate Tribunal, Delhi Benches in the cases of Madan Fruit Agency v. ITO [1988] 24 ITD 305 and Aeroplane Shoe Factory v. ITO [1989] 28 ITD 478. It is also contended that while it may be true that the subject matter of appeal before the CIT(A) was the depreciation allowable on the additions to the plant and machinery and not depreciation on the written down value of the machinery installed in earlier years. Since the same issue of allowance of higher depreciation on similar machinery was subject matter of consideration by the CIT(A), it is contended that it should be taken that the ITO's order in respect of the depreciation allowance has merged with that of the CIT(A). He also points out that for the asst. year 1981-82 the Tribunal had remitted back the matter to the file of the ITO with a direction to ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended that it has retrospective effect even in respect of orders passed before that date, and so only such portions of the assessment order which have been considered and decided upon by the CIT(A) will be deemed to have merged with the order of the CIT(A) and not other portions. As there is no dispute that the CIT(A) had not decided the question of allowability or otherwise of higher depreciation in respect of the written down value of the plant and machinery in the course of his appellate order, this issue cannot be considered to have merged in the CIT(A)'s order. In the circumstances, it is contended that the Commissioner is justified in invoking his jurisdiction u/s 263. Reliance in this connection was made on the decision of the Madhya Pradesh High Court in the case of CIT v. Vithal Textiles [1989] 175 ITR 629 and the decision of the Tribunal, A-Bench, Madras in the case of Agarwal Finance Co. [IT Appeal No. 2367 (Mad.) of 1986 dated 7-8-19891. Reference was also made to the notes on clauses, wherein the intention of the Legislature was clearly explained. On merits, it is contended that the burden was on the assessee to prove that its plant and machinery is entitled to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of S. Sundaram Pillai and Nitro Phosphetic Fertilizer in our opinion, is misplaced. In the decision of the Supreme Court referred to above, the objects of an Explanation to a statutory provision are explained, as follows : " (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same. " 6. It may be noticed from the above decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers to revise the assessment in respect of such matters as have not been considered and decided by the CIT (Appeals). As explained by the Supreme Court in CIT v. Shahzada Nand Sons [1966] 60 ITR 392, in order to arrive at the real meaning of a provision one has to consider (a) the position of law before the Act was passed, (b) what was the mischief or defect for which the law had not provided, (c) what remedy Parliament has appointed, and (d) the reason of the remedy. The reason for the amendment is amply made clear in the Memorandum explaining provisions in Finance Bill, 1989 (176 ITR St. 127) which runs as follows : " Under the existing provisions of sec. 263 of the Act and corresponding provisions of the Wealth-tax and Gift-tax Act, the Commissioner of Income-tax is empowered to call for and examine the record of any proceeding and if he considers that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of Revenue, he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the same or directing a fresh assessment. By the Finance Act, 1988, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g existed from the very beginning. It only means that any authority interpreting the provisions on or after 1-6-1988 has to take note of the Explanation also, while interpreting the section. 8. The Calcutta High Court had an occasion to consider a similar situation arising out of an amendment made to sec. 34 of the Income-tax Act, 1922 with effect from 30th March, 1948. On a writ filed by the assessee, Bose J., the learned Single Judge of Calcutta High Court held that the amendment is expressly made retrospective from 30th March, 1948 and so it had no further retrospective operation. On an appeal filed by the Department, the Division Bench held that while the section itself came into operation on 30th March, '48, in deciding in what manner it would operate, it is pertinent to enquire from what the section itself says. The effect of sec. 8 of the Amending Act was that it placed the section on the Statute Book as on 8th March, 1948 and made it part of the I.T. Act from that date. But what was the effect of such introduction of the new sec. 34 to the I.T. Act itself has to be found out by examining the words of the section itself. Though the decision of the Division Bench was ultima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the very beginning and for each year the depreciation and the w.d.v. will have to be reworked. If the lower rate is to be applied, it ought to be on much higher w.d.v., arrived at on the basis of lower rate with the result that the net revenue effect is negligible. He held that in view of the practical difficulties involved in this process and its doubtful benefit to the Revenue in the case of a company, the application of the lower rate on the written down value of the old plant and machinery would be unnecessary and unjustified. The Tribunal in that case upheld the action of the CIT(A) and held that the view taken by him on practical considerations of the case was reasonable and did not require any interference. 12. In this case also, in our opinion, the laborious exercise involved in the matter in finding out the nature of the machineries added in all the earlier years is uncalled for in view of the practical difficulties and doubtful revenue effect. If ultimately a few items of machinery are found to be entitled for lower rate of depreciation, the w.d.v. to be carried forward from year to year will necessarily be higher and higher amount of depreciation will have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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