9911796707
TMI Blog1994 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Ltd. and the assessment year involved is 1984-85. The assessee had been carrying on the business of manufacturing metallised polyester films and other products. The Assessing Officer completed the assessment under section 143(3) of the Income-tax Act, 1961. In the said assessment, the assessee was allowed to change its previous year from the financial year ending on March 31, 1983, to the year ending on September 30, 1983, and thus the previous year, for the assessment year under consideration, i.e., 1984-85 covered a period of 18 months beginning from April 1, 1982, and ending on September 30, 1983. On an examination of the assessment record of the assessee, the Commissioner of Income-tax noticed that the assessment was complete under section 143(3) of the Act, 1961, on a net loss of Rs. 24,86,967. It was also noticed that the assessee-company had been allowed by the Income-tax Officer to change its previous year relevant to the assessment year as a result of which the previous year was 18 months. While allowing depreciation, the Assessing Officer allowed normal depreciation for 18 months and additional depreciation at 50 per cent. of the normal depreciation. The Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the prescribed rate of depreciation allowance under the provisions of section 32 of the income-tax Act. An extra allowance was given to the assessee by virtue of the provisions of clause (iia) of section 32(1) of the Income-tax Act. The extra allowance will be a sum equal to one half of the depreciation allowance otherwise admissible because of the fact that the assessee's accounting period was April 1, 1982, to September 30, 1983. The assessee got depreciation allowance for a span of 18 months. Under these circumstances, the extra shift allowance had to be 50 per cent. of the depreciation allowance as calculated by the Income-tax Officer. It has been contended that whether the accounting period comprised of 12 months or any extended period is of no consequence in a case like this. Rule 5 of the Income-tax Rules, 1962, clearly recognised that the depreciation may be allowed for a period of 12 months or more and if the previous year of the assessee extended beyond the period of 12 months, then the calculation of depreciation had to be made in terms of the proviso to rule 5 of the Income-tax Rules. We are of the view that the contention made on behalf of the Revenue must be uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) of section 32 in respect of depreciation of buildings, machinery, plant or furniture (or the allowance under clause (i) of sub-section (1A) of section 32 in respect of depreciation of any structure or work referred to in that sub-section) shall be calculated at the percentages specified in the second column of the Table in Part I of Appendix I to these rules on the actual cost or, as the case may be, the written down value of such of the assets aforesaid as are used for the purposes of the business or profession of the assessee at any time during the previous year : Provided that in a case where the assessee has been allowed to vary the meaning of the expression 'previous year' in respect of any business or profession under sub-section (4) of section 3 and, thereby, his income from such business or profession for a period of thirteen months or more is included in his total income of any previous year, the allowance referred to in this sub-rule, calculated in the manner stated hereinabove, shall be increased by multiplying it by a fraction of which the numerator is the number of complete months in such previous year and the denominator is twelve. " Clause (iia) of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the twelve months ending on such date ; or (c) in the case of any person or business or class of persons or business not falling within clause (a) or clause (b), such period as may be determined by the Board or by any authority authorised by the Board in this behalf ; or (d) in the case of a business or profession newly set up in the said financial year, the period beginning with the date of the setting up of the business or profession and-- (i) ending with the said financial year, or (ii) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, ending on that date, or (iii) ending with the period, if any, determined under clause (c), as the case may be ; or (e) in the case of a business or profession newly set up in the twelve months immediately preceding the said financial year-- (i) if the accounts of the assessee have been made up to a date within the said financial year and the period from the date of the setting up of the business or profession to such date does not exceed twelve months, then, at the option of the assessee, such period, or (ii) if any period has been determined under cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has been permitted to extend the accounting period to a period of eighteen months. But the additional depreciation allowance is a one-time allowance given for one year only by the statute. The extension of the accounting period cannot have the effect of changing the quantum of the additional depreciation. The depreciation allowance under section 32(1)(ii) may be enhanced as a result of the extension of the accounting period because in the long run this will not make any difference to the total amount of depreciation that the assessee will get. But the additional depreciation allowance is given only for one year and has to be calculated on the basis of what is admissible in a normal case. Any other construction will lead to absurdity and should be avoided. The assessee whose accounting period consists of twelve months will get additional depreciation allowance for plant or machinery of a smaller amount than an assessee who is allowed to have an extended accounting period of eighteen months. In this connection reference may be made to the Budget Speech of the Finance Minister explaining the provisions of additional depreciation allowance : " It is necessary to encou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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