Andhra HC (Pre-Telangana)
Andhra Cements Co., Ltd., Vijayawada vs Commissioner Of Income Tax, ... on 3 April, 1998
Equivalent citations: 1998(3)ALD831, [1998]232ITR364(AP)
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
ORDER S.V. Maruthi, J.
1. At the instance of the Revenue the following question is referred :
"Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was correct in holding that the provisions of Income-tax (Fourth Amendment) Rules, 1983 coming into effect from 2-4-1983 were applicable for the assessment year 1983-84?"
At the instance of the assessee, the following question is referred :
"Whether on facts and in the circumstances of the case, depreciation as per Income Tax (Fourth Amendment) Rules, 1983, is to be allowed in all assessments which were pending on 2-4-1983, irrespective of the assessment year involved?"
2. The facts in brief are as follows:-The assessee is a public limited Company which manufactures and sells cement. The assessment years are 1982-83 and 1983-84 for which the previous years ended by 31-3-1982 and 31-3-1983 respectively. For the assessment year 1982-83 the assessee-Company filed its income-tax return on 9-9-1982 in which, it claimed a depreciation of Rs. 1,29,495-90 ps. On 15-5-1984 it filed a revised return claiming depreciation in accordance with the income-tax (Fourth Amendment) Rules, 1983 which came into force on 2-4-1983. The difference of depreciation claimed was arrived at Rs. 59,55,898/-. Similarly, for the assessment year 1983-84 the assessee claimed depreciation in accordance with the provisions of the Income-tax (Fourth Amendment) Rules, 1983. For the assessment years 1982-83 and 1983-84 the Income-tax Officer granted depreciation at the old rates. On appeal, the Commissioner of Income-Tax (Appeals) agreed with the Income-tax Officer. On a further appeal to the Tribunal, the Tribunal held that the assessee is entided to claim depreciation at the higher rates under the Income-tax (Fourth Amendment) Rules, 1983 for the assessment year 1983-84. The Tribunal also, at the instance of the Revenue as well as the assessee, referred the questions of law which were stated in the earlier paragraphs.
3. The question, therefore, is whether the Tribunal is right in holding that the assessee is entitled for the depreciation at higher rates for the assessment year 1983-84, as per the Income-tax (Fourth Amendment) Rules, 1983.
4. The Income-tax (Fourth Amendment) Rules, 1983 came into force on 2nd April, 1983. The relevant rule reads as follows:
"1(1) These rules may be called the Income-tax (Fourth Amendment) Rules (2) They shall come into force on the 2nd day of April, 1983.
2. In the Income-tax Rules, 1962, in part I of appendix I, in the "Table of rates at which depreciation is admissible"
(1) under the heading "I Buildings"
for items 1, 2 and 3 and the entries relating thereto in Columns 1,2 and 3, the following items and entries shall be substituted, namely:"
The main argument of the learned Counsel for the assessee is, since the rules are substituted, they are deemed to have come into force with effect from 1-4-1983 though the Fourth Amendment Rules were brought into force on 2-4-1983, therefore, the Tribunal is right in holding that the assessee is entitled for higher rate of depreciation for the assessment year 1983-84.
5. The contention of the learned Counsel for the assessee cannot be accepted as it is well-settled principle of law, as held by the Supreme Court in Karimtharuvi Tea Estate Limited v. Slate of Kerala, 60 I.T.R. 262, that:
"It is well-settled that the Income-tax Act as it stands amended on the first day of April on any financial year must apply to the assessment of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force."
Therefore, whatever is the rate of tax as on 1st April of the financial year 1983-84 is applicable to the assessment year of 1983-84 though the assessment is made subsequent to the amendment. Since the higher rates of depreciation have been brought into force on 2nd April, 1983, they cannot be made applicable to the assessee for the assessment year 1983-84.
6. Construing the Income-tax (Fourth Amendment) Rules, 1983 the Calcutta High Court also expressed a similar view in S.P. Jaiswal Estates Private Limited v. Commissioner of Income-Tax (No.2), 209 ITR 307, it was held:
"The Income-tax (Fourth Amendment) Rules, 1983 by which the higher rate of depreciation was laid down came into effect on April 2, 1983. Rates of depreciation are matters of substantial law. The new rates were intended to apply only from the assessment year 1984-85 since these were not in force on April 1, 1983 on which the assessment year 1983-84 began."
7. The Tribunal proceeded on the basis that the 1st April, 1983 being Sunday, the rules were brought into force on 2-4-1983 as the first working day of the assessment year. To verify the correctness of the order of the Tribunal, we have called for the file from the Finance Ministry. On a perusal of the file we find that that is not the correct position. There is no reference to 1st April, 1983 being a holiday and, therefore, bringing into force the amended rules with effect from 2nd April, 1983 as the first working day of the assessment year. The real reason is that the current pattern of the Finance Act is to notify the rates applicable one year in advance so that advance tax is calculated on the rates applicable for the next year. That was the reason why even in the budget speech the Finance Minister has calculated the loss arising out of this additional grant of depreciation for the financial year 1983-84 which is relevant to the assessment year 1983-84.
8. Therefore, the Tribunal is not right in holding that the assessee is entitled for the higher rates of depreciation for the assessment year 1983-84 as the amended rules came into force on 2.4.1983.
9. Following the above, the question referred at the instance of the Revenue is answered in the negative and in favour of the Revenue. Consequently, the Tribunal is right in holding that the assessee is not entitled at the higher rates for the earlier year, namely, 1982-83. The question referred at the instance of the assessee is answered in the affirmative and against the assessee.
10. The reference is answered accordingly.