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2012 (9) TMI 628 - HC - Income TaxRate of Depreciation u/s. 32 - should not be at the rates prescribed by the income-tax Rules, as amended with effect from 2.4.1983 - Held that:- As decided in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1965 (12) TMI 35 - SUPREME COURT] 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 April 1, of the financial year 1983-84 is applicable to the assessment year 1983-84 though the assessment is made subsequent to the amendment. Since the higher rates of depreciation have been brought into force on April 2, 1983, they cannot be made applicable to the assessee for the assessment year 1983-84 - assessee's demand for higher depreciation is quashed - against the assessee. Disallowance of expenditure - Rent to be treated as capital expenditure - Held that:- The Tribunal, after analyzing the documents, held that the arrangement between the parties conferred the benefit of ownership upon the assessee without the actual sale during the current accounting year. The Tribunal observed that the assessee had the right of user of the property for a long period and also obtained a future right to exercise the option to purchase the property after five years from the date of commencement of the lease. The Tribunal held that the assessee had acquired a capital asset and the expenditure had to be treated as capital expenditure - against assessee. Disallowance of depreciation - payment which was treated as capital expenditure for acquiring a capital asset - Held that:- There appear to be contradictory findings by the Tribunal. On the one hand, the Tribunal held that the arrangement between the parties was to confer the benefit of ownership upon the assessee and that the assessee had acquired a capital asset and the expenditure in doing so had to be treated as capital expenditure. On the other hand, the Tribunal held that the assessee being a lessee under the agreement, cannot be said to be the owner of the property and was, therefore, not entitled to depreciation under section 32 - as arrangement between the lessor and the assessee was, in effect, an agreement of sale of the property by the lessor to the assessee he is entitled to claim depreciation - in favour of assessee.
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