1984 (11) TMI 115 - AT - Income Tax

Summary

Issues:
1. Grant of depreciation at the rate of 40% on buses.
2. Interpretation of the amendment to the depreciation table.
3. Retrospective application of the amendment.
4. Application of the amendment to assets acquired before the effective date.

Detailed Analysis:
1. The firm, as an assessee, challenged the initial grant of depreciation at 30% by the ITO on its buses and sought an increase to 40% based on an amendment to the depreciation rates. The Commissioner (Appeals) accepted the plea and directed the ITO to allow depreciation at 40%. The department contested this decision.

2. The key issue revolved around whether the amendment to the depreciation table was procedural or substantive in nature. The Tribunal highlighted that the rates of depreciation specified in Appendix I of Part I are part of substantive law as per Rule 5 of the Income-tax Rules, and amendments to substantive law are typically not retrospective unless explicitly stated.

3. The Tribunal analyzed the phrase 'at once' used in the amending notification dated 24-7-1980 and concluded that it indicated the amendment's immediate effect from that date. Drawing parallels to past legal precedents, the Tribunal emphasized that amendments to substantive law are not presumed to be retrospective unless explicitly mentioned in the amending Act.

4. The Tribunal referred to the decision in South India Road Transport's case, emphasizing that the scheme of depreciation is based on usage during the accounting year, not the acquisition date. It clarified that assets acquired before the effective date of the amendment would not be eligible for the increased depreciation rate.

5. The Tribunal also considered the decision in Rayalaseema Passenger & Goods Transports (P.) Ltd., which suggested that amendments to procedural law apply to pending assessments. However, the Tribunal differentiated between procedural and substantive law, concluding that the amendment in question affected substantive law and, therefore, could not be applied to assets used before the effective date.

6. Ultimately, the Tribunal held that the increased depreciation rate introduced from 24-7-1980 would not apply to trucks and buses used before that date. Consequently, the department's appeal was allowed, overturning the Commissioner (Appeals)'s decision to grant depreciation at the higher rate.