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South India Road Transport Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1983)4ITD176(Hyd.)
AppellantSouth India Road Transport
Respondentincome-tax Officer
Excerpt:
.....first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. they must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied....hence, we would have to hold that if it is possible to infer that the intention was to give effect for that assessment year, though the rule was amended after 1st april of that year, there is no reason why the intention should not be given effect to. as pointed out, section 295(4) of the direct taxes amendment act, 1974, enables the cbdt to make rules with retrospective effect unless it is prejudicial to the assessee and not specifically warranted by the statute. here, there is no.....
Judgment:
1. This is an appeal filed by South India Road Transport objecting to the order of the Commissioner (Appeals), Hyderabad, for the assessment year 1980-81.

2. The assessee is a registered firm doing transport business. The assessee had claimed depreciation on lorries at the rate of 40 per cent as notified by the Government notification SO 562(E), dated 24-7-1980.

According to the ITO, since the assessment involved is the assessment year 1980-81, the law in force as on 1-4-1980 alone should apply and that the rate admissible was only 30 per cent as on that date. He, therefore, restricted the claim to 30 per cent. In first appeal, the assessee's claim was negatived on the same reason as adopted by the ITO by citing a number of decisions to the effect that the law to be applied is the law as it stands on first April of the relevant assessment year. The assessee is in second appeal. It is pointed out that it has been stated in the notification that it will come 'into force at once'. He claimed that this notification dated 24-7-1980 had every intention of its being applied to that assessment year. It is pointed out that the words 'at once' would have no meaning if it were actually to come into effect only from 1-4-1981 as understood by the authorities. It is also claimed that none of the authorities cited by the Commissioner (Appeals) would work against the assessee because in those cases the liability was sought to be imposed by a legislation coming into effect after 1st April without any suggestion in the amendment itself to make it retrospective. It is pointed out that the authorities are to the effect that the general rule as to the applicability of law as on 1st April is subject to the modification by any express or necessary implication. He claimed that necessary implication in this case is that the effect should be given in the assessment for the assessment year 1980-81. He also relied on the decision of the Supreme Court in Mathra Parshad & Sons v. State of Punjab [1962] 13 STC 180 for the proposition that an exemption granted in the middle of the year will apply for the entire year. According to him, the scheme of income-tax law is not different from the sales tax law. He also referred to another decision of the Bombay High Court in the case of CST v. Cooper & Co. [1968] 22 STC 111 wherein the decision of the Supreme Court was followed. The learned departmental representative, however, relied upon the orders of the authorities below. He claimed that there is no material for presuming that the operation of the notifica tion is retrospective. The words 'at once' can only mean that they are effective from that date and not earlier.

According to him the purchases of lorries on or after that date at best can qualify for higher depreciation. It is not so in the assessee's case. At any rate, he claimed that the general rule will apply and the assessee cannot ask for the higher depreciation for an assessment before the assessment year 1981-82.

3. We have carefully considered the records as well as the arguments.

It has been established in a number of decisions that the law to be applied is the law in force as at the beginning of the assessment year.

It has also been held that any amendment cannot affect the assessment of that year even if the assessment happens to be made subsequent to the amendment. At the same time, the amendment if it is clearly intended to be retrospective, the intention must be given effect. There is no dispute about this legal position. Sub-section (4) of Section 295 was introduced by Section 14 of the Direct Taxes (Amendment) Act, 1974, with effect from 18-8-1974. This sub-section gives the power to, the CBDT to make rules with retrospective effect from a date not earlier than the date of commencement of the Act. However, retrospective effect should not be given if the interest of the assessees is in prejudice unless such is permitted by law expressly or by necessary implication.

It, therefore, stands to reason that the CBDT has the power to grant relief even with retrospective effect. Even in the earliest decision upholding the application of law as at the beginning of the assessment year, the Courts have always pointed out that it is always possible that such retrospective intention could be inferred from the amendment and that in such an event it is possible to uphold the retrospective effect. In a recent decision, the Madras High Court in the case of CIT v. Best & Co. (P.) Ltd. [1979] 119 ITR 830 summarised the position of law in the following words: It is a well settled proposition in the income-tax law that in income-tax matters, the law to be applied is the law in force in the assessment year unless otherwise stated or implied. This proposition was laid down by the Supreme Court in CIT v. Isthmian Steamship Lines [1951] 20 ITR 572...

The Madras High Court has also referred to a number of other decisions where this principle had been followed. In the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262, the Supreme Court referred to its earlier decision in CIT v. Isthmian Steamship Lines [1951] 20 ITR 572 in the following words: It will be observed that we are here concerned with two datum lines: (1) the 1st of April, 1940, when the Act came into force, and (2) the 1st of April, 1939, which is the date mentioned in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied....

Hence, we would have to hold that if it is possible to infer that the intention was to give effect for that assessment year, though the rule was amended after 1st April of that year, there is no reason why the intention should not be given effect to. As pointed out, Section 295(4) of the Direct Taxes Amendment Act, 1974, enables the CBDT to make rules with retrospective effect unless it is prejudicial to the assessee and not specifically warranted by the statute. Here, there is no prejudice.

Depreciation rates are fixed by the Appendix under rule 5 of the Income-tax Rules, 1962. Depreciation has to be granted in respect of those assets which are used for the purposes of the business at any time during the previous year as per statute as well as the rule. The rate does not depend upon the date of purchase as was sought to be canvassed by the learned departmental representative with reference to the meaning to the words 'at once'. In other words, the scheme of depreciation is not with reference to the date of acquisition but with reference to the use during the accounting year. The amendment to the rule published in 126 ITR 1 (Statutes), clearly states that the said Income-tax (Fifth Amendment) Rules, 1980 'shall come into force at once' (underlining ours). We do not find these words in such other amendments. For example, the 6th Amendment is made effective from 1-9-1980 while the 7th Amendment is made effective from 1-4-1981. All these three amendments are published in the same part at 126 ]TR 1, and 28. Hence, we cannot assume that the words 'at once' do not have any significance which the assessee wants us to assign to them. If it was to have effect only from 1-4-1981 or in respect of purchases of lorries on or after 24-7-1980, there was hardly any reason for stating that the rules will come into force 'at once'. We have also to consider the intendment in the context of which this relief was given. The benefit was intended for the transport industry and higher depreciation was considered warranted in view of the rapid fall in prices and lesser demand for new vehicles during that period. The benefit was intended to be given immediate effect. If we take the view adopted by the revenue, we would not be giving effect to the intendment also. Even otherwise, we find that the words warrant the interpretation by 'necessary implication'. The relief is intended to be given effect for and from the assessment year 1980-81. Though the learned counsel for the assessee tried to say that it will apply for all pending assessments, we are in this case, concerned only with the relief claimed for the assessment year 1980-81 and we are of the view that there could be no doubt that it will apply for this assessment. It is because the words 'at once' imply that it should apply for the assessment year immediately under consideration. We have not referred to the sales tax cases relied upon by the assessee. In is our view that the law recognises retrospective liability if such is clearly intended and that in case of retrospective relief within the power of the rule-making authority, such intendment should be similarly respected as valid. At the same time, we cannot say that the sales tax decisions are not relevant and, in our opinion, they would additionally support the stand of the assessee. Sales tax as for income-tax is an annual tax. The Supreme Court in the case of Mathra Parshad's case (supra) held that exemption granted on 27-9-1954 was applicable even in respect of sales as from 1-4-1954, though the notification itself was silent as to the date from which this was to be given effect to. This decision was followed by the Bombay High Court in the case of Cooper & Co. (supra).

It may be pointed out that in the decision in Mathra Parshad's case (supra) the Supreme Court had referred to its earlier decision in CST v. Modi Sugar Mills Ltd. [1961] 2 SCR 189 which has been referred by the Supreme Court in a number of income-tax cases as in Karimtharuvi Tea Estate (supra) (a decision already referred to earlier) and followed, though for the general preposition that the liability cannot be assumed to be retrospective. We are mentioning this merely to point out that the test for interpreting a provision, as regards the question of retrospectivity is not different as between income-tax and sales tax cases. No doubt, the Courts have consistently drawn the general inference that all notifications imposing a liability should be presumed to be only prospective. Even so, if the intention to make it retrospective is expressly or impliedly evident, it could well be retrospective. The law for relief cannot be different. Though the words 'at once' do not ordinarily indicate retrospectivity and, therefore, cannot possibly apply to all pending assessments, in our opinion, it clearly indicates that it will apply for the assessment year itself as otherwise it will have no meaning. We are, therefore, of the view that the assessee's claim has to be allowed and it is accordingly allowed.

The ITO is directed to rework the depreciation at 40 per cent.


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