COMMISSIONER OF INCOME TAX Vs. REXOR INDIA LTD

JUDGEMENT

(1.) The Tribunal has stated the following questions of law to this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that if the assessee had been allowed to vary the meaning of the expression 'previous' year in respect of the business or profession and such previous year was of thirteen months or more, the depreciation allowance calculated as per Rule 5(1) of the Income-tax Rules, 1962, had to be increased by multiplying it by a fraction of which the numerator would be the number of complete months in such previous year and the denominator would be twelve ?

(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961 ? "

(3.) On an examination of the assessment record of the assessee, the Commissioner of Income-tax noticed that the assessment was completed 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 Commissioner of Income-tax took the view that additional depreciation under Section 32(1)(iia) of the Act was admissible in respect of the previous year comprising 12 months only. Since the Assessing Officer had allowed additional depreciation at 50 per cent. of the normal depreciation allowed for 18 months on account of change of the previous year, there was excess depreciation allowed at Rs. 4,11,370. In response to the show-cause notice issued by the Commissioner of Income-tax, it was submitted on behalf of the assessee that the Assessing Officer was justified in allowing additional depreciation at 50 per cent. of the normal depreciation. The Commissioner of Income-tax did not accept the assessee's submissions. The order of the Assessing Officer was considered to be erroneous and prejudicial to the interests of the Revenue. He accordingly directed the Assessing Officer to recompute the additional depreciation allowed at 50 per cent. of normal depreciation for 12 months.