1995 (1) TMI 2 - SC - Income Tax

Rectification bid for 10% factory building depreciation u/s154(7): limitation counted from original assessment order; claim time-barred.

The dominant issue was the limitation period under s.154(7) of the Income-tax Act for a rectification application seeking allowance of depreciation at 10% ... Interpretation of the provisions of section 154(7) - rectification of the order under section 154 - expression 'from the date of the order sought to be amended' in sub-section (7) of section 154 - entitlement to depreciation allowance on the factory building at the rate of ten per cent - rejected rectification application on being beyond time limitation - HELD THAT:- No dispute that the assessee would be entitled to ten per cent. depreciation allowance on the factory building and it has to be granted to him if it is held that this rectification application was within time. The view that the word 'any' in the expression 'order sought to be amended' would mean even the rectified order, we are satisfied that the High Court was wrong in setting aside the decision of the Tribunal. However, in view of the decisions of this court referred, we are of the opinion that the view taken by the Tribunal in the present case is the correct one. We, therefore, set aside the impugned order of the High Court and restore that of the Tribunal. The appeals are allowed accordingly with no order as to costs. Issues: Whether the period of four years prescribed by Section 154(7) of the Income-tax Act, 1961 for making an amendment is to be computed from the date of the original assessment order or from the date of a subsequently passed rectified/amended order (i.e., whether the expression 'the date of the order sought to be amended' includes a rectified order).Analysis: The statutory phrase 'order sought to be amended' is unqualified and includes 'any order', which can be a rectified or substituted assessment order. Judicial precedents interpreting similar expressions have held that when an assessment is reopened or rectified, the original order is set aside and replaced by a fresh order; consequently limitation periods for subsequent amendments run from the date of the substituted or rectified order. Authorities applying this principle show that reassessment or rectification results in a fresh operative order and the time-limits in limitation provisions should be computed from that operative order date. Applying these principles to Section 154(7) leads to the conclusion that the four-year period must be calculated from the date of the order which is actually in force and sought to be amended, which may be the rectified order.Conclusion: The expression 'from the date of the order sought to be amended' in Section 154(7) of the Income-tax Act, 1961 includes a rectified or substituted assessment order; the rectification application in the present case was within the four-year period as calculated from the rectified order. This result is in favour of the assessee.Ratio Decidendi: Where an assessment has been rectified or reopened so as to replace the original assessment, limitation for further amendment under Section 154(7) runs from the date of the operative (rectified) order, because the rectified order constitutes the 'order sought to be amended'.