Immediate commencement of beneficial tax notification allowed enhanced depreciation for the relevant assessment year

A beneficial fiscal notification raising depreciation to 40% was construed as operating immediately because it stated that the amended rules would come into force at once. The majority applied the settled principle that assessment is governed by the law in force on the first day of the assessment year, and held that the enhanced rate applied for assessment year 1980-81 even though the notification was issued during the previous year. The dissent viewed the notification as effective only from 24.07.1980 and therefore not available for that assessment year. The discussed ratio is that an express immediate commencement clause in a beneficial tax notification can make the relief available for the relevant assessment year.

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Issues: Whether the enhanced depreciation rate of 40% introduced by the Income-tax (Fifth Amendment) Rules, 1980 through Notification No. S.O. 562(E) dated 24.07.1980 applied to the assessment year 1980-81.

Analysis: The majority held that the notification stated that the amended rules "shall come into force at once", which indicated an immediate and effective operation from the date of publication. The rule change was treated as substantive and beneficial in nature. Applying the settled principle that the law applicable for an assessment is ordinarily the law in force on the first day of the assessment year, the majority concluded that the notification, though issued during the relevant previous year, governed the computation for the assessment year 1980-81. The majority also relied on the need to give meaning to the words "at once" and on the principle that, where two reasonable views are possible in a fiscal matter, the construction favourable to the taxpayer should be preferred.

Conclusion: The assessee was entitled to depreciation at 40% for the assessment year 1980-81, and the Revenue's appeal failed.

Dissenting Opinion: The Judicial Member held that the notification operated only from 24.07.1980 and could not be related back to 01.04.1980. On that view, the enhanced rate was not available for the assessment year 1980-81, and the Income-tax Officer's allowance at 30% was restored.

Ratio Decidendi: Where a beneficial fiscal notification expressly states that it shall come into force at once, and it operates within the relevant previous year, the benefit is available for the assessment year for which the income is computed, subject to the general rule that the law in force on the first day of the assessment year governs the assessment.

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