2008 (5) TMI 79

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....nvestment allowance at the higher rate on proportionate basis when the provisions of Rule 5 had been deleted with effect from 2.4.1987 ?" 2. The assessee, a registered firm claimed depreciation for a period commencing from 3.11.1986 to 31.3.1988 in relation to Assessment Year 1988-89. On 26.3.1991, the Assessing Officer framed assessment and in relation to claim of depreciation stated; during the year the assessee has claimed depreciation at a higher rate on proportionate basis. Proportionate deduction is allowable for A.Y. 1989-90 only. Therefore, assessee's depreciation claim will be allowed after revision. 3. The assessee carried the matter in appeal before the Commissioner (Appeals). Vide order dated 21.5.1991 Commissioner (Appeals) a....

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....e of the Act, it becomes apparent that the issue requires a closer scrutiny and for the reasons stated hereinafter, the issue is required to be decided by the Tribunal afresh. 8. Section 32 of the Act deals with depreciation in respect of the assets mentioned therein which are used by the assessee for the purposes of business or profession. By virtue of Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 with effect from 1.4.1988 clause (ii) of sub-section(1) of Section 32 of the Act has been substituted and the concept of block of assets introduced. The position in law, therefore, is that for and from Assessment Year 1988-89 instead of granting depreciation on each individual asset at the prescribed rate, depreciation is requir....

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....f the Act, more particularly sub-section (4) of the said section, has not been either amended or substituted with effect from 1.4.1988 or 2.4.1987. In fact, section 3 of the Act has been substituted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.1989, that is, as applicable for Assessment Year 1989-90 and subsequent Assessment Years. Thus, once an assessee is entitled to vary the previous year in terms of Section 3(4) of the Act, the larger income from business or profession stands included in the total income of the extended previous year, and is brought to tax. Accordingly, the corresponding depreciation for the extended period cannot be denied. The position in law is well settled that depreciation allowance is a provis....