M.N Rao, J.:— Commonality of questions of law and fact induces us to dispose of these three I.T Cs., by this common judgment.
2. The assessees, in these three I.T.C, are co-owners of a rice mill known as Sesharatna Rice Mill, located in Palakol, West Godavari District. Each of the assessees holds 13% share in the said rice mill. For the assessment years 1981–82, 1982–83 and 1984–85 to 1987–88, their claim for depreciation allowance to the extent of each of their shares was initially allowed by the assessing officer. Subsequently, by an order under Section 154 of the Income Tax Act, 1961, the depreciation allowance was withdrawn on the basis of the decision rendered by the Supreme Court in Seth Banarsi Dass Gupta v. C.I.T . 166 I.T.R 783 SC. The assessees, successfully, challenged the rectification order before the Deputy Commissioner of Income Tax.
3. The appeals were allowed by the Deputy commissioner on the basis of an earlier decision rendered by the Hyderabad Bench of the Income Tax Appellate Tribunal in I.T.A No. 397.HYD/1982. Aggrieved by that, the Revenue carried the matter in appeal to the Income Tax Appellate Tribunal. The Tribunal allowed the appeals of the Revenue taking the view that a fractional owner is not entitled to claim depreciation allowance and that the rectification done on the basis of the decision of the Supreme Court which was rendered subsequent to the original assessment was fully justified.
4. The assessees filed reference applications before the Tribunal requiring it to refer the following two questions of law to this Court for decision under Section 256(1).
“1. Whether on the facts and circumstances of the case, the assessee is entitled to the allowance of depreciation in respect of his fractional share in the assets of Sesharatna Rice Mill while computing income for the assessment years 1981–82, 1982–83, 1984–85 to 1987–88?
2. Whether on the facts and circumstances of the case, the Tribunal is justified in upholding the disallowance of depreciation in respect of the fractional share of the assessee under the provisions of 1961 Act as mistake apparent from record falling for rectification within the provisions of Section 154 of the Income Tax Act?”
5. The Tribunal declined to make the reference on the ground that what was decided by it was on the basis of the binding precedents in the form of decisions rendered by the Supreme Court.
6. It is not in dispute that each of the assessees holds only 13% of the shares in the rice mill. Whether a fractional owner is entitled to claim depreciation allowance was decided by the Supreme Court in Seth Banarsi Dass Gupta's case (1 supra). The relevant clause (vi) of sub-section (2) of Section 10 of the Income Tax Act, 1922, which fell for consideration before the Supreme Court was in the following terms:
“In respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee….”
7. The Supreme Court observed that “there is hardly any scope for doubt that the benefit of Sec. 10(2)(vi) of the Act (1922 Act) would be admissible only where the assessee is the owner of the property. It too is not admissible in respect of a fractional claim”.
8. Section 32 of the Income Tax Act, 1961 in so far as it is relevant is in the following terms:
“Sec. 32(1): In respect of depreciation of buildings, machinery, plant or furniture owner by the assessee…..”
9. The learned Counsel for the assessees seeks to contend that the expression “property of the assessee” occurring in Section 10(2)(vi) of the Income Tax Act, 1922 is distinct and different from the words “owned by the assessee” occurring in Section 32(1) of the Income Tax Act, 1961. Whatever may be the subtleties that can be discerned in the expressions “the property of a person” and “the ownership vested in a person”, so far as the right to claim depreciation allowance is concerned, the intendment of Section 10(2)(vi) of the Income Tax Act, 1922 and Section 32(1) of the Income Tax Act, 1961 is one and the same viz., that the benefit is not applicable to a fractional owner. Further, from the aforesaid statement of law declared by the Supreme Court, even under the Income Tax Act, 1922, the benefit of depreciation allowance is allowed only to “the owner of the property“. Section 32(1) of the Income Tax Act, 1961 also says that unless the assessee is the “owner of the property” he is not entitled to claim depreciation allowance.
10. There is no dispute that the decision of the Supreme Court in Seth Banarsi Doss Gupta's Case (1 supra) was rendered after the original assessments were finalised giving the benefit of depreciation allowance to the assessees. Based upon the said Supreme Court decision, rectification orders were passed, by the successor assessing authority. Whether a subsequent decision can be the basis for “rectifying” an earlier order in exercise of powers under Section 154 of the Income Tax Act? Although the opening words of Section 154(1)-“with a view to rectifying any mistake apparent from the record, the income-tax authority………”-may give the impression that a judgment which came subsequently, not being part of the record at the time when the assessment was finalised, could not be the basis for rectification of any mistake under Section 154, the legal position is no longer in doubt in view of the authoritative pronouncement of the Supreme Court in S.A.L Narayana Row, C.I.T v. Model Mills Nagpur Ltd. . 64 I.T.R 67 SC. In that case, the assessing authority subjected excess dividends to income tax. Subsequently, the Bombay High Court in Coimbatore Spinning & Weaving Co. Ltd. v. Commissioner Of Income-Tax . 30 I.T.R 841 Bombay, it was held that levy of tax on excess dividends was illegal. On the basis of that decision, a claim for refund was made by the assessee requesting the assessing authority to rectify the earlier order mistakenly made. That plea was rejected by the assessing authority and also by the Commissioner of Income Tax when a revision application was filed before him. The High Court of Bombay allowed the writ petition filed by the assessee and directed the Income Tax Officer to revise the order of assessment and grant refund to the extent of the tax levied on excess dividends. By the time the matter was carried to the Supreme Court, the decision of the Bombay High Court in Khatau Makanji Spinning & Weaving Co. Ltd.'s case was affirmed in Commissioner of Income Tax v. Khatau Makanji Spinning & Weaving Co. Ltd. . 40 I.T.R 189 SC. The Supreme Court affirmed the view taken by the Bombay High Court that the assessee was entitled to refund of the amount. This ruling is a clear authority for the proposition that a subsequent decision can validly form the basis for rectifying an order of assessment under Section 154 of the Income Tax Act, 1961.
11. The Tribunal was, therefore, right in rejecting the plea of the assessees to refer the two questions of law stated supra to this Court under Section 256(1).
12. For the foregoing reasons, the three I.T Cs., are rejected.