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Judgment
N.V. Balasubramanian, J.—By order dated September 16, 2002, this court admitted the above tax case appeal on the following questions
of law:
Whether, the Tribunal was right in holding that the provisions of Explanation 4A to Section 43(1) which came into force with effect from
October 1, 1996, would be applicable to prior period transactions which has taken place during August, 1995, relevant to the assessment year
1996-97 ?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing the Assessing Officer to adopt the WDV of the
assets in the books of the transferor for computing the depreciation allowance in the hands of the appellant when the valuation report regarding the
market value of the asset has not been disputed and the sale consideration has been accepted in the assessment of the transferor ?
We are of the view that it will suffice to consider the first question. The assessment year involved is 1996-97 and the relevant previous year
ended on March 31, 1996. The Income Tax Appellate Tribunal applied the provisions of Section 43(1), Explanation 4A, to the assessment year in
question and held that the assessee was not entitled to depreciation allowance as claimed by the assessee. It is pointed out by learned counsel for
the assessee that Explanation 4A to Section 43(1) of the Act was inserted by the Finance (No. 2) Act, 1996, with effect from October 1, 1996,
and the said provision is not applicable for the assessment year in question. Learned counsel for the Revenue has not seriously disputed that
Explanation 4A to Section 43(1) of the Act has no application to the assessment year in question.
Consequently we hold that the Tribunal was not correct in relying upon Explanation 4A to Section 43(1), which came into force only from
October 1, 1996, to the assessee''s case. It is axiomatic that the law governs the assessment, is the law that is prevailing on April 1, of the
assessment year in question, and since Explanation 4A to Section 43(1) of the Act came into force on October 1, 1996, it has no application to
the assessment year 1996-97. The Tribunal, in our view, has not applied the correct law and decided the question that arose before it. Both
learned counsel agree the matter may be remitted to the Tribunal to consider afresh. Accordingly, the order of the Income Tax Appellate Tribunal
is set aside so far as it deals with the points that arise in the tax case appeal are concerned and the Tribunal is directed to consider the matter afresh
in accordance with law. Consequently, T. C. M. P. No. 15 of 2002 for stay is closed.