Per Shri T.R. Thiruvengadam, Accountant Member - These appeals have been posted before this Bench for considering the following question:

"Whether depreciation as per Income-tax (Fourth Amendment) Rules, 1983 is to be allowed in all cases which were pending on 2-4-1983 irrespective of the assessment year involved or is to be allowed only in 1984-85 and subsequent assessment years [in view of the divergent views of the Tribunal Benches in the case of Rayalaseema Passenger & Goods Transports (P.) Ltd. v. IAC [1984] 7 ITD 111 and ITO v. Bharat Roadways [1985] 12 ITD 647 (Cal.)]."

2. Originally the reference to the Special Bench was made in the case of Rajapalayam Mills Ltd., Rajapalayam in IT Appeal No. 547 (Mad.) of 1985 in which Shri S. Swaminathan, the learned counsel for Sri Rani Lakshmi Gng., Spg. & Wvg. Mills (P.) Ltd., Madurai entered appearance as an intervener. In the course of the hearing the appeal in IT Appeal No. 566 (Mad.) of 1985 in the case of Sri Rani Lakshmi Gng., Spg. & Wvg. Mills (P.) Ltd. was also taken up for hearing. In both appeals the only question is the same, that is the question set out in the first paragraph.

3. The question involves only the quantum of depreciation to be allowed to these two assessees for the respective assessment years under appeal. The assessment year in both cases is the same, namely 1981-82.

4. In the case of Rajapalayam Mills Ltd., the original claim for depreciation was in a sum of Rs. 29,40,062. This together with a claim for additional depreciation amounted to a total of Rs. 29,56,253. The ITO allowed as depreciation and additional depreciation of Rs. 25,05,430. In addition, he allowed Rs. 25,638 as depreciation and additional depreciation on lathe capitalised. He disallowed Rs. 4,25,185 as excess depreciation claimed.

5. Two variations were made on appeal in this computation of depreciation by the ITO. The first was in determining the written down value by reference to the subsidy from SIPCOT while the ITO took the subsidy into account for reducing the written down value of the assets, the Commissioner (Appeals) directed him to work out the written down value without reducing the cost by the subsidy. The other point was the extra shift depreciation allowance which was computed by the ITO by taking into account the actual period during which each item of machinery worked extra shift. The Commissioner (Appeals) directed him to work out the extra shift allowance on the basis of the number of days for which the concern, as a whole, worked extra shift. Both resulted in enhancement of the depreciation allowable to the assessee. We are not concerned in this appeal with these two points.

6. Before the Commissioner (Appeals), the assessee Rajapalayam Mills Ltd. raised the question referred to this Bench by way of an additional ground. It seemed to have been raised orally. The Commissioner (Appeals) admitted this ground but rejected it for the reasons stated by him in the last paragraph of his order and the Annexure. He considered four possible interpretations including the interpretation placed oil a similar position resulting from the Income-tax (Fifth Amendment) Rules, 1980, by the Tribunal, Madras Bench ‘C’ in the case of Rayalaseema Passenger & Goods Transports (P.) Ltd. v. IAC [1984] 7 ITD 111. He rejected three of them and held that this amended rule would apply only for the assessment years commencing after 2-4-1983, the date on which the amended rule was to take effect.

7. The order of the Commissioner (Appeals) does not mention the quantum of the claim of the depreciation claimed by the assessee, Rajapalayam Mills Ltd. on its interpretation of the Income-tax (Fourth Amendment) Rules, 1983. The claim was not presented in a quantified sum before him, the assessee making the claim on the basis of the table of depreciation rates as laid down by the Income-tax (Fourth Amendment) Rules and leaving the working to be made at these rates. In the course of the hearing before us, the