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2013 (3) TMI 120 - AT - Income TaxDepreciation - Block of assets - assessee discarded the assets in question in pursuance to the International Treaty called “Montreal Protocol” and received the compensation of 15.60 crores. - held that:- It is clear that the provisions of sec. 32(1)(iii) stipulate the depreciation in case of the assets which is sold, discarded, demolished or destroyed is the amount, which is different between the written down value of the asset and scrap value. - the assessee has not claimed that the compensation received by the assessee in lieu of the discarded asset is short of its written down value; therefore, the claim of the assessee for depreciation on the written down value of the discarded assets is not permissible as per provisions of sec. 32 of the I T Act. MAT - Book profit - whether the Assessing Officer while computation book profit u/s 115JB can look into depreciation provided in the books of account on the assets which have already been discarded and not in use because of the activity permanently closed, is permitted as per the AS-6 as well as under the provisions of Companies Act. - held that:- Once the assessee closed the factory then the decision of the assessee to book the depreciation of dismantled assets has to be decided as per the provisions of companies Act as well as AS-6. The fundamental principle for providing deprecation on asset is diminution in the value of the assets due to wear and tear as a result of use or retain for business of the assessee. Thus, underline rule for depreciation is use or retain of assets for the purpose of the business of the assessee. When the asset has been discarded and dismantled, then in the absence of physical existence of the useful assets, mere retention of the assets in the books of account would not entitled for any depreciation even under the provisions of Companies Act. Assessing Officer has power to examine whether the accounts are maintained as per the Accounting Standard and policies as provided under the Companies Act. The Special Bench of the Tribunal in Rain Commodities Ltd. v. Deputy Commissioner of Income-tax [2010 (7) TMI 794 - ITAT HYDERABAD], after considering the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME COURT) as well as the decision of the Hon’ble jurisdictional High Court in the case of Akshay Textiles Trading & Agencies (P.) Ltd. [2007 (10) TMI 251 - BOMBAY HIGH COURT] & the decision of the Bombay High Court in the case of Veekaylal Investment Co. (P.) Ltd. [2001 (2) TMI 117 - BOMBAY HIGH COURT] has taken a view that the decision in the case of Veekaylal Investment Co. P. Ltd. [2001 (2) TMI 117 - BOMBAY HIGH COURT] has not been overruled by the decision in the case of Akshay Textile Trading & Agencies Pvt. [2007 (10) TMI 251 - BOMBAY HIGH COURT] - Decided in favor of revenue.
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