TMI Blog2012 (12) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/Ahd/2008, 4452/Ahd/2007 - - - Dated:- 31-1-2012 - SHRI MUKUL Kr.SHRAWAT AND SHRI B.P.JAIN, JJ. Assessee by : Shri S.N.Soparkar, Sr.Adv. Shri Yogesh Shah Revenue by: Alok Johri, CIT-Learned Departmental Representative ORDER PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER : The are cross appeals for A.Y. 2004-05 arising from the order of the CIT(A)-IV, Baroda dated 28.9.2007 and for A.Y. 2005-06 arising from the order of the CIT(A)-IV, Baroda dated 28.5.2008. [A] Revenue s appeals; ITA No.4457/Ahd/2007 for A.Y. 2004-05 and ITA No.2928/Ahd/2008 for A.Y. 2005-06. 2. Ground No.1 (for A.Y. 2004-05) reads as under 1. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in directing the A.O. to compute the depreciation on the W.D.V. for the A.Y. 2003- 04, without considering the fact that the assets which were acquired more than 10 years back and used when the assessee was not a taxable entity, gave a distorted picture of its profit loss a/c in this year when the assessee claimed depreciation on the original cost of assets for the first time in A.Y. 2003-04 and also ignoring the underlying principle of accountanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that although the issue of depreciation has been decided against the Revenue by the Tribunal and that order of the Tribunal (in the case of National Dairy Development Board vs. Addl.CIT) is reported as [2009]310 ITR (AT) 325 (Ahmedabad) but still the question is that in view of the definition of WDV as prescribed u/s.43(6) of IT Act, means the actual cost to the assessee less depreciation actually allowed. Since in the case of the assessee the admitted factual position is that the depreciation was not provided in the books of account in the past, there was no question of granting the same, nevertheless , a notional figure of depreciation should have been taken into account so as to arrive at the correct WDV. Ld. DR Mr.Alok Johri has also argued that the actual cost is defined in section 43(1) of IT Act. That actual cost has admittedly been reduced by the grants received. He has also referred section 32(1) of IT Act and argued that a depreciation in respect of block of assets are to be computed annually to arrive at the WDV for a particular year. Ld.DR has further elaborated his argument that as per the definition of actual cost as prescribed u/s.43(1) of IT Act read along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written down value had to be computed by reducing the depreciation actually allowed against the cost of the assets and that there was no concept of mental calculations of the depreciation as having been allowed in the tax-free period. Therefore, the depreciation during the current year has to be computed on the original cost of the assets. The Assessing Officer rejected the contention of the assessee, as in his view, the principle governing the depreciation allowance is the effective life of the depreciable assets and the expenditure incurred on its wear and tear for the period of its consideration and since the assessee had been using the assets in question for years, such assets must have depreciated greatly by their use and some of them might have reached the stage of being discarded, hence, in order to arrive at the correct income, normal wear and tear of the assets had to be taken into account. . We have heard the parties ad considered the rival submissions. Section 32 provides for the depreciation on the written down value of the asset. Section 43(6) defines the written down value to mean in the case of assets acquired in the previous year like building, plant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation on the original cost of the assets. We accordingly direct the Assessing Officer to allow the depreciation in accordance therewith. 6.1. It is worth to mention that for A.Y. 2003-04, the Revenue had gone in appeal before the Hon ble Gujarat High Court and vide Tax Appeal No.672 of 2008 order dated 22/12/2008 this ground was dismissed as follows:- 10. It is not in dispute that the provisions do not envisage any notional allowance and the Assessing Officer thus cannot work out such notional allowance and reduce the same from the depreciation claimed. The words actually allowed means actually allowed in the course of assessment. The assessee was not liable to be taxed and hence, no assessments were framed for the earlier years. Therefore, in absence of any legal infirmity in the impugned order of Tribunal, no question of law arises on this count. 6.2. We have been told that Revenue s SLP in Appeal (Civil) No.CC9999/2009 dated 31/07/2009 has also been dismissed. 7. Once the Hon ble the Courts have held a view in favour of assessee by duly analyzing the provisions of the Act, as discussed hereinabove, we hereby hold that in terms of provisions of section 43(6) of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax for A.Y. 2004-05. Resultantly the said amount was taxed. 9. When the matter was carried before the first appellate authority, the ld.CIT(A) has followed the order of the Tribunal for A.Y.2003-04 and deleted the addition. 10. Having heard the submissions of both the sides, this issue also stood decided by the order of the Tribunal reported as 310 ITR 325 (supra), wherein it was held as under:- Held, (i) that the policy of accounting the interest income was reviewed because the assessee was subject to tax under the provisions of the Income-tax Act. The resolutions being passed subsequent to the passing of the Finance Act, 2002 by itself could not be a ground for applying the provisions of section 145(3) read with section 145(1) of the Act to bring to tax, interest income pertaining to the period prior to the financial year 2002-03 but actually received during the year. The income of the assessee was chargeable to tax from the assessment year and the interest income was to be assessed following the mercantile system of accounting. The income that had accrued in the earlier year when the assessee was a non-taxable entity could not be assessed in the year under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the method of accounting with effect from 1.4.2001 cannot be read to mean that the act was mala fide because for the said period, admittedly, the assessee was not liable to tax. The contention of the Revenue that for the very same reason, the change in method of accounting was required to be ignored, namely, having been effected from 1.4.2001, is looking at the issue in a manner which can be termed to be one which no reasonable person would consider. Once the fact is admitted that for the said period, the assessee was not liable to tax, to say that the assessee should not have changed the method of accounting for the said period is ignoring the obvious, namely, the change is based on the advice received from the Consultant to adopt the prescribed accounting standards. It was only incidental that the change was effected at a point of time when provisions of Section 44 of the Act came to be omitted from the statute. Therefore, insofar as proposed question No. 1 is concerned, no question of law arises. 10.1. As noted above, SLP has also been dismissed by the Hon ble Apex Court. Even in A.Y. 2006-07 ITAT B Bench in assessee s own case vide an order dated 25/05/2011 has dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 04-05 Assessee s appeal) 3. The learned Commissioner of Income-tax has erred in confirming disallowance of grant of Rs.4,99,82,283 (for A.Y. 2005-06 of Rs.16,21,47,646/-) given to various cooperative societies as deductible expenditure u/s.36(1`)(xii) of the I.T. Act on the ground that the same are not in the nature of expenditure. Appellant submits that the grant given were in the nature of expenditure and allowable in accordance with section 36(1)(xii) of the I.T. Act. It is submitted that it be so held now. 3.1. The learned Commissioner of Income-tax has erred in not appreciating the fact that expenditure is booked only when advance given are utilized and therefore there is no question of possible conversion in such cases and hence the claim made ought to have been allowed. It be so held now. 3.2. In nay event the same is allowable u/s.37/28 of the I.T. Act and therefore, the same ought to have been allowed as deduction. It be so held now. 14. After the recall of the order for A.Y. 2003-04 an another order was passed by ITAT B Bench Ahmedabad bearing ITA No.454/Ahd/2006 order dated 21/04/2011 and the matter was restored to the file of the AO. Likewise, for A.Y. 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax (Appeals) has erred in disallowing the appellant claim for deduction u/s.36(1)(viii) Rs.4,02,06,000. It is submitted that appellant has satisfied necessary conditions and learned CIT(A) ought to have allowed the deduction as claimed. It is submitted that it be so held now. 2.1 The learned Commissioner of Income Tax (Appeals) has erred in upholding that producing milk and milk products is not an industry by relying on the finding of honorable ITAT that meaning of industry under the Industrial Development Regulation Act cannot be imported under the Income Tax Act to grant benefit u/s.36(1)(viii). It is submitted that production of milk and milk products is considered as an industry under the Income Tax Act itself in Notification no.SO627(E) dated 4-8-1999 issued by the Central Board of Direct Taxes (CBDT) and accordingly entitled to allowance u/s.36(1)(viii). It is submitted that it be so held now. 19. For A.Y.2003-04 (310 ITR 325)[AT] the issue was decided against the assessee and it was held that the conditions prescribed u/s.36(1)(viii) were not complied with by the assessee. Likewise, for A.Y. 2006-07 vide order dated 7/6/2011 that view of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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