TMI Blog2014 (7) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... t part of clause (B) of special clause (c) of Section 43 (6) of the Act - The expression, reduction does not exceed the WDV as so increased, appears to have been taken into account - It is nobody’s case that the reduction would offset the value in the increase of the WDV of the block assets - That occurred on account of acquiring of new items – there was no basis in the approach of the Tribunal – Decided in favor of assessee. - Reference Case No. 82 of 1999 - - - Dated:- 12-6-2014 - Sri L. Narasimha Reddy And Sri T. Sunil Chowdary,JJ. For the Applicant : Sri S. Ravi For the Respondent : Sri S. R. Ashok JUDGMENT (Per Honble Sri Justice L. Narasimha Reddy) The Finance Act, 1998 brought about substantial changes in the Income Tax Act, particularly, in the regime of depreciations. Till then, depreciations used to be allowed on individual assets, held by an assesee, whether an individual or an industry or a business undertaking. Through the amendment, the concept of block assets was introduced. The expression block assets is defined under Section 11 of Section 2 of the Income Tax Act, 1961, (for short the Act) as, pool of tangible assets such as buildings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961 for the purpose of arriving at the written down value of the block of assets, whether the Tribunal was correct in law to restrict the adjustment of the moneys payable in respect of insurance against the plant and machinery destroyed in fire accident, to the cost of plant and machinery acquired during the previous year instead of the whole of such moneys payable? AT THE REQUEST OF THE ASSESSEE 2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that under the provisions of S.46 (6) (c) of the Income- tax Act, 1961, the receipt from the Insurance Company towards claim against damage to building, plant and machinery was to be reduced from the block to the extent of additions made to the block of plant and machinery during the previous year in question? 4. Sri S. Ravi, learned Senior Counsel for the applicant, submits that the scheme introduced through the Finance Act, 1998 is almost, a self contained code and every aspect was dealt with in detail, but the Tribunal did not take the same into account. He contends that though the concept of block assets was introduced, Parliament provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to group all the tangible assets on one hand, and intangible ones, on the other, into blocks. Within this, broad categories, sub-grouping of items, on which same rate of depreciation is allowed, is required to be done, under the relevant provisions of law. 7. The block assets of the applicant comprised of buildings, plant, machinery and the like, as defined under Section 2 (11) of the Act. It is not in dispute that in a major fire accident that took place in the premises of the factory, certain items, which formed part of the block assets were destroyed. The book value of the items so destroyed was arrived at ₹ 68,06,562/-. The applicant had an insurance policy in respect of the items that were destroyed in the fire accident. Obviously, by taking into account the current market value, a sum of ₹ 1,54,99,051/- was paid by the insurer. 8. In the assessment year 1988-89, the return was in conformity with the provisions of the Act and the details of block items, the value of the items that were destroyed in the fire accident and the amount that was received in the insurance claim were furnished. It is also necessary to note that an item of machinery costing ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich reads as under: 43. . (6) . (c) in the case of ;any block of assets,-- (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets, at the beginning of the previous year and adjusted,-- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling within that ;block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced (a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and (b) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision been on the statute. Once that provision has been omitted, the assessing authority cannot be permitted to repeat the exercise thereunder, in the process of working out the WDV, under Section 43 (6) (c). It is well established that what is not permissible to be done directly under law, cannot be permitted to be done indirectly. Another concept is that where law requires particular thing to be done in a particular manner it should be done in that manner or not at all. Gujarat Electricity Board v. Giridharlal Motilal 1969 AIR 267. 16. The appellate authority took the correct view of the matter in permitting reduction in WDV only to the extent of ₹ 68,06,652/- representing the value of the deduction. It needs to be kept in mind that the figure 68,06,562/- is not something which was furnished by the applicant, as per its wish or fancy. It is usual or fancy, it was reflected in the account books and assessments, and it is the result of allowing of the depreciation over the years, for those items. 17. The Tribunal made an attempt to increase the amount to be deducted; corresponding to the item of machinery that was acquired at the relevant point of time. Obviously, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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