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2012 (12) TMI 891 - HC - Income TaxDepreciation in the case of succession - One unit of assessee was transferred to the subsidiary company with all assets and liabilities at the book value on 1.11.1996 - Assessee claim depreciation on the opening WDV of the depreciable assets comprised in unit proportionately between Holding & Subsidiary company - Succession to business otherwise than on death u/s 170 - AO u/s 43(6)(c)(B) held that machineries of unit were sold and hence there could be no WDV to allow depreciation - The assets of unit were transferred to the subsidiary company at the WDV as on 31.10.1996 - As the assets were sold during the accounting period, the sale value had to be reduced from the WDV and only the balance depreciation could be allowed Held that:- Contrary to the view of the Tribunal, we find that Section 170 of the Income Tax Act deals with succession to business, otherwise than on death. On a reading of Section 43(6)(c), Explanation 2 to the Section and Section 170 along with the fourth proviso to Section 32(1), we have no hesitation in agreeing with the assessee's case that when the assessee transferred its B Unit to the 100% subsidiary company, it was entitled to claim depreciation apportioned in terms of what is provided for under the fourth proviso to Section 32(1) of the Income Tax Act. The view of the Tribunal that the assessee was not entitled to any depreciation on the ground that there was only a sale, as both units continued to exist, cannot be sustained. As the fourth proviso to Sec. 32(1), that the entire unit is taken as one before succession and the aggregate deduction is calculated at the prescribed rates as if the succession had not taken place and such deduction, thereafter, is to be apportioned between the predecessor and the successor company in the ratio of number of days, for which the assets were used by them. Therefore, assessee is entitled to the claim of depreciation as provided for in the fourth proviso to Section 32(1) Appeal remand back to AO in favour of assessee
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