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2014 (8) TMI 567 - HC - Income TaxApproval of depreciation granted – Fixed assets taken over under Scheme of amalgamation - Whether the Tribunal was justified in approving the depreciation granted when the profits of the Indian undertaking of nonresident parent company were computed in accordance with the provisions of Rule 10 of the Income Tax Rules – Held that:- The income accruing or arising to any non-resident person, whether directly or indirectly, through or from any business connection in India or through or from any property in India etc., will be, for the purposes of assessment to income tax, calculated on any amount which bears the same proportion to the total profits and gains of the business of such person, as the receipts so accruing or arising, bears to the total receipts of the business - This computation has to be done in accordance with the provisions of the Income Tax Act - the U.K. Company was being assessed to income tax in India right from the AY 1960-61 in respect of profits of its Branch in India. The authorities below gravely misdirected themselves in adopting the method that they did - there is no concept of depreciation being allowed on a notional basis or that the same can be granted implicitly as held by the ITAT - The depreciation has to be actually allowed – Relying upon Madeva Upendra Sinai Versus Union of India And Others [1974 (11) TMI 7 - SUPREME Court] - the written down value of fixed assets of the U.K. Company had to be calculated on the basis of the actual cost less the depreciation “actually allowed” to the U.K. Company - The written down value could not have been arrived at on the basis that depreciation had been granted on a notional basis - depreciation on the fixed assets taken over by the Assessee Company under the Scheme of Amalgamation, ought to be granted by taking the written down value of the fixed assets at ₹ 1,72,78,297/- and not ₹ 93,14,942 – Decided in favour of Assessee.
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