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2016 (6) TMI 593 - AT - Income TaxDisallowance on account of depreciation claimed applying the provisions of explanation-3 below Section 43(1) - Held that:- Explanation 3 to Section 43(1) can be invoked in the given facts of the case. It prescribes that Assessing Officer must record a proper satisfaction that the main purpose of the transfer of such assets was reduction of liability to income-tax. This mandatory finding is conspicuously missing from the order impugned of the Assessing Officer. Besides, if it is not a case of transfer of assets, in that case the Explanation itself would not apply. In my considered view, it is purely factual matter where a new company is duly formed after transferring assets of a firm and undertook reclassification of the assets in proper blocks on which no adverse remark has been made by authorities below. Alternatively also, the Hon’ble Supreme Court in a recent judgment in the case of CIT vs. Excel Industries Ltd, reported in (2013 (10) TMI 324 - SUPREME COURT ), has held that the preponement or postponement of year of claim or allowance is a basically revenue neutral in character, more so when the rate of income tax in case of company is nearly same. The re-classification of asset at the most makes a benign shift in the claim of depreciation of machinery block and computer block. Depreciation being a carried over allowance based on WDV; rate of tax being same, following the Hon’ble Supreme Court judgment, is a revenue neutral exercise. So, in any case, the assessee cannot be blamed for the re-classification as deliberately to reduce its tax liability as contemplated by sec. 43(1) expln. 3. In view of these observations, see no justification in reduction of depreciation claim made by the assessee which is deleted. - Decided in favour of assessee
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