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2018 (9) TMI 1458 - AT - Income TaxDisallowance of depreciation on intangible assets - conversion of partnership firm into a company - Held that:- In the case on hand also, on account of conversion, the erstwhile partnership firm ceased to exist while the company has come into existence. Therefore, the assets come to vest in the hands of the company and there is no cost of assets to the company on such vesting. When the transaction itself has been treated to be not a transfer, but is akin to succession, in our opinion the 5th proviso to sub-clause (ii) of sec. 36(1) applies and the depreciation has to be calculated as if there is no transfer. As there is no transfer, there is no cost to the assessee. Depreciation is allowable on the WDV of the asset and WDV has been defined u/s 43(6) to mean in the case of assets acquired in the previous year, the actual cost to the assessee. As actual cost to the assessee was ‘Nil’, the WD value of the assets in the hands of the predecessor firm shall be considered for the allowance of depreciation. Therefore, we do not see any reason to interfere with the orders of the authorities below. Sub-sec(6) of sec. 43 defines ‘Written Down Value’ and it provides for both the acquisition of assets during the relevant previous year and acquisition of assets before the relevant previous year and both the clauses mention ‘actual cost to the assessee’. In the second circumstance i.e where the assets are acquired before the previous year as in the case of the assessee before us, the WDV shall be the actual cost to the assessee less all depreciation actually allowed to him under the Income-tax Act. Therefore, it is clear that the claim of depreciation can be examined even in the assessments years subsequent to the assessment year in which the succession has taken place. This argument is accordingly rejected. - Decided against the assessee
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