TMI Blog2004 (8) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... he same assets by following the order for assessment year 1992-93. 3. Briefly stated, the facts of the case are that the assessee purchased the business and manufacturing unit alongwith fixed assets from M/s. Aegies Chemical Industries Ltd. for a lump-sum consideration of Rs. 5.81 crores as per the agreement dated 25-11-1991. The agreement was to take effect from 1-4-1991 and as per the agreement till completion of all the formali- ties of transfer, the seller was to carry on business on behalf of the assessee. The lump-sum consideration was allotted to various fixed assets on the basis of the market value after revaluing the assets as per the Valuation Report. Income/loss of this manufacturing unit was included by the assessee in his return of income for assessment year 1992-93 and a claim of depreciation in respect of fixed assets of this manufacturing unit was made as per the revalued amount of building at Rs. 97 lakhs and plant and machinery at Rs. 250.87 lakhs. The amount of depreciation claimed by the assessee was Rs. 73,25,451. But the Assessing Officer did not agree with the same and it was held by the Assessing Officer that the assessee had paid incredible quantum of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough it had taken the possession and made part payment of consideration. It was submitted that the facts are identical in the present case because the assessee has made the payment of consideration and obtained the possession because as per the Agreement, the vendor is running the business on behalf of the assessee and income/loss arising out of that business being run by the vendor on behalf of the assessee is included by the assessee in his return of income and the same is accepted by the Assessing Officer. Our attention was drawn to page Nos. 1 2 of the paper book and it was pointed out that it has been informed to the Assessing Officer by the assessee vide this letter filed alongwith the return of income that loss incurred for this business in the year ended 31-3-1992 is considered in preparing the return of income of the assessee company for assessment year 1992-93; and the same is not included in the assessment of the vendor company. Copy of the assessment order of the vendor company M/s. Aegis Chemical Industries Ltd. for assessment year 1992-93 was also submitted and our attention was drawn to last page of the assessment order as per which, long-term capital gains on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case and Assessing Officer cannot simply adopt the WDV as per the income-tax in the hands of the vendor ignoring the WDV as per the books in the hands of the vendor, which is much higher than WDV as per the IT Act taken by the Assessing Officer. Our attention was drawn to page No. 129 of the paper book, which contains the original cost as per books as on 31-3-1991 and WDV as per books as on 31-3-1991 in the hands of the vendor, which is reproduced below : Assets Original cost as per books as on 31-3-1991 WD value as per books as on 31-3-1991 Sale price WD value as per Income-tax Act as on 31-3-1991 Leasehold Land 25,50,690 21,79,135 1,15,50,000 Building 62,08,512 54,72,245 97,00,000 6,06,626 Plant Machinery 2,86,32,817 1,48,75,635 2,50,87,000 4,57,481 Furniture Fixture 1,58,328 1,17,064 1,11,064 63,031 Equipment 1,02,835 48,738 48,738 6,623 Vehicles 75,743 15,624 15,624 Capital work-in-progress 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, judgment of the Hon ble Apex Court rendered in the case of McDowell Co. Ltd. ( supra ) was also rightly invoked by the Assessing Officer. Reliance was placed on the following judicial pronouncements in support of the contention that depreciation is allowable only on written down value of assets and not on enhanced cost : ( i ) CIT v. Alagappa Cotton Mills [2002] 253 ITR 100 (Mad.) ( ii ) CIT v. Alagappa Cotton Mills [1984] 149 ITR 640 (Mad.) ( iii ) Mittal Belting Machinery Stores v. CIT [2002] 253 ITR 34 (Punj. Har.) Regarding the ownership for allowing of depreciation, it was contended that no depreciation is allowable until registered deed of conveyance is executed in assessee s favour. Reliance was placed on the judgment of the Hon ble Gauhati High Court rendered in the case of CIT v. A.B.C. India Ltd. [1997] 226 ITR 733. Our attention was drawn by the learned DR of the revenue on para No. 9 of the agreement as appearing on page No. 18 of the paper book, as per which, the vendor was to carry on business for and on behalf of the assessee and on this basis, it was contended that there was no transfer of assets by the vendor to the assessee. Ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Haryana High Courts cannot be made applicable in the present case. Regarding the judgment of the Hon ble Gauhati High Court rendered in the case of A.B.C. India Ltd. ( supra ), on the ownership issue for allowance of depreciation, it was contended by the learned AR that the judgment of the Hon ble Apex Court in the case of Mysore Minerals Ltd. ( supra ) should be followed. 8. We have considered the rival submissions and perused the materials on record. We find that the assessee s claim of depreciation has been denied by the Assessing Officer on the basis that conveyance deed was not registered in the name of the assessee. Apart from this, the Assessing Officer is of the view that even if depreciation is to be allowed to the assessee, the same is to be allowed on the basis of WDV as per IT Act in the hands of the vendor, which comes to Rs. 1,22,328 as against Rs. 73,25,451 claimed by the assessee on the basis of cost of these assets to the assessee. The Assessing Officer has also invoked the judgment of the Hon ble Apex Court in the case of McDowell Co. Ltd. ( supra ) and has held that the assessee has paid incredible amount of price to withhold the taxes due to the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 lakhs for building, which has been sold by the vendor to the assessee at Rs. 97 lakhs and in respect of plant and machinery, WDV as per books of the vendor as on 31-3-1991 was Rs. 148.75 lakhs, which is sold to the assessee at Rs. 250.87 lakhs. Other items of assets i.e. furniture and fixture, office equipments and vehicles have been sold to the assessee at WDV as per books of the assessee-company as on 31-3-1991. The Assessing Officer has proceeded in the matter by comparing the WDV as per IT Act, which is only Rs. 6.06 lakhs as against Rs. 54.72 lakhs being WDV as per books in the case of building and in the case of plant and machinery, WDV as per IT Act considered by the Assessing Officer to compare the selling price is only Rs. 4.57 lakhs as against Rs. 148.57 lakhs being WDV as per books of the vendor as on 31-3-1991. This is an admitted fact that in Income-tax Act, depreciation is allowed at a higher percentage as an incentive; and hence, WDV as per IT Act cannot reflect the market value of the particular fixed asset. Whereas, the assets are sold on the basis of market value of the assets and not on the basis of WDV as per I.T. Act. For extra depreciation allowed to the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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