TMI Blog2009 (1) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ad claimed excess depreciation insofar as that depreciation was claimed at the rate of 50 per cent on the opening WDV and at 100 per cent on the additions made during the year. The explanation of the assessee was that it is an Original Equipment Manufacturer (OEM) for new vehicles being manufactured by the vehicle manufacturers. Even after the production of a particular vehicle has ceased, it has to keep supplying the original equipments in the replacement market. The Assessing Officer observed that from the explanation of the assessee it is clear that the tools, dies etc. are neither sold, nor discarded, demolished nor destroyed. They are kept, ready so that pistons and rings can be supplied to the replacement market. Accordingly, he was of the view that the assessee was entitled only to 25 per cent depreciation being the general rate for plant and machinery. He computed excess depreciation at Rs. 1,92,66,564. On the Assessing Officer s proposal to add back this excess, the response of the assessee was that the technology is obsolete, that the tools and dies are made for a specified product only and that if the product itself has failed or is modified, then the tools, dies etc. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Next, it was contended that so far as change in the method of accounting was concerned, AS 28 was not mandatory for the year under consideration and in any case, the provision of the Act would prevail over the Accounting Standard. Thus, according to her the relief given to the assessee by the CIT(A) was unwarranted. 6. The reply of the learned counsel to the above arguments was that clause ( i ) referred to in clause ( iii ) was the clause ( i ) immediately following the opening of section 32(1) and not the clause ( i ) following thereafter. In other words, the contention was that deduction under section 32(1)( iii ) was allowable in respect of the assets mentioned in the first clause ( i ) and it was not a reference to the second clause ( i ). According to the learned counsel, the only thing to be seen was whether the change effected by the assessee was bona fide or not. In the present case, it was not the case of the department that the change was not bona fide and hence the claim of the assessee was allowable. Whether 50 per cent of the brought forward stock was rightly written off or not was only a matter of estimate. 7. We have duly considered the rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons that follow. Clause ( iii ) opens with the sentence "in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause ( i ) ....". It can be seen that clause ( i ) qualifies the expression "...in respect of which depreciation is claimed and allowed....". Now deductions in respect of depreciation are allowed only under the subsequent set of clauses viz., clauses ( i ) to ( iii ). The first set of clauses specifies only the assets on which depreciation is allowable. But the quantum of depreciation to be allowed is specified in the second set of clauses and it is the quantum of depreciation which is material under clause ( iii ). Therefore, the reference to clause ( i ) in clause ( iii ) has to be understood as reference to the second clause ( i ). Further, power generation and distribution units are granted depreciation on straight line basis on individual assets as per the second clause ( i ). Units other than power generating units are granted depreciation written down value basis on block of assets. "Block of assets" is defined in section 2( 11 ) to mean a group of assets falling within a class of assets in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed as deduction, though the excess is to be taxed as capital gain under section 50 of the Act. Hence, there is no force in the argument of the learned counsel that for the purpose of section 32(1)( iii ), the concept of block of assets has to be ignored. Circular 772 issued by the Board also clarify the statutory provision to the effect that terminal allowance is allowed only in case of power generating and distributing units. We are unable to discern the reference to the amalgamation of banking companies in clause (2) of the Explanation to section 32(1)( iii ). But it does not necessarily mean that it supports the case of the assessee. The general scheme of the Act is that after the introduction of the concept of block of assets and the introduction of section 50 with effect from 1-4-1988, terminal allowance is not allowed except in case of power generating and distributing units. 9. There is another aspect to the issue. It is not the assessee s case that it is entitled to depreciation on the basis of straight line method. Clause ( i ) specifically permits power generating units to claim depreciation on straight line basis on individual assets. This is the reason that in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the CIT(A). 11. Next ground in the appeal is against restricting the deduction under section 80HHC to Rs. 5,93,898 as against the claim of Rs. 36,12,744. It was seen that the assessee had computed deduction under section 80HHC separately for each plant. This, as mentioned in the assessment order was based on the judgment of the Madras High Court in the case of CIT v. Ashoka Betelnut Co. Ltd. [2003] 259 ITR 733. However, according to the Assessing Officer profits of the business had to be computed for the assessee as a whole and not unit-wise. Accordingly, he recomputed the deduction and allowed to the extent computed by him. The CIT(A) confirmed the action of the Assessing Officer by relying on the judgment of the Kerala High Court in the case of CIT v. Parry Agro Industries Ltd. [2002] 257 ITR 41. 12. On due consideration of the matter, we reject this ground of the assessee. The reference to the judgment in the case of Ashoka Betelnut Co. Ltd. ( supra ) by the Assessing Officer appears to be misplaced as the said judgment is altogether on a different subject viz., depreciation. However, the reference appears to be to another judgment of the Madras H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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