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TMI Blog2014 (10) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the disallowance of depreciation of Rs. 9,82,47,164/- made by the Assessing Officer holding that the claim of depreciation on enhanced value of assets by the assessee was not with an intention to reduce the tax liability and also that the Assessing Officer has erroneously invoked the Explanation 3 of Section 43 (1) of the Incometax Act, 1961 and also holding valuation report of the Valuer as valid despite of the fact having brought on record by the Assessing Officer that valuation report was made after the transaction and 40% addition on account of time factor was not a prescribed method for valuation of plant and machinery ?" {B} "Whether the Tribunal is right in law and on facts to delete the disallowance of Rs. 1,57,63,526/- on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off] to the various depreciable assets and claimed depreciation accordingly. 4. For the assessment year in question ie., A.Y 1997-98, in the return of income, the respondent had claimed depreciation. However, the Assessing Officer noted that there was no amount mentioned in the agreement against each of the above items, and therefore, it was not possible to ascertain the value of the items. The Assessing Officer, on detailed discussion, was of the opinion that the plant and machinery installed could not be included in the actual cost and adopted the actual cost of the various assets as per the written down value shown in the books of account of the CTC Limited and against the depreciation claimed of Rs. 10.78 Crores [rounded off], an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumulative consideration of the entire materials, it held in favour of the assessee concurring with the findings of the CIT [A]. 7. At this stage, reliance placed upon by the learned advocate for the appellant on a decision of the Bombay High Court rendered in case of Famous Cine Laboratories & Studios Limited v. Commissioner of IncomeTax, Bombay City-I, reported in 121 ITR 648, requires a reference. The Bombay High Court in the said case has held that the original cost of any particular asset is entirely a question of fact and if the circumstances show that the assessee arranged to put a fictitious price on his assets, it is open to the incometax authorities to refuse to accept that price. Any document or formal deed mentioning the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale basis for transfer of a running business of EMD undertaking, and therefore, factum of respondentassessee not having paid consideration for acquiring individual assets cannot be construed as illusory or colorable. 9. Section 43 of the Act prescribes definitions of certain terms relevant to income from profits and gains of business or profession. Subsection (1) of Section 43 provides, thus- "43. In sections 28 to 41 and in this section, unless the context otherwise requires- (1) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. Provided that where the actual cost of an asset, being a motor car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of transfer of the assets, the assessee had no income for it to reduce its tax liabilities by way of such transfer, and therefore, both the CIT [A] and the Tribunal had rightly concluded that the Assessing Officer was in error in invoking Explanation 3 to Section 43 for determining actual cost in the said deal. 11. For the reasons mentioned hereinabove, we see no mistake in CIT [A] as well as Tribunal in concluding that Explanation 3 to Section 43 of the Act was not required to be invoked. The first issue need no consideration therefore as no substantial question of law has arisen. 12. The second issue concerns disallowance of Rs. 1.57 Crores [rounded off] on account of interest expenditure on unpaid purchase consideration. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or is payable as interest in connection with acquisition of asset, so much of such amount which is relatable to any period after such asset is first put to use shall not be included and shall be deemed to have been included in the actual cost of such asset. 14.3 The Bombay High Court in case of Commissioner of IncomeTax v. Rajaram Bandekar, reported in 202 ITR 514 was considering Explanation 8 to Section 143 (1) of the Act wherein, it is held that the said explanation was added with an object of removing doubts with regard to the includibility of interest relatable to any period after the asset has first been put to use, in the computation of its actual cost. By this Explanation, it has been declared by Parliament that, "where any amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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