TMI Blog2015 (1) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... tten down value of the transferred assets as appearing in the books of account”. However, immediately, before these provisions come into operation, an amendment was brought out in explanation 2B and the relevant words were substituted with ‘written down value of the transferred assets’. However, the other relevant words “as appearing in the books of account” were not omitted. If we take the contention of the assessee as correct, then in that event there would not have been any impact or change in the interpretation of the relevant provisions even after the amendment made by Finance Act, 2000. whatever rights had accrued to the assessee in view of the ambiguity in the provisions at the time of their insertion vide Finance Act, 1999, the same had been taken away/clarified immediately by removing the ambiguity through amendment made vide Finance Act, 2000. Hence no hesitation to hold that the proposition laid therein cannot be applied to the facts and circumstances of the case in hand. - Decided against the assessee. Non chargeability of interest under section 234B of the Act - Held that:- Now the law has been settled that the levy of interest under section 234B is mandatory. - De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n chargeability of interest under section 234B of the Act. 5.0 The learned CIT(A) ought to have held that no interest under section 234B of the Act could be charged in the facts of the present case. Grounds No.1 to 3 3. A perusal of the above grounds of appeal reveals that the effective issue raised by the assessee is relating to the interpretation/applicability of the provisions of Explanation 2B to section 43(6) of the Act as were applicable for the year under consideration. The assessee is aggrieved by the action of the lower authorities in not adopting the written value of block of assets as per books of account of the assets taken over from the demerged company as against the adopting of the written down value as per the provisions of Income Tax Act of the transferred assets of the demerged company adopted by the lower authorities. 4. The facts of the case, as brought out from the impugned order, are that the assessee claimed depreciation aggregating to ₹ 65,90,99,922/-. In the Annexure 3 of tax audit report the assessee made the following disclosure:- The assets transferred from the demerged company viz. Godrej appliances Ltd. pursuant to the scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets' were replaced by 'written down value of assets' in explanation 2A by the Finance Act 2000, a similar change was not made in explanation 2B, which deals with the computation of the written down value of the block of assets of the resulting company. By the Finance Act, 2000 the words value of assets as appearing in the books of accounts in explanation 2B were replaced by the word 'written down value of the transfer of asset as appearing in the books of account' thereby fortifying the belief that the legislature intended that the written down value of the block of assets in respect of resulting company shall be computed on the book WDV of the assets transferred to it from the demerged company. 7. The AO, however, was not satisfied with the assessee's submissions. The AO referred to the memorandum explaining the provisions of the finance Bill, 1999, whereby the provisions relating to the demerger of companies were initially introduced. The AO held that the amendments were made to the various provisions of the Act on the basis of certain broad principles, one of which was that the merger should be tax neutral and should not attract an additional liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation 2B deals with written down value of the resulting company. Explanation 2A and 2B were introduced by Finance Act, 1999, w.e.f. 1st April, 1999. The said Explanations were thereafter amended from time to time, namely by Finance Act 2000 and Finance Act, 2003. The assessees further explained that though the words 'book value of assets' were replaced by 'written down value of assets' in Explanation 2A by the Finance Act, 2000, a similar change was not made in Explanation 2B, which deals with the computation of the 'written down value' of the block of assets of the resulting company. By the Finance Act, 2000 the words 'value of assets as appearing in the books of account' in Explanation 2B were replaced by the words 'written down value of the transferred assets as appearing in the books of account' thereby fortifying the proposition that the Legislature intended that the written down value of the block of assets transferred by the demerged company to the resulting company shall be the book written down value of the assets as appearing in the books of account of the demerged company immediately before the demerger. 11. It had been furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lock of assets of the demerged company for the immediately preceding previous year shall be reduced by the book value of the assets transferred to the resulting company pursuant to the demerger. Explanation 2B. - Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the value of the assets as appearing in the books of account of the demerged company immediately before the demerger: (emphasis supplied) Provided that if the value of the assets as appearing in the books of account of the demerged company immediately before the demerger exceeds the written down value of such assets in the hands of the demerged company, the amount representing such excess shall be reduced from the written down value of the assets. Finance Act 2000 : w. e. f. assessment year 2000-2001 (upto assessment year 2003-04) Section 43(6) written down value means . . Explanation 2A. - Where in any previous year, any asset forming part of a block of asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective. Explanation 2B to section 43(6) clearly provides that in case of resulting company, the value to be added to the block of assets for the purpose of computing depreciation under the Income Tax Act is the written down value of the transferred assets as appearing in the books of account of the demerged company. 14. It was therefore submitted that the assessee company, being the resulting company, had accordingly increased its block of assets by the written down value of the assets as appearing in the books of account of Godrej Appliances Ltd. (the demerged company) immediately before the demerger, and depreciation during the previous year was claimed thereon, based on the provisions of Law, as it stood for assessment year 2003-04. The assessee company has accordingly, claimed depreciation by strictly applying the provisions of section 43(6) of the Act in respect of the scheme of demerger. The claim of depreciation should, therefore, be allowed as claimed by the assessees vide the return of income based on the complete details furnished thereof vide the annual audited accounts and tax audit report. 15. The Ld. CIT(A) however observed that the identical issue was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the corresponding relevant words under clause 2B were the value of assets as appearing in the books of accounts . However, a subsequent amendment was made vide Finance Act, 2000 w.e.f. the same date i.e. 01.04.2000 vide which the words the value of the assets as appearing in the books of account were substituted with the words written down value of the transferred assets as appearing in the books of account . Now we have to see whether any change was brought out with the amendment made vide Finance Act, 2000 into the relevant provisions? We find that at the time of insertion of the relevant provisions, the value of the assets of the demerged company was to be taken as its written down value under clause 2A, whereas under clause 2B, the corresponding written down value of the assets of the resulting company was mentioned as the value of assets as appearing in the books of account . However, immediately, before these provisions come into operation, an amendment was brought out in explanation 2B and the relevant words were substituted with written down value of the transferred assets . However, the other relevant words as appearing in the books of account were not omi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Godrej Industries Ltd. (supra) and we agree with the view taken by the Tribunal in the said case that the emphasis of the legislature in explanation 2B after the amendment made vide Finance Act, 2000 was that the value of the block of assets in the case of resulting company shall be the written down value of the assets of the demerged company immediately before the demerger. Hence, we do not find any infirmity in the findings of the lower authorities that only the written down value of the transferred assets of the demerged company as per the accounts maintained under the Income Tax Act shall accordingly constitute the written down value of the block of assets of the resulting company. 19. Now coming to some important decisions relied upon by the Ld. counsel for the assessee as mentioned herein below: 1. CIT vs. Triveni Engineering Industries Ltd. and Others (DOD:05.08.2010) (Delhi HC) 2. CIT vs. Kerala Electric Lamp Workers Ltd. 261 ITR 721 (Kerla HC) 3. SEDCO Forex International Drill INC and Others 279 ITR 310 (SC) 4. DCIT vs. Core Health Care Ltd. 298 ITR 194 (SC) 5. CIT vs. Sree Senha Valli Textiles P. Ltd. 259 ITR 77 (Mad. HC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of ₹ 41,00,000/- to Godrej Hi-care Ltd. Since the Godrej Capital Ltd. had merged into the assessee company w.e.f. 01.04.02 as result thereof inter corporate deposits placed by the erstwhile Godrej Capital Ltd. being irrecoverable, had been written off by the assessee company during the year under consideration. The demerged company was carrying out the finance business and was registered as a non banking financial company with the Reserve Bank of India. The interest income from the said deposits was always assessed as business income in the hands of the demerged company. Having regard to the business carried on by the Godrej Capital Ltd, money was the stock in trade of the company which had become irrecoverable and as such was a business loss and thus was required to be allowed both under section 36 as also under section 28 of the Act. The Ld. AO, however, did not agree with the contention of the assessee and held that the bad debts could be allowed only if such debt had passed through trading/P L account of the company. He therefore held that the deduction could not be allowed since the debt had been taken into account in computing the income of the assessee and accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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