TMI Blog2004 (10) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 43 the Assessing Officer as well as the Tribunal have rightly rejected the contention of the assessee and have rightly held that the actual cost once determined under section 43(1) read with Explanation 6 will remain the same for that assessee – Thus answer is required to be given in favour of the Revenue and against the assessee. - - - - - Dated:- 14-10-2004 - Judge(s) : B. C. PATEL., BADAR DURREZ AHMED. JUDGMENT The judgment of the court was delivered by B.C. PATEL C.J.- These group of references which are at the instance of the assessee have been referred to this court under section 256(1) of the Income-tax Act, 1961. Though, there were three questions suggested before the Tribunal, however, the Tribunal has referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The same decision is followed in the subsequent years and, therefore, all these references are being disposed of by a common judgment. Originally the assessee was known as M/s. Dalmia Ceramic Industries Limited and thereafter it changed its name to Shri Natraj Ceramic and Chemical Industries Ltd. Dalmia Cement (Bharat) Ltd. ceased to be a holding company of the assessee in the assessment year 1976-77. It was contended that the provisions contained in Explanation 6 to section 43(1) and Explanation 2 to section 43(6) were no longer applicable. As such, it was contended, that the working of the WDV of factory and non-factory buildings in 1975-76 was to be revoked and only the cost "actually" incurred by the assessee in acquiring the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account the original cost to it which was shown in a previous year, i.e., 1975-76, the assessee-company being a subsidiary company it has shown the value of machinery as well as non-factory building as Rs. 7,45,483 and Rs. 2,51,559, respectively, being the WDV which was appearing in the books of the holding company. However, for the assessment year 1976-77, the assessee was no more a subsidiary company and having paid to its parent company the sum of Rs. 19,95,557 for the said assets, it was required to show this amount as the actual cost as per section 43(1) of the Act, and was entitled to get depreciation on that value year to year. The only issue before this court is whether the written down value of the holding company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force." It may be noted that sub-clause (a) of clause (6) would not apply in the instant case as that would apply for the assessment year 1975-76. Sub-clause (b) clearly indicates that the written down value means the actual cost to the assessee less all depreciation actually allowed to him under the Act. In the instant case Explanation 2 to clause (6) of section 43 is relevant and is reproduced hereunder: "Explanation 2.- When any capital asset is transferred by a holding company to its subsidiary company or by a subsidiary company to its holding company, then, if the conditions of clause (iv), or, as the case may be, of clause (v) of section 47, are satisfied, the written down value of the transferred capital asset to the transferee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o on CIT v. Hides and Leather Products P. Ltd. [1975] 101 ITR 61 (Guj). It is required to be noted that the Revenue as well as the assessee placed reliance on the decision of the apex court in the case of Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294. The apex court considered the decisions in Maharana Mills P. Ltd. v. ITO [1959] 36 ITR 350 (SC) and CIT v. Hides and Leather Products P. Ltd. [1975] 101 ITR 61 (Guj) amongst other cases. The apex court after examining the provisions in detail pointed out at page 315 as under: "Explanation 6 offers no difficulty as the relationship of 'parent' and 'subsidiary between the companies involved in the transfer, for the purposes of this clause, has to be determined as at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Explanation 6 to clause (1) of section 43 the question is whether the Assessing Officer is entitled to change the actual cost. In the opinion of the court in view of Explanation 6 the Assessing Officer as well as the Tribunal have rightly rejected the contention of the assessee and have rightly held that the actual cost once determined under section 43(1) read with Explanation 6 will remain the same for that assessee. The apex court indicated the principle and has considered some instances also. The Bombay High Court had occasion to examine the case of Ciba of India Ltd. v. CIT [1993] 202 ITR 1 wherein the case of a gift to the assessee by a foreign company was examined which no doubt falls under Explanation 2 to section 43(1) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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