TMI Blog1982 (2) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... as estimated at about Rs. 5,00,000 and was claimed to be exempt. This claim was, however, rejected by the ITO in the case of the vendor-company and the total consideration of Rs. 14,50,000 was taken for the purpose of working out profits under section 41(2) of the Act. This order in the case of the vendor-company was passed on 21-8-1977 and the vendor-company filed an appeal before the appellate authorities and by an order dated 18-5-1979 the Tribunal held that the amount of Rs. 5,00,000 represented the value of route permits and other rights required by the seller-company and that was not to be taken into consideration for working out the taxable income of the vendor-company. On the basis of this decision of the Tribunal, the case was brought to the notice of the Commissioner stating that the assessee-company had been allowed larger depreciation than would be proper if the amount of Rs. 5,00,000 is excluded from the consideration paid for the buses. It was in these circumstances that the Commissioner assumed jurisdiction under section 263 and passed his order which is challenged before us. Various objections were raised before the Commissioner and it was contended that at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO with the directions of making a protective assessment in the case of the assessee-company on the basis of his order. 4. Before us, the learned counsel for the assessee, has submitted that the order of the Commissioner was assailable for more than one reason. He submitted that the assumption of jurisdiction by the Commissioner was invalid as there was no error in the order of the ITO who had taken a considered and consistent view in the case of the two assessees. He contended that the directions given by the Commissioner were also illegal insofar as he had directed for making a protective assessment though, in fact, his direction was for making an allowance of depreciation on a lower value and that was to be done on a protective basis till the question was finally decided in the case of the seller-company. It was contended by the learned counsel that at the time when the ITO passed the order, he did not commit any error and he read the agreement and found that Rs. 14,50,000 had been paid for the buses and adopted it as the basis for allowance of depreciation in the hands of the assessee. It was further contended by the learned counsel for the assessee that the error in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset, if a consideration has been paid, depreciation should be allowed on the whole of such consideration. A reference was made to the decision of the Allahabad High Court in the case of CIT v. J.K. Cotton Spinning Weaving Mills Ltd. [1975] 98 ITR 153 for the proposition that interest on the loan for purchase of machinery have to be capitalised for allowing depreciation. Reference was also made to the decision of the Supreme Court in the case of Challappalli Sugars Ltd. v. CIT [1975] 98 ITR 167. 7. In reply, the departmental representative submitted that the Commissioner had assumed jurisdiction rightly, as in the circumstances of the case, the ITO had not made a protective assessment. He pointed out that protective assessments have been accepted by the courts as valid. He further submitted that the error in the order of the ITO had to be seen by the Commissioner when he was passing the order and it is not to be limited to the time when the ITO passed the order. It was submitted that in view of the claim of the vendor-company the ITO should have protected the interest of revenue by accepting the view which appellate authority might take by accepting that company's plea. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the learned Commissioner was in error in holding that the ITO's order was erroneous in not allowing depreciation on a reduced written down value as a protective measure. In fact, if the ITO had followed this procedure the order would have been erroneous, as it would have been against his interpretation of the agreement and against the view he had taken in the case of the vendor-company. The possibility of an error arising as a result of any future order of the appellate authorities cannot make the order of assessment itself erroneous. The order has to be found erroneous as on the day when the ITO passed that order and that error cannot depend on an uncertain factor like a possible decision in appeal. The Commissioner does not hold that on the reading of the agreement itself the action of the ITO in allowing depreciation on the amount of Rs. 14,50,000 was erroneous. What he had held is that the ITO should anticipate any possible appellate order and take action to safeguard the revenue. The reliance of the assessee on the decision of the Calcutta High Court in Ganga Properties is well taken and a decision of the Tribunal coming several years later in another case cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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