TMI Blog2008 (3) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-firm filed its return of income for the impugned assessment year declaring a total income of NIL. The assessment was selected for scrutiny and was completed under section 143(3) of the Income-tax Act, 1961. 3. Thereafter the CIT perused the records of the case and found that the assessment has escaped levying of tax on short term capital gains worked out at Rs. 1,00,38,704, and therefore, the assessment was erroneous and prejudicial to the interest of the revenue. Accordingly, the assessment order was set aside and the Assessing Officer was directed to examine whether the short term capital gains liable for taxation has been omitted or not while completing the original assessment. 4. In compliance of the order of the CIT(A) u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability towards short term capital gains. It means that the CIT has given the Assessing Officer a free hand to examine the matter afresh and to redo the assessment in accordance with law, at the same time confining to that particular point. Therefore, the order of the Assessing Authority was not an order passed for giving effect to the direction of the Assessing Authority per se. It was an order, on the other hand, passed in compliance of the direction of the Commissioner of Income-tax and after examining the facts of the case as directed by the CIT. Therefore, the said order of the Assessing Authority should have been disposed off by the CIT(A) on merit as the said appeal was very much maintainable before him. Therefore, on this grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of tractors and trailers remained very high and even after adjusting the sale price of Rs. 4,31,73,420, there was a positive amount left in that particular asset account. As the sale consideration was less than the written down value of the block of assets, the assessee submitted that there was no question of any short term capital gains. to. Alternatively, the assessee argued that even if the assessee was to be thrust upon with the depreciation, all such depreciation to be thrust upon for the earlier assessment years would remain as unabsorbed depreciation, and therefore, would be carried forward and set off and in such circumstances also, there would be no short term capital gains liable for taxation. The Assessing Authority did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (42A) of section 2, where the capital asset is an asset forming part of asset in respect of which depreciation has been allowed under this Act, the provisions of sections 48 and 49 shall apply subject to modifications." 13. A bare reading of the law contained in section 50 brings home the point that the written down value has to be computed on the basis of the actual depreciation allowed by the Assessing Authority in the course of assessment. "Depreciation allowed" does not mean that "depreciation deemed to be allowed". The depreciation should be actually allowed. Here, the assessment year is 2001-02. During this relevant period, it was not mandatory on the part of the assessee to claim depreciation. It was optional as held by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the assessee and allowed by the Assessing Authority. The Supreme Court in the case of CIT v. Straw Products Ltd. [1966] 60 ITR 156 has held that the expression "actually allowed" is unambiguous and connotes the idea that the allowance was actually given effect to. The Apex Court expressed the same view in the case of Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 with the observation that the word "actually" used in section 43(6)(b) is the antithesis of that which is merely speculative, theatrical or imaginary. "Actually" contra-indicates a deeming construction of the word "allowed" which it qualifies. The connotation of the phrase "actually allowed" is thus limited to depreciation actually taken into account or granted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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