Depreciation cost based on surveyor's report upheld, appeals dismissed.

The court held that the actual cost of fixed assets for depreciation should be based on the surveyor's report, as both parties relied on it. The reliance on the report was deemed appropriate, and the court upheld the Tribunal's decision. The appeals were dismissed, favoring the respondent-Revenue and affirming the valuation based on the surveyor's report.

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Issues Involved:
1. Determination of the actual cost of fixed assets acquired by the appellant from M/s Wimco Ltd.
2. Reliance on the surveyor's report for determining the actual cost.
3. Allowance of depreciation based on the actual cost incurred.

Issue-Wise Detailed Analysis:

1. Determination of the actual cost of fixed assets acquired by the appellant from M/s Wimco Ltd.:
The appellant company, DENORA India Ltd., purchased the metal anode division from M/s Wimco Ltd. for Rs. 6,03,21,910/- as a running concern. The initial assessment for 1990-91 did not examine the actual cost of the fixed assets, and it was done for the first time in 1991-92. The Assessing Officer, relying on a surveyor's report, valued the assets at Rs. 3,50,37,238/-. The CIT (Appeals) upheld this valuation, and the Tribunal dismissed the appellant's appeal, affirming the valuation based on the surveyor's report.

2. Reliance on the surveyor's report for determining the actual cost:
The core issue was whether the Tribunal was correct in law in relying on the surveyor's report to determine the actual cost of the assets. The appellant argued that depreciation should be allowed on the actual cost incurred, as mandated by Sections 32, 43(6), and 43(1) of the Income Tax Act. They contended that the surveyor's report was an internal document and hypothetical, thus should not override the actual cost paid. However, the court noted that both the appellant and Wimco Ltd. had relied on the surveyor's report for the valuation of the fixed assets, making it a credible basis for determining the actual cost.

3. Allowance of depreciation based on the actual cost incurred:
The appellant computed the actual cost at Rs. 6,10,02,641/- and alternatively at Rs. 4,60,99,228/- after certain adjustments. The court examined the details provided by the appellant, including the computation of purchase consideration and the allocation of costs to fixed assets. It was observed that the purchase was of an ongoing undertaking for a lump sum amount without bifurcation into different heads. The authorities and the Tribunal deemed it appropriate to rely on the surveyor's report for computing the actual cost, which the court agreed with.

Conclusion:
The court held that the actual cost of the fixed assets for depreciation purposes should be based on the surveyor's report, as it was the basis on which both the appellant and Wimco Ltd. had relied. The Supreme Court's judgments in similar cases supported the reliance on such valuation reports when determining the actual cost of assets acquired in a slump sale. The appeals were dismissed, and the question of law was answered in favor of the respondent-Revenue, affirming the Tribunal's reliance on the surveyor's report for determining the actual cost of the fixed assets.

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