Tribunal allows depreciation on computers acquired in slump sale for AY 2007-08. Revenue appeal dismissed.

The tribunal upheld the CIT(A)'s decision to allow depreciation on computers acquired under slump sale for the assessment year 2007-08. The Revenue's appeal was dismissed, and the assessee's claim for depreciation of Rs. 98,88,500 was accepted based on the revised certificate provided by the auditor confirming the assets were used for more than 180 days in the relevant financial year. The tribunal emphasized the importance of assets being put to use promptly after a slump sale transaction to enable the undertaking to operate smoothly.

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Issues:
1. Allowance of depreciation on computers for assessment year 2007-08.
2. Discrepancy in dates of capitalization and put to use of assets acquired under slump sale.
3. Reliability of revised certificate from the auditor regarding the period of use of assets.

Issue 1: Allowance of Depreciation on Computers
The Revenue appealed against the CIT(A)'s decision to allow depreciation of Rs. 98,88,500 on computers, which was based on a revised certificate submitted by the assessee. The AO had initially noted that the assessee claimed depreciation of Rs. 197.77 lacs on computers, but only Rs. 98.88 lacs was allowable as the computers worth Rs. 329.92 lacs were put to use for less than 180 days as certified by the auditors. The assessee contended that all assets acquired under slump sale were put to use from April 1, 2002, and provided a certificate to support this claim. The AO, however, was not satisfied with the explanation and restricted the depreciation to Rs. 98.88 lacs. The CIT(A) upheld the assessee's claim, stating that there was no reason to doubt the revised certificate filed by the auditor, which confirmed that the assets were used for more than 180 days in the relevant financial year.

Issue 2: Discrepancy in Dates of Capitalization and Put to Use
The AO raised concerns about a typographical error in the tax audit report regarding the dates of capitalization and put to use of the assets acquired under slump sale. The assessee clarified that the error led to the wrong date being reflected as the put to use date. The revised certificate from the auditor supported the assessee's claim that the assets were indeed put to use from April 1, 2002. The CIT(A) emphasized that the purpose of a slump sale is to enable the undertaking to run smoothly after transfer, and it would be imprudent to leave the assets idle for an extended period. The tribunal agreed with the CIT(A) and upheld the decision based on the veracity of the revised certificate and the logical explanation provided by the assessee.

Issue 3: Reliability of Revised Certificate
The revised certificate submitted by the auditor played a crucial role in determining the period of use of the assets for depreciation calculation. The tribunal found no reason to doubt the revised certificate, especially considering the explanation provided by the assessee regarding the typographical error in the original report. The tribunal emphasized the importance of the assets being put to use for more than 180 days to claim full depreciation, which was supported by the revised certificate and the logical reasoning behind the slump sale transaction.

In conclusion, the tribunal dismissed the Revenue's appeal and the assessee's cross objection, upholding the CIT(A)'s decision regarding the allowance of depreciation on computers acquired under slump sale for the assessment year 2007-08.

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