Depreciation on transferred assets requires verified itemwise identification before allowance, so the matter was remitted for fresh examination.

Depreciation on fixed assets transferred under a 2003 transfer scheme could not be finally allowed where the assets were not itemwise identified and the opening balances of assets and liabilities had not been verified. The HC noted that an auditor later prepared itemwise accounting and the assessee ed that the assets became identifiable only later. Because the depreciation claim depended on verification of the auditor's report and updated asset records, the matter was remitted to the assessing authority for fresh examination and reconsideration on merits.

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Issues: Whether depreciation under the Income-tax Act could be finally allowed on fixed assets transferred under the 2003 transfer scheme when the assets were not yet itemwise identified and the opening balance of assets and liabilities had not been verified.

Analysis: The dispute turned on the entitlement to depreciation on assets transferred to the assessee under the transfer scheme, where the scheme did not contain itemwise break-up of the assets and liabilities. The record showed that an auditor had later prepared itemwise accounting of the assets and liabilities, and the assessee accepted that the assets became identifiable only later. In these circumstances, the material issue was whether the claim of depreciation could be decided without examining the auditor's report and the updated asset records.

Conclusion: The claim of depreciation was not finally determined on merits and the matter was remitted to the assessing authority for fresh verification and reconsideration in the light of the auditor's report and the records.

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