ITAT emphasizes actual sale price for depreciation, not fair market value. Appeal allowed under Section 50C.

The ITAT allowed the appeal, setting aside the disallowance of depreciation based on stamp value under Section 50C. The ITAT emphasized the correct application of depreciation rules under the Income Tax Act, stating that the written down value should be adjusted based on the actual sale price, not fair market value. The ITAT disagreed with lower authorities' interpretation, allowing the claim of depreciation of Rs. 2,07,226.

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Issues:
1. Disallowance of expenses relatable to exempt income under section 14A of the Act.
2. Disallowance of depreciation by adopting stamp value under Section 50C instead of value declared as per WDV.

Issue 1: Disallowance of expenses relatable to exempt income under section 14A of the Act:
The first issue in this case pertains to the disallowance of expenses related to exempt income under section 14A of the Act. The CIT(A) had restricted the disallowance by invoking section 14A read with Rule 8D(2) of the Income Tax Rules to the extent of exempt income only. However, during the appeal, the assessee did not press this issue, leading to its dismissal as not pressed.

Issue 2: Disallowance of depreciation by adopting stamp value under Section 50C:
The second issue revolves around the disallowance of depreciation by adopting the stamp value under Section 50C of the Act instead of the value declared as per the Written Down Value (WDV). The Assessing Officer deducted the value as per stamp authorities from the block of assets for determining the WDV, resulting in a reduced depreciation of Rs. 2,07,226. The CIT(A) upheld this disallowance, emphasizing the applicability of Section 50C and the failure of the assessee to provide sufficient evidence to prove the market value of the property was lower. However, the ITAT disagreed with the lower authorities' interpretation. They highlighted that Section 32 r.w.s 43(6) provides a self-contained scheme for computing depreciation, and there is no provision to substitute the sale price with any other value. The ITAT referred to relevant case laws to support the position that the written down value should be adjusted based on the actual sale price, not the fair market value. Consequently, the ITAT allowed the claim of depreciation of Rs. 2,07,226, setting aside the orders of the lower authorities on this issue.

In conclusion, the ITAT allowed the appeal of the assessee, emphasizing the correct application of the depreciation rules under the Income Tax Act and rejecting the disallowance based on stamp value under Section 50C.

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