Double Depreciation Allowed for Successive Firms: Assets Taken Over, Not Sold.

The Tribunal held that full depreciation should be allowed for each period as the two firms were treated as distinct entities with separate assessments. Citing legal provisions and the decision in Malabar Fisheries Co., the Tribunal emphasized that assets were not sold but taken over by the succeeding firm, justifying the allowance of full depreciation for both periods. The Department's appeal was dismissed, affirming the decision to allow depreciation twice on the same set of machinery used by the assessee firm before and after the death of one of the partners in the same assessment year.

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Issues:
1. Whether depreciation can be allowed twice on the same set of machinery used by an assessee firm before and after the death of one of the partners in the same assessment year.

Detailed Analysis:
The case involved an appeal for the assessment year 1982-83 where the only ground raised was regarding the allowance of depreciation twice on the same set of machinery used by the assessee firm before and after the death of one of the partners. The situation arose due to the succession of one firm by another after the death of a partner. The Income Tax Officer (ITO) allowed depreciation proportionately for both periods, which led to an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)] by the assessee firm (para 2).

The CIT(A) upheld the assessee's contention that full depreciation should be allowed for each period as the two firms were treated as distinct entities by the ITO, resulting in separate assessments for the two periods. The Tribunal was approached by the Department, arguing that depreciation should not be allowed twice on the same assets during the same assessment year. The authorized representative for the assessee relied on legal precedents, including the decision in Malabar Fisheries Co. v. CIT, to support the allowance of full depreciation for both periods (para 3-4).

The Tribunal noted that two separate assessments were made for the two periods, treating it as a case of succession of one firm by another, in accordance with the Income-tax Act. The Tribunal emphasized that once the ITO treated the two firms as separate entities and framed separate assessments, full depreciation should be allowed for each firm. Legal provisions were cited to support the decision, highlighting that the assets were not sold but taken over by the succeeding firm, justifying the allowance of full depreciation. The Tribunal referred to the Supreme Court's decision in Malabar Fisheries Co., which supported the view that assets of the dissolved firm were not sold to the succeeding firm, hence justifying the allowance of full depreciation for both periods. Consequently, the Departmental appeal was dismissed (para 5-6).

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