2003 (10) TMI 264

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....hinery as on the first day of the accounting year was Rs. 3,99,181. The assessee sold the entire machinery for a sum of Rs. 5 lakhs on 7th July, 1995. Thereafter, the assessee purchased machinery for Rs. 10,06,934 in November, 1995. Thus, the total cost of the machinery and WDV aggregated to Rs. 14,06,115 (Rs. 3,99,181 + Rs. 10,06,934). After adjusting the sale proceeds of Rs. 5 lakhs, the assessee had claimed depreciation on machinery worth Rs. 9,06,115. However, the AO observed that the assessee had sold the entire machinery in July, 1995 for a sum of Rs. 5 lakhs and the WDV of the said machinery was Rs. 3,99,181. According to the AO, the assessee was liable to an addition of Rs. 1,00,819 (i.e. Rs. 5 lakhs - Rs. 3,99,181), being excess of....

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.... acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.' A bare reading of sub-s. (2) would show that these provisions are applicable in a case where any block of assets ceases to exist for the reason that all the assets in that block are transferred during the previous year. It has further been provided that the cost of acquisition of the block of assets would be determined by taking into account the written down value of the assets at the beginning of the previous year as increased by the cost of any asset acquired by the assessee during the previous year. The income re....

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....d counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A) and reiterated the submissions which were made before him. 5. We have heard both the parties and carefully considered the rival submissions with reference to the facts, evidence and material on record. The case of the Revenue is that sale proceeds of Rs. 5 lakhs should have been considered against the WDV of Rs. 3,99,181 for the reason that the assessee had acquired the machinery at a later date i.e., in the month of November, 1995. But this position is contrary to the provisions of sub-s. (2) of s. 50 of the Act. Sub-s. (2) of s. 50 has been reproduced by the CIT(A) in the impugned order and the same has been extracted above. A bare reading of the s....