TaxTMI 
TaxTMI 
2012 (12) TMI 183
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....a/c in this year when the assessee claimed depreciation on the original cost of assets for the first time in A.Y. 2003-04 and also ignoring the underlying principle of accountancy that the wear and tear of the assets utilized by an assessee for earning profit has to be considered i.e. notional depreciation as laid down in CIT Vs. Bombay State Transport Corp. 118 ITR 399, 405 (Bom) and also not following the ration laid down in GR Govindrajulu Naidu Vs CIT 90 ITR 13 (Mad) wherein depreciation is capital loss whether claimed or not and which is contrary to the spirit of provision of Section 32. 2.1. National Dairy Development Board (hereinafter referred to as "NDDB") has several locations and its head office is at Anand (Gujarat) and regional offices are in Delhi, Mumbai, Calcutta, etc. The objective is to support dairy co-operatives. Its main role is to promote, finance and to provide technical support to dairy co-operatives. In the past, the NDDB was not a taxable entity in view of a special provision of section 44 of National Dairy Development Board Act, 1987. However, vide section 162 of Finance Act of 2002 and section 44 of NDDB Act, the said special provision was omitted w.e.....
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....to arrive at the WDV for a particular year. Ld.DR has further elaborated his argument that as per the definition of "actual cost" as prescribed u/s.43(1) of IT Act read along with Explanation the cost should be on the date of acquisition. In the present case, since the date of acquisition was not the assessment year under consideration, but it was acquired much earlier, therefore the actual cost should not be the WDV. He has explained that since the date of acquisition of the assets was much earlier hence the carried over amount was nothing but the WDV and that ought not to be the " cost" and since it was in the nature of WDV so it had to be as per the norms of Depreciation prescribed in the Statute. He has also referred Explanation- 3 to section 43(1) that the purpose of the claim of higher depreciation was to reduce the tax liability, hence the AO has rightly recomputed the depreciation. Ld.DR has also referred Explanation 5 to section 43(1) of the IT Act for the legal proposition that the "actual cost" to the assessee should be the "actual cost" as reduced by an amount of depreciation calculated at the rate in force on that date that would have been allowable had the asset been ....
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....on the written down value of the asset. Section 43(6) defines the written down value to mean in the case of assets acquired in the previous year like building, plant and machinery, furniture and fixtures etc., the actual cost of the assessee and in other case the actual cost to the assessee less all depreciation actually allowed to him under the Act. The short controversy is, as to whether, the "written down value" (WDV) of the asset is to be taken at their original cost or as reduced by the notional depreciation accounted for in the books of assessee and deemed to have been allowed in the earlier years when the assessee was not chargeable to tax. The term "actually allowed" came up for consideration before the Supreme Court in the cases of Straw Products Ltd. [1966] 60 ITR 156, Dharampur Leather Co.Ltd. [1966] 60 ITR 165, Mahendra Mills [2000] 243 ITR 56, Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 wherein it has been held that the term "actually allowed" means allowed actually under the Act and not notionally. Accepting the theory propounded by the Assessing Officer, as upheld by the Commissioner of Income-tax (Appeals) and thereby reducing notional depreciation for ....
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....a view in favour of assessee by duly analyzing the provisions of the Act, as discussed hereinabove, we hereby hold that in terms of provisions of section 43(6) of IT Act, WDV means the "actual cost" to the assessee less depreciation actually allowed. Since in the past when no depreciation was actually allowed, therefore the assessee has rightly claimed the depreciation as per its records. We hold accordingly and dismiss this ground of the Revenue for both the years. 8. Ground No.2 for A.Y. 2004-05 and Ground No.1 for A.Y. 2005- 06 of the Revenue are reproduced below:- Ground No. 2 (for A.Y. 2004-05) reads as under: 2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in deleting the addition of interest income of Rs.32,11,90,382/- following the ITAT's decision for A.Y. 2003-04 and ignoring the fact that the assessee was following cash system of accounting for interest income when it was not a taxable entity and switched over to mercantile system of accounting with retrospective effect when it became taxable, so that such interest income escaped from the tax net. Ground No. 1 (for A.Y. 2005-06) reads as under: 1. On the facts and in th....
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....f accounting. The income that had accrued in the earlier year when the assessee was a non-taxable entity could not be assessed in the year under consideration merely because it had been received in that year. In the circumstances, the addition made by the Assessing Officer was to be deleted." 10. It is worth to note that the Revenue Department had gone in appeal before the Hon'ble Gujarat High Court and vide Tax Appeal No.672 of 2008 order dated 22/12/2008( supra) the said ground was dismissed vide following observation:- "5. As can be seen from the facts which are not in dispute, the respondent-assessee was not liable to be taxed upto 31.3.2002 and became taxable only for the income earned during the period 1.4.2002 to 31.3.2003. In context of this position, the Tribunal has found as a matter of fact that the change in the method of accounting is bona fide, the change has been undertaken in consonance with the accounting standards prescribed by the Institute of Chartered Accountants on the advice of the Tax Consultant of the assessee. The said fact that the change in method of accounting is in line with the prescribed accounting standard has also been accepted by the Assessing ....
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....LP has also been dismissed by the Hon'ble Apex Court. Even in A.Y. 2006-07 ITAT "B" Bench in assessee's own case vide an order dated 25/05/2011 has dismissed that very ground of the Revenue. Respectfully following the view taken by the Hon'ble Courts we find no force in the grounds of the Revenue for both the years and dismiss the same. [B] Assessee's Appeals: 11. ITA No.4452/Ahd/2007 & 2810/Ahd/2008 for A.Ys. 2004-05 and 2005-06 respectively. In ITA No.4452/Ahd/2007, Assessee raised the following grounds: 1. The order passed by the Commissioner of Income Tax (Appeals) is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 2. The learned Commissioner of Income-tax (Appeals) has erred in confirming addition interest income earned on a project fund amounting to Rs.1,22,05,405/- as income of the appellant. It is submitted that in the facts and circumstances of the case, the appellant is acting as a nodal agency and income is diverted at source and not belonging to the appellant. It be so held now. 2.1. The learned Commissioner of Income-tax (Appeals) failed to appreciate that exp....
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....B" Bench Ahmedabad bearing ITA No.454/Ahd/2006 order dated 21/04/2011 and the matter was restored to the file of the AO. Likewise, for A.Y. 2006-07 ITAT "B" Bench in ITA No.3328/Ahd/2009 vide an order dated 07/06/2011 has followed A.Y. 2003-04 and restored the matter to the file of the AO. It is worth to mention that a decision of ITAT Delhi "E" Bench pronounced in the case of Oil Industry Development Board reported in (2009) 31 SOT 226 (Delhi) has been followed for the proposition that expenditure incurred by way of disbursement of grant for the objection purposes would be allowable as deduction u/s.36 (1)(xii) of the Act. The non-refundable grants sanctioned needs verification at the end of the AO as directed by the Respected Bench following the past history. Following the past history a consistent view taken for this year as well and grounds are restored for de novo consideration, therefore deemed to be allowed but for statistical purposes. 15. Ground No.4 1. The learned Commissioner of Income-tax (Appeals) has erred in confirming disallowance of Rs.2,39,924/- being contribution made to Employees' Recreation Trust by invoking provisions of section 40A(9) of the I.T. Act. It is....