TaxTMI 
TaxTMI 
2019 (2) TMI 711
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....04.08.2004 and commissioned it on 05.12.2005. As per the ld. DR, M/s.Tricom Vision had claimed deprecation on this LED panel from assessment year 2001-2002 and the written down value of the LED in their books was Rs. 8,41,579/- only. Further, as per the ld. DR, cost for this LED panel, when originally acquired by M/s. Tricom Vision, was Rs. 1,80,00,000/- only. Contention of the ld. DR was that against a written down value of Rs. 8,41,579/-, assessee had paid a sum of Rs. 3,00,00,000/- to M/s. Tricon Vision and claimed deprecation thereon. As per the ld. DR, if deprecation was to be allowed on a cost of Rs. 3,00,00,000/-, aggregate depreciation on the LED panel would exceed its original cost of Rs. 1,80,00,000/-. This according to the ld. DR was against first proviso to Rule 5(1A) of Income Tax Rules, 1962 (in short ''the Rules''). Submission of the ld. DR was that Managing Partner of M/s. Tricom Vision, from whom assessee purchased LED panel was also the Managing Director of the assessee company. Thus, according to him, huge price of Rs. 3,00,00,000/- paid was only with an intention of claiming undue benefit by way of deprecation. 3. Alluding to the question of deprecation rate ....
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....thout giving any reason. 6. Adverting to the rate of depreciation, ld. Authorized Representative submitted that the LED panel acquired by the assessee was an electronic display system with large of number of display screens and data processing abilities, for displaying pictures in a synchronized manner over various display screens after processing the inputs. According to him, its architecture and design was the same as of a computer and hence it was eligible for claiming depreciation at the rate of 60%. 7. We have considered the rival contentions and perused the orders of the authorities below. First we will deal with the issue regarding cost on which on deprecation is to be calculated. It is not disputed that assessee had acquired the LED panel from M/s. Tricom Vision for a total cost of Rs. 3,12,60,000/- including the VAT. It is also not disputed that Managing partner of the said firm and Managing Director of the assessee was the very same person. Ld. AO had taken the written down value of Rs. 8,41,579/- in the books of M/s. Tricom Vision as the cost for the assessee, on which depreciation was allowed. Claim of the assessee before us is that it had filed a valuation report....
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....ereunder:- ''From the method deployed as explained above, it is clear that the assessee had resorted to the provisions of Section 41(2). On being asked to clarify, the AA of the assessee filed in his reply dated 28.11.2007. a note on the sale of LED - Board. In that reply, the assessee admitted -that it had sold one of its LED Display Equipment board to M/s. Kumudam Publications Private ltd for a consideration of Rs. 300 lakhs. The WDVof the concerned block of assets as on the date of sale is Rs. 8,41,579. The original cost of the LED Display Equipments is Rs. 188.0 Lakhs. The differential value of Rs. 1,79,58,421 has bun considered as balancing charge U/S 41(2) of the IT Act, 196L" and that the difference between the sale consideration and the actual cost amounting to Rs. 112.0 L.akhs (300-188 lakhs) has been admitted as short term capital gains as per section 50 at IT Act ... However, though the assessee had quoted the provisions of section 41(2) verbatim in his above mentioned reply, it is seen here that he has failed to understand the nuances of the above mentioned subsection. For the purpose of clear understanding, the provisions of Section4....
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.... satisfy all the three conditions imposed in that sub section. Apart from being owned by the assessee and used for the PU-po5e of business, the depreciation for the asset must have been claimed under clause (i) of Sub section 1 of Section 32. Going back to such clause and reading it would clearly mention that the assets must not only be of an undertaking engaged in generation a generation and distribution of power but also undergo depreciation under the straight line method. The words ' ... such percentage on the actual cost thereof,' clearly mentions this. In the above case, the assessee engaged in advertising business, cannot, under any figment of imagination, be termed as an undertaking engaged in the generation of power. Hence, for not fulfilling one of the three basic conditions of section 41(2), the assessee would not be entitled to the benefits of the sub section, Even assuming for a minute that the assessee is engaged in the business of generating power and is eligible to get the benefits of Balancing Charge, the assessee would not be entitled to claim so for the reason given below : According to Rule 5(1A) and Appendix 1A, a power generat....