TaxTMI 
TaxTMI 
2020 (3) TMI 576
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....provision of section 154 expired on 31-03-2017 it was decided by the assessee company to file appeals for the concerned assessment years. 3. On consideration of the reasonable cause of delay, we condone the said delay. 4. Since the issues are common and connected, the appeals were heard together. These are being consolidated and hence disposed of together by this common order. 5. We note that for assessment years 1999-2000 to 2009-10 (except assessment year 2007-08) are appeals which were already adjudicated by the Tribunal vide order dated 11-12-2015 and the matter was remanded. The Tribunal had noted that the core issue raised in all these appeals related to the allowability of depreciation on the actual cost of the assets arrived at by virtue of revaluation of the trade mark. The Tribunal had referred to the facts of 1999-2000 which was the first year. The Tribunal had also noted that these matters had also travelled to the ITAT earlier also 6. In this regard it may be gainful to refer to the said order of the ITAT dated 11-12- 2015 which dealt with the issue as under : "3. Firstly, we shall take up the issues raised in appeal ITA No.7230/M/2012 the AY 1999-2000. Briefly ....
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....d above, it is evident that the assessee questioned the applicability of Explanation-3 to section 43(1) of the Act. It is the claim of the assessee that the Assessing Officer has not obtained the approval of the JCIT, which is the statutory requirement specified in the said Explanation-3 the consequence of the same is that the assessee's claim of depreciation should be allowed without any substitution on the cost. In the set aside proceedings, CIT (A) considered the above additional grounds raised by the assessee and called for the relevant records for ascertaining the fact of obtaining the approval of the JCIT. It appears that relevant records are not available for his perusal. Consequently, CIT (A) decided the issue by inference and the relevant lines from para 1.7 of his order are extracted as follows:- "1.7. ......... ......... In the instant case, the AO has clearly mentioned in the last sentence of the first para on page 8 that the main purpose of such valuation was for reduction of liability to tax. However, in the absence of complete records it cannot be said that the AO had obtained prior approval of the JCIT. Hence, the disallowance of claim of depreciation under this s....
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....hmedabad in the case of Unimed Technologies Ltd vs. DCIT [2000] 73 ITD 150 (Ahd.) and the judgment of the Hon'ble Gujarat High Court in the case of Ashwin Vanaspati Industries vs. CIT [2002] 255 ITR 26 (Guj). These decisions suggest for accepting the valuation report furnished by the assessee and depreciation should be granted on the enhanced cost of the asset. 9. Further, Ld Counsel for the assessee brought our attention to the fact that the CIT (A) erroneously invoked the 5th proviso to section 32(1) of the Act, when such proviso came into statute only from the AY 2000-01. The amended provision do not apply to the trademark valued vide the valuation report dated 17.11.1998. 10. On hearing Ld Representatives of both the parties on the issues raised before us for the AY 1999-2000, we find the CIT (A) in the second round has left so many gaps with regard to the fact of AO's failure to obtain prior approval of the JCIT and the consequences of not obtaining such approval on the claim of the assessee. The CIT (A) did not consider the fact whether the provisions of Explanation-3 to section 43(1) of the Act actually apply to the facts of the present case; whether AO merely ignored th....
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....o the quantification of allowable depreciation u/s 32 of the 6 Act. The same is dependent on the WDV of the asset, therefore, Block of Asset. If the value of the asset varies in the year of acquisition and in amount, the consequence shall be there in all the subsequent years. It is an admitted fact that the issue raised in the allowability of depreciation is always with reference to the WDV of the trademark at the end of each of the AY. Accordingly, considering the commonality of the issues involved in all the 9 appeals with that of the one adjudicated by us in the above paragraphs of this order (appeal for the AY 1999- 2000), our decision given therein squarely applies to the present 9 appeals too. Accordingly, all the grounds as well as the additional grounds raised in all the 9 appeals are allowed for statistical purposes. 13. In the result, 9 appeals of the assessee are allowed for statistical purposes. 14. Conclusively, all the 10 appeals of the assessee are allowed for statistical purposes. " 7. In the set aside assessment the learned CIT(Appeals) referred to the remand report obtained. The learned CIT(Appeals) noted that the appeal is to be strictly decided within the b....
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.... the reasons for not accepting the valuation done by the appellant company in the order of A.Y.2001-02. vi The 5th Proviso to section 32(1)(ii) is clearly applicable in the instant case. This provision includes clause (xiii) of section 47 i.e. conversion of a Partnership firm into a company, which is the issue in instant appeal. vii. The 5th Proviso to section 32(1)(ii) has to two limbs. Firstly, it explicitly makes clear that depreciation in the hands of transferee and transferor should be computed as if there is no succession. The second limb is with respect to apportionment of claim of depreciation depending on the number of days, the transferred assets have been utilized by the transferor/transferee entity. viii. From the background and expert committee report, before amendment of section 43(xiii), it is clear that tax incentive given for corporatization was limited to exemption from the capital gain u/s.45 of the Act. Allowance of depreciation on revalued assets will tantamount to tax abuse. ix. The appellant's case is squarely covered by the decision of Hon'ble ITAT, Bangalore, in case of United Breveries (Supra). In this case, the disallowance was made under ....
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.... appeals before us. The submissions of the learned counsel of the assessee in this regard are as under : Proposition and case laws : 1) Circular No. 762 dated 18th February, 1998 (1998) 230 ITR (St) 26 explaining the amendment specifies in paragraph 23.2 as under (Refer page 109 of Paper Book): "23.2 The third proviso to sub-section (I) of section 32 provides that the depreciation allowance will be restricted to fifty per cent, of the amount calculated at the prescribed rates in cases where assets acquired by an assessee during the previous year are put to use for the purpose of business or profession for a period of less than one hundred and eighty days in that previous year. Thus, in the cases of succession in business and amalgamation of companies, the predecessor in business and the successor or amalgamating company and amalgamated company, as tht case may be, are entitled to depreciation allowance on the same assets which in the aggregate may exceed the depreciation allowance admissible for a previous year at the rates prescribed in Appendix I of the Income tax Rules, 1962. An amendment has, therefore, been made to restrict th aggregate deduction for this allowance in a y....
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....32(1) provided for determination of actual cost then there was no need of Explanation 7,7A, 2B and 12 to section 43(1). 6) Hence, if the A.O. disputes the actual cost being the revalued amount of the Asset then the only option available with the A.O. is to dispute the value by invoking Explanation 3 to Section 43(1). 7)) Thus, as per 5th Proviso AO can allow depreciation on actual cost (ie revalued amount) to the successor company ie Assessee but only for the no of days for which it is held by the Assessee. As far as the predecessor firm is concerned it will get B) Without prejudice to above, 5th Proviso to Section 32(1) is not applicable in the facts of the present case. 1) 5th Proviso states "Provided also that the aggregate deduction in respect of depreciation............................ allowable to the predecessor and the successor in the case of succession refereed to in clause (xiii)...... ................................." 2) Thus, for 5th Proviso to be applicable both the predecessor and the successor company should be capable/eligible for claiming depreciation. In the facts of the present case, predecessor company could not have claimed depreciation on the reval....
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....has been held that depreciation is allowable on revalued figures : a) CIT v. Mira Exim Ltd. (2013) 359 ITR 70 (Del) - there is transfer on amalgamation. Hence, assesse entitled to depreciation on asset acquired under amalgamation, though depreciation was not allowable to amalgamating company. b) CIT v. Manipal Universal Learning Pvt. Ltd. (2013) 359 ITR 369 (Karn) - assesse entitled to depreciation on revalued amount. c) In De Nora India Ltd. vs. CIT (2015) 370 ITR 391 (Delhi)(HC) Acquisition of entire business including assets and liabilities for a lump sum amount. Depreciation is allowable on the basis of valuation. 3) Decision relied upon by the CIT(A) in United Breweries Ltd v ACIT (2016) 76 taxmann.com 103 (Bang)(Trib) is not applicable for the following reasons : (i) The decision dealt with the issue of Amalgamation. In case of amalgamation Explanation 7 to Section 43(1) defines Actual cost. Whereas present case deals with succession of firm by company for which no separate Explanation is provided u/s 43(l). (ii) It is contrary to the following decisions of Mumbai, Pune and Ahmedabad tribunal Which have been passed after considering decision of Gujarat High co....
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....d that depreciation had to be valued on the value in the hands of the predecessor. As the facts of this case are totally different, the said case does not apply to the present case. f) The facts of Kamlapat Moti Lal (1939) 7 ITR 374 (All) was also in context of income of predecessor i.e. similar to that of Mazagaon (supra). Hence, the said case is not applicable to the facts of the present case. g) In CIT Vs. Alagappa Cotton Mills (1984) 149 ITR 640 (Mad) there was a change in constitution of the firm. It was in this context, the hon'ble High Court held that assesse is not entitled to claim depreciation on revalued figure. As there is not change in constitution but a sucession of a firm by a company, the said decision is not applicable to the facts of the case. (iv) Decision in the case of Mascot (India) Tools & Forgings (P.) Ltd. v. ITO (1987) 23 ITD 274 (Del) is in the context of Explanation 3 to section 43(1). The hon'ble CIT(A) having held that the disallowance of depreciation as per Explanation 3 o section 43(1) was not justified, erred in relying on said decision. In view of the above, appellant prays that AO may be directed to allow depreciation claimed. ....
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....s) has given a finding that the Revenue has not been able to produce the copy of approval from Joint CIT for invocation of Explanation 3 to section 43(1) of the Act. 14. In our considered opinion, once there is a categorical finding in this regard, the invocation of Explanation 3 to section 43(1) fails. Accordingly we hold that that the disallowance of depreciation by invocation of Explanation 3 to section 43(1) in this regard fails on account of lack of jurisdiction. 15. The other issue which remains for adjudication is the applicability of 5th proviso to section 32(1). In this regard we may gainfully refer to the said proviso : " Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in [clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the de....
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....uccession had not taken place. If the succession had not taken place, there would not have been any depreciation allowance on the revaluation figure. In other words, the revaluation of Rs. 5.52 crores (less Rs. 100/-) cannot be taken into account for granting depreciation to the successor i.e. the assessee company. 17. In this view of the matter, as per the plain reading of the Law, the 5th Proviso to section 32(1) debars the assessee company to claim depreciation on the amount which was represented by revaluation in the books of the predecessor. The various arguments given by the learned counsel of the assessee are not at all sustainable on the plain meaning of the provision of the statute. It is settled Law that when the language of the Act is simple and clear, the same should be applied. As evident from the above, Act clearly provides that the total depreciation shall be limited to the depreciation that would have occurred to the predecessor as if the transfer has not taken place. Even at the cost of repetition , we may state that the predecessor i.e. the firm was not entitled to depreciation on the revaluation figure. In view of the specific 5th proviso to section 32, the succ....
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....e the proviso mentions that the predecessor has always to be a company. It specifically covers transfer under section 47(xiii). This section deals with succession of a firm by a company. When learned counsel of the assessee is himself admitting that the predecessor could not have claimed on the revalued amount, there is no question of the assessee company getting depreciation on the revalued amount. 18. In this view of the matter, in our considered opinion, the submissions of the learned counsel of the assessee are not at all sustainable. 19. The reliance by the learned counsel of the assessee on Ashwin Vanaspati Industries (supra) is not at all applicable as the said case was not with respect to 5th proviso to section 32(1). 20. As regards the case laws wherein revaluation by professionals have been found to be in order are in the context of invocation of section 43(6), hence they are inapplicable in the facts of the present case. The case laws in the case of ITAT, Bengalore Bench in the case of United Breveries vs. ACIT 77 taxmann.com. 103 supports the proposition as in that case it is found that by virtue of 5th proviso to section 32(1), the assessee being amalgamated company....