TaxTMI 
TaxTMI 
1986 (1) TMI 150
X X X X Extracts X X X X
X X X X Extracts X X X X
.... did not agree that the issue is covered. He submitted that there is another decision of the Tribunal which goes against the assessee and he would like to rely on the same. He submitted that earlier, firm had not only machinery and building but had land also. It was a firm constituted of close relations and the value of the land was not revalued. He submitted that the instant case clearly falls under the mischief of Explanation 3 to section 43(1) of the Income-tax Act, 1961 ('the Act'). He also submitted that the valuation has been appreciated only by book entries and in that respect, he relied on the cases of CIT v. Dalmia Dadri Cement Ltd. [1980] 125 ITR 510 (Delhi) and CIT v. Alagappa Cotton Mills [1984] 149 ITR 640 (Mad.). 4. After taking into consideration the rival submissions and going thoroughly through the case law relied upon by both the parties, specially the two decisions of the Chandigarh Bench one in the case of Bharat Cold Storage and the other in Markanda Rice Mills [IT Appeal No. 675 (Chd.) of 1983 dated 18-9-1984] relied upon by the learned departmental representative, we are of the view that the issue is clearly covered by our earlier decision in the case of B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g into consideration the provisions of section 187 it is a case of change in the constitution of firm, as held by their Lordships of the Hon'ble Punjab and Haryana High Court in the case of Nandlal Sohanlal v. CIT [1977] 110 ITR 170 (FB). The position has also been accepted inasmuch as only one assessment has been made for both the periods for the assessment year 1974-75. Allowance for depreciation is essentially a part of the assessment. Once it is accepted to be a case of the firm before reconstitution and, therefore, the depreciation has to be adopted as in the case of the firm before reconstitution and, therefore, the depreciation has to be allowed at the WDV as in the case of the firm, taking into consideration Explanation 4 below section 43 of Income-tax Act." 5. Before we deal with the two High Courts decisions, on which reliance was placed by the learned departmental representative, it is better, we give a brief background of the facts which would also indicate as to how close is the instant case with that of the case of Bharat Cold Storage in which our decision has gone in favour of the assessee and which also supports the contention of the learned counsel for the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arned AAC confirmed the order of the ITO. He even observed that in fact no actual consideration has been passed on to the partners of the dissolved firm. Only book entries have been passed to make these adjustments. It was this action of the AAC which was contested. 6. Then we go through the earlier order of the Tribunal in the case of Bharat Cold Storage, we find that it is absolutely in support of the assessee's contentions. In that firm, there was an old partnership which was dissolved and four partners had taken over the running business. In the instant case, there was an old partnership which was dissolved and only one partner took over the running business. Absolutely similar are the clauses of the dissolution deed in the case of Bharat Cold Storage, and similar is the preamble of the dissolution deed. It seems, draftsman of the dissolution deeds in the case of Bharat Cold Storage and the instant case is one and the same. It is mentioned in the preamble that : "... Whereas the business be wound up with lock, stock and barrel consisting of factory, land, building, machinery and other assets, after division of profit and loss, as the case may be, to the satisfaction of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted at Bar that not only credit entries were passed but outgoing partners were subsequently also paid of in cash, and he was prepared to produce the accounts of such payments. It was at length that we had dealt with the Punjab and Haryana High Court decision in the case of Nandlal Sohanlal v. CIT [1977] 110 ITR 170 (FB) and in the case of Bharat Cold Storage and had observed that observations, extracted and placed in the said order, support the contentions of the assessee and not of the revenue. According to us, it was very incorrect on the part of the learned departmental representative to have said that on identical issue of depreciation, this Bench had taken a separate view in the case of Markanda Rice Mills. Unfortunately, though decision in the case of Bharat Cold Storage was not cited by the learned counsel for the assessee in that case but even then it was due to difference in facts that the assessee's appeal in the case of Markanda Rice Mills was dismissed. The difference can be appreciated by anyone who independently goes through the said orders carefully. 7. Reliance of the learned departmental representative on the case of Dalmia Dadri Cement Ltd. is also mispla....