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JUDGMENT L. Narasimha Reddy, J. - The Finance Act, 1998, brought about substantial changes in the Income-tax Act, particularly, in the regime of depreciations. Till then, depreciations used to be allowed on individual assets, held by an assessee, whether an individual or an industry or a business undertaking. Through the amendment, the concept of block assets was introduced. The expression "block assets" is defined under clause (11) of section 2 of the Income-tax Act, 1961, (for short "the Act") as, pool of tangible assets such as buildings, machinery, plant or furniture on the one hand and intangible assets such as patents, copyrights, trade marks, licences, franchises, etc., on the other hand. One condition for grouping such items together, is that the rate of depreciation must be same for the items to be included in each block. Section 43(6) of the Act provided for working out of written down value (WDV) as a step in the process of determining the allowable depreciation. The procedure to workout the written down value in respect of block assets is prescribed under clause (c) therein. 2. The applicant submitted its returns for the assessment year 1988-89. It was mentioned that certain items, which formed part of a block assets, valued at Rs. 68,06,562 were destroyed in a fire accident. It was also stated that the applicant has taken out reinstatement value insurance policies and accepting the claim submitted thereunder, the insurer paid a sum of Rs. 1,54,99,051. They, however, deducted only a sum of Rs. 68,06,562 in the process of working out the written down value, and, accordingly, claimed deprecation, in accordance with the relevant provisions. The assessing authority, however, passed an order, dated March 20, 1991, stating that irrespective of the written down value of the destroyed items, the amount that is received on the basis of the insurance claim must be taken into account and deducted. Not satisfied with that order, the applicant filed an appeal before the appellate authority. Through its order, dated November 23, 1993, the appellate authority accepted the contention of the applicant and restricted the deduction from the written down value only to…

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