Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessee was a company engaged in business of manufacture of soft drinks - It acquired manufacturing assets and other fixed assets from various companies - While dealing with assessee's claim for depreciation, Assessing Officer opined that assessee had suppressed value of land whereas price of plant and machinery had been inflated to claim excess depreciation - He thus increased value of land by 50 per cent., reduced value of bottles and crates by 50 per cent and reduced cost of acquisition of plant and machinery by 25 per cent - Accordingly, Assessing Officer restricted assessee's claim of depreciation - Tribunal, however, allowed assessee's claim holding that acquisition of specified assets was duly supported by relevant agreements as well as report of registered valuer - Whether since consideration was paid as stipulated in agreements entered into between parties, Tribunal was justified in allowing assessee's claim - Held, yes [In favour of assessee] FACTS The assessee was a company engaged in the business of manufacture of soft drinks. It acquired manufacturing assets and other assets, land and building at various locations and started its business. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed to have purchased only fixed assets although the assessee had purchased five companies as running business. He further noticed that the assessee had purchased the running plant of the abovementioned franchisees and the purchase was made to eliminate these companies from the market for future competition to establish the monopoly of the assessee. The Assessing Officer thus opined that the land value had been suppressed by the assessee and the price of plant and machinery was inflated to claim excess depreciation and that the agreement between the assessee and the franchinsees for sale and purchase of the assets was a collusive agreement. The Assessing Officer increased the value of land by 50 per cent on estimated basis, reduced the value of bottles and crates by 50 per cent and reduced the cost of acquisition of plant and machinery by…

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