Law:

Section:

section 32 read with explanation 2a to clause (6) of section 43 of the income-tax act, 1961-depreciation-written down value in case of amalgamation-on amalgamation, assets of amalgamating company were transferred to assessee-whether depreciation was to be allowed on the assets at book value or at written down value-held that it should be allowed at written down value as appearing in the books of amalgamating company Facts Belvedere Jute Mills Co. Ltd. was amalgamated with the assessee-company with effect from November 30, 1961. For the assessment year, 1967-68, the assessee claimed that depreciation should be allowed on the assets taken over by it on amalgamation calculated at the book value at which they were taken over. The ITO, however, allowed depreciation on the assets on their written down value in the books of the amalgamating company. The AAC held that Explanation 7 to clause (1) of section 43 was not applicable as the same was made applicable with effect from April 1, 1967 and that the assessee was entitled to depreciation on the written down value worked out in its books on the cost at which the assessee acquired such assets, namely, the book value shown in the books of the amalgamating company less the depreciation allowed from year to year. The Tribunal upheld the AAC's order. On reference: Held Under section 32, depreciation was to be allowed on the prescribed percentage on the written down value of plant and machinery. In view of Explanation 2A to section 43(6), it would be enough, in allowing or calculating depreciation, if the amalgamation was ignored and written down value in the books of the amalgamating company was taken. Under section 43(6) read with Explanation 2A, all depreciation actually allowed on the assets, whether in the hands of the amalgamating or the amalgamated company, should be taken into account in determining the written down value. The overall effect of section 34 should also be kept in view. Cases referred to CIT v. Isthmian Steamship Lines [1951] 20 ITR 572 (SC), Maharajah of Pithapuram v. CIT [1945] 13 ITR 221(PC) and Riverside (Bhatpara) Electric Supply Co. Ltd. v. CIT [1977] 109 ITR 399 (Cal.). JUDGMENT Dipak Kumar Sen,…

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