Law:

Section:

Section 43(1), read with section 32(2), of the Income-tax Act, 1961 - Actual cost - Assessment years 1975-76 to 1979-80 - A company 'L' amalgamated with assessee-company, during previous year relevant to assessment year 1975-76 - Certain depreciation allowance had remained unabsorbed in case of company 'L' as at end of previous year relevant to assessment year 1974-75 - Whether for purposes of allowing depreciation to assessee- company for assessment year 1975-76, written down value of assets would be actual cost of assets to 'L' less depreciation actually allowed to 'L' and unabsorbed depreciation which could not be set off or carried forward, as 'L' ceased to exist, was not to be taken into account - Held, yes FACTS A company' L' was amalgamated with the assessee-company during the previous year relevant for the assessment year 1975-76. The depreciation allowance to the extent of Rs. 21,42,815 had remained unabsorbed in the case of that company as at the end of the previous year relevant for the assessment year 1974-75. For the assessment year 1975-76 the assessee-company claimed depreciation, inter alia, on the assets it took over from 'L'. The depreciation was claimed on the written down value of the assets. In view of Explanation 2A written down value was claimed to be on the basis of actual cost of those assets to L, less depreciation actually allowed to it, the expression 'actually allowed' meaning the depreciation factually allowed and not merely computed and not given effect to in the assessments. Thus, while computing written down value the assessee did not reduce the actual cost further by the aforesaid amount of Rs. 21,42,815 which represented unabsorbed depreciation not given effect to. The ITO, however, held that 'written down value' was required to be determined under section 43(6)(b) read with Explanation 2A and Explanation 3, and accordingly, he determined the written down value by reducing from the actual cost not only depreciation actually allowed but also depreciation carried forward and allowed depreciation on that basis. On appeal, the Commissioner (Appeals) accepted the assessee's claim. The Tribunal, however, held that the written down…

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