Law:

Section:

Section 43(1), read with sections 43(6) and 32, of the Income-tax Act, 1961 - Actual cost - Assessment years 1976-77 to 1982-83 - Whether where a capital asset is transferred by a holding company (transferor) to its subsidiary company (transferee), actual cost of such asset to transferee, for purpose of depreciation, will be written down value of same for holding company - Held, yes - Whether actual cost once determined under section 43(1), read with Explanation 6 will remain same for that assessee - Held, yes FACTS The assessee-company, having purchased factory and non-factory buildings from its holding company during the assessment year 1975-76, claimed depreciation thereon. The Assessing Officer, the Commissioner (Appeals) and the Tribunal, however, relying on the provisions of Explanation 6 to section 43(1) and Explanation 2 to section 43(6), allowed the same on the basis of Written Down Value (WDV) shown by its holding company, which was lower than the purchase consideration paid by the assessee. On reference: HELD What would be the actual cost to the transferee-company on the date of transfer is indicated in Explanation 6to section 43(1). Thus, actual cost to the transferee-company will be the WDV for the holding company (transferor-company). [Para 10] Thus, in view of Explanation 6, the written down value of the holding company was required to be taken into consideration. [Para 12] In view of Explanation 6, the Assessing Officer as well as the Tribunal had rightly rejected the contention of the assessee and had rightly held that the actual cost once determined under section 43(1), read with Explanation 6 would remain the same for that assessee. [Para 15] CASES REFERRED TO Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC) [Para 11], Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294/60 Taxman 412 (SC) [Para 11], Ciba of India Ltd. v. CIT [1993] 202 ITR 1 (Bom.)/ 70 Taxman 505 [Para 11] and CIT v. Hides & Leather Products (P.) Ltd. [1975] 101 ITR 61 (Guj.) [Para 11]. R.P. Bhatt and Ms. Seema Sharma for the Petitioner. P.L. Bansal and R.D. Jolly for the Respondent. JUDGMENT B.C. Patel, CJ. - These group of references which are at the…

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