2009 (10) TMI 917 - AT - Income Tax

Summary

Issues involved:
The correctness of CIT (A)'s order reducing fair market value u/s 32 for depreciation calculation and deleting disallowance.

Summary:

Issue 1: Correctness of CIT (A)'s order on reducing fair market value for depreciation calculation and deleting disallowance:

1. The Revenue appealed against CIT (A)'s order for the assessment year 1995-96, questioning the reduction of fair market value determined by DVO from the block for depreciation calculation and deletion of disallowance.

2. The Assessing Officer referred the matter to the Departmental Valuation Officer to ascertain the fair market value of a flat sold by the assessee. The DVO valued the property at a higher amount than the consideration received by the assessee.

3. The Assessing Officer concluded that the excess depreciation allowed was withdrawn as the full consideration was set off against the written down value remaining in the same block of assets.

4. The assessee contended that only the 'money payable' on account of the sale of the asset should be considered for reducing the written down value, not the market value. CIT (A) upheld this contention, emphasizing that the price at which the asset is sold is crucial for depreciation calculation.

5. The Revenue appealed, but the ITAT Mumbai upheld CIT (A)'s decision, stating that the Assessing Officer should not have reduced the fair market value from the block for depreciation calculation, as the sale price of the asset is the determining factor, not the market value.

6. The ITAT Mumbai found no reason to interfere with CIT (A)'s well-reasoned findings, emphasizing that the sale price, not the fair market value, should be considered for computing the block of assets. The judgment supported the assessee's stand, and no interference was warranted.

7. Consequently, the appeal of the Revenue was dismissed by the ITAT Mumbai on 29th October 2009.