1982 (10) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Malaysian branches were vested and if the compensation relates only to Indian assets.
2. Whether the written down value of the asset as on July 18, 1969, should be considered as the cost of acquisition for determining capital gains.
3. Whether the written down value as on December 31, 1968, or July 18, 1969, should be taken for the computation of capital gains.
4. Whether the assessee is entitled to depreciation in respect of Malaysian assets for the assessment years 1970-71 and 1972-73.

Summary:

Issue 1: Vesting of Malaysian Branches and Compensation Relating to Indian Assets
The first question regarding whether the Malaysian branches were vested and if the compensation relates only to Indian assets was conceded by the assessee's counsel, acknowledging that the Malaysian assets had vested with the corresponding bank due to the acquisition. Therefore, this question was deemed unnecessary to answer and remained unanswered.

Issue 2: Written Down Value as Cost of Acquisition
The Tribunal held that the written down value of the asset as on July 18, 1969, should be considered as the cost of acquisition for determining capital gains. The court agreed with this view, stating that the cost of acquisition of an undertaking includes depreciation granted up to December 31, 1968, and thus, the sum of Rs. 2,66,099 should be excluded from the cost of the undertaking. The second question in T.C. No. 626 of 1977 was answered in the affirmative and against the assessee.

Issue 3: Basis for Written Down Value
The court examined whether the written down value as on December 31, 1968, or July 18, 1969, should be taken for the computation of capital gains. It was noted that the assessee did not claim depreciation up to July 18, 1969, and depreciation was allowed only up to December 31, 1968. Therefore, the view that Rs. 4,04,285 should be added to the capital gains was not legally sustainable. Consequently, question No. 1 in T.C. Nos. 857 and 858 of 1979 was answered in the affirmative and against the Revenue.

Issue 4: Depreciation on Malaysian Assets
The court addressed whether the assessee is entitled to depreciation in respect of Malaysian assets for the assessment years 1970-71 and 1972-73. The ITO had withdrawn the depreciation due to the lack of item-wise particulars. However, the AAC and Tribunal held that depreciation should be allowed on a proportionate basis, given that the assets were used for business purposes. The court agreed with this view, stating that the ITO was not justified in withdrawing the depreciation merely because item-wise particulars were not furnished. Thus, the second question in T.C. Nos. 857 and 858 of 1979 was answered in the affirmative and against the Revenue.

Conclusion:
The tax cases were ordered accordingly, with no order as to costs.