2017 (8) TMI 612 - HC - Income Tax

Addition on account of depreciation - increased value of assets being unabsorbed depreciation of the amalgamating company JG Glass Ltd. which had amalgamated into the assessee - Held that - It is self evident from the reading of Section 32 and Section 43(6)(c)(ii) that the depreciation would be allowed on the written down value of the block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed on the the block of assets in the preceding previous year as further adjusted in terms of Section 43(6)(c)(i) of the Act. In the above view, for the subject assessment year the written down value of the block of assets which includes the assets belonging to the amalgamating company on which depreciation was first taken in the assessment year 1989-90 cannot be disturbed for the subject year unless the written down value of the earlier assessment years is modified. This modification of the written down value would go back to the assessment year 1989-90 when the amalgamation took place and the unabsorbed depreciation was added to the assets of the amalgamating company to determine the written down value of the block of assets. So far as the written down value of the block of assets for assessment year 1989-90 is concerned the inclusion of unabsorbed depreciation into the assets of amalgamating company is now final in favour of respondentassessee by virtue of our dated 10.07.2017 in ITR No.39/1998. Therefore, for all the subsequent years after assessment year 1989-90 depreciation is actually allowed in respect of the written down value of block of assets in accord with Section 32 read with Section 43(6) of the Act. No substantial question of law as the position is self evident on reading of the definition of written down value under Section 43(6) of the Act for the purposes of depreciation to be allowed on block of assets as provided under Section 32 of the Act.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in upholding the deletion of the addition of interest on a loan given to a company?
2. Whether the Income Tax Appellate Tribunal was justified in upholding the deletion of the addition of withholding tax for technical services rendered to a foreign company?
3. Whether the Income Tax Appellate Tribunal was justified in upholding the deletion of the addition of payment made to various Institutions/Schools?
4. Whether the Income Tax Appellate Tribunal was justified in upholding the deletion of the addition of depreciation in assets of an amalgamating company?

Analysis:
1. The issue of interest on a loan given to a company was concluded in favor of the assessee in a previous order. The substantial question of law was answered in favor of the respondent-assessee and against the appellant-revenue based on the previous order.
2. Similarly, the issue of withholding tax for technical services rendered to a foreign company was also concluded in favor of the assessee based on a previous order, and the substantial question of law was answered in favor of the respondent-assessee and against the appellant-revenue.
3. The issue of payment made to various Institutions/Schools was also concluded in favor of the assessee based on a previous order, and the substantial question of law was answered in favor of the respondent-assessee and against the appellant-revenue.
4. Regarding the depreciation in assets of an amalgamating company, the Tribunal upheld the order of the CIT (Appeals) allowing the depreciation on the increased value of assets. The Tribunal's decision was based on a previous order related to the same respondent-assessee. The Court's analysis of Sections 32 and 43(6) of the Income Tax Act confirmed that the depreciation should be allowed on the written down value of the block of assets, including the assets of the amalgamating company. The Court's previous order in a related case further supported the inclusion of unabsorbed depreciation in the assets of the amalgamating company. Therefore, the question related to depreciation did not give rise to any substantial question of law, and the appeal was dismissed in favor of the respondent-assessee.

Conclusion:
The High Court upheld the decisions of the Income Tax Appellate Tribunal in favor of the respondent-assessee on all issues raised in the appeal under Section 260A of the Income Tax Act, 1961. The Court's detailed analysis of each issue and relevant legal provisions led to the dismissal of the appeal with no order as to costs.