2021 (5) TMI 3 - AT - Income Tax

Depreciation by adopting the stamp value as per the provision of Section 50C of the Act instead of value declared as per WDV - HELD THAT - AO and CIT(A) has taken the value as per the provision of Section 50C of the Act and disallowed the differential depreciation claimed - In our view, while computing the amount of depreciation allowable for a year, what is to be reduced from the opening WDV is the price for which an asset, comprising with a particular block of assets, is sold during the year. There is no provision to substitute this money payable by any other value, either expressly or by implication, much less substantiating fair market value or stamp duty value as per the provision of Section 50C of the Act for the price agreed. As per the scheme of the provision of Section 32 r.w.s 43(6) of the Act, which is a self contained scheme to compute the amount of deprecation allowable under the Act. According to our view, the reference to section 48 of the Act or the termful value of consideration are absent. Therefore, even otherwise, these two sections are not applicable in section 43(6) - assessee relied on the decision of Hon ble Bombay High Court in the case of Cable Corporation of India Ltd. 2011 (6) TMI 233 - BOMBAY HIGH COURT Thus we are of the view that the provision of Section 50C of the Act will not apply and the claim of the depreciation is allowable. Hence, we allow the claim of the assessee and set aside the order of the lower authorities on this issue. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of expenses relatable to exempt income under section 14A of the Act.
2. Disallowance of depreciation by adopting stamp value under Section 50C instead of value declared as per WDV.

Issue 1: Disallowance of expenses relatable to exempt income under section 14A of the Act:
The first issue in this case pertains to the disallowance of expenses related to exempt income under section 14A of the Act. The CIT(A) had restricted the disallowance by invoking section 14A read with Rule 8D(2) of the Income Tax Rules to the extent of exempt income only. However, during the appeal, the assessee did not press this issue, leading to its dismissal as not pressed.

Issue 2: Disallowance of depreciation by adopting stamp value under Section 50C:
The second issue revolves around the disallowance of depreciation by adopting the stamp value under Section 50C of the Act instead of the value declared as per the Written Down Value (WDV). The Assessing Officer deducted the value as per stamp authorities from the block of assets for determining the WDV, resulting in a reduced depreciation of ?2,07,226. The CIT(A) upheld this disallowance, emphasizing the applicability of Section 50C and the failure of the assessee to provide sufficient evidence to prove the market value of the property was lower. However, the ITAT disagreed with the lower authorities' interpretation. They highlighted that Section 32 r.w.s 43(6) provides a self-contained scheme for computing depreciation, and there is no provision to substitute the sale price with any other value. The ITAT referred to relevant case laws to support the position that the written down value should be adjusted based on the actual sale price, not the fair market value. Consequently, the ITAT allowed the claim of depreciation of ?2,07,226, setting aside the orders of the lower authorities on this issue.

In conclusion, the ITAT allowed the appeal of the assessee, emphasizing the correct application of the depreciation rules under the Income Tax Act and rejecting the disallowance based on stamp value under Section 50C.