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TMI Blog2015 (1) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.0 The learned CIT(A) failed to appreciate that under Explanation 2B to section 43(6) of the Act, the written down value of the block of assets in the hands of the Appellant (the resulting company) would be such written down value of the assets as appearing in the books of account of Godrej Appliances Limited (the demerged company) immediately before the demerger. 3.0 The learned CIT(A) erred in holding that amendment in Explanation 2B to section 43(6) of the Act by Finance Act, 2003 with effect from assessment year 2004-05 will have retrospective effect and will also apply to a demerger in assessment year 2003-04. 4.0 The learned CIT(A) erred in not deciding the additional ground relating to non chargeability of interest under section 234B of the Act. 5.0 The learned CIT(A) ought to have held that no interest under section 234B of the Act could be charged in the facts of the present case." Grounds No.1 to 3 3. A perusal of the above grounds of appeal reveals that the effective issue raised by the assessee is relating to the interpretation/applicability of the provisions of Explanation 2B to section 43(6) of the Act as were applicable for the year under consideration. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he block of assets arrived at after such addition. -In this regard we invite your attention to explanation 2B to section 43 (6) of the Act which deals with the provisions relating to additions made to the block of assets of the resulting company i.e. the assessee company, pursuant to the scheme of demerger. -It was therefore apparent that as per the said explanation 2B to section 43(6), the written down value of the assets transferred as appearing in the books of accounts of the demerged company was to be considered in the books of accounts of the resulting company i.e. the assessee company. 6. The assessee further explained that though the words 'book value of assets' were replaced by 'written down value of assets' in explanation 2A by the Finance Act 2000, a similar change was not made in explanation 2B, which deals with the computation of the written down value of the block of assets of the resulting company. By the Finance Act, 2000 the words 'value of assets' as appearing in the books of accounts in explanation 2B were replaced by the word 'written down value of the transfer of asset as appearing in the books of account' thereby fortifying the belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferred assets as appearing in the books of account of the demerged company immediately before the demerger". 9. Consequent thereto, the block of assets of the Assessee company (the resulting company) was increased by the written down value of the assets as per the books of account of Godrej Appliances Ltd. (the demerged company) and depreciation thereon was claimed accordingly with complete disclosure thereof in terms of the audited accounts, Tax Audit Report (depreciation schedule) and the Return of Income. 10. It was further argued that Explanation 2A to section 43(6) of the Act deals with written down value of the demerged company, whereas Explanation 2B deals with written down value of the resulting company. Explanation 2A and 2B were introduced by Finance Act, 1999, w.e.f. 1st April, 1999. The said Explanations were thereafter amended from time to time, namely by Finance Act 2000 and Finance Act, 2003. The assessees further explained that though the words 'book value of assets' were replaced by 'written down value of assets' in Explanation 2A by the Finance Act, 2000, a similar change was not made in Explanation 2B, which deals with the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten down value of block. Attention was also invited to the Explanation 2A and Explanation 2B to section 43(6) of the Act as originally introduced by Finance Act, 1999 and thereafter amended by Finance Act, 2000 and Finance Act, 2003, which, for the sake of convenience, are reproduced as under: "Finance Act 1999 w. e. f. assessment year 2000-2001 Section 43(6) "written down value" means ........... ........... "Explanation 2A. - Where in any previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets of the demerged company for the immediately preceding previous year shall be reduced by the book value of the assets transferred to the resulting company pursuant to the demerger. Explanation 2B. - Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the value of the assets as appearing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transferred assets of the demerged company immediately before the demerger.] (emphasis supplied) 13. It had been contended that the "Written down value as appearing in the books of account" means value of net block of the assets (i.e. Gross value of block less depreciation as charged in books of account) as appearing in the books of account maintained by the Company under the Companies Act, 1956. "Written down value" as defined in the Income Tax Act, means the actual cost to the assessee less all depreciation allowed to him under the Income-tax Act. Hence, it was contended that the amendments made above from time to time were prospective and not retrospective. Explanation 2B to section 43(6) clearly provides that in case of resulting company, the value to be added to the block of assets for the purpose of computing depreciation under the Income Tax Act is the written down value of the transferred assets as appearing in the books of account of the demerged company. 14. It was therefore submitted that the assessee company, being the resulting company, had accordingly increased its block of assets by the written down value of the assets as appearing in the books of account of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision, unless, so specifically provided in the relevant statute itself. On the other hand the ld. DR has relied upon the findings of the lower authorities. 17. We have considered the rival contentions and have also gone through the record. We have carefully gone through the relevant provisions i.e. explanation 2A and 2B to section 43(6) and have also considered the respective amendments brought out from time to time in the said provisions. We find that the explanations 2A and 2B were inserted by Finance Act, 1999 w.e.f. 01.04.2000. The relevant words under clause 2A were "written down value of the block of assets of the demerged company" whereas the corresponding relevant words under clause 2B were "the value of assets as appearing in the books of accounts". However, a subsequent amendment was made vide Finance Act, 2000 w.e.f. the same date i.e. 01.04.2000 vide which the words "the value of the assets as appearing in the books of account" were substituted with the words "written down value of the transferred assets as appearing in the books of account". Now we have to see whether any change was brought out with the amendment made vide Finance Act, 2000 into the relevant prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal tax liability. The value of the assets of the demerged company should be the same when transferred to the resulting company. The amendment made by Finance Act, 2003 w.e.f. 01.04.2004, in our view, is curative and clarificatory in nature. The omission of the words "as appearing in the books of account" have neither taken away nor affected any rights of the assessee which were accrued to him before the said amendment. The amendment made vide Finance Act, 2003 has just removed the ambiguity. It has neither taken away any right of any assessee nor has given any new right to the Revenue. 18. We have gone through the order of the Tribunal in the case of "Godrej Industries Ltd." (supra) and we agree with the view taken by the Tribunal in the said case that the emphasis of the legislature in explanation 2B after the amendment made vide Finance Act, 2000 was that the value of the block of assets in the case of resulting company shall be the written down value of the assets of the demerged company immediately before the demerger. Hence, we do not find any infirmity in the findings of the lower authorities that only the written down value of the transferred assets of the demerged company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese grounds, being consequential, are accordingly decided against the assessee. ITA No.4754/M/2011 for assessment year 2003-04 (Revenue's Appeal) 22. The Revenue in this appeal has agitated the action of the Ld. CIT(A) in deleting the disallowance made by the AO on account of irrecoverable inter corporate deposits written off. 23. The facts are that the assessee had written off inter corporate deposits placed with Godrej Hi-care Ltd. of Rs. 41,00,000/-. The assessee explained to the AO that the demerged company Godrej Capital Ltd. was in the business of carrying out financial operations and had advanced an amount of Rs. 41,00,000/- to Godrej Hi-care Ltd. Since the Godrej Capital Ltd. had merged into the assessee company w.e.f. 01.04.02 as result thereof inter corporate deposits placed by the erstwhile Godrej Capital Ltd. being irrecoverable, had been written off by the assessee company during the year under consideration. The demerged company was carrying out the finance business and was registered as a non banking financial company with the Reserve Bank of India. The interest income from the said deposits was always assessed as business income in the hands of the demerged comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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