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TMI Blog2016 (1) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... tion-1 to Sec. 43(6) of the Act is highly questionable in the hands of the present assessee inasmuch as the said explanation refers to the provisions of Sec. 170(2) of the Act which is relevant when the predecessor cannot be found then the assessment of the income of the previous year in which the succession took place upto the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor. The facts of the case in hand do not warrant any relevance to the aforesaid provision of the Act. It would not be out of place to mention here that the revaluation of the assets is supported by the certificate of a registered valuor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 declaring loss of ₹ 1,30,85,355/-. The return was selected for scrutiny assessment. During the course of the assessment proceedings, the Assessing Officer came to know that M/s. Suyash Chemicals, a partnership firm was succeeded in its business by the assessee company on 31.3.2004 by which all the assets and liabilities of the partnership firm were transferred to the assessee company. 3.1. The AO further noticed that erstwhile partnership firm had revalued its assets during the financial year 2003-04 by which the assets value were increased by ₹ 29,18,45,075/-. The AO further noticed that the assessee company has claimed depreciation on the revalued assets taken over from the erstwhile partnership firm. On the basis of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio. 3.4. Another reason given by the AO is that the partnership firm has revalued two intangible assets in financial year 2003-04 which are trade name and Technical Know-how which assets were not in existence in the books of the firm. These assets were created is only for the purpose of claiming higher depreciation. Heavily relying upon Explanation-1 to Sec. 43(6) of the Act, the AO disallowed the claim of depreciation. 4. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and explained the transaction between the erstwhile firm and the assessee company. Before the First Appellate authority, it was strongly contended that the succession of the firm by the assessee company has been accepted as a genuine trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO has accepted the transaction between the firm and the assessee company u/s. 47(xiii) of the Act. It is also an undisputed fact that the firm has revalued its assets in the financial year 2003-04 pertaining to assessment year 2004-05 whereas the impugned assessment years before us are A.Y. 2005-06 2006-07. We failed to understand how the objections raised by the AO re relevant in the case of the assessee when the transaction has been accepted in the hands of the erstwhile partnership firm. 8.1. A perusal of the assessment order shows that the AO has heavily relied upon Explanation-1 to Sec. 43(6) of the Act. The relevance of the applicability of Explanation-1 to Sec. 43(6) of the Act is highly questionable in the hands of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (registered valuer s report) cannot be dislodged by any authority by merely ignoring the same. In the present case that is what has happened. Neither the Assessing Officer the Tribunal have even attempted to state that the valuation report and the values put on the assets are incorrect in any manner whatsoever. They have simply ignored the valuation report. The assessee having made a claim for depreciation on enhanced cost, which is the actual cost in its hands, it was necessary for the authority who wanted to determine the actual cost (as required by Explanation 3 to section 43 of the Act) to place some evidence on record. It could not have substituted its opinion and adopted the book value or the written down value in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided that (a) all the assets and liabilities of the firm 6or of the association of persons or body of individuals relating to the business immediately before the succession become the assets and liabilities of the company ; (b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession ; (c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company ; and (d) the aggregate of the shareholding in the company of the partners of the firm is not less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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