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TMI Blog2016 (6) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... y formed after transferring assets of a firm and undertook reclassification of the assets in proper blocks on which no adverse remark has been made by authorities below. Alternatively also, the Hon’ble Supreme Court in a recent judgment in the case of CIT vs. Excel Industries Ltd, reported in (2013 (10) TMI 324 - SUPREME COURT ), has held that the preponement or postponement of year of claim or allowance is a basically revenue neutral in character, more so when the rate of income tax in case of company is nearly same. The re-classification of asset at the most makes a benign shift in the claim of depreciation of machinery block and computer block. Depreciation being a carried over allowance based on WDV; rate of tax being same, following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2000. According to assessee, the WDV of firm s assets as on 31.03.2000 has been adopted as cost in the hands of the new company at the same value as on 1- 4-2000. However, company auditors found that computer and peripherals were wrongly debited to machinery account, which was corrected in books by transferring such assets in to appropriate block of assets. In other words, aggregate WDV in the hands of the firm and the cost taken in the hands of the new company are at the same value. The deference in claim of depreciation on same WDV resulted due to correction of intra-block of assets variation was reclassified for some items; thereby the machinery block WDV got reduced and computer block WDV eligible for depreciation @ 60% got increased. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Explanation 3 is not applicable in its case. However, on consideration of the facts I find that there was no reason for adopting the higher opening WDV in respect of certain assets only on the ground that the same value adopted on conversion of firm into company. As rightly pointed out in the order dated 24.11.2004 passed by my predecessor, the assessee had claimed WDV of computers at ₹ 34.21 lakh as against the WDV as per the books of firm of ₹ 21.93 lakh and that there cannot be higher market value of the computers than WDV. The AO was thus justified in applying Explanation 3 of section 43 (1) and adopting WDV as that of the erstwhile firm in view of the above facts. Considering all these aspects the AO was justified in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medabad Tribunal) (b) The decision of Hon ble High Court of Gujarat in the case of Ashwin Vanaspati Industries, 255 ITR 26 (Guj.) (iii) It is pointed out that the Assessing Officer also miscarried himself in holding that there is no transfer of assets from firm to company, inasmuch as the firm and company are separate entities and the use of word conversion is used for convenience only. Assessee-firm has been transferred to the new company by virtue of the provision of Chapter-IX of the Companies Act. The re-classification having been done as per prescribed Income-tax Rules and Companies Rules. The action of lower authorities in reducing the depreciation is unjustified. 6. Ld. Departmental Representative supported the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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