1985 (2) TMI 61

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..... sue prize point cheques, each point being equal to Rs. 500. But that scheme did not allow the dealer to encash the total number of points. The dealer was to select any prize article from a catalogue which detailed the description of the prize items together with a number of points against each. Under that scheme the assessee who had earned 148 points chose two ambassador cars as the prize items to which it was entitled. Accordingly, TAFE delivered two ambassador cars, valued at Rs. 76,000. It was conceded by the assessee that this sum of Rs. 76,000 was liable to be taxed as the income of the assessee under section 28(iv) of the Income-tax Act, 1961 ('the Act'), which requires the value of any benefit arising from the business to be included .....

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..... the Act provides that in respect of depreciation of plant or machinery owned by the assessee and used for the purpose of business a deduction shall be given. The assessee, admittedly, fulfils these two conditions, viz., that the asset is owned by it and also used in its business. But while making the computation, the percentage of depreciation depends upon the actual cost of the asset. Section 43(1) of the Act defines actual cost to mean the actual cost as reduced by any portion of the cost met directly or indirectly by any other person. According to the revenue, the cost of the two cars has been met by TAFE and, therefore, the cost to the assessee is nil. But we are unable to accept this contention on the face of the assessment of the valu .....

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..... nd Explanation 2 to section 43(1) would be attracted and the cost of the asset to the assessee would be the written down value as in the case of the previous owner or the market value on the date of acquisition whichever is less. The contention of the revenue is that it cannot be treated as a gift where the value is assessed as the income. But then the assessment of the value as income is only because of the deeming provisions of section 28. If the treatment of the value of the cars as income is to be ignored, then the real nature of the transaction cannot be ignored. If it is to be treated as income then it should be taken as having been spent for the acquisition of the car. If the treatment of the value of the car as the income is not to .....

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