9911796707
TMI Blog1982 (7) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975-76. 2. In order to appreciate the issue, a brief backdrop of facts would be of immense assistance. There was a firm duly constituted under a partnership deed dated 1-12-1969 under the name and style of Bharat Cold Storage situated at Shahbad and doing its business with effect from 2-9-1969. The said firm was constituted of the following partners : "i. Shri Amir Chand 5 per cent ii. Shri Ram Labhaya 20 per cent iii. Smt. Shanti Devi 20 per cent iv. Smt. Daya Wanti 20 per cent v. Shri Hakim Rai 6 per cent vi. Smt. Pushpa Rani 12 per cent vii. Smt. Kala Wanti 10 per cent viii. Smt. Suhag Wanti 10 per cent ix. Smt. Kailash Devi 10 per cent". In the dissolution deed of this firm, first four partners were treated as partners of the first part whereas the next five partners were treated as partners of the second part. On 20-1-1972, the above said firm was dissolved and the said dissolution deed which is on the assessee's compilation contained clauses 1 to 3 which are of importance to the issue and which read as under : "1. That this partnership firm is hereby dissolved today for all intents and purposes. 2. That the statement of profit and loss showing net p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation of storage, building, machinery, wooden platforms-cum-racks and land beneath the store has been fixed at Rs. 4 lakhs in which all the partners to this deed shall have and enjoy their rights in title and ownership of these assets pro rata according to the share held by them." Out of the total value of the assets amounting to Rs. 4 lakhs, the same were individually valued under : Rs. "i. Building 1,50,000 ii. Furniture (wooden racks) 80,000 iii. Machinery 1,50,000 iv. Land 20,000". The appellant-firm, in the course of the assessment year 1973-74, claimed depreciation on the cost of assets acquired from the outgoing partners but the ITO allowed depreciation only on the written down value (WDV) of the assets as in the hands of the firm before the above said dissolution was effected. The issue was carried before the AAC where the assessee did not meet with success and even when the matter came up before the Tribunal, the assessee's appeal was dismissed for default of non-appearance. The assessee attempted restoration of the said appeal through its miscellaneous petition but that too was not allowed by the Tribunal. 3. For the next year, i. e., the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts (P.) Ltd. [1975] 101 ITR 61 (Guj.) and argued at length as to what 'actual cost' means. In respect of second issue raised by the Commissioner (Appeals) in his order, as mentioned in para 4, he submitted that the Commissioner (Appeals) himself has observed that the issue is res integra and he drew our attention to the case of Karnani Industrial Bank Ltd. He submitted that the case of D. S. Bist Sons v. CIT [1972] 85 ITR 254 (Delhi) stands overruled in the case of Bist Sons v. CIT [1979] 116 ITR 131 (SC). In short, he summarised that the assessee's claim of depreciation should be admitted and the assessee should be allowed depreciation on actual cost minus depreciation allowed by the revenue in earlier years. 6. The learned departmental representative, Mr. M. P. Singh, on the other hand, beside relying on the order of the Commissioner (Appeals) submitted that there was no dissolution. But, according to him, as he argued at length, it was a change of constitution. He placed his reliance on the case of Nandlal Sohanlal v. CIT [1977] 110 ITR 170 (Punj. Har.)(FB) and argued at length that the firm has continued its activities, the old and new firms are both separate entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stop at the WDV of the previous year : "The limit to which the ITO can go back does not stop at the written down value of the previous year but extends up to the figure of the original cost, and the method enjoined by section 10(5)(b) of the Income-tax Act is not that the Income-tax Officer should merely scale down the written down value of the previous year, but that he should take into consideration the actual cost, determining it for himself, if necessary, take also into consideration the allowances granted in the past, and then make his own computation as to the written down value for the assessment year with which he is concerned. Thus it cannot be said that merely because under section 35 some written down value and the depreciation amount have been determined they are a final determination binding for all times to come ; nor does the determination operate as estoppel or res judicata for the following years." Reliance of the learned departmental representative on the Full Bench decision of the Punjab and Haryana High Court in the case of Nandlal Sohanlal is misplaced. Their Lordships in that case while dissenting from the case of CIT v. Shiv Shanker Lal Ram Nath [1977] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is available that the same valuation assigned to the assets has been accepted by the new partners and it will not be out of place to mention that howsoever small it may be but there is a gap of time between the dissolution of the old firm and restart of the new. Some guidance as to the 'actual cost' is also available from the Gujarat High Court decision in the case of Hides Leather Products (P.) Ltd. and their Lordships also abserved that neither res judicata nor estoppel prevent the ITO from determining as to what the actual cost of the assets to the assessee has been, which is apparent from the very first few lines from the headnote : "Neither the principle of res judicata nor estoppel prevent the Income-tax Officer from determining for himself the written down value of an asset for each assessment year. He can determine for himself what the actual cost to the assessee had been in the first instance and is not bound by the determination of that question in any of the previous assessment years." It is wrong to say that the Allahabad High Court decision in the case of Matrumal Dhanna Lal does not support the contention of the assessee. In that case, the assessee was a HUF whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a member cannot be that at which it was purchased by the joint family in the remote past, but would be the value given to it for the purpose of allotment or at which it was auctioned for the purpose of partition." In the instant case, it is not the case of the revenue that the assignment of valuation to assets is collusive or fraudulent. Indirectly the contention of the assessee also gets support from the Supreme Court decision in the case of Bist Sons. 8. Explanation 4 to section 43(1) also does not take the revenue's case any further because in the instant case the old assessee does not survive the moment the old firm undergoes dissolution. The remaining four partners as well cannot be called the same assessee and under no circumstances the present assessee can be called the same assessee especially when after lapse of some time from the date of dissolution, the new firm was constituted. 9. The Commissioner (Appeals) has expressed his fears that absurd result would follow in case the assessee's contention is accepted. The issues are got to be adjudicated as per law and what would follow should not come in the way of the appellate authority. The Commissioner (Appeals) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
