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The Tax Publishers Southern Ferro Steels Ltd. v. ITO [ITA No. 429/Bang/2014, dt. 12-4-2016] : 2016 TaxPub(DT) 2187 (Bang-Trib) Application of explanation 3 to section 43(1) *Facts:* Assessee took over the used assets of an existing entity at a value of 20 times more than that of the erstwhile entity. The assessing officer did not make any inquiry of the same. The case was reopened by CIT under section 263. This was questioned by the assessee. On appeal: Held against the assessee that the very fact the assessing officer did not conduct inquiry about the huge variation in the brought forward asset values from the erstwhile company at 20 times more than their WDV required invocation of section 43(1) explanation. Thus the order of revision was correct. The assessees reference of valuation cell was not give due weight due to the legal operation of section 43(1) explanation 3. "Section 43(1) Explanation 3 -- Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the assessing officer is satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the assessing officer may, with the previous approval of the Joint Commissioner, determine having regard to all the circumstances of the case."

The Tax Publishers

Southern Ferro Steels Ltd. v. ITO [ITA No. 429/Bang/2014, dt. 12-4-2016] : 2016 TaxPub(DT) 2187 (Bang-Trib)

Application of explanation 3 to section 43(1)

Facts:

Assessee took over the used assets of an existing entity at a value of 20 times more than that of the erstwhile entity. The assessing officer did not make any inquiry of the same. The case was reopened by CIT under section 263. This was questioned by the assessee. On appeal:

Held against the assessee that the very fact the assessing officer did not conduct inquiry about the huge variation in the brought forward asset values from the erstwhile company at 20 times more than their WDV required invocation of section 43(1) explanation. Thus the order of revision was correct. The assessees reference of valuation cell was not give due weight due to the legal operation of section 43(1) explanation 3.

"Section 43(1) Explanation 3 -- Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the assessing officer is satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the assessing officer may, with the previous approval of the Joint Commissioner, determine having regard to all the circumstances of the case."