|The Tax Publishers2020 TaxPub(DT) 5588 (Mum-Trib)
INCOME TAX ACT, 1961
Section 47(iv) Sections 32 & 43(6)
Where assessee purchased second-hand machinery from its holding company at a certain value and claimed depreciation thereon as per WDV which remained in the books of account of its holding company, however, as there was change in shareholding pattern of holding company, whereby the assessee ceased to be a wholly-owned subsidiary, the assessee was entitled to depreciation on the transfered/actual acquired value of asset.
Depreciation - Transfer of capital asset - Scope of section 47(iv) -
Assessee during assessment year 2007-08 had purchased certain second-hand machinery from its holding company at a certain value and depreciation was claimed since then on the same on the acquired value. Since the said acquisition of capital asset fell within the scope of section 47(iv) the AO was disallowing the excess depreciation more than the value of depreciation on the WDV which remained in the books of account of the holding company as per Explanation 2 to section 47(iv) year after year. In the said assessment year 2014-15, the AO found that the assessee had filed a revised return and claimed a higher depreciation based on the actual transferred price. When questioned, the assessee confirmed that there was change in shareholding pattern of the holding company, whereby it ceased to be a wholly-owned subsidiary and accordingly the conditions of section 47(iv) would no longer apply justifying the claim of higher depreciation on the transferred value. AO disallowed the depreciation. On appeal, Commissioner (Appeals) concurred with the views of the assessee. Held: Assessee was entitled to the depreciation on the transferred/actual acquired value as the cost of the asset as the said transfer fell outside the scope of section 47(iv), consequent to change in the pattern of shareholding of parent company thereby nullifying the conditions of section 47(iv).
Applied:Tata Motors Ltd.'s case -- ITA No. 6020/Mum/2011 for assessment year 2007-08, dt. 31-8-2012; Essar Oil Ltd. v. DCIT (2007) 13 SOT 691 (Mum-Trib) : 2007 TaxPub(DT) 0963 (Mum-Trib)
FAVOUR : In assessee's favour
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
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