Commissioner of Income Tax vs Cable Corporation of India Ltd.

The appeal is admitted on the following question of law:

Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that for the purpose of calculating depreciation allowable to a block of fixed assets, only the apparent consideration for which the flat was sold should be reduced from the block of fixed assets being Rs. 9 lakhs even though the fair market value of the said flat was Rs. 66,44,902 as determined by the Departmental Valuation Officer ?

By consent, the appeal is taken up for final hearing.

In the present case, the Assessee had sold a flat for Rs. 9,00,000. In the course of the assessment proceedings, the Assessing Officer called for the valuation of the said flat from the Departmental Valuation Officer, who determined the fair market value of the flat at Rs. 66,44,902. The Assessing Officer reduced the amount of Rs. 66,44,902 from the written down value of the block while calculating depreciation.

On appeal, the Commissioner of income tax (Appeals) held that the Assessing Officer was not justified in reducing the fair market value of the flat as determined by the District Valuation Officer from the block while calculating the depreciation allowable to the Assessee.

On further appeal, the income tax Appellate Tribunal by the impugned order dated October 29, 2009 dismissed the Department''s appeal. Hence the Revenue has filed the present appeal u/s 260A of the income tax Act, 1961.

When an asset is sold, Section 43(6)(c)(i)(B) of the Act provides that the written down value of the block of assets shall be reduced by "moneys payable" in respect of the asset that is sold. The expression "moneys payable" as per Explanation 4 to Section 43(6) shall have the meaning as in the Explanation below Sub-section (4) of Section 41.

As per Explanation below Section 41(4) the expression "moneys payable" in relation to the sale of a building, machinery, plant or furniture would be the price for which it is sold and not the fair market value of the asset. Therefore, on a plain reading of the above provisions, it is clear that the written down value of all the assets falling within that block of assets at the beginning of the previous year has to be adjusted by the amount at which the asset is actually sold and not by the fair market value of the asset that is sold.

As rightly observed by the income tax Appellate Tribunal, the Legislature in Section 43(6)(c)(i)(B) has used a different connotation in respect of sale of assets and sale of scrap. As per that section on sale of an asset, the written down value of the block of assets is to be reduced by the amount at which the asset is actually sold, whereas, in the case of sale of scrap, the value of the scrap, meaning thereby, the fair market value of the scrap and not the price at which the scrap is sold should be reduced from the written down value of the block of assets.

In our opinion, the interpretation adopted by the income tax Appellate Tribunal is in accordance with law and no fault can be found with the decision of the Tribunal. In the result, the question of law raised in this appeal is answered in the affirmative i.e. in favour of the Assessee and against the Revenue.

The appeal is disposed of accordingly with no order as to costs.