February 2020

I. Section 43(6), Explanation 2 – In Explanation 2 to section 43(6), deprecation actually allowed shall not include any unabsorbed depreciation – The WDV in the hands of the amalgamated company is to be calculated without considering the unabsorbed depreciation of the amalgamating companies, for which set-off was never allowed II. When a receipt is held to be capital in nature and not chargeable to tax under the normal provisions of the Act, the same cannot be taxed u/s 115JB of the Act as well III. Section 234B r/w/s 115JB – Interest u/s 234B cannot be levied where liability arises on account of retrospective amendment in the Act

Jagdish T.Punjabi
Chartered Accountant | Devendra Jain
Advocate

16. [2019] 112 taxmann.com 55 (Trib.)(Mum.) ACIT vs. JSW Steel Ltd. ITA No. 156/Bang/2011; CO No. 59/Mum/2012 A.Y.: 2006-07 Date of order: 29th November, 2019

 

I.  Section 43(6), Explanation 2 – In Explanation 2 to section 43(6), deprecation actually allowed shall not include any unabsorbed depreciation – The WDV in the hands of the amalgamated company is to be calculated without considering the unabsorbed depreciation of the amalgamating companies, for which set-off was never allowed

 

II. When a receipt is held to be capital in nature and not chargeable to tax under the normal provisions of the Act, the same cannot be taxed u/s 115JB of the Act as well

 

III.        Section 234B r/w/s 115JB – Interest u/s 234B cannot be levied where liability arises on account of retrospective amendment in the Act

 

FACTS I

In the return of income filed by the assessee for the year of amalgamation, i.e., A.Y. 2006-07, the assessee computed WDV in respect of the assets transferred by the amalgamating companies by reducing the amount of deprecation (‘actually allowed’) in A.Y. 2005-06 in accordance with the provisions of Explanation (2) to section 43(6) of the Act.

 

The AO observed that the closing WDV of the amalgamating company becomes the WDV in the hands of the amalgamated company and accordingly determined the WDV of the assets acquired on amalgamation after considering normal depreciation allowed on assets of the two amalgamating companies; consequently, he disallowed excess depreciation of Rs. 6,81,27,607 (being 15% of the difference in the WDV of Rs. 45,41,84,048).

 

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