S. 43(6)(c) — When an asset is sold, the block of assets stands reduced only by moneys payable on account of sale of the asset and not by the fair market value of the asset sold.

18. DCIT v. Cable Corporation of India Ltd.

ITAT ‘E’ Bench, Mumbai

Before Pramodkumar (AM) and

V. D. Rao (JM)

ITA No. 5592/Mum./2002

A.Y. : 1995-96. Decided on : 29-10-2009

Counsel for revenue/assessee : Vandana Sagar/

Arvind Sonde

S. 43(6)(c) — When an asset is sold, the block of assets
stands reduced only by moneys payable on account of sale of the asset and not
by the fair market value of the asset sold.

Per Pramodkumar :

Facts :

During the previous year relevant to the assessment year
under consideration, the assessee sold a flat which formed part of block of
assets and on which depreciation was claimed and was allowed @ 5%, for a
consideration of Rs.9,00,000. The District Valuation Officer (DVO), on a
reference by the Assessing Officer (AO), valued the flat at Rs.66,44,902. For
the purposes of computing the amount of depreciation allowable, the AO
computed the written down value of the block by reducing the value determined
by the DVO instead of reducing the consideration for which the flat was sold.
He, therefore, disallowed depreciation of Rs.2,96,551.

Aggrieved, the assessee preferred an appeal to the CIT(A)
who allowed the appeal and held that for computing written down value it is
only the sale consideration of the asset sold, which needs to be deducted and
not the fair market value of the asset sold.

Aggrieved, the Revenue preferred an appeal to the Tribunal.

Held :

In view of the provisions of S. 43(6)(c) read with
Explanation 4 to S. 43(6) and also Explanation below S. 41(4), when an asset
is sold, the block of assets shall stand reduced by ‘moneys payable’ in
respect of the asset sold. The expression moneys payable refers to ‘the price
at which it is sold’. What really matters is the price at which the asset is
sold and not its fair market value. The AO does not have any power to tinker
with the sale price of the asset sold. The AO ought to take the sale price for
computing the WDV of the block.

The Tribunal dismissed the appeal filed by the Revenue.