F. C. RUSTAGI, J.M.: sum and substance of all grounds raised by assessee in this appeal, is that on assets acquired by assessee-firm after dissolution of earlier firm from whom assets were taken after by one of partners who after some time entered into new partnership, i.e., assessee-firm with his tow sons, was entitled to depreciation on value of assets assigned on dissolution or earlier WDV of said assets. issue is squarely covered, as per submissions of ld. counsel for assessee, Mr. D. K. Gupta by earlier decision of Tribunal in case of M/s Bharat Cold Storage vs. ITO (1983) 14 Tax Law Review 311, as, according to him, absolutely similar are facts, similar is deed of dissolution and similar is partnership deed. But ld. Departmental Representative Mr. M. P. Singh did not agree that issue is covered. He submitted that there is another decision of Tribunal which goes against assessee and he would like to rely on same. He submitted that earlier firm had not only machinery and building but had land also., It was firm constituted of close relations and value of land was not revalued. He submitted that instant case clearly falls under mischief of Explanation 3 to s. 43(1). he also submitted that valuation has been appreciated only by book entries and in that respect, he relied on cases of CIT vs. Dalmia Dadri Cement Ltd. (1980) 125 ITR 510 (Del) and CIT vs. Alagappa Cotton Mills (1984) 41 CTR (Mad) 230: (1984) 149 ITR 640 (Mad). After taking into consideration rival submissions and going thoroughly through case law relied upon by both parties specially two decisions of Chandigarh Bench-one in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review311 and other dt. 18th Sept., 1984 in ITA No. 675/Chandi/83 M/s Markanda Rice Mills relied upon by ld. Departmental Representative we are of view that issue is clearly covered by our earlier decision in case of M/s Bharat Cold Storage in favour of assessee and, therefore, action of AAC is to be reversed. Reliance of ld. Departmental Representative on our earlier decision in case of M/s Markanda Rice Mills is absolutely misplaced. That was case where one assessment was framed of five periods and there was no dissolution of earlier firm. Moreover, that was case of reconstitution of firm, as is apparent from submissions of ld. Departmental available in p. 5 of said order, which reds as under: "He also urged that ITO had made one assessment for both periods, firm as reconstituted, and assessee has not challenged same by way of appeal. It was, therefore, urged that conduct of assessee showed that it was not case of dissolution but case of change in constitution of firm, as contemplated under s. 187 of IT Act. He also urged that assuming for moment that it was not case of dissolution of firm, as contended by ld. counsel for assessee, even then, one assessment had to be made for both periods, taking it as change in constitution of firm, in view of special provisions contained in s. 187. He therefore, urged that being position, depreciation was to be allowed on WDV in case of old firm, taking into consideration provisions contained in Explanation 4 below s. 43 of IT Act." With above submissions of ld. Departmental Representative Tribunal, after recording submissions of ld. counsel for assessee in p 7, give its. finding against assessee and in favour of Revenue in p of its order, which are extracted and placed below: "7. second ground of appeal is reg. actual allowance of depreciation. learned counsel for assessee contended that it was case of dissolution of firm and, therefore, depreciation was rightly allowed by ITO at time of original assessment on appreciated value. He was, therefore, not justified in curtailing depreciation with reference to reduced value. ld. Departmental Representative addressed same arguments as we have referred against ground No. 1 above." "8. We have carefully considered rival submissions. In our opinion, taking into consideration provisions of s. 187 it is case of change in constitution of firm, as held by their Lordships of Hon ble Punjab and Haryana High Court in case of Nandlal sohanlal 1978 CTR (P&H) 5 (FB): (1977) 110 ITR 170 (P&H) (FB). This position has also been accepted inasmuch as only one assessment has been made for both periods for asst. yr. 1974-75. Allowance for depreciation is essentially part of assessment. Once it is accepted to be case of firm before reconstitution and, therefore, depreciation has to be adopted as in case of firm before reconstitution and, therefore, depreciation has to be allowed at WDV as in case of firm, taking into consideration Explanation 4 below s. 43 of IT Act." Before we deal with two High Courts decisions, on which reliance was placed by ld. Departmental Representative, it is better, we give brief background of facts which would also indicate as to how close is instant case with that of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311 in which our decision has gone in favour of assessee and which also supports t h e contention of ld. counsel of assessee in appeal under consideration. There was firm styled as M/s Daryadittamal Bhagwandass which constituted of four partners, Daryaditta, Mal, Bhagwandass, Lekh Raj and Raj Kumar. said firm was dissolved on which entire business after dissolution, was taken over by Lekh Raj. assets were taken over by Lekh Raj on dissolution by mode of common bid amongst partners, as indicated in dissolution deed unequivocally. Undoubtedly, land was taken at same value but building and machinery were taken at enhanced value, against WDV as per record of old firm, Subsequently, Lekh Raj formed another firm with two of his sons, i.e. Dev Raj and Narinder Kumar, and assets taken over by Lekh Raj on dissolution from old firm, were brought into new firm on same value. Their capital accounts were accordingly credited by enhanced value. In original assessment of assessee-firm depreciation was allowed on WDV as per record of old firm. assessee-firm went in appeal before AAC who set aside assessment and directed ITO to look into whether Explanation 3 to s. 43 (1) was applicable. Subsequently, fresh assessment was framed and ITO allowed depreciation on enhanced value, as claimed by assessee. In proceedings by CIT under s. 263, matter was looked into and assessment set aside with direction to ITO that will make same fresh after working out depreciation with provisions of IT Act and if necessary, after making reference to IAC as required in Explanation 3 to s. 43 (1). In spite of facts that Tribunal s decision that of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311. on which reliance is placed by ld. counsel for assessee now, was placed before ITO, but ITO observing that actual cost of assets has to be what was in hands of previous firm, after referring matter, got approval of IAC and rejected claim of assessee on enhanced value. When assessee felt aggrieved by said decision of ITO, he came before AAC who, in very flowery language contested said assessment and gave number of other decisions, in some of which Tribunal and in others Revenue itself had accepted contentions as identical those of assessee. ld. AAC confirmed order of ITO. He even observed that in fact no actual consideration has been passed on to partners of dissolved firm. Only book entries have been passed to make these adjustments. It was this action of AAC which was contested. When we got through earlier order of Tribunal in case of M/s Bharat Cold Storage (supra), we find that it is absolutely in support of assessee s contentions. In that firm, there was old partnership which was dissolved and four partners had taken over running business. In instant case, there was old partnership which was dissolved and only one partner took over running business. Absolutely similar are clauses of dissolution deed in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311 and similar is preamble of dissolution deed. It seems, draftsman of dissolution deeds in case of M/s Bharat Cold Storage and instant case, is one and same. It is mentioned in preamble that: " Whereas business be wound up with lock, stock and barrel consisting is factory land building, machinery and other assets after division of profit and loss, as case may be, to satisfaction of parties. And whereas parties readily agreed for its dissolution from 24th Aug., 1974 by taking over assets and liabilities on value fixed in auction between partners by open bid system to avoid any litigation and set-back to reputation of business and partners." first three clauses of said dissolution deed read as under: "1. That firm as now constituted is dissolved from today for all intents and purposes and no one partner shall be lawful to run any business in future in this name and style of firm. That account of firm were scrutinised and checked and net profit as revealed at Rs. 1,389 was found correct and accepted by parties top this deed. That all lock, stock and barrel of firm consisting factory machinery equipped with tubewell, engines and complete husking and shelling machinery, factory, land and building comprising of sheller room godowns, barracks, shops staff and store rooms, machinery and office rooms old and new attached portions were taken over by Sh. Lekh Raj, partner for money value of Rs. 2 1/2 lakh (cost of land Rs. 40,000 cost of building Rs. 12,000): and cost of machinery Rs. 90,000: fixed in auction in open bid between partners today at time of dissolution of firm. And remaining partners got their investments by adjustments to their accounts in successors-firm." These are identical to clauses of dissolution deed in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311 extracted and placed in p 2 of said order. Like M/s Bharat Cold Storage (1983) 14 Tax Law Review 311 it was subsequently that continuing partner Lekh Raj entered into new partnership and two new incoming partners like in said case joined firm accepting very same valuation assigned to building, machinery and other assets which was adopted at time of dissolution. Then even in new partnership deed, similar mention regarding assets is there. We have at length dealt with definition of WDV , difference between dissolution of firm and change in constitution etc, and for very same reasons give in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311, which we intentionally avoid repeating here, we accept contention of assessee. Instant is case of dissolution of firm wherein by internal bed and method of auction, values were assigned. ld. counsel for assessee submitted at Bar that not only credit entries were passed but outgoing partners were subsequently paid of also in cash, and he was prepared to produce accounts of such payments. It was at length that we had dealt with Punjab and Haryana High Court decision in case of Nand Lal Sohan Lal (supra) in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311. and had observed that observations, extracted and placed in said order, support contentions of assessee and not of Revenue. According to us, it was very incorrect by ld. Departmental Representative to have said that on identical issue of depreciation, this Bench had taken separate view in case of Markanda Rice Mills ITA No. 675/Chandi/83 decided on dt. 18th Sept., 1984. Unfortunately, though decision in case of M/s Bharat Cold Storage (supra) was not cited by ld. counsel for assessee in that case but even then it was due to difference in facts that assessee s appeal in case of M/s Markanda Rice Mills ITA No. 675/Chandi/83 dt. 18th Sept., 1984 was dismissed. difference can be appreciated by anyone who independently goes through said orders carefully. Reliance of ld. Departmental Representative on case of Dalmia Dadri Cement Ltd. (1980) 125 ITR 510 (Del) is also misplaced. In that case, their lordships of Delhi High Court held: " That when legislature had prefixed word actual to word cost in s. 43 (1) of IT Act, 1961, it was to lay emphasis on reality and genuineness of cost and to exclude collusive, inflated, deflated or fictitious cost." This, in other words, supports contention of assessee. On dissolution, by internal bid system, values were taken and respective credits were given and those who got credits were paid of also subsequently. Similarly, reliance of ld. Departmental Representative. On case of Alagappa Cotton Mills (1984) 149 ITR 640 reliance (Mad) is misplaced because that was also case of re-constitution of firm as it was observed therein as under: " conduct of assessee also indicated that they had proceeded on basis that there was reconstitution of old firm on 1st Oct., 1964 inasmuch as they had claimed consolidated loss treating old firm to be continuing as reconstituted. Further for purpose of grant of registration, parties had applied in Form No. 11-A and this was only consistent with stand of assessee that there was change in constitution. There was no dissolution of firm and as same assessable entity continued after 30th Sept., 1964, assessee could claim depreciation only on WDV of Rs. 14,61,621." This is case which supports our decision in case of Markanda Rice Mills ITA No. 675/Chandi/83 decided on dt. 18th Sept., 1984 and is not opposed to our decision in case of M/s Bharat Cold Storage (1983) 14 Tax Law Review 311 on basis of reasoning of which and on basis of similar facts there being in background, we accept contention of assessee. action of AAC is, therefore, reversed. In result, appeal is allowed. *** LEKH RAJ NARINDER KUMAR v. INCOME TAX OFFICER