This is appeal filed by assessee against order of CIT(A)- XXVI, New Delhi dt. 13th July, 2005 for asst. yr. 2002-03, in matter of order passed under s. 143(3) of IT Act, 1961, wherein following grounds of appeal have been raised: "1. impugned order of learned AO is bad in law, is devoid of jurisdiction, is arbitrary, based on conjectures and surmises, passed without application of mind, without granting proper opportunity to defend and without following proper legal procedures against principles of natural justice. As such, order is null and void ab initio. order is against provisions of Act and appellant denies his liability to tax as determined and computed by learned AO and manner in which it has been so determined or computed. learned CIT(A) has erred in law in upholding legal validity of impugned order, whether in specific terms or by implication. learned AO has erred in law and on facts and circumstances of case in making additions of Rs. 1,01,400 on account of disallowance of depreciation and learned CIT(A) has erred in law and on facts in sustaining impugned addition in total. appellant craves leave to and permission of Hon ble Tribunal to add to or alter any of grounds of appeal at any time upto final decision of appeal. appellant craves leave and sanction of Hon ble Tribunal to file additional evidence, if so required for proper prosecution of case, based on facts and circumstances, which has not been or could not be adduced or filed before lower authorities either because proper and sufficient opportunity was not provided or because it was not solicited or its need was not appreciated." Rival contentions have been heard and record perused. During course o f scrutiny assessment, AO found that depreciation was shown to extent of Rs. 89,108 as per depreciation schedule whereas as per P&L a/c, depreciation amount was shown at Rs. 1,90,568. This depreciation was i n respect of two cars. AO further found that first car was bought in month of May, 2001 on loan from Kotak Mohindra Bank for Rs. 5,90,000. Later on due to non-payment of instalments, Kotak Mohindra Bank has confiscated car in month of September, 2001 for consideration of Rs. 5,90,000 which was shown as sale in depreciation schedule. learned Authorised Representative submitted that depreciation has been calculated on both cars and was claimed in P&L a/c. AO observed that as per provisions of s. 32, no depreciation is allowable on car which was sold during year. Thus, assessee s claim for depreciation amounting to Rs. 1,01,400 was declined by AO which was attributable to car confiscated during year. By impugned order, CIT(A) confirmed action of AO. Aggrieved by order of CIT(A), assessee is now in appeal before us. It was argued by learned Authorised Representative that motorcar alleged to be taken back by financier, was actually used by assessee, therefore, assessee was eligible for claim of depreciation. He relied on decision reported at in case of Oil & Natural Gas Commission vs. Addl. CIT (1999) 64 TTJ (Del) 606, Tribunal Delhi Bench, in support of proposition that taking of car by finance company does not amount to sale within ambit of s. 43(6)(c) of Act, therefore, amount of car taken over by finance company cannot be reduced from WDV for computation of depreciation on block of assets. He further contended that even after amendment in provisions of s. 32(1), concept of balancing charge under s. 41(2) and charging of excess sales realization as business income under s. 50, as short-term capital gain has not been given go by. change from business income to short-term capital gains in s. 50 makes depreciation allowance mandatory so that even if depreciable asset is sold after use within same year, depreciation has to be allowed first and then only provisions of s. 50 would be applied. On other hand, learned Departmental Representative relied on order of lower authorities. We have considered rival contentions, carefully gone through relevant provisions of IT Act, 1961 with regard to claim of depreciation and l s o deliberated on case laws referred to by learned Authorised Representative during course of hearing before us. From record, we found that during year under consideration, assessee has bought two motorcars first in May, 2001 for Rs. 5,90,000, it was financed by Kotak Mohindra Bank. Subsequently, due to non-payment of instalment, Kotak Mohindra Bank has confiscated car in month of September, 2001. This car was stated to be sold through financier on 28th Dec., 2001 for Rs. 4,85,775. assessee bought second car on 28th Dec., 2001 for Rs. 8,30,500. In depreciation schedule, assessee has claimed depreciation on new car which remained its asset as at end of year. However, in P&L a/c, assessee has claimed depreciation not only on new car bought on 28th Dec., 2001, but also on old car which was sold during year and did not remain in its block of assets as at end of financial year. AO allowed claim of depreciation on cost of new car only. However, claim of depreciation on balance in block of assets as on 31st March, 2002 was not computed which require addition of new assets acquired during year and reduction of money payable in respect of any assets falling within that block. Taxation Laws (Amendment) Act, 1986, had changed thoroughly system of allowing depreciation w.e.f. 1st April, 1988. By these provisions, concept of b l o c k of assets brought into statute book for purpose of allowing depreciation. relevant provision as it stood after amendment that is applicable to year under consideration reads as under: "32. (1) In respect of depreciation of building, machinery, plant or furniture owned by assessee and used for purposes of business or profession, following deductions shall, subject to provisions of s. 34, be allowed. (i)** ** ** (ii) in case of any block of assets, such percentage on WDV thereof as may be prescribed: Provided that where actual cost of any machinery or plant does not exceed five thousand rupees, actual cost thereof shall be allowed as deduction in respect of previous year in which such machinery or plant is first put to use by assessee for purpose of his business or profession:" From above, it is clear that depreciation is to be allowed on WDV of block of assets at such percentage as may be prescribed. Block of assets is defined in s. 2(11) as under: " block of assets means group of assets falling within class of assets, being building, machinery, plant or furniture, in respect of which same percentage of depreciation is prescribed." Sec. 43(6) provides definition of WDV cl. (c) of s. 43(6) reads as under: "43(6) "Written down value" means (a) ** ** ** (b) ** ** ** (c) in case of any block of assets, (i) in respect of any previous year relevant to assessment year commencing on 1st day of April, 1988, aggregate of written down values of all assets falling within that block of assets at beginning of previous year and adjusted, (A) by increase by actual cost of any asset falling within that block, acquired during previous year; and (B) by reduction of moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with amount of scrap value, if any, so, however, that amount of such reduction does not exceed WDV as so increased; and (ii) in respect of any previous year relevant to assessment year commencing on or after 1st day of April, 1989, written down value of that block of assets in immediately preceding previous year as reduced by depreciation actually allowed in respect of that block of assets in relation to said preceding previous year and as further adjusted by increase or reduction referred to in item (i)." Thus, WDV of any block of assets shall be aggregate of WDV of all assets falling within that block of assets at beginning of previous year. From this, adjustment has to be made for increase or reduction in block of assets during year under consideration. deduction from block of assets has to be made in respect of any asset sold, discarded or demolished or destroyed during previous year. Prior to amendment of s. 32(1) of Act, old system in this regard requires calculation of depreciation in respect of each capital asset separately and not in respect of block of assets. This requires elaborate book- keeping and process of checking by AO was time-consuming. greater differentiation in rates, according to date of purchase, type of asset, intensity of use, etc., more disaggregated has to be record- keeping. Moreover, practice of granting terminal allowance as per s. 32(1)(iii) or taxing balancing charges as per s. 41(2) of IT Act necessitated keeping of records of depreciation already availed of by each asset eligible for depreciation. In order to simplify existing cumbersome provisions, Amending Act has introduced system of allowing depreciation o n block of assets. This will mean calculation of lump sum amount of depreciation for entire block of depreciable assets in each of four classes of assets, namely, building, machinery, plant and furniture. Moreover, legislature has deleted provision for allowing terminal depreciation in respect of each asset, which was previously allowable under s. 32(1)(iii) and also taxing of balancing charge under s. 41(2) in year of sale. Instead of these two provisions, now whatever is sale proceeds of sale of any depreciable asset, it has to be reduced from block of assets. This amendment was made because now assessees are not required to maintain particulars of each asset separately and in absence of such particular, it cannot be ascertained whether on sale of any asset, there was any profit liable to be taxed under s. 41(2) or terminal loss allowable under s. 32(1)(iii). This amendment also strengthens claim that now only detail for "block of assets" has to be maintained and not separately for each asset. Thus claim of learned Authorised Representative for allowing loss on sale of first car is also not sustainable, and assessee is only eligible to reduce amount realized in respect of such block of assets, out of such block. In instant case, admitted position is that assessee had sold first car through financier. However on plea of same having used in business before sale assessee has claimed depreciation. Instead of computing depreciation of balance lying in block of assets as at end of year, after reducing value realized on first car as per provisions of s. 43(6)(c), AO has declined claim on first car as whole which is not correct. learned Authorised Representative has also taken plea that taking of car by financier does not amount to transfer therefore depreciation should be allowed on first car also, for which he placed reliance on decision in case of ONGC (supra). We found that in this case, undertaking of assessee (ONGC) came to be transferred and vested in statutory corporation w.e.f. 1st Feb., 1994 under Oil & Natural Gas Commission (Transfer of Undertaking & Repeal) Act, 1993. This was not treated by Tribunal as transaction of sale, on plea that there was no "transfer" by way of exchange, corporation has not transferred anything in favour of ONGC hence transfer and vesting of assets did not come within expression "sold" used in s. 43(6)(c) of Act. However, facts of case before us are entirely distinguishable and assessee himself in depreciation schedule shown value at which old car was sold through financier. Thus, case law referred by learned Authorised Representative is of no help to assessee for coming to conclusion that sale price of car sold/taken away by financier and which did not form (part) of block of assets as at end of year, was eligible for claim of depreciation. In instant case, while disallowing claim of depreciation on first car, AO has not arrived at WDV of block of assets as per provisions of s. 43(6)(c) and outrightly declined claim on cost of first car, which is not correct. In interest of justice and fair play, we restore matter back to file of AO for arriving at WDV of block of assets keeping in view provisions of s. 43(6)(c) of Act and recompute claim of depreciation as per amended provisions of s. 32(1) of Act, as discussed hereinabove. In result, appeal of assessee is allowed in part for statistical purposes. *** GAURAV KHULLAR v. ASSISTANT COMMISSIONER OF INCOME TAX