IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ITA No. 1031/Ahd/2012 Assessment Year : 2003-04 ACIT, Agriculture Produce Market Patan Circle, Vs Committee, Patan Market Yard, Visnagar PAN : AAAAT 5794 R (Appellant) (Respondent) Revenue by : Shri Satish Solanki, Sr DR Assessee by : Shri M K Patel, AR Date of Hearing : 17/08/2016 Date of Pronouncement: 29/09/2016 ORDER This appeal by Revenue is directed against order of Commissioner of Income-Tax (Appeals), Gandhinagar, Ahmedabad dated 03.02.2012 for AY 2003-04. 2. sole ground raised is as under;- ld. CIT(A) has erred in law and on facts in directing to allow depreciation on assets by taking WDV of assets as original cost of assets which is not in accordance with explanation 6 to section 43(6) applicable in relevant year. 3. Brief facts are Assessment u/s 147 was set aside and restored back to Assessing Officer to consider claim of deduction u/s 11 & 12 of Act. Consequent thereto, order u/s 143(3) r.w.s. 147 r.w.s. 254 was passed and claim of depreciation and benefit u/s 10, 11 & 12 were denied. assessee preferred appeal against this second order where ld. CIT(A) directed AO to allow claim of depreciation, by following observations:- SMC-ITA No. 1031/Ahd/2012 ACIT vs. Agriculture Produce Market Committee AY : 2003-04 2 5.1 As it has already been decided that in these proceedings appellant is being assessed as AOP (Others) and no benefit of section 10, 11 & 12 would be available. If its income was to be computed u/s 11 then depreciation would have to be allowed under commercial principles and not as per Income-tax Act (Section 32). However, as held earlier, it is to be assessed as AOP (Others) only and income escaping assessment has to be discussed and added, if needed in this status only. Therefore, allowability of depreciation is to be seen u/s 32 only. Now, depreciation is to be allowed on WDV at rates prescribed. appellant has claimed actual cost of block of assets as WDV. Its income was not taxable earlier as local authority up to A.Y. 2002-03 and income was exempt as per section 10(20) of I.T Act. Therefore, it has not claimed depreciation earlier and therefore it was not "actually allowed". various courts have held that WDV has to be worked out by reducing depreciation "actually allowed" and not only "allowable". Reliance is placed on in case of CIT vs. Mahendra Mills (2000) 243 ITR 56 (SC). In fact decision of Hon'ble ITAT Rajkot Bench in case of Kandla Port Trust - [2007] 104 ITD 1 (RAJKOT) is squarely on issue and gist of decision is as follows: "Section 43(1), read with section 32, of Income-tax Act, 1961 - Actual cost - Assessment year 2003-04 -Assessee, port trust, was exempted from income-tax under section 10(20) till 31-3-2002 - By virtue of amendment in section 10(20) by Finance Act, 2002, assessee filed its first return for assessment year 2003-04 -. In computation of total income, assessee claimed depreciation, which was computed on original cost of assets, i.e., assessee had taken WDV of assets as on 1- 4-2002 as original cost of assets - Assessing Officer allowed depreciation on book value of assets, which was arrived at after deducting from original cost of assets depreciation provided in account books till 31-3-2002 - Whether, in instant case, WDV as on 1-4-2002 would be original cost of assets - Held, yes - Whether, therefore, assessee was entitled to depreciation on original cost of assets - Held, yes" Therefore, respectfully following above, AO is directed to allow depreciation as per IT Act by calculating WDV as per directions given above. income determined finally would not be less than that declared in original return u/s 139(1) and assessed u/s 143(1) in regular assessment. principle laid down by Hon'ble Supreme Court in case of Sun Engg. (Supra) should be adhered to. ground is decided accordingly. SMC-ITA No. 1031/Ahd/2012 ACIT vs. Agriculture Produce Market Committee AY : 2003-04 3 4. ld. Counsel for assessee contends that there is no infirmity in order of ld. CIT(A) in allowing depreciation on WDV based on actual allowance of depreciation. assessee has no objection if matter is set aside and restored back to file of AO to verify amount of depreciation actually allowed and work out WDV and allowable depreciation accordingly. 5. Ld. Departmental Representative is heard. 6. I have heard rival contentions, perused material available on record and gone through orders of lower authorities. On principle, there is no infirmity in order of ld. CIT(A) that WDV shall be worked out on basis of depreciation actually allowed to assessee as evident from assessment record. In view thereof, I find merit in contention of ld. Counsel for assessee that matter may be restored back to file of AO to verify claim of depreciation actually allowed to assessee and work out WDV and consequent depreciation in impugned year in conformity with assessment records. This Revenue s appeal is accordingly allowed for statistical purposes. 7. In result, Revenues appeal is allowed for statistical purposes. Order pronounced in Court on 29th September, 2016 at Ahmedabad. Sd/- R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 29/09/2016 Biju T. SMC-ITA No. 1031/Ahd/2012 ACIT vs. Agriculture Produce Market Committee AY : 2003-04 4 /Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. Concerned CIT 4. CIT(A) 5. DR, ITAT, Ahmedabad 6. Guard file. BY ORDER, TRUE COPY (Dy Asstt.Registrar) ITAT, Ahmedabad ACIT, Patan Circle, Patan v. Agriculture Produce Market Committee