Income Tax Act, 1961

--Depreciation--AllowabilityAmalgamation of assessee-company--During the year assessee purchased edible oils and bakery fats division of Limited vide an agreement dated 28-8-2003. Later on, w.e.f. 1-10-2003 assessee company was amalgamated with G Pvt. Ltd. The assessee claimed depreciation for six months on the assets purchased from H Ltd. Further depreciation of six months was claimed by G Pvt. Ltd. In response to a query that why depreciation should not be allowed in the ratio of number of days for which assets were used by these two companies, it was submitted that the assets were purchased w.e.f. 1-9-2003 and depreciation has been claimed for six months in terms of the fith proviso to section 32(1) because later on assets were transferred to G Pvt. Ltd. However, assessing officer did not accept this explanation. According to him, because of the fifth proviso the total depreciation cannot exceed the deduction calculated at the prescribed rate as if the amalgamation had not taken place. Since assessee had acquired the assets on 29-8-2003 and same were transferred due to amalgamation on 1-10-2003, therefore, assessee has used the assets only for one month and, accordingly, he calculated the allowable depreciation for one month. However, assessee claimed depreciation for six months, i.e., 180 days as per the second proviso. Held: On basis of second proviso to section 32(1) depreciation at the rate of 50 per cent would be allowable to assessee, i.e., 180 days in view of atoresaiel. Therefore, assessee, i.e., amalgamating company, had rightly claimed the depreciation for the first six months because only depreciation of six months had been claimed in the case of amalgamated company. Therefore, the order of the Commissioner (Appeals) is set aside and the assessing officer is directed to allow the depreciation for six months.