I have a confusion regarding Explanation 4A of Sec 43(1) of Income Tax Act
My problem is as follows,
X Sold a Plant to Y on 1.6.2008 at 2,00,000.
W.D.V on the date of transfer by X to Y is 1,50,000. In the Books of Y W.D.V of the relevant Block (Plant @ 15% dep) as on 1.4.2008 was 3,00,000. Y treated the Plant as follows:
In the Books of Y
W.D.V of the relevant Block on 1.4.2008 3,00,000
Add: Additions during the year 2008-2009 Rs. 2,00,000
5,00,000
Less: Sale proceeds nil .
5,00,000
Depreciation @ 15% 75,000 .
W.D.V as on 31.3.2009 4,25,000
Add: Additions during the year 2009-2010 50,000 .
4,75,000
Less: Sale Proceeds nil .
4,75,000
Less: Depreciation @ 15% 71,250 .
W.D.V as on 31.3.2010 4,03,750 .
Now on 1.8.2010 the Plant which was acquired by Y from X was LEASED back to X by Y.
Vide Explanation 4A of Sec 43(1) the actual cost of the asset for the purpose of depreciation in the hands of Y will be the W.D.V on the date of transfer by X to Y i.e, 1,50,000.
My question is whether the above calculation of the depreciation will be recomputed and assessment order of the
P.Y 2008-2009 and 2009-2010 will be rectified u/s 154? Please show the the computation of the depreciation and W.D.V of the relevant Block during the P. Y 2010-11 in the Books of Y. (assume there is no purchase or sale of plant in 2010-2011)
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