Section 43(1) explaination 4

The explanation 4 tackles bogus sale and buy back arrangements. For eg. a company may have a plant whihc is say now having a WDV of 10000/-. This is sold to another concern, may be a related concern. After 3 years the plant is revalued by an expert and bought back for say 10,00,000/-.

This re valuation would not be possible without such sale transaction. Even though the repalcement cost of the plant may be genuinely 10 lakhs, IT act does not permit it. So the above sale and buy back circumvents the law.

Now it is irrelevant whether the other assessee claimed depreciation or not. As far as the asessee who originally owned the plant is concerned, he is eligible for depreciation only on WDV of 10000/- less the depreciation that would have been allowed to him in the intervening period

Thanku Sir, But eske andar Hum Tax planing vi to kar sakte h. Let us suppose if we have a Plant and Machinary of Rs. 100,000 on 31.3.2010 and then we tfd it to another person of Rs. 100,000 and after 5 years the another person sells the asset to us for Rs. 100,000  & another assessee claim deprication for this. But now the asset value in our hand is Rs, 100,000. But the actual cost if the assessee does not sold the asset is Rs. 100,000 minus Deprication For five Years.. But as per expalination 4 the value is 100000.