Though Expl. 10 to s. 43(1) does not apply to loan waiver, treatment in books of reducing amount waived from asset cost means that WDV has to be reduced

Steel Authority of India Ltd vs. CIT (Delhi High Court)

The assessee received a loan of Rs. 5,277 crores from the Steel Development Fund in earlier years. In AY 2000-01, a substantial part of the loan was waived. In its books of account, the assessee reduced the cost of the assets by the amount of loan waived and claimed depreciation on the reduced figure. However, the assessee claimed that for income-tax purposes, the waiver did not impact the WDV of the assets and that depreciation had to be allowed on the original figure. The AO, CIT (A) & Tribunal (included in file) decided the issue against the assessee by relying on Explanation 10 to s. 43(1) inserted by the F (No. 2) Act 1998 w.e.f. 1.4.1999. On further appeal to the Tribunal, HELD reframing the question: