ACIT CC-34, MUMBAI v. RAMESH B PAREKH, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D : MUMBAI BEFORE SHRI D. MANMOHAN HONBLE VICE PRESIDENT AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER ITA. NO.2281/MUM/2009 ASSESSMENT YEAR 2004-2005 ACIT CC-34 MUMBAI 400 020. VS. SHRI RAMESH B. PAREKH MUMBAI 054 PAN AAFPP-6795-C (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI KISHAN VYAS FOR RESPONDENT : SHRI SANJIV SHAH ORDER PER SHRI D. MANMOHAN V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 16-1-2009 PASSED BY THE CIT(A)-VI MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-2005. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) WAS NOT CORRECT IN NOT HOLDING T HAT THE PROVISIONS OF SECTION 50C COULD NOT APPLIED IN A CA SE WHERE THE PROVISIONS OF SECTION 50 WERE APPLICABLE IGNOR ING THE FACT THAT THE PROVISIONS OF SECTION 50 ARE ONLY WITH RES PECT TO COMPUTATION OF GAIN ON DEPRECIABLE ASSETS AND THE P ROVISIONS OF SECTION 50C IS SPECIFIC REGARDING THE VALUE OF C ONSIDERATION TO BE ADOPTED WHEN THE VALUE OF ASSET RECEIVED IS L ESS THAN THE VALUE ADOPTED OR ASSESSED BY THE STAMP DUTY AUT HORITIES. 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURC HASE AND SALE OF PETROLEUM PRODUCTS BESIDES TRANSPORT BUSIN ESS. ASSESSEE HAD ALSO DECLARED HOUSE PROPERTY INCOME OF RS.12 50 583 /- IN RESPECT OF HIS GOREGAON PROPERTY. AS AGAINST THE GROSS RENT RECEIV ED ASSESSEE DEDUCTED MUNICIPAL TAXES ETC. UNDER SECTION 24 OF THE ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE GOREGAON PROPERTY WAS S ITUATED IN A COMMERCIAL LOCALITY AND IT IS A BUSINESS ASSET; THE REFORE INCOME EARNED THEREON HAS TO BE TREATED AS BUSINESS INCOME. ACCOR DINGLY DEDUCTION UNDER SECTION 24 WAS DISALLOWED. 3. IT WAS FURTHER FOUND THAT ASSESSEE SOLD THE PR EMISES AT 405 COMMERCE HOUSE WHICH FALLS IN THE BLOCK OF ASSETS ON WHICH DEPRECIATION IS ALLOWABLE @ 10%. AS PER THE AGREEME NT THE SALE CONSIDERATION IS ONLY RS. 9 LAKHS. HOWEVER SINCE T HE SAID PROPERTY IS A DEPRECIABLE ASSET FALLING IN THE BLOCK OF ASSETS T HE ASSESSING OFFICER WAS OF THE OPINION THAT SECTION 50C IS APPLICABLE IN RE SPECT OF THIS TRANSACTION IN WHICH EVENT ASSUMED VALUE OF RS. 20 40 000/- (VALUATION FOR THE STAMP DUTY PURPOSE) HAS TO BE TAKEN INTO CO NSIDERATION AND THE SAME HAS TO BE REDUCED FROM THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AND DEPRECIATION IS ALLOWABLE ON THE NET WRI TTEN DOWN VALUE. 4. THE CASE OF THE ASSESSEE ON THE OTHER HAND WA S THAT WITH REGARD TO CALCULATION OF DEPRECIATION PROVISIONS O F SECTION 50C OF THE I.T. ACT ARE NOT APPLICABLE AND THUS THE METHOD FOLLOWE D BY THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH LAW. THE ASSESSIN G OFFICER REJECTED THE CONTENTION OF THE ASSESSEE. 5. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) OBSERVED THAT THE SALE VALUE REALIZED IN RESPECT OF DEPRECIABLE ASSETS HAS TO BE REDUCED FROM THE BLOCK OF ASSETS AND NOT THE ARTIFICIAL VALUE ON THE LAND PORTION IN RESPECT OF THE IMPUGNED PREMISES P ARTICULARLY WHEN NO 3 SUCH VALUE WAS AVAILABLE IN THEIR SALE AGREEMENTS. THE ASSESSING OFFICER WAS DIRECTED TO REWORK THE DEPRECIATION ACCORDINGLY . 6. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. AT T HE TIME OF HEARING LEARNED COUNSEL PLACED RELIANCE UPON THE L ATEST DECISION OF THE ITAT E BENCH MUMBAI IN THE CASE OF DCIT VS. CABL E CORPORATION OF INDIA LIMITED ITA. NO.5592/MUM/2002 DATED 29-10-200 9 WHEREIN THE BENCH HELD THAT ARTIFICIAL VALUE SHOULD NOT BE TAKE N INTO CONSIDERATION FOR THE PURPOSE OF REDUCTION FROM THE BLOCK OF ASSE TS. IN THIS REGARD THE BENCH OBSERVED IN PARA 6 AS UNDER : HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERU SED THE RECORD WE ARE NOT INCLINED TO DISTURB WELL REASONE D FINDINGS OF THE LEARNED CIT(A). WE HAVE NOTED THAT WHEN AN ASSE T IS SOLD UNDER SECTION 43(6)(C) THE BLOCK OF ASSETS SHALL S TAND REDUCED BY MONEYS PAYABLE IN RESPECT OF THE ASSET SO SOLD . EXPLANATION 4 TO SECTION 43(6) PROVIDES THAT THE CO NNOTATIONS OF EXPRESSION MONEYS PAYABLE FOR THIS PURPOSE WIL L BE SAME AS PROVIDED BY EXPLANATION BELOW SECTION 41(4). THI S EXPLANATION IN TURN REFERS TO THE PRICE AT WHICH IT IS SOLD. IT IS THUS CLEAR THAT THERE NO OCCASION TO ADOPT THE F AIR MARKET VALUE FOR THIS PURPOSE. WHAT REALLY MATTERS IS THE PRICE AT WHICH THE ASSET IS SOLD. AS REGARDS THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF DEPARTMENTAL REPRESENTATIVE WE FIND THAT THIS DECISION PROCEEDS ON THE SIGNIFICANCE ON DIFFERENT EXPRESSIONS EMPLOYED WITH RESPECT TO SALE OF ASSET AND WITH RESPECT TO VALUE OF SCRAP. W HILE IN CASE OF THE FORMER WHAT IS RELEVANT IS THE PRICE AT WH ICH IT (THE ASSET) IS SOLD SINCE EXPRESSION EMPLOYED FOR SCRA P IS AMOUNT OF VALUE OF SCRAP THEIR LORDSHIPS HAVE HELD THAT IT IS THE VALUE OF THE SCRAP WHICH MUST BE TAKEN INTO ACCOU NT BY THE 4 ASSESSING OFFICER. IN A WAY THUS THIS DECISION SU PPORTS THE STAND OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIE W THAT AS HAS BEEN HELD BY THE LEARNED CIT(A) THAT THE ASSES SING OFFICER DID NOT HAVE ANY POWERS TO TINKER WITH THE SALE PRICE OF THE ASSET AND THAT HE OUGHT TO HAVE TAKEN INTO ACCO UNT SUCH SALE PRICE FOR THE PURPOSE OF COMPUTING THE BLOCK O F ASSETS. NO INTERFERENCE IS THUS CALLED FOR. WE APPROVE THE STA ND OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. LEARNED COUNSEL THEREFORE SUBMITTED THAT THE ASSES SING OFFICER HAS NO JUSTIFICATION IN TAKING INTO CONSIDERATION THE ASSU MED MARKET VALUE FOR THE PURPOSE OF REDUCING THE SAME FROM THE BLOCK OF ASSETS. 7. ON THE OTHER HAND LEARNED D.R. STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. SINCE THE VIEW TAKEN BY THE LEA RNED CIT(A) IS IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT E BEN CH MUMBAI (SUPRA) WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED CIT(A). THEREFORE THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY. SD/- SD/- (P.M. JAGTAP) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 15 TH JANUARY 2010. VBP/- 5 COPY TO 1. ACIT CC-34 R.NO. 104 FIRST FLOOR AAYAKAR BHA VAN MUMBAI 400 020. 2. SHRI RAMESH B. PAREKH 801 ADRASH CLASSIC A-WI NG OFF. MARVE ROAD MALAD MUMBAI 400 054. PAN AAFPP-6795-C 4. CIT(A) CENTRAL-VI MUMBAI 5. CCIT CENTRAL-II MUMBAI. 6. D.R. D BENCH MUMBAI. 7. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. SNO DATE INITIALS 1 DRAFT DICTATED ON 14-01-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 15-01-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER