M/s Hirsch Bracelet India Private Limited, Bangalore v. Assistant Commissioner of Income Tax Circle-3(1)(2), Bangalore

ITA 3392/BANG/2018 | 2015-2016
Pronouncement Date: 03-07-2019 | Result: Partly Allowed

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Expert Summary: The issue revolves around three major concerns, first whether all the expenditures incurred after transfer of leasehold rights are to be allowed as deduction. The Tribunal relying on the judgement of High Court of Karnataka in case of Lawrence D’souza held that even though the business had come to a halt but being a company all the expenditures incurred were necessary to maintain its legal status till the assets are liquidated and hence allowed as deduction. The second issue deals with whether a claim that the capital gain earned on sale of land and building is to be bifurcated separately as wrongly claimed by assessee in his return of income is to be allowed. The Tribunal held that CIT(a) has the power to examine the claim and remand the claim to AO if required, hence it was directed to AO to examine the claim placed before CIT(a). The third issue pertains to whether the profit on transfer of depreciable assets can be set off against unabsorbed depreciation. The Tribunal held that as the transfer led to short term capital gain, is in nature of business income and hence can be set off against the unabsorbed depreciation. [partly allowed in favour of assessee]

Appeal Details

RSA Number 339221114 RSA 2018
Assessee PAN AAACH0119E
Bench Bangalore
Appeal Number ITA 3392/BANG/2018
Duration Of Justice 6 month(s) 9 day(s)
Appellant M/s Hirsch Bracelet India Private Limited, Bangalore
Respondent Assistant Commissioner of Income Tax Circle-3(1)(2), Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 03-07-2019
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 03-07-2019
Last Hearing Date 27-06-2019
First Hearing Date 27-06-2019
Assessment Year 2015-2016
Appeal Filed On 24-12-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN VICE PRESIDENT AND SHRI B.R. BASKA RAN ACCOUNTANT MEMBER ITA NO. 3392/BANG/2018 ASSESSMENT YEAR : 2015 - 16 HIRSH BRACELET INDIA PVT. LTD. 6/14 GURAPPA AVENUE PRIMROSE ROAD BANGALORE 560 025. PAN: AAACH 0119 E VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(1)(2) BANGALORE. APPELLANT RESPONDENT APP E LLANT B Y : SHRI R.S.V.S. PAVAN KUMAR ADVOCATE RESPONDENT BY : DR. P.V. PRADEEP KUMAR ADDL.CIT(DR)(ITAT) BENGALURU. DATE OF HEARING : 27 .0 6 .2019 DATE OF PRONOUNCEMENT : 03 . 0 7 . 2 0 1 9 O R D E R PER N.V. VASUDEVAN VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 24.10.2018 OF THE CIT(APPEALS)-3 BANGALORE RELATIN G TO ASSESSMENT YEAR 2015-16. 2. THE CONCISE GROUNDS OF APPEAL FILED BY THE AS SESSEE READS AS FOLLOWS:- 1. THE ORDER OF THE LEARNED CIT(A) IS AGAINST THE PROVISIONS OF LAW AND CONTRARY TO THE FACTS OF THE CASE AND IS TH EREFORE UNSUSTAINABLE. ITA NO. 3392/BANG/2018 PAGE 2 OF 13 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT OPERATIONS OF THE COMPANY HAVE STOPPED WITHOUT CONS IDERING THAT THE COMPANY WAS STILL IN EXISTENCE AND THE EXP ENDITURE WAS NEEDED TO BE MADE FOR MAINTAINING THE LEGAL STA TUS AND FOR DISPOSING THE ASSETS AND SETTLING THE LIABILITI ES. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT DECISION OF HON'BLE SUPREME COURT IN GOETZ (INDIA) LTD VS COMMISSIONER OF INCOME TAX (2006) 157 TAXMAN 1 WHE RE NO SCRUTINY ASSESSMENT WAS PENDING WAS APPLICABLE TO APPELLANT'S CASE WITHOUT APPRECIATING THE FACT THAT IN THE APPELLANT'S CASE SCRUTINY WAS PENDING BEFORE THE AS SESSING OFFICER. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT U/S 143(3) OF THE INCOME TAX ACT 1961 IT IS THE RESPONSIBILITY OF TH E ASSESSING OFFICER TO CONCLUDE AN ASSESSMENT AFTER TAKING INTO ACCOUNT ALL THE MATERIAL PRODUCED BY THE APPELLANT AND GATHERED BY THE ASSESSING OFFICER. IT IS INCUMBENT ON THE ASSESSING OFFICER TO CONSIDER THE SUBMISSIONS OF THE APPELLANT ON ASSESS ABILITY OF THE CAPITAL GAINS ON THE SALE OF LAND AS LONG-TERM CAPITAL GAINS. 5. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSESS MENT ORDER WHICH IS AGAINST THE CBDT CIRCULAR NO. 14(XL-35) DA TED APRIL 11 THAT HAS BEEN JUDICIALLY NOTED AND APPROV ED. 6. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT TRANSFER OF LEASEHOLD LAND ALONG WITH THE BUILDINGS ON IT LEADS TO SHORT-TERM CAPITAL GAINS U/S 50 OF THE INCOME TA X ACT 1961 WITHOUT APPRECIATING THAT SEC 50 OF THE I.T.AC T 1961 IS APPLICABLE IN THE CASE OF DEPRECIABLE ASSETS AND L AND/LEASE HOLD LAND IS NOT A DEPRECIABLE ASSET. 7. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT IT IS NOT POSSIBLE TO BIFURCATE THE CONSIDERATION B ETWEEN LAND AND BUILDINGS. ITA NO. 3392/BANG/2018 PAGE 3 OF 13 3. THE ADDITIONAL GROUNDS OF APPEAL SOUGHT TO BE RA ISED BY THE ASSESSEE READS AS FOLLOWS:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION U/S32(2) RWS 71 OF THE I.T. ACT. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINS T THE SHORT TERM CAPITAL GAINS ON SALE OF BUSINESS ASSETS. 4. THE ABOVE ADDITIONAL GROUNDS SOUGHT TO BE RAISED BY THE ASSESSEE WERE GROUNDS OF APPEAL WHICH WERE AGITATED BY THE A SSESSEE BEFORE THE CIT(A) BUT WERE NOT ADJUDICATED BY THE CIT(A). THE SE GROUNDS ARE THEREFORE ADMITTED FOR ADJUDICATION. 5. THERE ARE BASICALLY THREE ISSUES TO BE DECIDED I N THIS APPEAL VIZ. (I) DISALLOWANCE OF EXPENSES OF RS.1 08 54 687; (II) NON-CONSIDERATION OF CLAIM OF ASSESSEE THAT CAPITAL GAIN ON SALE OF LAND AND BUILDING HAS TO BE BIFURCATED INTO TWO I.E (A) CAPITAL GAIN ON SALE OF LAND WHICH HAS TO BE R EGARDED AS LONG TERM CAPITAL GAIN; AND (B) CAPITAL GAIN ON SALE OF A BUILDING HAS TO BE R EGARDED AS SHORT TERM CAPITAL GAIN U/S. 50 OF THE INCOME-TAX A CT 1961 [THE ACT]; & (III) CLAIM OF ASSESSEE FOR SET OFF OF UNABSORBED DEPRECI ATION U/S. 32(2) R.W.S. 71 OF THE ACT. 6. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF WRIST WATCH STRAPS. THE ASSESSEE TOOK LAND AT PLOT NO. 45 PART SF 646 PT 647 PT 648 PT 650 PT SIPCOT C OMPLEX 1 HOSUR- 635126 FROM STATE INDUSTRIES PROMOTION CORPORATION OF TAMIL NADU LTD ITA NO. 3392/BANG/2018 PAGE 4 OF 13 (SIPCOT) ON LEASE FOR A PERIOD OF 99 YEARS FOR THE PURPOSE OF SETTING UP A UNIT FOR DESIGNING IMPORTING EXPORTING DEALING I N AND MANUFACTURE OF WRIST WATCH STRAPS. THE ASSESSEE PUT UP A FACTORY ON THE LEASEHOLD LAND AND CARRIED ON THE BUSINESS OF MANUFACTURE OF WRIST WAT CH STRAPS FROM 1992. 7. DUE TO OPERATIONAL DIFFICULTIES AND CONTINUED BU SINESS LOSSES OVER THE YEARS IT CEASED MANUFACTURING OPERATIONS IN TH E YEAR 2006 AND CONTINUED WITH TRADING OPERATIONS TILL 2010 WHEN IT FINALLY DECIDED TO CLOSE DOWN THE BUSINESS. AS THE ASSESSEE WAS OPERATING FR OM THE LEASEHOLD LAND ALLOTTED BY SIPCOT IT HAD TO SEEK PERMISSION FROM SIPCOT TO TRANSFER THE LEASEHOLD RIGHTS OVER THE LAND AS WELL AS THE FACTO RY SHED BUILT OVER THE LAND TO A BUYER. IT ENTERED INTO A MEMORANDUM OF AGREEME NT DATED 27TH NOVEMBER 1991 WITH M/S DEVAS ENGINEERING PVT LTD TO TRANSFER THE LEASEHOLD INTEREST IN THE LAND AND OWNERSHIP RIGHTS OVER THE BUILDING THEREON SUBJECT TO APPROVAL FROM SIPCOT. APPROVAL O F SIPCOT WAS RECEIVED VIDE APPROVAL LETTER DATED 06/02/2014 AND THE TRANSFER OF LEASEHOLD LAND AND BUILDING WAS COMPLETED THEREAFTE R. PERMISSION AND APPROVAL WERE FURTHER SUBJECT TO PAYMENT OF DUES AN D CLAIMS WHICH PREVENTED THE ASSESSEE FROM COMMENCING THE PROCEDUR E OF CLOSING AND WINDING UP OF BUSINESS. 8. ALSO DUE TO PENDING CLAIMS OF CREDITORS LABOUR MATTER SALES TAX DEMANDS AND PROPERTY TAX DUES THE ASSESSEE HAD TO INCUR EXPENSES TOWARDS OFFICE RENT LEGAL PROFESSIONAL FEES PROPE RTY MAINTENANCE CHARGES FEES TOWARDS MEETING COMPLIANCE UNDER COMP ANIES ACT INCOME TAX ACT AND OTHER STATUTORY APPLICABLE LAWS. 9. IN THE RETURN OF INCOME FILED FOR A.Y. 2015-16 O N 30/11/2005 THE ASSESSEE RETURNED CAPITAL GAINS ON TRANSFER OF LEAS EHOLD RIGHTS IN LAND AND BUILDINGS PUT UP ON IT BY THE ASSESSEE AS SHORT TER M CAPITAL GAINS AT RS. ITA NO. 3392/BANG/2018 PAGE 5 OF 13 3 67 67 836 AND AFTER ADJUSTING CURRENT YEARS BUSIN ESS EXPENSES OF RS. 1 08 54 687 (INCLUDING DEPRECIATION AS PER THE I.T. ACT) UNDER THE APPLICABLE PROVISIONS OF THE INCOME TAX ACT 1961 (SET OFF PRO VISION UNDER SECTION 71 OF THE ACT) RETURNED A TOTAL TAXABLE INCOME OF RS. 2 59 15 640. 10. IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE CLA IMED THAT THE SALE OF THE LEASEHOLD RIGHTS OVER THE LAND THAT WAS SOLD GAVE RISE TO LONG TERM CAPITAL GAIN (LTCG). THAT THE SALE OF BUILDING WAS TAXABLE AS SHORT TERM CAPITAL GAIN (STCG) U/S. 50 OF THE ACT AS THE BUILD ING WAS A DEPRECIABLE ASSET AND WAS PART OF THE BLOCK OF ASSETS OF BUILD ING ON WHICH THE ASSESSEE HAD CLAIMED DEPRECIATION. THE PLEA OF ASS ESSEE WAS THAT WHENEVER AN ASSET COMPRISING OF LAND & BUILDING IS SOLD CAPITAL GAIN HAS TO BE COMPUTED BY BIFURCATING SALE CONSIDERATION TOWAR DS LAND AND BUILDING. LAND IS NOT A DEPRECIABLE ASSET AND THEREFORE CAPIT AL GAIN ON SALE OF LAND HAS TO BE COMPUTED AS LTCG AS IT WAS HELD BY THE AS SESSEE FOR MORE THAN 36 MONTHS. THE ASSESSEE SUBMITTED THAT BY MISTAKE (WRONG ADVISE) THE ASSESSEE HAD DECLARED CAPITAL GAIN ON SALE OF LAND & BUILDING AS STCG IN THE RETURN OF INCOME. 11. IN THE ASSESSMENT ORDER DATED 24/11/2017 PASSED U/S 143(3) OF THE ACT THE ASSESSING OFFICER (AO) DISALLOWED THE SETT ING OFF OF THE EXPENDITURE OF RS.1 08 54 687 AGAINST THE CAPITAL GAINS STATIN G THAT THERE WAS NO BUSINESS AND THAT THE EXPENDITURE CLAIMED IS DISALL OWED U/S 37 OF THE ACT. OUT OF THE EXPENDITURE REIMBURSEMENT OF EXPENDITUR E OF RS.13 41 015 WAS ALSO HELD TO BE NOT ALLOWABLE BECAUSE NO TDS WAS MA DE ON IT. REGARDING THE SUBMISSIONS ON RECOMPUTATION OF CAPITAL GAINS A ND SET OFF OF BROUGHT FORWARD BUSINESS LOSSES THE AO ASSESSED CAPITAL GA INS ON SALE OF LAND AND BUILDINGS AS SHORT TERM CAPITAL GAINS AND DID NOT S ET OFF THE BROUGHT FORWARD BUSINESS LOSSES. NO REASONS WERE ASSIGNED B Y THE AO FOR DOING SO. ITA NO. 3392/BANG/2018 PAGE 6 OF 13 12. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE AS SESSMENT ORDER BEFORE THE CIT(APPEALS). THE LEARNED CIT(A) DISMISS ED THE APPEAL. HE HELD THAT AS THE BUSINESS WAS COMPLETELY STOPPED T HE ACTION OF THE AO IN DISALLOWING THE EXPENDITURE OF RS. 1 08 54 687 CANN OT BE FAULTED WITH. CITING THE DECISION OF HON'BLE APEX COURT IN THE CA SE GOETZE (INDIA) LTD VS. COMMISSIONER OF INCOME-TAX [2006] 157 TAXMAN 1 (SC) HE HELD THAT THE CLAIM OF THE ASSESSEE FOR RECOMPUTING THE CAPITAL G AINS DECLARED AS STCG CANNOT BE CONSIDERED BY THE AO IN THE ABSENCE OF A REVISED RETURN. 13. THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL AGAINST THE ORDER OF THE CIT(APPEALS). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISSU E OF DISALLOWANCE OF EXPENSES OF RS. 1 08 54 687. THE LD. COUNSEL FOR T HE ASSESSEE RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V. LAWRENCE D'SOUZA [2011] 15 TAXMANN.COM 148 (KARNATAKA) RENDERED ON VERY SIMILAR FACTS. IN THAT CASE THE ASSESSEE WAS ENGAGED IN RU NNING A HOTEL AND HE STOPPED HIS BUSINESS FROM AUGUST 1994 ONWARDS DUE T O LABOUR PROBLEM. THE BUSINESS PREMISES WAS A LEASED PREMISES AND WAS SOLD ALONG WITH FURNITURE FIXTURES ETC. DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 1996-97. IN THE RETURN OF INCOME THE ASSESSEE CLAIMED DEDUCTIO NS FOR EXPENDITURE INCLUDING FOR RENOVATION OF THE BUILDINGS AFTER THE BUSINESS WAS STOPPED POST OPERATIVE RENT AND POST OPERATIVE INTEREST. TH E HON'BLE COURT REJECTED THE CONTENTION THAT NO DEDUCTION IS TO BE ALLOWED A S THE BUSINESS WAS COMPLETELY STOPPED AND ALSO THAT THE EXPENDITURE CL AIMED WAS ALSO NOT SUBSTANTIATED. IT HELD THAT THE LIABILITIES LIKE PA YING RENT ETC. ARE NOT PERSONAL LIABILITIES OF THE ASSESSEE AND THAT ALL T HE EXPENDITURE INCLUDING THE EXPENDITURE FOR RENOVATION OF BUILDINGS ETC. INCUR RED AFTER THE BUSINESS WAS STOPPED HAS TO BE ALLOWED THOUGH THE BUSINESS WAS STOPPED IN THE YEAR 1994. ITA NO. 3392/BANG/2018 PAGE 7 OF 13 15. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TO MAINTAIN ITS LEGAL STATUS AS A COMPANY TILL THE ASS ETS ARE DISPOSED AND LIABILITIES ARE PAID. HE BROUGHT TO OUR NOTICE THE BREAK-UP OF THE VARIOUS EXPENSES CLAIMED WHICH ARE AS FOLLOWS:- PARTICU LAR S AMOUNT IN RS. REMARKS RENT 394 208 REGISTERED OFFICE & STORAGE OF BOOKS PROFESSIONAL CHARGES 18 00 732 ACCOUNTIN G CORPORATE SECRETARIAL LABOUR CHARGES RATES & TAXES 53 33 202 SALES TAX DEMAND PAID PROPERTY TAX 8 70 833 ARREARS OF PROPERTY TAX AUDIT FEES 1 42 500 STATUTORY AUDIT FEE & TAX RETURN FILING PROPERTY MAINTENANCE CHARGES 3 78 200 LEASEHOLD P ROPERTY REPAIRS LEGAL EXPENSES 13 41 055 LEGAL CHARGES IN RELATION TO TRANSFER OF PROPERTY BAD DEBTS 2 41 884 TITAN WATCHES PAST EMPLOYEE PAYMENT 2 32 500 SETTLEMENT AMOUNT PAID ON LABOUR COURT ORDER 16. HE POINTED OUT THAT THE AFORESAID EXPENDITURE I NCURRED BY THE ASSESSEE WAS ESSENTIAL FOR THE PURPOSE OF MAINTAINI NG THE LEGAL STATUS AND FOR DISPOSING THE ASSETS. FURTHER NEITHER THE AO NO R THE CIT(A) HAVE DOUBTED THE INCURRING OF THE EXPENDITURE. 17. THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S AN UNDISPUTED FACT THAT THOUGH BUSINESS OF ASSESSEE CAME TO A HALT IN THE YEAR 2010 YET THE ASSESSEE WAS LIQUIDATING ITS ASSETS. THE ASSESSEE HAD ONLY A LEASEHOLD ITA NO. 3392/BANG/2018 PAGE 8 OF 13 RIGHTS ON THE LAND AND IT HAD TO GET THE PERMISSION OF SIPCOT FOR TRANSFER OF LEASEHOLD RIGHTS. THAT APPROVAL CAME TO ASSESSEE O NLY ON 06.02.2014. THE PROCESS OF TRANSFER COULD BE COMPLETED ONLY DUR ING THE PREVIOUS YEAR. A LOOK AT THE VARIOUS EXPENSES WHICH WERE CLAIMED A S DEDUCTION WOULD SHOW THAT THEY WERE RATHER OF THE REGISTERED OFFI CE PROFESSIONAL CHARGES AUDIT FEES AND PROPERTY MAINTENANCE CHARGES. ALL T HESE EXPENSES HAD TO BE INCURRED SINCE THE ASSESSEE WAS A COMPANY AND IT WAS REQUIRED TO MAINTAIN ITS LEGAL STATUS TILL THE ASSETS OF THE CO MPANY ARE LIQUIDATED. THE MAJOR PORTION OF EXPENSES CLAIMED IS ON ACCOUNT OF SALES TAX DEMAND OF RS.53.33 LAKHS PROPERTY TAX AUDIT FEES PROPERTY MAINTENANCE SETTLEMENT AMOUNT PAID ON LABOUR COURTS ORDER. IT IS THEREF ORE CLEAR THAT ALL THESE EXPENSES HAD TO BE INCURRED FOR PROPER LIQUIDATION OF ASSETS OF THE COMPANY. IN IDENTICAL CIRCUMSTANCES THE HONBLE H IGH COURT OF KARNATAKA IN THE CASE OF LAWRENCE D'SOUZA (SUPRA) TOOK THE VIEW THAT EXPENDITURE IN QUESTION HAD TO BE ALLOWED IN AY 1996-97 THOUGH BU SINESS CAME TO A HALT IN THE YEAR 1994. FOLLOWING THE AFORESAID DECISION OF HONBLE HIGH COURT OF KARNATAKA WE ARE OF THE VIEW THAT THE EXPENSES IN QUESTION HAVE TO BE ALLOWED AS A DEDUCTION. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF ASSESSEE. 19. AS FAR AS THE OTHER ISSUE OF CAPITAL GAIN ON SA LE OF LAND & BUILDING IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD WRONGLY TREATED THE ENTIRE CAPITAL GAINS AS SHO RT TERM CAPITAL GAIN IN ITS RETURN OF INCOME AND THE SAME NEEDS TO BE TREATED A S SHORT TERM CAPITAL GAINS FOR SALE OF BUILDING AND LONG TERM CAPITAL GA INS FOR LEASEHOLD RIGHTS IN LAND. HE BROUGHT TO OUR NOTICE THAT THE CIT(A) REJ ECTED THE CLAIM OF ASSESSEE ONLY FOR THE REASON THAT ASSESSEE HAS SHOW N SHORT TERM CAPITAL GAINS FROM SALE OF ITS CAPITAL ASSETS IN ITS RETURN OF INCOME. THE CIT(A) DISMISSED THE CLAIM OF ASSESSEE HOLDING AS FOLLOWS: - ITA NO. 3392/BANG/2018 PAGE 9 OF 13 . NO REVISED RETURN OF INCOME WAS FILED BY THE ASSESSEE. SO THE CLAIM OF THE ASSESSEE COULD NOT HAVE BEEN CONSI DERED BY THE AO IN VIEW OF THE BINDING DECISION OF HON'BLE SUPRE ME COURT IN THE CASE OF GOETZ (INDIA) LTD. V. COMMISSIONER OF INCOME TAX 12006] 157 TAXMAN 1(SC) . THE POWER OF AO TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RE TURN WAS CONSIDERED BY THE HON'BLE SUPREME COURT IN THIS CAS E AND THE COURT HELD THAT THE AO HAD NO SUCH POWER TO ENTERTAIN ANY CLAIM OF FRESH DEDUCTION BY THE ASSESSEE IF THE SAME WAS NOT FILE D BY WAY OF REVISED RETURN. FURTHER THE BUILDING IS A DEPRECIA BLE ASSET AND THE LAND ON WHICH IT IS SITUATED CANNOT BE SEGREGATED A S THE SALE OF LAND AND BUILDING IS AS A WHOLE AND SEPARATE VALUES TO T HE SAME HAVE NOT BEEN ASSIGNED DURING SALE. THE CLAIM OF THE ASSESSE E THAT THE SALE PRICE SHOULD BE CONSIDERED TO BE BOOK VALUE OF THE BUILDING AND THE BALANCE AMOUNT NEEDS TO BE CONSIDERED AS RELATED TO THE LEASEHOLD RIGHTS OF LAND IS WITHOUT ANY BASIS. CONSIDERING AB OVE THE GROUNDS OF APPEAL 7 TO 9 OF THE APPELLANT ARE DISMISSED.' 20. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX CHENNAI V. ABHINITHA FOUNDATION (P.) LTD. [2017] 83 TAXMANN.COM 100 (MADRAS) WHEREIN ON A REVIEW OF VARIOUS DECISIONS ON THE MA TTER INCLUDING THE DECISION IN GOETZE (INDIA) CASE HAS HELD THAT THE CLAIM CAN BE CONSIDERED BY THE APPELLATE AUTHORITIES INCLUDING T HE CIT(A) AND ALSO ON REMAND BY THE ASSESSING OFFICER. THE RELEVANT PORTI ON OF THE JUDGEMENT IS EXTRACTED BELOW:- '18. IN SUM WHAT EMERGES FROM A PERUSAL OF THE RAT IO OF THE JUDGMENTS CITED ABOVE IN PARTICULAR THE JUDGMENTS RENDERED BY THE SUPREME COURT IN GOETZE'S INDIA LTD.'S CASE (SUPRA) AND NATIONAL THERMAL POWER CO. LTD.'S CASE (SUPRA) AND THOSE R ENDERED BY THE DIVISION BENCH OF THIS COURT IN RAMCO CEMENTS LTD. (SUPRA) AND MALIND LABORATORIES (P.) LTD. (SUPRA) AS ALSO THE J UDGMENTS OF THE DELHI HIGH COURT IN SAM GLOBAL SECURITIES LTD.'S CA SE (SUPRA) AND JAI PARABOLIC SPRINGS LTD.'S CASE (SUPRA) THAT EV EN IF THE CLAIM MADE BY THE ASSESSEE COMPANY DOES NOT FORM PART OF THE ORIGINAL RETURN OR EVEN THE REVISED RETURN IT COULD STILL B E CONSIDERED IF THE ITA NO. 3392/BANG/2018 PAGE 10 OF 13 RELEVANT MATERIAL WAS AVAILABLE ON RECORD EITHER B Y THE APPELLATE AUTHORITIES (WHICH INCLUDES BOTH THE CIT (A) AND T HE TRIBUNAL) BY THEMSELVES OR ON REMAND BY THE ASSESSING OFFICER. IN THE INSTANT CASE THE TRIBUNAL ON PERUSAL OF THE RECORD FOUND THAT THE RELEVANT MATERIAL QUA THE CLAIM MADE BY THE ASSESSEE COMPANY UNDER SECTION 80 IB (10) OF THE ACT WAS PLACED ON RECORD BY THE ASSESSEE COMPANY DURING THE ASSESSMENT PROCEEDINGS AND THERE FORE IT DEEMED IT FIT TO DIRECT ITS REEXAMINATION BY THE AS SESSING OFFICER. 18.1 IN OUR OPINION THE VIEW TAKEN BY THE TRIBUNAL IS UNEXCEPTIONABLE AND THEREFORE DOES NOT MERIT ANY I NTERFERENCE.' 21. HE SUBMITTED THAT SIMILAR DECISIONS HAVE BEEN R ENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASES: CIT V. PRABHU STEEL INDUSTRIES (P.) LTD [1988] 171 ITR 530 (BOMBAY) AND CIT V. PRU THVI BROKERS & SHAREHOLDERS [2012] 23 TAXMANN.COM 23 (BORN.) . HE POINTED OUT THAT DURING THE ASSESSMENT PROCEEDINGS AND THE PROCEEDIN GS BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THE DETAILS OF THE TRANSFER OF LEASE HOLD RIGHT IN THE LAND AND BUILDING ON THE LAND ALONG WITH THE SUPPOR TING DOCUMENTS AND NEITHER THE AO NOR THE CIT(A) HAVE COMMENTED ADVERS ELY ON THEM. IT WAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR CORREC T COMPUTATION OF THE CAPITAL GAINS SHOULD BE CONSIDERED BY THIS TRIBUNAL AS THE RELEVANT RECORD WAS AVAILABLE ON RECORD WITH THE AO AND THE CIT(A). 22. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE CIT(APPEALS) OUGHT TO HAVE EXAMINED THE CLAIM OF ASSESSEE THAT THE CAPITAL GAI N ON SALE OF LAND & BUILDING SHOULD BE BIFURCATED BY CONSIDERING THE LA ND AS A SEPARATE CAPITAL ASSET AND COMPUTED AS LONG TERM CAPITAL GAIN ON ITS TRANSFER AND BY CONSIDERING THE BUILDING BEING A DEPRECIABLE ASSET AS LIABLE TO CAPITAL GAIN IN ACCORDANCE WITH THE PROVISIONS OF SECTION 50 OF THE ACT. THE CIT(APPEALS) HAD THE POWER TO EXAMINE THE CLAIM AND DECISION CITED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US CLEARLY SUP PORTS THE PROPOSITION THAT ITA NO. 3392/BANG/2018 PAGE 11 OF 13 THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF GOETZ (INDIA) LTD. (SUPRA) WILL NOT STAND IN THE WAY OF APPELLATE AUTHORITY E XAMINING THE CLAIM OF ASSESSEE AND ALSO REMANDING SUCH A CLAIM TO THE AO IF THE CIRCUMSTANCES WARRANT. WE THEREFORE DIRECT THE AO TO EXAMINE THE CLAIM OF ASSESSEE AS PUT FORTH BEFORE THE CIT(APPEALS) AFTE R AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. 23. WE ARE OF THE VIEW THAT SECTION 50 OF THE ACT I S A SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECI ABLE ASSETS AND IS APPLICABLE ONLY TO CAPITAL ASSETS FORMING PART OF B LOCK OF ASSETS ON WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THE ACT. AND AL SO ONLY FOR THE PURPOSES OF SECTIONS 48 AND 49 OF THE ACT. 24. IT IS UNDISPUTED THAT THE CAPITAL ASSETS TRANSF ERRED BY THE ASSESSEE ARE LEASE HOLD RIGHT IN THE LAND (ACQUIRED IN 1991) AND BUILDING ON THE LAND CONSTRUCTED SUBSEQUENTLY. IT IS UNDISPUTED THAT RIG HT IN LEASE HOLD LAND CANNOT FORM PART OF ANY BLOCK OF ASSETS ON WHICH DE PRECIATION CAN BE CLAIMED. IT IS UNDISPUTED THAT NO DEPRECIATION WAS CLAIMED OR ALLOWED UNDER THE ACT ON THE RIGHT IN LEASE HOLD LAND. IT IS ALSO UNDISPUTED THAT BUILDINGS FORM A PART OF BLOCK OF ASSETS ON WHICH DEPRECIATIO N AND THAT DEPRECIATION WAS CLAIMED AND ALLOWED UNDER THE ACT ON THE BUILDI NGS. 25. ON A PLAIN READING OF SECTION 50 OF THE ACT IT IS CLEAR THAT IT IS APPLICABLE FOR TRANSFER OF BUILDINGS AND NOT FOR TR ANSFER OF RIGHT IN LEASE HOLD LAND. THEREFORE THE CAPITAL GAINS ON THE TRANSFER OF THE RIGHT IN LEASE HOLD LAND HAS TO BE COMPUTED UNDER THE NORMAL PROVISIONS AS LONG TERM CAPITAL GAINS AND THE CAPITAL GAINS ON THE TRANSFER OF THE BUILDINGS HAS TO BE COMPUTED UNDER THE PROVISIONS OF SECTION 50 AS SHOR T TERM CAPITAL GAINS. THE OBSERVATIONS OF THE CIT(APPEALS) CONTRARY TO TH E AFORESAID PROVISIONS ARE UNSUSTAINABLE AND ARE HEREBY VACATED. THE LD. COUNSEL FOR THE ITA NO. 3392/BANG/2018 PAGE 12 OF 13 ASSESSEE HAS IN THIS REGARD RIGHTLY PLACED RELIANC E ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. VIMAL CHAND GOLECHA [1993] 201 ITR 442 (RAJ.) WHEREIN IT WAS HELD THAT WHEN PRICE OF TWO CAPITAL ASSETS IS CHARGED AT ONE CONSOLIDATED PRICE WHERE A GAIN FROM ONE OF CAPITAL ASSETS WAS A SHORT-TERM CAPITAL GAIN WHI LE FROM OTHER IT WAS A LONG TERM CAPITAL GAIN THEN THE ASSESSEE IS ENTITL ED TO BIFURCATE THE SAME AND BENEFIT TO ASSESSEE COULD NOT BE DENIED IN RESP ECT OF GAIN ARISING FROM SALE OF AN ASSET WHICH COULD BE CONSIDERED AS LONG- TERM CAPITAL GAIN. 26. AS FAR AS THE ISSUE OF SET OFF OF BUSINESS LOS S AND UNABSORBED DEPRECIATION IS CONCERNED A SPECIFIC GROUND WAS RA ISED BY THE ASSESSEE BEFORE THE CIT(APPEALS) BUT THE CIT(A) HAS NOT REN DERED ANY DECISION SPECIFICALLY ON THIS ISSUE. IT IS A FACT THAT DURI NG THE ASSESSMENT PROCEEDINGS IT WAS SUBMITTED TO THE AO THAT PROFIT ON TRANSFER OF A BUSINESS DEPRECIABLE ASSET (WHICH IS DETERMINED UNDER SECTIO N 50) AND TAXABLE AS SHORT-TERM CAPITAL GAIN UNDER THE HEAD 'CAPITAL GAI NS' IS AN INCOME IN NATURE OF INCOME OF BUSINESS AND THE ASSESSEE CAN C LAIM SET OFF OF UNABSORBED BUSINESS LOSSES AGAINST SUCH INCOME. DEC ISION OF THE ITAT MUMBAI IN DIGITAL ELECTRONICS LTD VS CIT (2012) 49 SOT 65 WAS CITED IN SUPPORT. HOWEVER IN THE ASSESSMENT ORDER NO SET O FF WAS GIVEN FOR THE BROUGHT FORWARD BUSINESS LOSS. 27. THE FOLLOWING ARE THE BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION OF THE ASSESSEE:- ASST.YEAR BUSINESS LOSS UNABSORBED DEPRECIATION TOTAL LOSS 2009 - 10 1345567 2227027 3572594 2010 - 11 4931189 286866 9925008 (INCLUDES LOSS ON CAPITAL GAINS) 2011 - 12 4248181 240820 4489001 ITA NO. 3392/BANG/2018 PAGE 13 OF 13 2012 - 13 3021275 216738 3238013 2013 - 14 3800165 195064 3995229 2014 - 1 5 1340782 175558 1516340 2015 - 16 0 0 0 2016-17 0 0 1735217 TOTAL 18687159 3342073 28471402 28. AS PER SECTION 32(2) OF THE ACT THE UNABSORBE D DEPRECIATION IS DEEMED TO BE CURRENT YEAR'S DEPRECIATION AND CAN BE SET OFF AGAINST CAPITAL GAINS AS PER SECTION 71 OF THE ACT. THE AO IS DIRE CTED TO EXAMINE THE CLAIM OF ASSESSEE FOR SET OFF IN THE LIGHT OF OTHER OBSERVATIONS IN THIS ORDER. 29. IN THE RESULT THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF JULY 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V . VASUDEVAN ) A C COUNTANT M EMBER VICE PRESIDENT BANGALORE DATED THE 03 RD JULY 2019. / D ESAI S MURTHY / COPY TO: 1 . APPELLANT 2 . RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.