Bagrodia Tea Trading Co.,, Hyderabad v. ACIT, Hyderabad

ITA 444/HYD/2008 | 2001-2002
Pronouncement Date: 18-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 44422514 RSA 2008
Assessee PAN AABCB4847N
Bench Hyderabad
Appeal Number ITA 444/HYD/2008
Duration Of Justice 1 year(s) 11 month(s) 1 day(s)
Appellant Bagrodia Tea Trading Co.,, Hyderabad
Respondent ACIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 18-02-2010
Date Of Final Hearing 13-01-2010
Next Hearing Date 13-01-2010
Assessment Year 2001-2002
Appeal Filed On 17-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAH JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO: 444/HYD/2008 ASSTT. YEAR : 2001-02 BAGRODIA TEA TRADING COMPANY HYDERABAD (AABCB 4847 N) VS THE ACIT CIRCLE 1(3) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VASANT KUMAR RESPONDENT BY : SHRI G. MALLIGARJUNA DR O R D E R PER : CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER PASSED BY THE CIT(A)-II HYDERABAD DATED 11. 12.2007 AND PERTAINS TO THE AY 2001-02. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW IN S O FAR AS IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE CIT(A) ERRED IN HOLDING THAT THE SHORT TERM CAPI TAL GAINS COMPUTED U/S 50 CANNOT BE SET OFF AGAINST CARRIED FORWARD BUSINESS LOSS AND DEPRECIATION. 3. THE CIT(A) ERRED IN HOLDING THAT SECTION 50A NEED N OT BE APPLIED FOR COMPUTATION OF SHORT TERM CAPITAL GAINS THEREBY HOLDING THAT THE ENTIRE UNOBSERVED DEPRECIATION SHOULD BE CONSIDERED AND NOT THE CURRENT YEAR DEPRECIATION ALONE. 4. THE CIT(A) ERRED IN NOT CONSIDERING THE GROUND RELAT ING TO SET OFF OF LONG TERM CAPITAL LOSS ON SALE OF LAND AGAINST THE SHORT TERM CAPITAL GAINS ON SALE OF BUILDING AND MACHINERY ON SIMPLE GROUND THAT SUCH A CL AIM IS NOT MADE BEFORE THE ASSESSING OFFICER. 2 2 5. THE CIT(A) FAILED TO APPRECIATE THAT THE CIT(A) HAS ALL THE POWERS OF THE ASSESSING OFFICER AND COULD HAVE ENTERTAINED A LEGAL CLAIM AND THEREBY ERRED IN NOT DIRECTING FOR SET OFF OF LONG TERM CAPITAL LOSS A GAINST SHORT TERM CAPITAL GAINS THOUGH PERMISSIBLE UNDER THE PROVISIONS OF ACT . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30.10.2001 DECLARING INCOME OF RS.8 15 960 AND THE SAME WAS PROCESSED U/S 143(3). THE CASE WAS REOPENED U/ S 147 OF THE IT ACT. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE HAD DERIVED INCOME FROM CAPITAL GAIN ON SALE OF LAND FAC TORY BUILDING AND MACHINERY. THE SALE CONSIDERATION FOR THE LAND WAS RS.6 08 220/- AND AFTER INDEXATION COST OF LAND PURCHASE AMOUNTING TO RS.7 29 117/- THE ASSESSEE HAD SHOWN NET INCOME FROM THE LONG TERM CAPITAL G AIN AS NIL. AS REGARDS FACTORY BUILDING THE SALE PROCEEDS WAS SHOWN AT RS.9 41 780/- AND AFTER DEDUCTING THE WDV AS AT THE BE GINNING OF FINANCIAL YEAR 2000-01 OF RS.1 28 297/- THE NET CAPIT AL GAIN WAS ARRIVED AT RS.8 13 483. SIMILARLY IN RESPECT OF MACHINERY THE SALE PROCEEDS WAS SHOWN AT RS.19 50 000. AFTER DEDUCTING THE WDV AN D THE ELECTRICITY DEPOSITS THE NET CAPITAL GAIN ON MACHINERY W AS ARRIVED AT RS.17 01 865. THUS THE AGGREGATE SHORT TERM CAPITAL GA IN WAS SHOWN AT RS.25 15 348. AFTER INTER HEAD SET OFF THE GROW TOT AL INCOME WAS SHOWN AT RS.20 75 035/-. THE ASSESSEE ADJUSTED THE BROUG HT FORWARD BUSINESS LOSS AND BROUGHT FORWARD DEPRECIATION AGGREGATIN G TO RS.12 59 073/- TO ARRIVE AT A TOTAL INCOME OF RS.8 15 960. AFTER PERUSAL OF THE EXPLANATION FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER WAS OF THE VIEW THAT TH E ASSESSEE CANNOT AVAIL THE BENEFIT OF SET OFF OF BROUGHT FORWAR D BUSINESS LOSS AND BROUGHT FORWARD UNABSORBED DEPRECIATION AGAINST THE SHO RT TERM CAPITAL GAIN COMPUTED U/S 50 OF THE IT ACT. ACCORDINGLY THE N ET TOTAL INCOME WAS ASSESSED AT RS.20 75 035/- ON WHICH A TAX DEMAND OF RS.8 26 727/- WAS RAISED. BEING AGGRIEVED AGAINST THE ASSESSMENT THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO HAS CONFIRM ED THE ORDER OF THE ASSESSING OFFICER. HENCE THE ASSESSEE IS IN APPEAL BEF ORE US. 3 3 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. THE CONTENTION OF THE ASSESSEE IS THAT UNABSORBED LOSS AND DEPRECIATION SHOULD HAVE BEEN ALLOWED AGAINST THE TOTA L INCOME INCLUDING CAPITAL GAIN COMPUTED IN THIS YEAR DOES NOT H OLD ANY WATER AS BUSINESS LOSS CANNOT BE SET OFF AGAINST CAPITAL GAINS AND DEEMING CAPITAL GAIN U/S 50 OF THE ACT IS ONLY REGARDING THE CAPITAL GA IN BEING SHORT TERM CAPITAL GAIN U/S 50 OF THE IT ACT. WE HAVE AGREE WITH THE CIT(A) THAT CAPITAL ASSET AS DEFINED U/S 2(14) OF THE ACT MEANS PROP ERTY OF ANY KIND WHETHER OR NOT CONNECTED WITH THE BUSINESS. THUS BUSINESS A SSETS ARE ALSO CAPITAL ASSETS HAVING RAISE TO CAPITAL GAINS ON THEIR SALE UNDER THE CHARGING SECTION 45 OF THE ACT WHICH REFERS TO TRANSFER OF CAPITAL ASSET. WE THUS FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHO HAS RIGHTLY HELD THAT NO BUSINESS LOSS CAN BE ALLOWED TO BE SET OFF AGAINST SHORT TERM CAPITAL GAIN U/S 50 OF THE IT ACT. NO UNABSO RBED DEPRECIATION CAN BE ALLOWED TO BE SET OFF BY VIRTUE OF SECTION 72 (2 ) OF THE ACT WHICH GIVE PRECEDENTS TO UNABSORBED BUSINESS LOSS OVER UNABSORBED DEPRECIATION IN THE MATTER OF SET OFF. THE UNABSORBNED DEPRECIATION OF EARLIER YEAR COULD NOT TAKE THE CHARACTER OF CURRENT YE AR DEPRECIATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION SO AS TO BE SET OFF AGAINST THE INCOME FROM OTHER THAN BUSINESS HEAD. AS AMENDED PROVI SIONS OF SECTION 32 (2) CAME IN FORCE W.E.F. 1.4.1997. THUS FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN THIS REGARD AND THE CAME IS CONFIRMED. 5. NOW COMING TO THE GROUND NO.3 THE PROVISIONS OF SECTION 50A TAKES CARE OF A SITUATION THAT IF THE DEPRECIATION WAS ALLOWED ON A PARTICULAR ASSET IN THE PAST THE COST OF ACQUISITION OF SAI D ASSET SHALL BE REDUCED TO THAT EXTENT. THE CONTENTION OF THE ASSESSEE I S THAT ONLY THE CURRENT YEAR DEPRECIATION U/S 32(1) (I) SHALL BE REDUCED AND NOT THE UNABSORBED DEPRECIATION OF THE EARLIER ASSESSMENT YEARS. WE ARE OF THE OPINION THAT UNABSORBED DEPRECIATION ARISES ONLY WHEN DEPRECIATION 4 4 ALLOWED U/S 32 (1)(I) IN THE ASSESSMENT YEAR IS NOT FULL Y ABSORBED IN THAT YEAR AND IT IS CARRIED FORWARD TO THE SUBSEQUENT YEAR AND TERMED AS UNABSORBED DEPRECIATION AND GETS ADDED TO THE CURRENT YEAR DEPRECIATION. SO ASSESSEES ARGUMENT THAT UNABSORBED DEP RECIATION FOR THE EARLIER YEARS FOR THE PURPOSE OF ARRIVING WRITTEN DOWN VALUE U/S 50A IS WITHOUT ANY MERITS. ACCORDINGLY THE OTHER GROUND R AISED BY THE ASSESSEE ALSO DISMISSED. 6. THE GROUND NOS.4 & 5 WITH REFERENCE TO SET OFF OF LONG TERM CAPITAL LOSS WITH SHORT TERM CAPITAL GAINS. THIS SET OFF WAS EXPLICITLY PROVIDED U/S 70 OF THE IT ACT WHICH WAS AMENDED W.E.F. ASSESSMENT YEAR 2003-04 AND THE CLAIM OF ASSESSEE DENIED ON THE SOLE REASON THAT ASSESSEE HAS NOT MADE A CLAIM IN THE COMPUTATION OF INCOME. IN OUR OPINION THE ASSESSEE MADE A CLAIM BEFORE THE CIT(A) AN D THIS SET OFF IS PERMISSIBLE UPTO ASSESSMENT YEAR 2003-04 ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE COURT 18 .2.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 18TH FEBRUARY 2010 COPY FORWARDED TO: 1. SHRI K. VASANT KUMAR ADVOCAT3 102 TARAMANDAL CO MPLEX SAIFABVAD HYDERABAD. 2. THE ACIT CIRCLE 1(3) HYDERABAD 3. CIT(A)-II HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP