DIVINE CONSTRUCTION COMPANY, MUMBAI v. ACIT CIR 19(3), MUMBAI

ITA 5396/MUM/2009 | 2006-2007
Pronouncement Date: 20-12-2010 | Result: Allowed

Appeal Details

RSA Number 539619914 RSA 2009
Assessee PAN SINCE1999W
Bench Mumbai
Appeal Number ITA 5396/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 25 day(s)
Appellant DIVINE CONSTRUCTION COMPANY, MUMBAI
Respondent ACIT CIR 19(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 20-12-2010
Date Of Final Hearing 05-07-2010
Next Hearing Date 05-07-2010
Assessment Year 2006-2007
Appeal Filed On 25-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI VIJAY PAL RAO JM ITA NO.5396/MUM/2009 : ASST.YEAR 2006-2007 M/S.DIVINE CONSTRUCTION COMPANY A-37-346 GANDHI NAGAR BANDRA (EAST) MUMBAI 400 051. PA NO.AACFD8420B. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 19(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.P.DANIEL & SHRI S.M.MAKHIJA RESPONDENT BY : SHRI JITENDRA YADAV O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 13.08.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY GRIEVANCE IS AGAINST THE UPHOLDING OF T HE VIEW TAKEN BY THE AO IN TREATING LONG TERM CAPITAL GAIN EARNED BY THE ASSES SEE ON TRANSFER OF AN OFFICE PREMISES ON WHICH DEPRECIATION WAS NEITHER CLAIMED NOR ALLOWED BY INVOKING SECTION 50 OF THE ACT. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL ENGINEERING CONTRACTING FIRM. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS OWNIN G A PREMISE AT MANGAL BHAVAN SINCE 1999 WHICH WAS SOLD DURING THE YEAR AND INCOM E THERE FROM WAS OFFERED TO TAX AS LONG TERM CAPITAL GAIN. THE ASSESSING OFFICE R CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIONS OF SECTION 50 BE NOT A PPLIED. THE ASSESSEE TENDERED ITS EXPLANATION STATING THAT THOUGH THE PROPERTY WAS IN CLUDED IN THE BLOCK OF ASSETS BUT NEITHER IT WAS USED FOR THE PURPOSE OF BUSINESS NOR ANY DEPRECIATION WAS CLAIMED THEREON. IT WAS ALSO STATED THAT THE ASSESSEE WAS CARRYING ON ITS BUSINESS FROM A ITA NO.5396/MUM/2009 M/S.DIVINE CONSTRUCTION COMPANY. 2 RENTED PREMISES AT BANDRA (EAST) AND THEREFORE THE PROPERTY COULD NOT BE CATEGORIZED AS BUSINESS ASSET. THE ASSESSING OFFICE R DID NOT ACCEPT THE ASSESSEES CONTENTION IN VIEW OF SECTION 50 READ WITH EXPLANATION (5) OF SECTION 32 AND COMPUTED SHORT TERM CAPITAL GAIN AS UNDER:- SALE VALUE RS.14 62 500 LESS : PURCHASE COST RS. 8 26 750 ------------------ TOTAL RS. 6 35 750 ========== THE ASSESSEE WAS UNSUCCESSFUL BEFORE THE LEARNED C IT(A) AS WELL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SECTION 50 HAS BEEN INVOKED BY THE ASSESSIN G OFFICER FOR TREATING THE SALE OF ASSET AS THE ONE ELIGIBLE TO BE CONSIDERED AS SH ORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. AT THIS JUNCTURE IT WOULD BE RELEVANT TO CONSIDER THE RELEVANT PART OF SECTION 5 0 AS UNDER:- 50. NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE ( 42A) OF SECTION 2 WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN AL LOWED UNDER THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT 1922 (11 OF 1922) THE PROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT T O THE FOLLOWING MODIFICATIONS :- (1) WHERE THE FULL VALUE OF THE CONSIDERATION RECE IVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ASSET TOGETHER W ITH THE FULL VALUE OF SUCH CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF THE ASSETS DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE FOL LOWING AMOUNTS NAMELY:- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER OR TRANSFERS; ITA NO.5396/MUM/2009 M/S.DIVINE CONSTRUCTION COMPANY. 3 (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT TH E BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE BLO CK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS; 4. ON GOING THROUGH THE MANDATE OF THIS SECTION IT CAN BE EASILY NOTICED THAT IN ORDER TO TREAT CAPITAL GAIN ARISING FROM THE TRANSF ER OF CAPITAL ASSETS IN THE CIRCUMSTANCES MENTIONED IN THE SECTION AS SHORT TER M CAPITAL GAIN IT IS NECESSARY THAT THE CONDITIONS MENTIONED IN THE OPENING LINES OF SECTION 50 BE FULFILLED VIZ. (I) THE CAPITAL ASSET SHOULD BE AN ASSET FORMING PART O F BLOCK OF ASSET AND (II) DEPRECIATION SHOULD HAVE BEEN ALLOWED ON IT UNDER THIS ACT OR UNDER THE INDIAN INCOME TAX ACT 1922. IT IS ONLY ON THE FULFILLMENT OF THESE TWIN CONDITIONS THAT THE PRESCRIPTION OF SECTION 50 GETS ACTIVATED. ADVERTI NG TO THE FACTS OF THE INSTANT CASE IT IS NOTED THAT THE ASSESSEE INCLUDED THE PROPERTY IN ITS SCHEDULE OF FIXED ASSETS FOR THIS YEAR AT RS.8 91 460. NO DEPRECIATION WAS CLAIM ED IN THIS YEAR. WE ARE IN AGREEMENT WITH THE LD. DR THAT MERELY NOT CLAIMING DEPRECIATION IN ONE YEAR IS NOT SUFFICIENT TO PUSH A CASE OUT OF THE PURVIEW OF SEC TION 50. IT IS NECESSARY THAT THE DEPRECIATION SHOULD HAVE NEVER BEEN ALLOWED ON SUCH CAPITAL ASSET. THE LEARNED A.R. WAS DIRECTED TO FILE PURCHASE DEED OF THIS PRE MISES IN 1999 AND SUBSEQUENT BALANCE SHEETS. TODAY SUCH DETAILS HAVE BEEN PLACED ON RECORD. IT CAN BE NOTICED THAT THE VALUE OF THIS PROPERTY AS APPEARING IN TH E BALANCE SHEET FOR ASSESSMENT YEAR UNDER CONSIDERATION AT RS.8 91 460 CONTINUES TO REM AIN THE SAME SINCE ITS PURCHASE IN 1999. IT SHOWS THAT NO DEPRECIATION WAS EVER CLA IMED OR ALLOWED ON THIS PROPERTY. IN THAT VIEW OF THE MATTER THE PROVISIONS OF SECTION 50 CANNOT BE APPLIED. WE THEREFORE OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND HOLD THAT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE BE ACCEP TED AS SUCH SINCE NO INFIRMITY WAS POINTED OUT BY THE ASSESSING OFFICER IN THE CAL CULATION SHOWN BY THE ASSESSEE. ITA NO.5396/MUM/2009 M/S.DIVINE CONSTRUCTION COMPANY. 4 5. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF DECEMBER 2010. SD/- SD/- ( VIJAY PAL RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 20 TH DECEMBER 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XIX MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.