COMM. OF INCOME TAX V. M/S KAUSHICO MACHINE TOOLS

ITA/149/1999

AI Insights

The case involves an appeal by the Commissioner of Income Tax, Rohtak against M/s Kaushico Machine Tools Pvt Ltd concerning the assessment of income tax for the year 1990-91. The primary legal issue was whether the provisions of Section 50 of the Income Tax Act, which deals with the treatment of short-term capital gains on the sale of depreciable assets, applied to the assessee's case. The Income Tax Appellate Tribunal had previously allowed the assessee's appeal, leading to the current appeal by the Revenue. The High Court's decision to remit the case back to the Tribunal was based on the need to ascertain whether the machinery sold was used during the year, which would affect the applicability of Section 50.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 683181 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 26-08-2010
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Depreciation; Income Tax; Short Term Capital Gain; Machinery Sale
• Section: 143(3); 143(1); 48; 49; 50; 2(42)

Judgement Text

" . 149 1999 Income Tax Appeal No of 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- - . 149 1999 Income tax Appeal No of : 26.8.2010 Date of decision Commissioner of Income Tax Rohtak --- Appellant Versus / . . . M s Kaushico Machine Tools Pvt Ltd --- Respondent : CORAM ’ . HON BLE MR JUSTICE ADARSH KUMAR GOEL ’ . HON BLE MR JUSTICE AJAY KUMAR MITTAL --- : Present . , Ms Urvashi Dhugga Advocate . for the appellant - . None for the respondent assessee --- , . AJAY KUMAR MITTAL J 260 - , 1961 This appeal under Section A of the Income tax Act ( ) for short “the Act’” has been filed by the assessee against the order 22.3.1999, , dated passed by the Income Tax Appellate Tribunal Delhi . 149 1999 Income Tax Appeal No of 2 , ( ) . 777/ /93, Bench “B” New Delhi in short “the Tribunal” in ITA No Del for 1990-91. the assessment year , 50 The question herein is whether provisions of Section of . the Act would apply to the case of the assessee or not 31.12.1990 The assessee Company filed its return on for the 1990-91, . 18,61,180/-. assessment year declaring an income of Rs Case 143(1) of the assessee was processed under Section of the Act on 11.3.1991 .19,91,010/-. at an income of Rs The assessing officer there after 143(3) 25.9.1992 framed assessment under Section on at an income of . 25,17,680/- . 1,61,300/- Rs making an addition of Rs on account of profit earned by the assessee on the sale of machinery treating the same to . be short term capital gain As per the observations of the assessing , 50 officer provisions of Section of the Act were not applicable in the . case of the assessee as such no benefit was admissible The - ( ) { ( ) } Commissioner of Income tax Appeals in short “CIT A ” affirmed the finding of the assessing officer and dismissed the assessee’s appeal 15.12.1992. , by order dated However both sides were aggrieved by the . 149 1999 Income Tax Appeal No of 3 ( ) , , order of the CIT A and thus two appeals were preferred before the , . Tribunal one by the assessee and other on behalf of the Revenue The Tribunal held that the addition of the above amount . , could not have been made Consequently the appeal of the assessee was partly allowed whereas the one preferred by the revenue was , 22.3.1999. dismissed vide order , , The Revenue has thus preferred the instant appeal proposing the following substantial question of law for determination by , : this Court which can be perceived in the following manner “ - Whether the Income tax Appellate Tribunal was right in law in deleting the addition made on account of profit on sale of fixed assets purchased and sold during the relevant previous year itself even when the assets were not covered 50 under Section of the Act and the gains involved were ? short term gains only ” We have heard learned counsel for the Revenue and . perused the record . 149 1999 Income Tax Appeal No of 4 ( ) The assessing officer as well as the CIT A had come to the conclusion that the assessee who had purchased certain machinery in the year under consideration and had sold it during the , same year without using for the business purposes was not entitled to 50 . , deduction under Section of the Act However on appeal by the , assessee the Tribunal following its earlier order for the assessment 1989-90 , year in the case of the assessee allowed the appeal vide order -1. , Annexure A Accordingly the revenue was directed to place order of 1989-90 . the Tribunal for the assessment year on record A perusal of 1989-90 the order of the Tribunal for the assessment year shows that the Tribunal was therein considering the issue where the assessee had purchased the machinery and after using it for some time sold it in the . same year It was in those circumstances the assessee was held 50 . entitled to the benefit of the provisions of Section of the Act Learned counsel for the Revenue submitted that the facts , and circumstances of the present case are different inasmuch as in , the case in hand the machinery which was purchased by the assessee during the year under reference was sold in the same year without . 149 1999 Income Tax Appeal No of 5 . putting it to use even for some time before it was sold According to , the learned counsel the assessee was not entitled to the deduction 32 under Section as no depreciation could be claimed by it in terms . , , thereof Further according to the learned counsel once the benefit of , depreciation on the machinery was not admissible question of invoking 50 . the provisions of Section by the assessee did not arise 50 Section makes a special provision in the case of - 2(42 ), 48 depreciable assets over riding the provisions of Sections A and 49. 50 A plain reading of Section would spell out that once the capital , asset that has been transferred forms part of block of assets in respect 1961 1922 , of which depreciation has been allowed under the or the Act , , the surplus if any computed under this provision will be treated as - . short term capital gains The essential ingredient for applicability of the aforesaid provision is that the assessee must have claimed deduction . , on account of depreciation from the capital asset In other words absence of deduction of depreciation from the value of the asset would . disentitle an assessee to benefit of this provision . 149 1999 Income Tax Appeal No of 6 , From the perusal of the order of the Tribunal it is discerned that the Tribunal has not recorded any finding with regard to the usage . of the machinery which was sold during the year under consideration , In this view of the matter we consider it appropriate to remit the matter to the Tribunal to look into it and dispose of the matter afresh after examining the admissibility of depreciation on the machinery in . , question However it is clarified that in case it is found that the , machinery was not put to use during the year under consideration , which was sold in the same year the assessee would not be entitled to 50 . the benefit of Section of the Act The appeal is disposed of with the observations indicated . above ( ) AJAY KUMAR MITTAL JUDGE ( ) ADARSH KUMAR GOEL 26, 2010 August JUDGE * * rkmalik . 149 1999 Income Tax Appeal No of 7 . 149 1999 Income Tax Appeal No of 8 "