COMPUTER MEDIA DEALERS ASSOCIATION,MUMBAI V. CIT (EXEMPTIONS), MUMBAI

ITA 3033/MUM/2025

AI Insights

The case involves the Computer Media Dealers Association, which appealed against the revision order passed by the CIT(Exemption), Mumbai, under Section 263 of the Income Tax Act, 1961, for the assessment year 2017-18. The CIT(Exemption) had set aside the original assessment order, which had treated the association as a charitable institution and exempted its income from tax under Section 11. The CIT(Exemption) contended that the income from the sale of office premises, which was not applied for charitable purposes, should be taxed, and that the association was a 'mutual concern' and not eligible for the benefits under Section 11. The Tribunal, however, found that the CIT(Exemption) had misapplied the law regarding the taxability of the income from the sale of the premises and the applicability of Section 50.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713271 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: LALCHAND CHOUDHARY
• Keywords: Set aside; Capital asset; Opportunity of being heard; Transfer pricing; Depreciation; Cost of acquisition; Capital Gains; Principle of natural justice; Assessment record; Charitable institution; Revision of order
• Section: 143(3); 263; 11; 12

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 3033/MUM/2025 Assessment Year: 2017-18 Computer Media Dealers Association, 22-D, Motlibai House, S.A. Brelvi Road, Mumbai-400 001. Vs. CIT(Exemption), Room No. 601, Cumballa Hill, MTNL TE Building, Peddar Road, Dr. Gopalrao Deshmukh Marg, Mumbai-400026. PAN NO. AAATC 0225 F Appellant Respondent Assessee by : Mr. Lalchand Choudhary Revenue by : Mr. R.A. Dhyani, CIT-DR Date of Hearing : 12/06/2025 Date of pronouncement : 31/07/2025 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against revision order dated 31.03.2025 passed by the Ld. Commissioner of Income-tax (Exemption), Mumbai [in short ‘the Ld. CIT(E)’] for assessment year 2017-18, wherein he has set aside the order passed by the Ld. Assessing Officer dated 02.03.2023. 2. The grounds raised by the assessee are reproduced as under: Printed from counselvise.com 1. The appellant prefers the following Appeal against the order dated 31/03/2025 of the Commissioner of Income Tax (Exemptions), Mumbai (hereinafter referred to as \"The CIT\") passed under section 263 of the Income Tax Act, 1961 (\"The Act\"). alternative and without prejudice to other. 2. On facts of this case, the CIT was not justified in passing the order under S. 263 of the Act. The CIT failed to appreciate that In this case, the Assessment Unit has only given effect earlier order dated 19/03/2022 passed under S. 263 of the Income tax Act, 1961. He failed to appreciate that an order giving effect to the order passed under S. 263 cannot be subjected to action under S. 263 again on th same issue. 3. 3: The CIT failed to appreciate that the Assessment Unit while passing the assessment order giving effect to the directions passed by the CIT (Exemptions) has made detailed inquiries in respect of the issue and therefore the said Assessment O erroneous in so far as it is prejudicial to the interest of the revenue. 4. 4: The CIT failed to appreciate that the office premises ('the asset') in question has not at all entered into 'Block of Assets' as defined under S. 2(11) Act, 1961 and the appellant has never claimed depreciation under S. 32(1) of the Income Tax Act, 1961. 5. 5: The CIT failed to appreciate that any gain on sale of asset could be subject matter of S. 50 only in a case where an assessee is de heading 'Profits & Gains of Business' and the asset has been forming part of 'Block of Assets' in respect of which depreciation has been allowed under section 32(1) of the Income Tax Act, 1961. 6. 6: On facts and in law, the CIT f he was not empowered to pass an order under S. 263 in respect of an Assessment order passed by the Assessment Unit. He failed to appreciate that the jurisdiction under S. 263 could be invoked only in respect of an order passed by t Transfer Pricing Officer and not in respect of any order passed by the Assessment Unit. The order so passed under S. 263 is thus bad in law, illegal and void Computer Media Dealers Association ITA No. 3033/MUM/2025 The appellant prefers the following Appeal against the order dated 31/03/2025 of the Commissioner of Income Tax (Exemptions), Mumbai (hereinafter referred to as \"The CIT\") passed under section 263 of the Income Tax Act, 1961 (\"The Act\"). Each of the grounds is in alternative and without prejudice to other. On facts of this case, the CIT was not justified in passing the order under S. 263 of the Act. The CIT failed to appreciate that In this case, the Assessment Unit has only given effect to the clear direction passed in his earlier order dated 19/03/2022 passed under S. 263 of the Income tax Act, 1961. He failed to appreciate that an order giving effect to the order passed under S. 263 cannot be subjected to action under S. 263 again on th same issue. 3: The CIT failed to appreciate that the Assessment Unit while passing the assessment order giving effect to the directions passed by the CIT (Exemptions) has made detailed inquiries in respect of the issue and therefore the said Assessment Order cannot be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. 4: The CIT failed to appreciate that the office premises ('the asset') in question has not at all entered into 'Block of Assets' as defined under S. 2(11) of the Income Tax Act, 1961 and the appellant has never claimed depreciation under S. 32(1) of the Income Tax Act, 1961. 5: The CIT failed to appreciate that any gain on sale of asset could be subject matter of S. 50 only in a case where an assessee is declaring its Income under the heading 'Profits & Gains of Business' and the asset has been forming part of 'Block of Assets' in respect of which depreciation has been allowed under section 32(1) of the Income Tax Act, 1961. 6: On facts and in law, the CIT failed to appreciate that he was not empowered to pass an order under S. 263 in respect of an Assessment order passed by the Assessment Unit. He failed to appreciate that the jurisdiction under S. 263 could be invoked only in respect of an order passed by the Assessing Officer or the Transfer Pricing Officer and not in respect of any order passed by the Assessment Unit. The order so passed under S. 263 is thus bad in law, illegal void ab initio. Computer Media Dealers Association 2 ITA No. 3033/MUM/2025 The appellant prefers the following Appeal against the order dated 31/03/2025 of the Commissioner of Income Tax (Exemptions), Mumbai (hereinafter referred to as \"The CIT\") passed under section 263 of the Income Tax Each of the grounds is in On facts of this case, the CIT was not justified in passing the order under S. 263 of the Act. The CIT failed to appreciate that In this case, the Assessment Unit has to the clear direction passed in his earlier order dated 19/03/2022 passed under S. 263 of the Income tax Act, 1961. He failed to appreciate that an order giving effect to the order passed under S. 263 cannot be subjected to action under S. 263 again on the 3: The CIT failed to appreciate that the Assessment Unit while passing the assessment order giving effect to the directions passed by the CIT (Exemptions) has made detailed inquiries in respect of the issue and therefore rder cannot be deemed to be erroneous in so far as it is prejudicial to the interest of 4: The CIT failed to appreciate that the office premises ('the asset') in question has not at all entered into 'Block of the Income Tax Act, 1961 and the appellant has never claimed depreciation under S. 32(1) of the Income Tax Act, 1961. 5: The CIT failed to appreciate that any gain on sale of asset could be subject matter of S. 50 only in a case claring its Income under the heading 'Profits & Gains of Business' and the asset has been forming part of 'Block of Assets' in respect of which depreciation has been allowed under section 32(1) of the ailed to appreciate that he was not empowered to pass an order under S. 263 in respect of an Assessment order passed by the Assessment Unit. He failed to appreciate that the jurisdiction under S. 263 could be invoked only in respect he Assessing Officer or the Transfer Pricing Officer and not in respect of any order passed by the Assessment Unit. The order so passed under S. 263 is thus bad in law, illegal Printed from counselvise.com 3. Briefly stated, facts of the case are that association of computer media dealers, filed its wherein claimed exemption of income u/s 11 of the Income 1961 (in short ‘the Act’) treating itself as charitable institution and declared Nil total income. assessee sold office premises for Rs.26,29,833/- and in the return of income filed, was set apart by the assessee for further application invoking section 11(2) of the Act. The case of selected for scrutiny and in the scrutiny assessment order passed u/s 143(3) of the Act the claim of the assessee for exemption by treating the assessee as a total income at Rs.1,44,922/ the Ld. First Appellate Authority but later on withdrew the same by opting for settlement under Vivad se Vishwas Scheme, 2020 Subsequently, the Ld. CIT( and issued notice to the assessee as consideration sale of the office premises funds invoking section 11(2) of the Act was not available to the assessee as assessee was charitable organisation by the AO, received on office premises was subject to tax which the Assessing Officer omitted to do so. The relevant part of the finding of the Ld. Computer Media Dealers Association ITA No. 3033/MUM/2025 Briefly stated, facts of the case are that the assessee, association of computer media dealers, filed its return of income wherein claimed exemption of income u/s 11 of the Income 1961 (in short ‘the Act’) treating itself as charitable institution and total income. During the year under consideration, the assessee sold office premises for sale consideration of in the return of income filed, said consideration was set apart by the assessee for further application invoking section 11(2) of the Act. The case of the assessee was selected for scrutiny and in the scrutiny assessment order passed u/s 143(3) of the Act, wherein the Assessing Officer denied the claim of the assessee for exemption of income u/s 11 by treating the assessee as a ‘mutual concern’ and income at Rs.1,44,922/-. The assessee carried the matter to the Ld. First Appellate Authority but later on withdrew the same by opting for settlement under Vivad se Vishwas Scheme, 2020 ubsequently, the Ld. CIT(E) invoked jurisdiction u/s 263 and issued notice to the assessee as consideration sale of the office premises and set apart for further invoking section 11(2) of the Act was not available to the assessee as assessee was held to be a “mutual concern charitable organisation by the AO, therefore, the consideration received on office premises was subject to tax which the Assessing Officer omitted to do so. The relevant part of the finding of the Ld. Computer Media Dealers Association 3 ITA No. 3033/MUM/2025 the assessee, an return of income wherein claimed exemption of income u/s 11 of the Income-tax Act, 1961 (in short ‘the Act’) treating itself as charitable institution and consideration, the consideration of said consideration was set apart by the assessee for further application of income the assessee was selected for scrutiny and in the scrutiny assessment order was he Assessing Officer denied u/s 11 of the Act and assessed the . The assessee carried the matter to the Ld. First Appellate Authority but later on withdrew the same by opting for settlement under Vivad se Vishwas Scheme, 2020. jurisdiction u/s 263 of the Act and issued notice to the assessee as consideration received from set apart for further application of invoking section 11(2) of the Act was not available to the mutual concern” and not a therefore, the consideration received on office premises was subject to tax which the Assessing Officer omitted to do so. The relevant part of the finding of the Ld. Printed from counselvise.com CIT(E) vide his order u/s 263 of the Act dated 19.03.2022 (first order u/s 263) is reproduced as under: “10. Accordingly, by virtue of powers vested in the undersigned vide provisions of Section 263 of the Act, I deem it appropriate to set aside the assessment order date the AO to reframe the assessment order with following direction: (a) As the assessee has been considered to be non charitable entity, it may be clearly mentioned in the assessment order that the rules of accumulation, applicatio Section 11 and 12 of the Act are not available for the assessee in the AY.2017 (b) The immunity under VSVS 2020 is not available to the assessee with regard to the income from the property amounting to Rs.26,29,833/ mutual association, this income from sale of property from non mutual sources may be brought to tax accordingly. Necessary indexation following the computational rules in Chapter V of the Act may be granted as per law. (c) The scope of assessment proceeding pursuant to this order is limited to above issues only and the AO is directed not to travel beyond the scope of this issue. No other findings in the assessment order dated 13/11/2019 may be disturbed. (d) The AO is directed to fol grant the assessee adequate opportunity 3.1 Consequent to the direction of the PCIT, the Assessing Officer issued notice for considering the taxability in respect of consideration received on the sale Assessing Officer in para 2 of the impugned assessment order mentioned that various opportunities from 19.08.2022 to 15.02.2023 were provided to the assessee. The Assessing Officer after considering the sub transaction of the sale of the office premises as subjected to capital Computer Media Dealers Association ITA No. 3033/MUM/2025 order u/s 263 of the Act dated 19.03.2022 (first order u/s 263) is reproduced as under: 10. Accordingly, by virtue of powers vested in the undersigned vide provisions of Section 263 of the Act, I deem it appropriate to set aside the assessment order dated 13/11/2019 to the file of the AO to reframe the assessment order with following (a) As the assessee has been considered to be non charitable entity, it may be clearly mentioned in the assessment order that the rules of accumulation, application as well as benefits of Section 11 and 12 of the Act are not available for the assessee in the AY.2017-18 (b) The immunity under VSVS 2020 is not available to the assessee with regard to the income from the property amounting to Rs.26,29,833/-. Accordingly, the assessee being a mutual association, this income from sale of property from non mutual sources may be brought to tax accordingly. Necessary indexation following the computational rules in Chapter V of the Act may be granted as per law. of assessment proceeding pursuant to this order is limited to above issues only and the AO is directed not to travel beyond the scope of this issue. No other findings in the assessment order dated 13/11/2019 may be disturbed. (d) The AO is directed to follow principles of natural justice and grant the assessee adequate opportunity of being heard. Consequent to the direction of the PCIT, the Assessing Officer issued notice for considering the taxability in respect of consideration received on the sale of the office premises. The Assessing Officer in para 2 of the impugned assessment order mentioned that various opportunities from 19.08.2022 to provided to the assessee. The Assessing Officer after considering the submission of the assesse transaction of the sale of the office premises as subjected to capital Computer Media Dealers Association 4 ITA No. 3033/MUM/2025 order u/s 263 of the Act dated 19.03.2022 (first 10. Accordingly, by virtue of powers vested in the undersigned vide provisions of Section 263 of the Act, I deem it appropriate to d 13/11/2019 to the file of the AO to reframe the assessment order with following (a) As the assessee has been considered to be non charitable entity, it may be clearly mentioned in the assessment order that n as well as benefits of Section 11 and 12 of the Act are not available for the assessee (b) The immunity under VSVS 2020 is not available to the assessee with regard to the income from the property y, the assessee being a mutual association, this income from sale of property from non- mutual sources may be brought to tax accordingly. Necessary indexation following the computational rules in Chapter V of the of assessment proceeding pursuant to this order is limited to above issues only and the AO is directed not to travel beyond the scope of this issue. No other findings in the assessment order dated 13/11/2019 may be disturbed. low principles of natural justice and heard.” Consequent to the direction of the PCIT, the Assessing Officer issued notice for considering the taxability in respect of of the office premises. The Assessing Officer in para 2 of the impugned assessment order mentioned that various opportunities from 19.08.2022 to provided to the assessee. The Assessing Officer mission of the assessee treated the transaction of the sale of the office premises as subjected to capital Printed from counselvise.com gain and in view of holding period of the office premises, the Assessing Officer computed the long term capital ga Rs.2,72,683/-, which was the Assessing Officer assessed the said income while giving effect to the order of the Ld. CIT(E) passed u/s 263 of the Act on 19.03.2022 (First order u/s 263). 3.2 Subsequently, again the Ld. CIT(E) called for the assessment record and after examination he was of the view that sale of the transaction of the office premises was liable gain u/s 50 of the Act and since the Assessing Officer did not carry out any inquiry on this issue order passed while giving effect to the order of ld CIT(E) Assessing Officer, is erroneous in so far as prejudicial to the interest of the Revenue. Accordingly, with the direction to pass a speaking order after taking into consideration his direction for examining the taxability of the sale of the depreciable asset amounting to Rs.26,29,833/ the section 50 and accordingly charge 4. Aggrieved with the above finding of the Ld. CIT(E) examining the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. 4.1 We find that before the Ld. CIT(E), the assessee challenged jurisdiction acquired by the Ld. CIT( Computer Media Dealers Association ITA No. 3033/MUM/2025 gain and in view of holding period of the office premises, the Assessing Officer computed the long term capital ga , which was accepted by the assessee. the Assessing Officer assessed the said income while giving effect to the order of the Ld. CIT(E) passed u/s 263 of the Act on 19.03.2022 . Subsequently, again the Ld. CIT(E) called for the assessment examination he was of the view that sale of the transaction of the office premises was liable for short term capital gain u/s 50 of the Act and since the Assessing Officer did not carry out any inquiry on this issue, therefore, the impugned assessment while giving effect to the order of ld CIT(E) is erroneous in so far as prejudicial to the interest of the Revenue. Accordingly, he set aside the said order with the direction to pass a speaking order after taking into nsideration his direction for examining the taxability of the sale of the depreciable asset amounting to Rs.26,29,833/- ction 50 and accordingly charge short term capital gain. Aggrieved with the above finding of the Ld. CIT(E) examining in appeal before the Tribunal by way of raising grounds as reproduced above. We find that before the Ld. CIT(E), the assessee challenged jurisdiction acquired by the Ld. CIT(E) and also challenged the Computer Media Dealers Association 5 ITA No. 3033/MUM/2025 gain and in view of holding period of the office premises, the Assessing Officer computed the long term capital gain at by the assessee. Accordingly, the Assessing Officer assessed the said income while giving effect to the order of the Ld. CIT(E) passed u/s 263 of the Act on 19.03.2022 Subsequently, again the Ld. CIT(E) called for the assessment examination he was of the view that sale of the short term capital gain u/s 50 of the Act and since the Assessing Officer did not carry therefore, the impugned assessment while giving effect to the order of ld CIT(E) by the is erroneous in so far as prejudicial to the set aside the said order with the direction to pass a speaking order after taking into nsideration his direction for examining the taxability of the sale of - in the light of short term capital gain. Aggrieved with the above finding of the Ld. CIT(E) examining in appeal before the Tribunal by way of raising We find that before the Ld. CIT(E), the assessee challenged E) and also challenged the Printed from counselvise.com finding of the Ld. CIT(E) on the law. Before us, the Ld. Counsel for the assessee also submitted that the office premises sold was neither part of the block of asset nor any depreciation by the assessee on said office section 50 were not applicable reproduced as under: [Special provision for computation of capital gains in case of depreciable assets. 51 50. Notwi section 2, where the capital asset is an asset forming part of a block of assets allowed under this Act or under the Indian Income 1922 (11 of 1922), the provisions of sections subject to the following modifications : (1) where as a result of the transfer of the asset together with 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 ass aggregate of the following amounts, namely : (i) (ii) (iii) such excess shall be deemed to be the capital gains arising from the transfer of short (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the begin actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the Computer Media Dealers Association ITA No. 3033/MUM/2025 finding of the Ld. CIT(E) on the law. Before us, the Ld. Counsel for submitted that the office premises sold was neither part of the block of asset nor any depreciation the assessee on said office premises, therefore, the provision of not applicable. For ready reference, section 50 is reproduced as under: Special provision for computation of capital gains in case of depreciable Notwithstanding anything contained in clause (42A) of , where the capital asset is an asset forming part of a block of assets 52 in respect of which depreciation has been allowed under this Act or under the Indian Income 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :- where the full value of the consideration received or accruing as a result of the transfer of the asset together with 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 assets during the previous year, exceeds the aggregate of the following amounts, namely : expenditure incurred wholly and exclusively in connection with such transfer or transfers; the written down value of the block of assets at the beginning of the previous year; and the actual cost of any asset falling within the block 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; where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the Computer Media Dealers Association 6 ITA No. 3033/MUM/2025 finding of the Ld. CIT(E) on the law. Before us, the Ld. Counsel for submitted that the office premises sold was neither part of the block of asset nor any depreciation was claimed therefore, the provision of or ready reference, section 50 is Special provision for computation of capital gains in case of depreciable thstanding anything contained in clause (42A) of , where the capital asset is an asset forming part of a in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, and 49 shall be the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the ets during the previous year, exceeds the aggregate of the following amounts, namely :- expenditure incurred wholly and exclusively in connection with such transfer or transfers; the written down value of the block of assets at the beginning of the previous year; and the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains arising assets; where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets ning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the Printed from counselvise.com income received or accruing as a result of such transfer or transfers shall be deemed to the transfer of short 53 [Provided that in a case where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Act, the written down value of that block of asset and short determined in such manner as may be prescribed 55 [Explanation.-For the purposes of this section, reduction of the amount of goodwill of a business or profession, from the block of asset in accordance with sub clause (6) of section 43 4.2 In view of plain reading evident that the asset under consid depreciable asset and In such circumstances, the value, expenses incu purchase of new asset, gain. 5. Before us, learned counsel appearing on behalf of the assessee has contended that although the status of the assessee has been treated as a “mutual concern” by the Assessing Officer, it is not engaged in any business activity and, therefore, falls outside the scope of Section 28(iii) of the Act. It has been submitted that both the income and expenditure of the assessee pertain to mutual activities, and any surplus arising there from is not liable to tax, in view of the principle of mutuality. It is further submitted that in the event any income accrues outside the framework of mutuality, such Computer Media Dealers Association ITA No. 3033/MUM/2025 income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets:] that in a case where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Act, the written down value of at block of asset and short-term capital gain, if any, shall be determined in such manner as may be prescribed 54.] For the purposes of this section, reduction of the nt of goodwill of a business or profession, from the block of asset in accordance with sub-item (B) of item (ii) of sub section 43 shall be deemed to be transfer.] In view of plain reading of the provisions of section 50 it is evident that the asset under consideration should be, firstly, a asset and, secondly, it should be part of block of asset. In such circumstances, the excess if any over the written down value, expenses incurred for sale of asset and amount invested in purchase of new asset, would be deemed to be short term capital Before us, learned counsel appearing on behalf of the assessee has contended that although the status of the assessee has been s a “mutual concern” by the Assessing Officer, it is not engaged in any business activity and, therefore, falls outside the scope of Section 28(iii) of the Act. It has been submitted that both the income and expenditure of the assessee pertain to mutual tivities, and any surplus arising there from is not liable to tax, in view of the principle of mutuality. It is further submitted that in the event any income accrues outside the framework of mutuality, such Computer Media Dealers Association 7 ITA No. 3033/MUM/2025 income received or accruing as a result of such transfer or be the capital gains arising from that in a case where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Act, the written down value of term capital gain, if any, shall be For the purposes of this section, reduction of the nt of goodwill of a business or profession, from the block of item (B) of item (ii) of sub-clause (c) of of the provisions of section 50 it is eration should be, firstly, a it should be part of block of asset. excess if any over the written down rred for sale of asset and amount invested in deemed to be short term capital Before us, learned counsel appearing on behalf of the assessee has contended that although the status of the assessee has been s a “mutual concern” by the Assessing Officer, it is not engaged in any business activity and, therefore, falls outside the scope of Section 28(iii) of the Act. It has been submitted that both the income and expenditure of the assessee pertain to mutual tivities, and any surplus arising there from is not liable to tax, in view of the principle of mutuality. It is further submitted that in the event any income accrues outside the framework of mutuality, such Printed from counselvise.com income, if at all, may be assessed under the hea Other Sources\" and not under the head \"Profits and Gains of Business or Profession.\" 5.1 Learned counsel also submitted that the assessee has never claimed depreciation on the office premises in question, and therefore, the provisions of Sec capital gains on the sale of depreciable assets, would have no application. Consequently, the Assessing Officer was under no obligation to inquire into the applicability of Section 50, and the observation of the CIT(E) such inquiry—is both unwarranted and misplaced in the facts of the present case. 6. We have heard the rival submissions advanced by the learned counsel for the parties and have perused the material available on record. Upon careful consideration, we find merit in the contentions advanced on behalf of the assessee. The learned CIT(E), in the impugned revisionary order passed under Section 263 of the Act, has proceeded on the presumption that the assessee had claimed depreciation on the office premises in earlier assessment years, without verifying the relevant records. The factual position, however, as discernible from the record, is that the Assessing Officer neither treated the income of the assessee as arising from Computer Media Dealers Association ITA No. 3033/MUM/2025 income, if at all, may be assessed under the head \"Income from Other Sources\" and not under the head \"Profits and Gains of Business or Profession.\" Learned counsel also submitted that the assessee has never claimed depreciation on the office premises in question, and therefore, the provisions of Section 50 of the Act, which apply to capital gains on the sale of depreciable assets, would have no application. Consequently, the Assessing Officer was under no obligation to inquire into the applicability of Section 50, and the CIT(E)—that the Assessing Officer failed to make is both unwarranted and misplaced in the facts of 6. We have heard the rival submissions advanced by the learned counsel for the parties and have perused the material available on d. Upon careful consideration, we find merit in the contentions advanced on behalf of the assessee. The learned CIT(E), in the impugned revisionary order passed under Section 263 of the Act, has proceeded on the presumption that the assessee had claimed preciation on the office premises in earlier assessment years, without verifying the relevant records. The factual position, however, as discernible from the record, is that the Assessing Officer neither treated the income of the assessee as arising from Computer Media Dealers Association 8 ITA No. 3033/MUM/2025 d \"Income from Other Sources\" and not under the head \"Profits and Gains of Learned counsel also submitted that the assessee has never claimed depreciation on the office premises in question, and tion 50 of the Act, which apply to capital gains on the sale of depreciable assets, would have no application. Consequently, the Assessing Officer was under no obligation to inquire into the applicability of Section 50, and the at the Assessing Officer failed to make is both unwarranted and misplaced in the facts of 6. We have heard the rival submissions advanced by the learned counsel for the parties and have perused the material available on d. Upon careful consideration, we find merit in the contentions advanced on behalf of the assessee. The learned CIT(E), in the impugned revisionary order passed under Section 263 of the Act, has proceeded on the presumption that the assessee had claimed preciation on the office premises in earlier assessment years, without verifying the relevant records. The factual position, however, as discernible from the record, is that the Assessing Officer neither treated the income of the assessee as arising from Printed from counselvise.com business activity nor allowed any depreciation on the said premises in the past. 6.1 It is an undisputed position that the assessee functions as a mutual concern, and that the surplus, if any, generated within the fold of mutuality is not taxable, except to from sources outside the scope of mutual activities. In the absence of any finding to the contrary by the Assessing Officer, and there being no claim of depreciation by the assessee, the provisions of Section 50 of the Act could no was no occasion for the Assessing Officer to initiate an inquiry in respect of the said provision. 6.2 In this view of the matter, we find no infirmity in the assessment order passed by the Assessing Officer, and consequently, the invocation of revisional jurisdiction under Section 263 by the learned CIT(E), predicated upon Explanation 2 thereto, is not sustainable on the facts of the present case. 6.3 Accordingly, the impugned order passed by the learned CIT(E) is set aside, and the assessment order passed by the Assessing Officer is restored. Grounds No. 3 and 5 raised by the assessee are, therefore, allowed. 6.4 In light of the above conclusion, the remaining grounds Grounds No. 1, 2, and 6, which pertain to the j Computer Media Dealers Association ITA No. 3033/MUM/2025 usiness activity nor allowed any depreciation on the said premises It is an undisputed position that the assessee functions as a mutual concern, and that the surplus, if any, generated within the fold of mutuality is not taxable, except to the extent it is earned from sources outside the scope of mutual activities. In the absence of any finding to the contrary by the Assessing Officer, and there being no claim of depreciation by the assessee, the provisions of Section 50 of the Act could not have been invoked. As such, there was no occasion for the Assessing Officer to initiate an inquiry in respect of the said provision. In this view of the matter, we find no infirmity in the assessment order passed by the Assessing Officer, and ently, the invocation of revisional jurisdiction under Section 263 by the learned CIT(E), predicated upon Explanation 2 thereto, is not sustainable on the facts of the present case. Accordingly, the impugned order passed by the learned CIT(E) ide, and the assessment order passed by the Assessing Officer is restored. Grounds No. 3 and 5 raised by the assessee are, In light of the above conclusion, the remaining grounds Grounds No. 1, 2, and 6, which pertain to the jurisdictional validity Computer Media Dealers Association 9 ITA No. 3033/MUM/2025 usiness activity nor allowed any depreciation on the said premises It is an undisputed position that the assessee functions as a mutual concern, and that the surplus, if any, generated within the the extent it is earned from sources outside the scope of mutual activities. In the absence of any finding to the contrary by the Assessing Officer, and there being no claim of depreciation by the assessee, the provisions of t have been invoked. As such, there was no occasion for the Assessing Officer to initiate an inquiry in In this view of the matter, we find no infirmity in the assessment order passed by the Assessing Officer, and ently, the invocation of revisional jurisdiction under Section 263 by the learned CIT(E), predicated upon Explanation 2 thereto, Accordingly, the impugned order passed by the learned CIT(E) ide, and the assessment order passed by the Assessing Officer is restored. Grounds No. 3 and 5 raised by the assessee are, In light of the above conclusion, the remaining grounds—i.e., urisdictional validity Printed from counselvise.com of the revisionary proceedings initiated under Section 263 in consequence of an earlier order warrant adjudication at this stage. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 31/07/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Computer Media Dealers Association ITA No. 3033/MUM/2025 of the revisionary proceedings initiated under Section 263 in consequence of an earlier order—are rendered academic and do not warrant adjudication at this stage. In the result, the appeal of the assessee is allowed. nounced in the open Court on 31/07/2025. Sd/- Sd/ RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Computer Media Dealers Association 10 ITA No. 3033/MUM/2025 of the revisionary proceedings initiated under Section 263 in are rendered academic and do not In the result, the appeal of the assessee is allowed. /07/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "