PODDAR BROTHERS INVESTMENTS P. LTD, MUMBAI V. DCIT CIR 7(1), MUMBAI

ITA 1114/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9205 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Cost of acquisition; Assessment record; Tax effect
• Section: 143(3); 50C; 54; 263; 154

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA/1114/MUM/2013, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2006-07 M/S PODDAR BROTHERS INVESTMENT PVT. LTD. 307, 3RD FLOOR , TRADE WORLD, B- WING, KAMALA CITY, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400011 PAN: AAACP2220J VS DCIT 7(1), R.NO. 622, 6TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( #$ / APPELLANT) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) / ASSESSEE BY : SHRI SANJIV M. SHAH * ) / REVENUE BY : SHRI PREMANAND J. ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING : 04.03.2015 ,-' * (+ / DATE OF PRONOUNCEMENT : 25.03.2015 ! ! ! ! 1961 * ** * 254(1) (.( (.( (.( (.( / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! : CHALLENGING THE ORDER DATED 19.10.2009 OF THE CIT(A )-13,MUMBAI THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUND OF APPEAL: 1.THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMIN G STAMP DUTY VALUATION OF RS.70,14,442/- U/S.50C FOR THE SALE OF DEPRECIABLE ASSETS INSTEAD OF ADOPTING AGREEMENT VALUE OF RS.46,53,000/- U/S.50 AND THE REASONS ASSI GNED BY HIM IN DOING SO ARE WRONG AND ARE CONTRARY TO THE PROVISIONS OF THE INCOME TAX AC T, 1961 AND RULES MADE THERE UNDER. 2.THE LEARNED CIT(A) HAS FURTHER ERRED IN CONFIRMIN G THE DISALLOWANCE OF DEDUCTION OF RS.37,500/- FROM CAPITAL GAINS U/S 48(1) BEING PAYM ENT TOWARDS WELFARE FUND OF SOCIETY FOR TRANSFER OF DEPRECIABLE ASSETS AND REAS ONS ASSIGNED BY HIM IN DOING SO ARE WRONG AND ARE CONTRARY TO THE PROVISIONS OF THE INCOME TA X ACT, 1961 AND RULES MADE THERE UNDER. 3.THE LEARNED CIT(A) HAS FURTHER GROSSLY ERRED IN C ONFIRMING THE CHARGING OF INTEREST U/S.220(2) OF RS.10,60,465/- FROM 7 TH OCTOBER, 1997 WHICH IS TOTALLY WRONG INSTEAD OF ORD ER U/S. 143(3) R.W.S.263 PASSED ON30-1 1-2011 AND THE REASO NS ASSIGNED BY HIM IN DOING SO ARE WRONG AND ARE CONTRARY TO THE PROVISIONS OF THE INC OME TAX ACT, 1961 AND RULES MADE THERE UNDER. 4.THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. 5.ALL THE AFORESAID GROUNDS OF APPEAL ARE INDEPENDE NT, IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO ONE ANOTHER. VIDE ITS LETTER,DATED .04.08.2014,THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUND OF APPEAL: I.)WITHOUT PREJUDICE AND IN ANY EVENT, LEARNED ASSE SSING OFFICER [AO] BE DIRECTED TO APPLY THE RATE OF TAX APPLICABLE TO LONG TERM CAPITAL GAI NS INSTEAD OF SHORT TERM GAINS WHILE COMPUTING CAPITAL GAINS TAX LIABILITY CONCERNING DE PRECIABLE ASSETS ADVERTED TO IN ORIGINAL GROUND NO 1. II.)APPELLANT CRAVES LEAVE TO ADD TO AND/OR AMEND A ND/OR MODIFY AND/OR ALTER AND/OR DELETE AFORESAID ADDITIONAL GROUND OF APPEAL. III).THE AFORESAID ADDITIONAL GROUND OF APPEAL IS W ITHOUT PREJUDICE TO THE ORIGINAL GROUNDS OF APPEAL. AS THE ADDITIONAL GROUND IS A PURELY LEGAL NATURE A ND ARISING OUT OF THE ORDER OF THE FIRST APPELLATE AUTHORITY(FAA),THEREFORE SAME IS BEING ADMITTED. 2 ITA NO.1114/MUM/2013 M/S PODDAR BROTHERS INVESTMENTS P. LTD. DURING THE COURSE OF HEARING THE AUTHORISED REPRESE NTATIVE(AR)OF THE ASSESSEE STATED THAT CONSIDERING THE SMALLNESS OF TAX EFFECT,GROUND NO.2 WAS NOT BEING PRESSED.HENCE,GROUND NO.2 STANDS DISMISSED. 2. FIRST GROUND OF APPEAL IS ABOUT APPLICABILITY OF SE CTION 50C OF THE ACT.IN THE ADDITIONAL GROUND OF APPEAL THE ASSESSEE HAS RAISED THE ISSUE OF RATE OF TAX WHILE COMPUTING THE CAPITAL GAINS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE AS SESSEE HAD SHOWN CAPITAL GAINS FROM SALE OF DEPRECIABLE ASSETS,THAT THE AMOUNT ARISING AS SHORT -TERM CAPITAL GAIN U/S. 50 WAS INVESTED IN BONDS AND EXEMPTION U/S.50EC OF THE ACT WAS CLAIMED BASED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF M/S ACE BUILDERS,THAT THAT IN THE WORKING OF SHORT-TERM CAPITAL GAIN(STCG),IT HAD ADOPTED THE SALE VALUE AS PER SALE AGREEMENT AT R.46,53,000/-. ASSESSEE'S RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND VIDE HIS ASSESSMENT O RDER,DATED 26-12-2008,THE AO DISALLOWED ASSESSEE'S CLAIM OF EXEMPTION U/S.54 EC OF THE ACT. HOWEVER,ON APPEAL, THE FIRST APPELLATE AUTHORITY(FAA),VIDE ORDER,DATED 19-10-2009,DIRECTED AO TO ALLOW EXEMPTION U/S 50 EC OF THE ACT. THEREAFTER,THE CIT-7 MUMBAI INITIATED PROCEEDINGS U /S 263 OF THE ACT.IT WAS NOTICED FROM THE ASSESSMENT RECORD THAT DURING THE YEAR UNDER CONSID ERATION,THE ASSESSEE SOLD THREE UNITS BEARING NUMBER 412,413 AND 414 IN INDUSTRIAL ESTATE.THE MAR KET VALUE OF THE SAME WAS RS.70,14,442/-. THE THREE UNITS WERE DEPRECIABLE ASSETS U/S 50 AND THE WDV AS ON 01.04.2005 WAS RS.74,902/- AND THE COST OF PURCHASE WAS RS.4,87,034/-.THESE UN ITS WERE SOLD FOR A CONSIDERATION OF RS. 46,53,000/- AND THIS WAS THE VALUE WHICH WAS TAKEN BY THE ASSESSEE AS SALE PRICE FOR COMPUTATION OF CAPITAL GAIN INSTEAD OF THE MARKET VALUE OF THE PROPERTY AS PER SECTION 50C. IT WAS ALSO SEEN FROM THE RETURN OF INCOME THAT WHILE COMPUTING THE TAXABLE GAIN U/S 50 THE COST OF PURCHASE I.E. RS.4,87,034/- WAS DEDUCTED FROM THE SALE CONSIDERAT ION OF RS.46,53,000/- WHEN IT WAS THE WDV OF RS.74,902/-WHICH ONLY DESERVED TO BE REDUCED.IN VIEW OF THOSE FACTS,THE CIT-7 MUMBAI PASSED ORDER U/S.263 ON 01.02.2011 WITH DIRECTION TO THE A O TO ADOPT THE WDV OF THE DEPRECIABLE ASSET AS COST OF ACQUISITION FOR COMPUTATION OF CAPITAL G AINS U/S 50. THE CIT-7 MUMBAI ALSO DIRECTED THE AO TO EXAMINE THE APPLICABILITY OF SECTION 50C IN T HE CASE. IN PURSUANCE OF CIT-7 MUMBAI DIRECTIONS,THE AO INIT IATED RE-ASSESSMENT PROCEEDINGS.DURING THE RE-ASSESSMENT PROCEEDINGS,THE ASSESSEE AGREED THAT FOR THE PURPOSE OF COMPUTING CAPITAL GAIN, THE COST OF ACQUISITION SHOULD BE RESTRICTED TO WDV OF RS. 74,902/- AS PER SECTION 50 (1) & (2) INSTEAD OF DEDUCTION OF ACTUAL COST OF RS.4,87,034/-.HOWEVE R, IN ITS EXHAUSTIVE SUBMISSIONS, THE ASSESSEE ARGUED THAT WHILE COMPUTING THE CAPITAL GAIN U/S 50 OF THE ACT, THE PROVISIONS OF SECTION 50 C WERE NOT APPLICABLE.IN ITS SUBMISSIONS BEFORE AO,THE ASS ESSEE REITERATED THE ABOVE FACTS STATING THAT SECTION 50 AND SECTION 50C BOTH HAVE INDEPENDENT AP PLICATIONS.THE ASSESSEE ALSO RELIED ON THE PROVISIONS OF SECTION 43 (6) (C) DEFINING BLOCK OF ASSETS. THE ASSESSEE ALSO RELIED ON THE PROVISIONS OF EXPLANATION BELOW SECTION 41(4). IN SUPPORT OF I TS ARGUMENT THAT THE PROVISIONS OF SECTION 50 C WERE NOT APPLICABLE ON SALE OF DEPRECIABLE ASSETS, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS:- -DCIT VS. CABLE CORPORATION OF INDIA ITA NO. 5592/M UM/2002 -ACIT .CC-34 VS. SHRI RAMESH B PAREKH ITA NO. 2281/ MUM/2009 -ACIT-RANGE 5(3) VS. ROGER PEREIRA COMMUNICATION PV T. LTD. 34 SOT 64 (MUM) -PANCHIRAM NAHATA VS. JCIT (2010) 127 TTJ (KOL)(URO ) 128 THE AO DID NOT ACCEPT THE ASSESSEE'S SUBMISSIONS TH AT PROVISION OF SECTION 50C WERE NOT APPLICAB -LE ON SALE OF DEPRECIABLE ASSETS.HE RELIED ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF UNITED MARINE ACADEMY(ITA/968/MUM/2007)WHEREIN THE BENCH HELD THAT THE AO WAS RIGHT IN APPLYING THE PROVISIONS OF SECTION 50C TO THE TRANS FER OF DEPRECIABLE CAPITAL ASSETS COVERED BY SECTION IN COMPUTING THE CAPITAL GAINS ARISING FROM THE SAID TRANSFER BY ADOPTING THE STAMP DUTY VALUATION. IN THE FACTS AND CIRCUMSTANCES, THE AO C OMPUTED THE CAPITAL GAIN BY ADOPTING THE MARKET VALUE OF RS. 70,14,442/-, AS SALE CONSIDERAT ION AS PER THE PROVISIONS OF SECTION 50C OF THE ACT AND THE WDV OF THE DEPRECIABLE ASSET AT RS.74,9 02/- WAS TAKEN AS COST OF ACQUISITION AS PER PROVISIONS OF SECTION 50 OF THE ACT. THE AO COMPUTE D THE TOTAL CAPITAL GAINS AS UNDER:- TOTAL SALE CONSIDERATION RS. 70,14,442/- 3 ITA NO.1114/MUM/2013 M/S PODDAR BROTHERS INVESTMENTS P. LTD. (MARKET VALUE AS PER SECTION 50 C) LESS COST OF ACQUISITION-WDV OF DEPRECIABLE RS. 74,902/- ASSETS (AS PER SECTION 50) _____________ CAPITAL GAIN RS. 16,39,540/- LESS DEDUCTION U/S 54 EC RS.40,92,96 5/- TAXABLE STCG RS.28,46,575/- 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA.DURING APPELLATE PROCEEDINGS THE ASSESSEE REITERATED ITS A RGUMENT TAKEN BEFORE AO DURING RE-ASSESSMENT PROCEEDINGS AND ALSO RELIED ON THE DECISIONS OF TRI BUNALS AS MENTIONED ABOVE.IT WAS ARGUED THAT THE SALE PRICE OF DEPRECIABLE ASSETS SHOULD BE TAKE N AS PER THE AGREEMENT FOR SALE FOR COMPUTING THE CAPITAL GAINS U/S.50 OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA D SOLD ITS THREE UNITS LOCATED IN THE INDUSTRIAL ESTATE,THAT SAME WERE ASSESSEE'S BUSINESS ASSETS FO RMING PART OF THE DEPRECIATION CHART,THAT THE ASSESTS IN QUESTION WERE DEPRECIABLE ASSETS,THAT TH E SALE CONSIDERATION AS PER THE SALE AGREEMENT WAS RS. 46, 53,000/-,THAT MARKET VALUE OF THE UNITS AS PER STAMP DUTY AUTHORITIES WAS RS.70, 14, 442/-,THAT THE CAPITAL GAIN ON SALE OF THOSE DEPREC IABLE ASSETS WAS TO BE COMPUTED AS PER PROVISIONS OF SECTION 50 OF THE ACT,THAT THE COST OF ACQUISITI ON OF THE DEPRECIABLE ASSETS WAS ADMITTEDLY AT RS.74,902/- I.E. WDV OF ASSETS,THAT AS PER THE ASSE SSEE, THE SALE CONSIDERATION WAS REQUIRED TO BE CONSIDERED THE VALUE AS PER SALE AGREEMENT I.E. AT RS. 46,53,000/-.REFERRING TO THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF ETC INDUSTRIES LTD .(79 DTR-IND,TRIB 391)ORDER DATED 10/05/2012 WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 50C WOULD BE APPLICABLE ON SALE OF DEPRECIABLE ASSETS. FOLLOWING THE DECISION OF ACIT VS.ETC INDUSTRIES LTD.THE FAA HELD THAT THE AO WAS JUSTIFIED IN CONSIDERING THE SALE CONSIDERAT ION OF DEPRECIABLE ASSETS AT RS.70,14,442/- U/S.50C OF THE ACT AS PER THE VALUATION MADE BY STA MP DUTY AUTHORITIES. 5. BEFORE US,THE AR FAIRLY CONCEDED THAT THE ISSUE RAI SED BY THE ASSESSEE WAS COVERED AGAINST IT,THAT IN THE MATTER OF UNITED MARINE ACADEMY(130I TD113)THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT.HOWEVER,HE CONTENDED THAT THE AO SHOULD BE DIRECTED TO APPLY THE RATE FOR TAX APPLICABLE TO LONG TERM CAPITAL GAINS(LTCG) INSTEAD OF SHORT TERM CAPITAL GAINS (STCG )WHILE COMPUTING CAPITAL GAINS TAX CONCERNING DEPR ECIABLE ASSET IN QUESTION.HE RELIED UPON THE DECISION OF SMITA CONDUCTOR.(ITA/4004/MUM/2011,AY.2 006-06,DATED-17.09.22013). DEPARTMENT -AL REPRESENTATIVE(DR)LEFT THE ISSUE TO THE DISCRET ION OF THE BENCH. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF SMITA CONDUCTOR(SUPRA)THE TRIBUNAL HAS HELD AS U NDER: 2.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE FAIRL Y CONCEDED THAT ISSUE WHETHER THE PROVISIONS OF SECTION 50C WOULD APPLY IN CASE OF CAPITAL GAIN COM PUTED U/S 50 OF THE IT ACT HAS BEEN DECIDED BY THE SPECIAL BENCH OF TRIBUNAL IN CASE OF UNITED MAR INE ACADEMY (130 ITD 113) IN WHICH IT HAS BEEN HELD THAT PROVISIONS OF SECTION 50C WOULD ALSO APPLY IN CASE OF COMPUTATION OF CAPITA GAIN FROM DEPRECIABLE ASSETS U/S 50 OF THE IT ACT. THE L EARNED AR FURTHER SUBMITTED THAT THE FLAT SOLD BY THE ASSESSEE HAD BEEN HELD FOR A LONG TIME EXCEEDIN G MORE THAN THREE YEARS AND, THEREFORE, THE CAPITAL GAIN THOUGH IT WAS REQUIRED TO BE COMPUTED U/S 50 OF THE IT ACT, IT HAS TO BE TREATED AS LONG TERM CAPITAL GAIN IN VIEW OF THE JUDGMENT OF HON'BL E HIGH COURT OF BOMBAY IN CASE OF ACE BUILDERS LTD. (281 ITR 410) IN WHICH IT HAS BEEN HE LD THAT THE FACTUM OF DEEMED SHORT TERM CAPITAL GAIN U/S 50 OF THE IT ACT WAS APPLICABLE ONLY TO CO MPUTATION OF CAPITAL GAIN AND FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT SUCH AS 54EC THE CAPITA L GAIN HAD TO BE TREATED AS LONG TERM CAPITAL GAIN IF THE ASSET WAS HELD FOR MORE THAN THREE YEAR S. THE LEARNED AR POINTED OUT THAT SECTION 50(1) MADE IT QUITE CLEAR THAT THE CAPITAL GAIN IN RESPEC T OF DEPRECIABLE ASSET WAS DEEMED AS SHORT TERM CAPITAL GAIN FOR THE PURPOSES OF SECTION 48 AND 49 OF THE IT ACT WHICH RELATED TO COMPUTATION OF 4 ITA NO.1114/MUM/2013 M/S PODDAR BROTHERS INVESTMENTS P. LTD. CAPITAL GAIN. THEREFORE, THE DEEMING PROVISION WAS ONLY LIMITED TO THE PROVISIONS FOR COMPUTATION OF CAPITAL GAIN. HE ALSO REFERRED TO THE DECISION O F THE MUMBAI BENCH OF TRIBUNAL IN CASE OF MAHINDRA FREIGHT CARRIERS VS. DCIT (139 TTJ 422) IN WHICH IT HAS BEEN HELD THAT PRESCRIPTIONS OF SECTION 50 ARE TO BE EXTENDED ONLY TO STAGE OF COMP UTATION OF CAPITAL GAIN AND, THEREFORE, CAPITAL GAIN RESULTING FROM TRANSFER OF DEPRECIABLE ASSET W HICH M/S SMITA CONDUCTORS LTD WAS HELD FROM MORE THAN PERIOD OF THREE YEARS WOULD RETAIN THE CH ARACTER OF LONG TERM CAPITAL GAIN FOR ALL OTHER PROVISIONS OF THE ACT AND CONSEQUENTLY QUALIFY FOR SET OFF AGAINST BROUGHT FORWARD LOSS OF LONG TERM CAPITAL GAIN. REFERENCE WAS ALSO MADE TO ANOTHER DE CISION OF MUMBAI BENCH OF TRIBUNAL IN CASE OF PRABODH INVESTMENT & TRADING COMPANY VS. ITO IN (IT A NO. 6557/MUM/2008) IN WHICH FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CAS E OF ACE BUILDERS P. LTD, (SUPRA) THE TRIBUNAL HELD THAT SECTION 50 CREATED A LEGAL FICTI ON ONLY FOR A LIMITED PURPOSE I.E. FOR THE PURPOSE OF SECTION 48 AND 49 AND FOR THE PURPOSES OF SECTIO N 54E, THE CAPITAL HAS TO BE TREATED AS LONG TERM CAPITAL GAIN. THE TRIBUNAL ALSO ACCEPTED THE ARGUME NTS OF THE ASSESSEE THAT IN CASE CAPITAL GAIN IS ASSESSED AS LONG TERM CAPITAL GAIN THE RATE OF TAX WOULD APPLY AS PROVIDED IN SECTION 112 OF THE IT ACT. IT WAS, THEREFORE, ARGUED THAT IN CASE OF ASSE SSEE, RATE OF TAX APPLICABLE TO LONG TERM CAPITAL GAIN HAD TO BE APPLIED AS PER THE PROVISIONS OF SEC TION 112 OF THE IT ACT. 2.3 THE LEARNED DR ON THE OTHER HAND PLACED RELIANC E ON THE ORDERS OF AUTHORITIES BELOW. 2.4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING APPLICABILITY OF PROVISIONS OF SECTION 50C TO THE C OMPUTATION OF CAPITAL GAIN IN CASE OF DEPRECIABLE ASSET U/S 50 OF THE IT ACT. AS PER THE PROVISIONS O F SECTION 50C IN CASE OF COMPUTATION OF CAPITAL GAIN FROM SALE OF BUILDING AND LAND APPURTMENT THER EOF, THE VALUE OF THE PROPERTY ASSESSED FOR STAMP DUTY PURPOSE HAS TO BE ADOPTED AS THE SALE CO NSIDERATION. THE AUTHORITIES BELOW HAVE TAKEN THE VIEW THAT PROVISIONS OF SECTION 50C WOULD ALSO APPLY IN CASE OF COMPUTATION OF CAPITAL GAIN FROM DEPRECIABLE ASSETS. THE VIEW TAKEN BY THE AUTH ORITIES BELOW IS SUPPORTED BY M/S SMITA CONDUCTORS LTD THE SPECIAL BENCH OF TRIBUNAL IN CAS E OF UNITED MARINE ACADEMY (130 ITD 113). THEREFORE, WE CONFIRM THE ORDER OF CIT (A) HOLDING THAT THE STAMP DUTY VALUE ASSESSED BY THE STAMP DUTY AUTHORITIES IS REQUIRED TO BE ADOPTED AS SALE CONSIDERATION IN CASE OF SALE OF THE FLAT UNDER REFERENCE IN THIS CASE. 2.5 THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROU ND THAT FOR THE PURPOSE OF APPLICATION OF TAX RATE, THE CAPITAL GAIN IN CASE OF THE ASSESSEE HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN AS THE FLA T HAD BEEN HELD BY THE ASSESSEE FOR MORE THAN THREE Y EARS. IT HAS BEEN ARGUED THAT PROVISIONS OF SECTION 50 DEEMING THE CAPITAL GAIN AS SHORT TERM C APITAL GAIN IS ONLY FOR THE PURPOSES OF SECTION 48 AND 49 WHICH RELATE TO COMPUTATION OF CAPITAL GA IN. THE DEEMING PROVISIONS HAS, THEREFORE, TO BE RESTRICTED ONLY TO COMPUTATION OF CAPITAL GAIN A ND FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT, THE CAPITAL GAIN HAS TO BE TREATED AS LONG TERM CAP ITAL GAIN. THE VIEW CANVASSED BY THE LEARNED AR IS SUPPORTED BY THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF ACE BUILDERS P. LTD. (SUPRA) IN WHICH IT HAS BEEN HELD THAT FOR THE PURP OSE OF OTHER PROVISIONS OF THE ACT SUCH AS SECTION 54EC THE CAPITAL GAIN HAS TO BE TREATED AS LONG TER M CAPITAL GAIN, IF THE ASSET IS HELD FOR MORE THAN THREE YEARS. THE SAME VIEW HAS BEEN TAKEN BY THE MU MBAI BENCH OF TRIBUNAL IN CASE OF MANALI INVESTMENTS VS. ASSISTANT COMMISSIONER OF INCOME TA X (139 TTJ 411) IN WHICH IT HAS BEEN HELD THAT THE PRESCRIPTIONS OF SECTION 50 ARE TO BE EXTE NDED ONLY TO THE STAGE OF COMPUTATION OF CAPITAL GAIN AND, THEREFORE,CAPITAL GAIN RESULTING FROM TRA NSFER OF DEPRECIABLE ASSET WHICH WAS HELD FOR MORE THAN THREE YEARS WOULD RETAIN THE CHARACTER OF LONG TERM CAPITAL GAIN FOR THE PURPOSE OF ALL OTHER PROVISIONS OF THE ACT. IN THIS CASE THE LD. A R FOR THE ASSESSEE SUBMITTED THAT FLAT HAD BEEN HELD FOR 15 TO 20 YEARS WHICH IS SUPPORTED BY THE F ACT THAT COST OF THE FLAT AS SHOWN IN THE BALANCE SHEET WAS ONLY RS. 1,30,000/-. THEREFORE, IF THE FL AT IS HELD FOR MORE THAN THREE YEARS THE M/S SMITA CONDUCTORS LTD TAX RATE HAS TO BE APPLIED AS PROVID ED IN SECTION 112 OF THE IT ACT APPLICABLE IN RESPECT OF CAPITAL GAIN ARISING FROM TRANSFER OF LO NG TERM CAPITAL ASSET. 2.6 WE, THEREFORE, HELD THAT, FOR THE PURPOSE OF CO MPUTATION OF CAPITAL GAIN, THE FLAT HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN U/S 50 OF THE IT ACT, BUT FOR THE PURPOSE OF APPLICABILITY OF TAX RATE IT HAS TO BE TREATED AS LONG TERM CAPITAL GAIN IF HELD FOR MORE THAN THREE YEARS. WE ACCORDINGLY DIRECT THE AO TO COMPUTE THE CAPITAL GAIN FROM THE SALE OF FLAT AND APPLY THE APPROPRIATE TAX RATE AFTER NECESSARY VERIFICATION IN THE LIGHT OF OBSERV ATIONS MADE IN THIS ORDER. RESPECTFULLY,FOLLOWING THE ABOVE WE DIRECT THE AO T O COMPUTE THE CAPITAL GAIN FROM SALE OF INDUSTRIAL UNITS AND APPLY THE APPROPRIATE TAX RATE AFTER NECESSARY VERIFICATION,AS THE ASSETS HAVE BEEN CLAIMED TO HAVE BEEN OWNED FOR MORE THAN THREE YEARS. 5 ITA NO.1114/MUM/2013 M/S PODDAR BROTHERS INVESTMENTS P. LTD. GROUND NO.1IS DECIDED AGAINST THE ASSESSEE.ADDITION AL GROUND STANDS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 7. LAST GROUND OF APPEAL IS ABOUT CHARGING OF INTERES T U/S.220(2)OF THE ACT,AMOUNTING TO RS. 10, 60,465/-.DURING THE ASSESSMENT PROCEEDINGS THE AO H AD LEVIED INTEREST U/S.220(2)FROM THE DATE OF ORIGINAL ORDER.THE ASSESSEE AGITATED THE ISSUE BEFO RE THE FAA.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE UPHELD THE ORDER OF THE AO. DURING THE COURSE OF HEARING BEFORE US,THE AR RELIE D UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF CHIKA OVERSEASE (P) LTD. (23 TAXMANN.COM 315).HE ALSO REFERRED TO THE DECISION OF THE H. BENCH OF MUMBAI TRIBUNAL IN THE CASE OF NARAD INVESTMENTS AND TRADING P. LTD.(ITA/3360/MUM/2010-AY-1996-97, DT. 1 9.10.2011).THE DR SUPPORTED THE ORDER OF THE FAA . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE NARAD INVESTMENTS AND TRADING P. LTD.(SUPRA)THE MAT TER HAS BEEN DISCUSSED AND DECIDED AS UNDER: 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF INTEREST U/S. 220(2) OF THE INCOM E TAX ACT, 1961. UNDER THE SAID SECTION, INTEREST AT A SPECIFIED RATE IS CHARGEABLE IN CASE THE DEMAN D RAISED ON THE ASSESSEE AS PER THE DEMAND NOTICE IS NOT PAID WITHIN THE TIME ALLOWED IN THE N OTICE. THE ISSUE RAISED IN THIS GROUND IS AS TO WHEN THE ORIGINAL ASSESSMENT HAS BEEN SET ASIDE BY TRIBUNAL AND FRESH ASSESSMENT HAS BEEN MADE BY THE A.O., THE PERIOD FOR LEVY OF INTEREST U/S.22 0(2) SHOULD BE RECKONED FROM THE DATE OF DEFAULT AS PER THE ORIGINAL ASSESSMENT ORDER OR AS PER THE FRESH ASSESSMENT ORDER. WE FIND THAT THIS ISSUE HAS ALREADY BEEN EXAMINED BY THE CBDT WHO HAD CLARI FIED THE ISSUE VIDE CIRCLE NO.334 DT.3.4.1982, THE RELEVANT PORTION OF WHICH IS REPRO DUCED BELOW FOR READY REFERENCE : ' (2) THESE ISSUES WERE COMPREHENSIVELY EXAMINED IN CONSULTATION WITH THE MINISTRY OF LAW AND THE BOARD HAS BEEN ADVISED : (I) WHERE AN ASSESSMENT ORDER IS CANCELLED UNDER SE CTION 146 OR CANCELLED / SET ASIDE BY AN APPELLATE/REVISIONAL AUTHORITY AND THE CANCELLATION / SETTING ASIDE BECOMES FINAL (I.E. IT IS NOT VARI ED AS A RESULT OF FURTHER APPEALS / REVISIONS), NO INT EREST UNDER SECTION 220(2) CAN BE CHARGED PURSUANT TO THE ORIGINAL DEMAND NOTICE. THE NECESSARY COROLL ARY OF THIS POSITION WILL BE THAT EVEN WHEN THE ASSESSMENT IS REFRAMED, INTEREST CAN BE CHARGED ONL Y AFTER THE EXPIRY OF 35 DAYS FROM THE DATE OF SERVICE OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASS ESSMENT ORDER. (II) WHERE THE ASSESSMENT MADE ORIGINALLY BY THE IN COME TAX OFFICER IS EITHER VARIED OR EVEN SET ASIDE BY ONE APPELLATE AUTHORITY BUT, ON APPEAL, TH E ORIGINAL ORDER OF THE INCOME TAX OFFICER IS RESTORED EITHER IN PART OR WHOLLY, THE INTEREST PAY ABLE UNDER SECTION 220(2) WILL BE COMPUTED WITH REFERENCE TO THE DUE DATE RECKONED FROM THE ORIGINA L DEMAND NOTICE AND WITH REFERENCE TO THE TAX FINALLY DETERMINED. THE FACT THAT DURING AN INTERVE NING PERIOD, THERE WAS NO TAX PAYABLE BY THE ASSESSEE UNDER ANY OPERATIVE ORDER WOULD MAKE NO DI FFERENCE TO THIS POSITION. (3) THE FOREGOING LEGAL POSITION WILL APPLY MUTATIS MUTANDIS TO THE PROCEEDINGS UNDER OTHER DIRECT TAXES ALSO.' 3.3 IN VIEW OF THE CIRCULAR NO.334 DT.3.4.1982 OF C BDT, IN CASE, THE ASSESSMENT IS SET ASIDE BY CIT(A) AND SETTING ASIDE BECOME FINAL, INTEREST UND ER SECTION 220(2) HAS TO BE CHARGED ONLY AFTER EXPIRY OF 35 DAYS FROM THE DATE OF SERVICE OF DEMAN D NOTICE PURSUANT TO THE FRESH ASSESSMENT ORDER. BUT IN CASE THE ORDER OF CIT(A) IS SUBJECT MATTER O F FURTHER APPEAL AND THE TRIBUNAL HAS RESTORED THE ORDER OF ASSESSING OFFICER EITHER IN PART OR WH OLLY, THE INTEREST PAYABLE UNDER SECTION 220(2) WILL BE COMPUTED WITH REFERENCE TO THE DUE DATE REC KONED FROM ORIGINAL DEMAND NOTICE AND WITH REFERENCE TO THE TAX FINALLY DETERMINED IN THE ASSE SSMENT. IN THE PRESENT CASE, THE ORIGINAL ORDER OF ASSESSMENT WAS CONFIRMED BY CIT(A) BUT ON FURTHER A PPEAL, THE TRIBUNAL SET ASIDE THE ORDER OF CIT(A) AND THE ISSUE RESTORED TO THE ASSESSING OFFI CER. THEREFORE IN TERMS OF THE CIRCULAR OF CBDT (SUPRA), THE INTEREST UNDER SECTION 220(2) HAS TO B E CHARGED ONLY IN ITA NO.3360/MUM/2010 RESPECT OF DEMAND RAISED AS PER THE FRESH ASSESSMEN T ORDER. THE CIT(A) FOLLOWING CERTAIN JUDGMENTS HAS HELD THAT INTEREST UNDER SECTION 220( 2) HAS TO BE LEVIED FROM DATE OF DEFAULT OF DEMAND NOTICE ISSUED AS PER THE ORIGINAL ASSESSMENT ORDER. WE HAVE PERUSED THE JUDGMENTS CITED BY CIT(A) AND THE SAME ARE FOUND TO BE DISTINGUISHA BLE. IN CASE OF PITAMBER DAS DULI (SUPRA), HON'BLE HIGH COURT OF MADHYA PRADESH HAS HELD THAT IN CASE THE ORDER OF CIT(A) IS SET ASIDE AND THE ORDER OF ASSESSING OFFICER IS RESTORED, THEN, T HE DEMAND RAISED ON THE BASIS OF ORIGINAL 6 ITA NO.1114/MUM/2013 M/S PODDAR BROTHERS INVESTMENTS P. LTD. ASSESSMENT ORDER WILL GET REVIVED AND THE ASSESSEE IS LIABLE TO PAY INTEREST ON THAT DEMAND FROM THE DATE OF ORIGINAL ORDER. OBVIOUSLY, THE CASE IS NOT APPLICABLE TO THE PRESENT SITUATION AS THE ASSESSMENT ORDER IN THIS CASE HAS NOT BEEN RESTORED BY THE TRIBUNAL BUT THE MATTER HAS BEEN SENT BACK TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT AND THEREFORE THE DEMAND IN TERMS OF THE CIRCULAR OF CBDT HAS TO BE LEVIED FROM THE DATE OF THE FRESH ASSESSMENT ORDER. SIMILARLY, IN THE CASE OF SUPER SPINNING (SUPRA), THE ADDITION MADE B Y ASSESSING OFFICER IN ASSESSMENT HAD BEEN DELETED BY CIT(A) BUT ON FURTHER APPEAL, THE TRIBUN AL SET ASIDE THE ORDER OF CIT(A) WHICH MEANT THAT THE ORDER OF ASSESSING OFFICER WAS RESTORED. I T WAS THEREFORE HELD BY THE HON'BLE HIGH COURT OF MADRAS THAT THE ORIGINAL ASSESSMENT GOT REVIVED DUE TO THE ORDER OF TRIBUNAL AND THE INTEREST ITA NO.3360/MUM/2010 UNDER SECTION 220(2) WOULD BE LEVIED FROM THE DATE OF ORIGINAL ASSESSMENT ORDER. THIS IS THE POSITION AS PER THE C BDT CIRCULAR ALSO ON WHICH THE ASSESSEE HAS RELIED. SIMILARLY, THE JUDGMENT OF HON'BLE HIGH COU RT OF DELHI IN CASE OF BHARAT COMMERCE & INDUSTRIES LTD. (SUPRA) IS ALSO DISTINGUISHABLE. IN THAT CASE, AS PER THE ORIGINAL ASSESSMENT UNDER SECTION 143(3), THERE WAS NO DEMAND RAISED AND SUBS EQUENTLY ORDER UNDER SECTION 154 WAS PASSED RAISING DEMAND OF RS.1,24,56,311 WHICH INCLUDED INT EREST UNDER SECTION 220(2) OF RS.11,83,631 CHARGED FROM THE DATE OF DEFAULT AS PER THE ORIGINA L ASSESSMENT ORDER. THE DEMAND HAD ARISEN VIDE ORDER UNDER SECTION 154 AND THEREFORE IT WAS HELD B Y THE HON'BLE HIGH COURT THAT INTEREST UNDER SECTION 220(2) WILL BE CHARGED FROM DATE OF DEFAULT AS PER THE DEMAND NOTICE ISSUED PURSUANT TO SECTION 154 ORDER. THE SAID JUDGMENT IS THEREFORE N OT APPLICABLE TO THE FACTS OF THE PRESENT CASE IN WHICH THE ORIGINAL ASSESSMENT ORDER HAS BEEN SET AS IDE BY THE TRIBUNAL AND MATTER RESTORED TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT AND THEREFOR E IN VIEW OF THE CIRCULAR OF CBDT (SUPRA), THE INTEREST CAN BE LEVIED ONLY FROM THE DATE OF DEFAUL T OF THE DEMAND NOTICE ISSUED IN PURSUANCE OF THE FRESH ASSESSMENT ORDER. THE ORDER OF CIT(A) HOLDING THAT INTEREST UNDER SECTION 220(2) HAS TO BE LEVIED FROM THE DATE ITA NO.3360/MUM/2010 OF DEFAUL T AS PER THE ORIGINAL ASSESSMENT ORDER THEREFORE CANNOT BE SUSTAINED. THE SAME IS SET ASID E AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY A LLOWED. RESPECFULLY,FOLLOWING THE ORDER OF THE HONBLE BOMB AY HIGH COURT AND THE ABOVE MENTIONED DECISION OF THE TRIBUNAL,WE DECIDE GROUND NO.3 IN F AVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. 0(1 !'( 3 4 * . /(1 5 * ( 67. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH,MARCH,20 15. / * ,-' 9 :! 25 ;,2015 - * . A SD/- SD/- ( / VIJAY PAL RAO) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, :! /DATE: 25.03 . 2015. SK / / / / * ** * %( %( %( %( B'( B'( B'( B'( / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR C BENCH, ITAT, MUMBAI / E. %(! , . . . 6. GUARD FILE/ . 0 &( &( &( &( %( %(%( %( //TRUE COPY// /! / BY ORDER, F / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI.