PRADEEP P. MODY, MUMBAI V. ITO WD 18(2)(4), MUMBAI

ITA 1281/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83743 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: B P MANTRI SHRI HARSHED AJMERA
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Fair market value
• Section: 50C; 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI , , ! '#$ , % & BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 1281/MUM/2011 ( ' ' ' ' / ASSESSMENT YEAR : 2006-07 SHRI PRADEEP P. MODY, 51, GAURAV, SAYANI MARG, PRABHADEVI, MUMBAI-400 025 / VS. THE ITO, WARD NO. 18(2)(4), PIRAMAL CHAMBERS, MUMBAI-400 012 ( % ./ ) ./ PAN/GIR NO. : AAAPM 5987C ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI B.P. MANTRI SHRI HARSHED AJMERA +,(* . - / RESPONDENT BY: SMT. PARMINDER . /0% / DATE OF HEARING :10.09.2014 12' . /0% / DATE OF PRONOUNCEMENT :17.9.2014 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-29, MUMBAI DT.16.11.2010 PERTAINING TO A.Y.2 006-07. 2. THE SOLE GRIEVANCE OF THE ASSESSEE READ AS UNDER : THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL OF Y OUR APPELLANT AND UPHOLDING THE ORDER OF AO. THE AO ER RED IN ITA NO. 1281/M/2011 2 TAKING THE SALE VALUE OF OFFICE PREMISES SOLD AT RS . 31,77,864 & RS. 6,29,425/- BEING STAMP DUTY VALUATION AS PER SEC. 50C INSTEAD OF ACTUAL SALE VALUE AT RS. 21,00,000/- AND RS. 6,00,000/- RESPECTIVELY AND TAKING THE SHORT TERM C APITAL GAIN ON SALE OF OFFICE PREMISES AT RS. 9,39,335/-. YOUR APPELLANT PRAYS TO TAKE THE ACTUAL SALE PRICE OF OF FICE PREMISES AND DELETE THE SHORT TERM CAPITAL GAIN OF RS. 9,39,335/-. 3. THE ASSESSEE RECEIVED INCOME FROM COMMISSION AND INTEREST FROM THE INVESTMENT MADE BY HIM. THE RETURN OF INCOME D ECLARING TOTAL INCOME OF RS. 81,240/- WAS FILED ON 26.3.2006. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SOLD OFFICE PREMISES AT DADAR AND KANDIVALI AND PURCHASE D NEW OFFICE PREMISES AT PRABHADEVI. THE AO FOUND THAT THE ASSE SSEE HAS SHOWN THE SALE CONSIDERATION OF BOTH THE PROPERTIES MUCH LESS THAN THE STAMP DUTY VALUE. INVOKING THE PROVISIONS OF SEC. 50C OF THE ACT, THE AO PROCEEDED BY TAKING THE STAMP DUTY VALUE AS THE FULL VALUE OF CONSIDERATION AND RECOMPUTED THE SHORT TERM CAPITAL GAIN AT RS. 9,39, 335/-. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BEFORE THE LD. C IT(A) THAT THE ASSETS SOLD WERE DEPRECIABLE BUSINESS ASSETS AND SALE VALU E HAS TO BE TAKEN AS PER EXPLANATION 4 TO SEC. 43(6) OF THE ACT. IT WAS SUBMITTED THAT ONLY ACTUAL CONSIDERATION SHOULD HAVE BEEN TAKEN FOR CO MPUTATION OF CAPITAL GAIN. HOWEVER, THE LD. CIT(A) WAS OF THE FIRM BELI EF THAT SEC. 50C DOES NOT MAKE ANY EXCEPTION TO DEPRECIABLE ASSETS. ACCO RDING TO THE LD. CIT(A) MONEY PAYABLE AS DEFINED U/S. 43(6) HAS TO BE SUBSTITUTED BY THE STAMP DUTY VALUE OF THE ASSET AND WENT ON TO CO NFIRM THE FINDINGS OF THE AO. ITA NO. 1281/M/2011 3 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT THOUGH THE ASS ESSEE HAD SOLD TWO PREMISES DURING THE YEAR UNDER CONSIDERATION BUT AT THE SAME TIME HAS PURCHASED ONE ANOTHER NEW PREMISE THEREFORE THE BLO CK OF ASSETS OF BUILDING DOES NOT CEASE TO EXIST. THE DEPRECIATION IS TO BE ALLOWED ON THE WRITTEN DOWN VALUE AT THE END OF THE YEAR. IT IS TH E SAY OF THE LD. COUNSEL THAT THE AO NEVER ASKED THE ASSESSEE TO EXPLAIN WHY THE PROVISIONS OF SEC. 50 R.W. SEC. 50C SHOULD NOT BE APPLIED. THE L D. COUNSEL FURTHER STATED THAT SEC. 43(6) OF THE ACT PROVIDES A WELL D EFINED MECHANISM TO COMPUTE WRITTEN DOWN VALUE FOR THE PURPOSE OF CALCU LATING DEPRECIATION U/S. 32 OF THE ACT. THE LD. COUNSEL FURTHER STATED THAT IN CASE OF BLOCK OF ASSETS, DEPRECIATION U/S. 32 CAN BE CLAIMED ON THE WDV AS COMPUTED U/S. 43(6) OF THE ACT PROVIDED AS ON THE LAST DAY OF THE PREVIOUS YEAR, THE TWIN CONDITIONS ARE FULFILLED NAMELY THERE MUST BE ASSET S IN THE BLOCK AND THERE MUST BE SOME POSITIVE VALUE FOR THE BLOCK ON WHICH PRESCRIBED PERCENTAGE CAN BE APPLIED. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ROGER PEREIRA COMMUNICATION PVT. LTD 34 SOT 64 (MUM), ACIT VS SHRI RAMESH B. PAREKH IN ITA NO. 228 1/M/09, CIT VS CABLE CORPORATION OF INDIA LTD. 336 ITR 56 (BOM). DRAWING SUPPORT FROM THESE JUDICIAL DECISIONS, THE LD. COUNSEL CONC LUDED BY SAYING THAT THE ACTUAL SALE PRICE SHOULD BE CONSIDERED AND THE ADDITION OF SHORT TERM CAPITAL GAIN OF RS. 9,39,335/- SHOULD BE DELETED. 6. SUPPORTING THE FINDINGS OF THE REVENUE AUTHORIT IES, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON TH E DECISION OF THE SPECIAL BENCH, MUMBAI IN THE CASE OF ITO VS UNITED MARINE ACADEMY 138 TTJ 129. ITA NO. 1281/M/2011 4 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE DECISIONS BROUGHT TO OUR NOTICE. WE FIND THAT THE ASSESSEE AS COMPUTED WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AS PER PROVISIONS OF SEC. 43(6)(C) OF THE ACT WHICH CAN BE SUMMARIZED AS UNDER: PARTICULARS AMOUNT (IN RS.) AMOUNT (IN RS.) OPENING WDV AS ON 1.4.2005 DADAR OFFICE KANDIVALI OFFICE 57,789/- 1,95,065/- TOTAL OPENING WDV 2,52,854/- ADD: ACTUAL COST OF THE ASSETS FALLING WITHIN THE BLOCK, ACQUIRED DURING THE PREVIOUS YEAR I.E. NEW OFFICE PREMISES ACQUIRED AT PRABHADEVI 26,15,100/- TOTAL 28,67,954/- LESS: SALE VALUE OF DADAR OFFICE SALE VALUE OF KANDIVALI OFFICE 21,00,000 6,00,000 GROSS SALES VALUE 27,00,000 LESS: EXPENSES IN RELATION TO SALE 31,000 NET SALE VALUE 26,69,000/- WDV BEFORE CLAIMING DEPRECIATION U/S. 32 FOR F.Y. 2005- 06 (A.Y. 2006-07) 1,98,954/- 8. IN OUR CONSIDERED OPINION, WHEN AN ASSET IS SOLD , SEC. 43(6)(C)(1)(B) OF THE ACT PROVIDES THAT THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS SHALL BE REDUCED BY MONIES PAYABL E IN RESPECT OF THE ASSETS I.E. SOLD WHICH MEANS THAT ON SALE OF ASSET, THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS IS TO BE REDUCED BY THE AMOU NT AT WHICH THE ASSET IS ACTUALLY SOLD. FOR THIS PROPOSITION, WE DRAW SUPPO RT FROM THE DECISION OF ITA NO. 1281/M/2011 5 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CABLE CORPORATION OF INDIA LTD (SUPRA). THE QUESTION BEFORE THE HONBLE COURT WAS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN HOLDING THAT F OR THE PURPOSE OF CALCULATING DEPRECIATION ALLOWABLE TO A BLOCK OF FIXED ASSETS, ONLY THE APPARENT CONSIDERATION FOR W HICH THE FLAT WAS SOLD SHOULD BE REDUCED FROM THE BLOCK OF F IXED ASSETS BEING RS. 9 LAKHS EVEN THOUGH THE FAIR MARKET VALUE OF THE SAID FLAT WAS RS. 66,44,902/- AS DETERMINED BY THE DVO. 9. CONFIRMING THE FINDINGS OF THE TRIBUNAL, THE HON BLE COURT THUS OBSERVED AS UNDER: AS RIGHTLY OBSERVED BY THE TRIBUNAL, THE LEGISLATU RE IN SEC. 43(6)(C)(I)(B) HAS USED A DIFFERENT CONNOTATION IN RESPECT OF SALE OF ASSETS AND SALE OF SCRAP. AS PER THAT SECT ION ON SALE OF AN ASSET, THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS IS TO BE REDUCED BY THE AMOUNT AT WHICH THE ASSET IS ACTU ALLY SOLD. 10. IN OUR CONSIDERED VIEW, THIS DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT SQUARELY APPLY ON THE FACTS OF THE CASE IN HAND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 9,39,335/-. 11. BEFORE CLOSING, THE LD. DEPARTMENTAL REPRESENTA TIVE HAS STRONGLY RELIED UPON THE DECISION OF THE SPECIAL BENCH, MUMB AI IN THE CASE OF UNITED MARINE ACADEMY (SUPRA). WE FIND THAT THE DE CISION OF THE SPECIAL BENCH IS DT. 25.4.2011 AND THE DECISION OF THE HON BLE HIGH COURT IS DT. 16.6.2011. SINCE WE HAVE FOLLOWED THE DECISION OF T HE HONBLE ITA NO. 1281/M/2011 6 JURISDICTIONAL HIGH COURT, WE DO NOT FIND IT NECESS ARY TO DWELL INTO THE FINDINGS OF THE SPECIAL BENCH. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/9/2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 4 DATED : 17 TH SEPTEMBER, 2014 . . ./ RJ , SR. PS 3 3 3 3 . .. . +/ +/ +/ +/ 5 '/ 5 '/ 5 '/ 5 '/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 78 +/ , , / DR, ITAT, MUMBAI 6. 89 : / GUARD FILE. 3 3 3 3 / BY ORDER, ,/ +/ //TRUE COPY// ; ;; ; / < < < < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI