M/s. Kum Industries, Pune V. Additional Commissioner of Income-tax,

ITA 1317/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1796 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 13 1 7 /PN/201 4 / ASSESSMENT YEAR : 20 0 7 - 0 8 M/S. KUM INDUSTRIES, 34, AUNDH ROAD, BHAU PATIL MARG, PUNE 41 10 2 0 . / APPELLANT PAN: AA BFK2831L VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 8 , PUNE . / RESPONDENT / APPELLANT BY : SHRI SUNIL PATHAK / RESPONDENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 18 . 0 5 .201 6 / DATE OF PRONOUNCEMENT: 20 . 0 5 .201 6 DATE OF HEARING : 18 . 0 5 .201 6 DATE OF PRONOUNCEMENT: 20 . 0 5 .201 6 / ORDER PE R SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 23 . 04 .20 1 4 RELATING TO ASSESSMENT YEAR 20 0 7 - 0 8 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.8,03,896/ - ON SALE OF ASSETS ON THE GROUND THAT THE ASSESSEE HAD NOT OBTAINED ANY VALUATION REPORT AT THE TIME OF SE LLING THE ASSETS AND ACCORDINGLY, THE LOSS CLAIMED BY THE ASSESSEE ON SALE OF ASSETS WAS NOT ALLOWABLE. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LOSS CLAIMED BY THE ASSESSEE WAS NOT ALLOWABLE SINCE THE ASSESSEE COULD NOT SUPPORT IT WITH PROPER EVI DENCES. ITA NO. 13 1 7 /PN/20 1 4 M/S. KUM INDUSTRIES 2 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LOSS CLAIMED BY THE ASSESSEE ON SALE OF ASSETS WAS GENUINE LOSS AND THERE WAS NO REASON TO DISALLOW THE SAME WHILE COMPUTING THE INCOME OF THE ASSESSEE. 4] THE LEARNED CIT(A) ERRED IN NOT APP RECIATING THAT - A . THE ASSESSEE HAD RECORDED THE ACTUAL SELLING PRICE OF THE ASSETS SOLD IN ITS BOOKS AND ACCORDINGLY, HAD COMPUTED THE SHORT TERM CAPITAL LOSS AND HENCE, THERE WAS NO REASON TO DISALLOW THE SAME IN THE ABSENCE OF ANY EVIDENCE THAT THE ASSES SEE HAD ACTUALLY RECEIVED ANY HIGHER CONSIDERATION ON SALE OF ASSETS. B . SIMPLY BECAUSE, THE ASSESSEE HAD NOT OBTAINED VALUATION REPORT DID NOT MEAN THAT THE LOSS CLAIMED BY THE ASSESSEE WAS NOT GENUINE AND CONSIDERING THE FACT THAT THERE IS NO EVIDENCE WIT H THE DEPT. THAT THE ASSESSEE HAD RECEIVED ANY ADDITIONAL SALE CONSIDERATION, THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS WAS NOT JUSTIFIED AT ALL. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST ADDITION OF RS. 8,03,896/ - ON ACCOUNT OF DISALLOWA NCE OF LOSS CLAIMED BY THE ASSESSEE ON SALE OF ASSETS. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS MANUFACTURER OF CHEMICALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED CHEMICALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED INCOME FROM BUSINESS AND ALSO INCOME FROM CAPITAL GAIN S ON SALE OF VARIOUS ASSETS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SOLD ITS PLANT & MACHINERY TO ITS SISTER CONCERN. HOWEVER, NO VALUATION OF ASSETS WAS DONE BY THE ASSESSEE BEFORE SELLING THE SAME . AS PER THE ASSESSING OFFICER, THE ASSESSEE HAD SOLD OUT THE ASSETS TO ITS SISTER CONCERN AT A THROW AWAY PRICE. FURTHER, THE ASSESSING OFFICER ALSO ASKED THE ASSESSEE TO FURNISH SEPARATE WDV OF THE ASSETS WHICH WERE SOLD TO THE SISTER CONCERN, BUT THE ASSESSEE STATED THAT SEPARATE WDV OF THOSE ASSETS WAS NOT AVAILABLE. CONSEQUENTLY, THE SHORT TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE UNDER SECTION 50 OF THE ACT WAS DISALLOWED AND ADDITION WAS MADE IN THE HANDS OF ASSESSEE TO THE EXTENT OF RS. 8,03,896/ - . 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER NOTING THAT OUT OF TOTAL SALE OF PLANT & MACHINERY, ALMOST 45% OF ASSETS WERE SOLD TO THE CONCERNS, ITA NO. 13 1 7 /PN/20 1 4 M/S. KUM INDUSTRIES 3 WHERE ONE OF THE PARTNERS WAS HAVING 33% SHARE. WHERE THE ASSESSEE HAD FAILED TO SUBMIT COPY OF ASSE TS VALUED BY THE REGISTERED VALUER SO AS TO ARRIVE THE MARKET PRICE OF THE ASSESSEE, T HE CIT(A) UPHELD THE ACTION OF ASSESSING OFFICER IN DISALLOWING LOSS OF RS. 8,03,896/ - . 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZ ED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS MANUFACTURER OF CHEMICALS AND THE ASSETS SOLD BY THE ASSESSEE WERE IN CONSTANT USE FOR THE MANUFACTURING ACTIVITY, WHICH WERE SOLD DURING THE YEAR UNDER CONSIDERATION BY THE ASSESSEE TO I TS SISTER CONCERN. HE FURTHER STATED THAT THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF ASSESSEE AS THERE WAS NO VALUATION REPORT OF SALE VALUE OF THE ASSESSEE PLUS APPLIED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN ALA FIRM VS. CIT (1991) 18 9 ITR 285 (SC) AND ALSO ON THE PREMISE THAT WHERE THE ASSETS SOLD TO THE SISTER CONCERN, THE MARKET VALUE SHOULD HAVE BEEN TAKEN. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT UNDER THE PROVISIONS OF THE ACT, A PRESUMPTION COULD BE TO THE COST OF ACQUISITION BUT NO PRESUMPTION CAN BE DRAWN AGAINST THE SALE VALUE OF ASSETS. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND , PLACED RELIANCE ON THE ORDER OF CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS A ND PERUSED THE RECORD. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF MANUFACTURING OF CHEMICALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMS THAT IT HAD SOLD ITS PLANT & MACHINERY SINCE IT HAD CLOSED DOWN ITS BUSINESS. THE SAID SALE OF ASSET S WAS PARTLY MADE TO ONE OF THE SISTER CONCERNS I.E. CONCERN IN WHICH ONE OF THE ITA NO. 13 1 7 /PN/20 1 4 M/S. KUM INDUSTRIES 4 PARTNERS HAD MORE THAN 33% SHARE. THE ASSESSING OFFICER ASKED THE ASSESSEE FIRST TO JUSTIFY THE SALE PRICE, SINCE THE SALE WAS BEING MADE TO SISTER CONCERN AND ALSO TO FURNIS H SEPARATE WDV OF THESE ASSETS, WHICH WERE SOLD TO THE SISTER CONCERN AND OTHERS . THE ASSESSING OFFICER IN THE ABSENCE OF DETAILS OBSERVED THAT THE ASSETS WERE SOLD TO THE SISTER CONCERNS AND OTHER PERSONS ON THROW AWAY PRICE AND THEREFORE, HE DISALLOWED THE SHORT TERM CAPITAL LOSS OF RS. 8,03,896/ - , WHICH ACTION OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE CIT(A). 10. THERE ARE TWO ASPECTS TO THE CLAIM OF LOSS BY THE ASSESSEE ON SALE OF ITS ASSETS. FIRST OF ALL, ALL THESE ASSETS WERE USED IN CHEMICA L INDUSTRY CARRIED ON BY THE ASSESSEE AND HAD ITS WEAR AND TEAR. WHERE THE PLANT HAS BEEN CLOSED DOWN BY THE ASSESSEE, THE WHOLE PLANT & MACHINERY WHICH WA S PART OF FIXED ASSETS OWNED BY THE ASSESSEE AND WA S CLASSIFIED IN THE BLOCK OF ASSETS AS PLANT & MA CHINERY HA D BEEN DISPOSED OF BY THE ASSESSEE , PARTLY, THE ASSETS HAVE BEEN SOLD TO THE SISTER CONCERN AND PARTLY TO THE OTHERS. THE FIRST ASPECT OF THE ISSUE IS THE SALE PRICE OF ASSETS WHICH WAS RECEIVED BY THE ASSESSEE WHICH HAS BEEN DECLARED UNDER SECT ION 50 OF THE ACT. WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN NOT ACCEPTING THE SALE VALUE SHOWN BY THE ASSESSEE IN THE ABSENCE OF ANY EVIDENCE FOUND TO THE CONTRARY THAT THE SALE VALUE SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WAS UNDERST ATED AND NOT CORRECT. THE SAID SALE VALUE CANNOT BE DISTURBED. FURTHER, THE ASSESSEE HAS SOLD THE TOTAL PLANT & MACHINERY AND WHILE COMPUTING INCOME / LOSS UNDER SECTION 50 OF THE ACT, SINCE EACH ASSET UNDER THE HEAD PLANT & MACHINERY FORMS PART OF BLOCK OF ASSETS, THE WDV OF THE WHOLE BLOCK IS TO BE CONSIDERED FOR CO MPUTING SHORT TERM CAPITAL LOSS IN THE HANDS OF ASSESSEE . IN THIS REGARD, WE FIND NO MERIT IN THE OBJECTIONS OF ASSESSING OFFICER THAT WHERE THE ASSESSEE HAS FAILED TO GIVE BREAK UP OF WDV O F ASSETS SOLD, THE SAID CLAIM CANNOT BE ALLOWED ITA NO. 13 1 7 /PN/20 1 4 M/S. KUM INDUSTRIES 5 TO THE ASSESSEE. REVERSING THE ORDER OF CIT(A), WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SHORT TERM CAPITAL LOSS OF RS. 8,03,896/ - IN THE HANDS OF ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE THUS, ALLOWED. 1 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF MAY , 201 6 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 20 TH MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT - V , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE