Industrial Engineers India Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1356/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90602 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2014
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: M VISWANATHAN
• Keywords: Reopening of assessment; Capital asset; Depreciation; Period of limitation
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1356/MDS/2014 / ASSESSMENT YEAR : 2007-08 M/S INDUSTRIAL ENGINEERS INDIA PVT. LTD A-10, THIRU-VI-KA INDUSTRIAL ESTATE GUINDY, CHENNAI 600 032 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE II(3) CHENNAI [PAN AAABCI 0864 J] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI M. VISWANATHAN, CA /RESPONDENT BY : SHRI N. MADHAVAN, JCIT / DATE OF HEARING : 19 - 05 - 2015 ! / DATE OF PRONOUNCEMENT : 30 - 0 6 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, CHENNA I, DATED 13.2.2014 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS COMPUTAT ION OF CAPITAL GAINS. ITA NO.1356/14 :- 2 -: 3. SHRI M. VISWANATHAN, LD. REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE SOLD A FACTORY SITE TO GETHER WITH LAND FOR A SALE CONSIDERATION OF ` 2,25,00,000/- AND THE ASSESSEE OFFERED THE GAINS AS LONG TERM CAPITAL GAINS FOR TAXATION. HOW EVER, THE ASSESSING OFFICER TREATED THE GAINS ARISING OUT THE SALE OF L AND AS SHORT TERM CAPITAL GAINS AND ACCORDINGLY, LEVIED TAXES. REFER RING TO THE ASSESSMENT ORDER, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS CLAIMING DEPRECIATION ON THE LAND AND BUILDING FROM ASSESSMENT YEAR 1998-99 ONWARDS. THE CLAIM OF THE ASSESSEE F OR DEPRECIATION ON THE LAND CANNOT BE ALLOWED UNDER THE PROVISIONS OF INCOME-TAX ACT, 1961. SINCE THE ASSESSEE WRONGLY CLAIMED DEPRECIA TION ON THE LAND, THE ASSESSEE IS NOW READY TO WITHDRAW THE CLAIM OF DEPRECIATION FOR ALL EARLIER ASSESSMENT YEARS. EVEN OTHERWISE, ACC ORDING TO THE LD. REPRESENTATIVE WHEN THE INCOME-TAX ACT DOES NOT ALL OW DEPRECIATION ON THE LAND MERELY BECAUSE THE ASSESSEE CLAIMED TH E SAME, IT CANNOT BE ALLOWED BY THE ASSESSING OFFICER. THEREFORE, THE GAINS ARISING OUT THE SALE OF LAND HAS TO BE ASSESSED ONLY AS LONG TE RM CAPITAL GAINS. 4. ON THE CONTRARY, SHRI N. MADHAVAN, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS CLAI MING DEPRECIATION ON THE LAND AND BUILDING @ 10% ON THE BLOCK OF ASSE TS FROM ASSESSMENT YEAR 1995-96 TO 2006-07. THE ASSESSING OFFICER ALSO ALLOWED THE CLAIM OF THE ASSESSEE. REFERRING TO T HE PROVISIONS OF ITA NO.1356/14 :- 3 -: INCOME-TAX ACT, THE LD. DR SUBMITTED THAT THE ASSE SSEE IS NOT ENTITLED FOR DEPRECIATION ON THE LAND. AT THE BEST, THE AS SESSEE MAY BE ENTITLED FOR DEPRECIATION ONLY ON THE BUILDING. RE FERRING TO SECTION 50 OF THE ACT, THE LD. DR SUBMITTED THAT IN RESPECT OF DEPRECIABLE ASSET, THE GAINS ARISING OUT OF SALE HAS TO BE TREATED AS SHORT TERM CAPITAL GAINS. REFERRING TO THE CLAIM OF THE ASSESSEE THA T IT IS WILLING TO WITHDRAW THE DEPRECIATION CLAIMED IN THE EARLIER YE ARS, THE LD. DR SUBMITTED THAT LIMITATION IS ALREADY OVER AND THE ASSESSEE CANNOT WITHDRAW THE CLAIM NOW. THE ASSESSING OFFICER ALSO CANNOT REOPEN THE ASSESSMENTS SINCE THE PERIOD OF LIMITATION HAS ALRE ADY EXPIRED. THEREFORE, THE DEPRECIATION CLAIMED FOR THE ASSESSM ENT YEARS 1995-96 TO 2006-07 CANNOT BE WITHDRAWN EITHER BY THE ASSES SEE OR BY THE ASSESSING OFFICER AT THIS STAGE. SINCE THE ASSESSI NG OFFICER ALLOWED DEPRECIATION ON THE LAND, THE GAIN ARISING OUT OF T HE SALE OF THE LAND HAS TO BE TREATED AS SHORT TERM CAPITAL GAINS, THER EFORE, THERE IS NO INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADM ITTEDLY, THE ASSESSEE SOLD A LAND ALONGWITH BUILDING WHICH WAS U SED AS A FACTORY FOR ` 2,25,00,000/-. IT IS ALSO AN ADMITTED FACT THAT T HE ASSESSEE CLAIMED DEPRECIATION ON THE LAND @ 10% FROM ASSESSM ENT YEARS 1995- 96 TO 2006-07. THE QUESTION ARISES FOR CONSIDERATI ON IS WHEN THE ITA NO.1356/14 :- 4 -: ASSESSEE CLAIMED DEPRECIATION ON THE LAND WHETHER T HE PROFIT ARISING OUT OF THE SALE OF SUCH LAND HAS TO BE TREATED AS L ONG TERM CAPITAL GAINS OR SHORT TERM CAPITAL GAINS. WE HAVE CAREFUL LY GONE THROUGH THE PROVISIONS OF SECTION 50 OF THE ACT WHICH READS AS FOLLOWS: 50. SPECIAL PROVISION FOR COMPUTATION OF CAPITAL G AINS IN CASE OF DEPRECIABLE ASSETS NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2, WH ERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLO CK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN AL LOWED UNDER THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT, 1922 (11 OF 1922) THE PROVISIONS OF SECTIONS 48 AND 49 S HALL BE SUBJECT TO THE FOLLOWING MODIFICATIONS:- .. 6. THE LEGISLATURE USED THE WORDS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THIS ACT. THE REFORE, WHENEVER DEPRECIATION WAS ALLOWED IN RESPECT OF BLOCK OF ASS ETS THEN THE PROFIT ON SALE OF SUCH ASSET HAS TO BE TREATED AS SHORT TE RM CAPITAL GAINS. 7. IT IS ALSO AN ADMITTED FACT THAT IN RESPECT OF LAND NO DEPRECIATION COULD BE ALLOWED. IN OTHER WORDS, THE LAND IS NOT A DEPRECIABLE ASSET. BUT THE ASSESSEE CLAIMED DEPRE CIATION AND THE AUTHORITIES BELOW HAVE ALSO ALLOWED THE CLAIM OF TH E ASSESSEE FROM ASSESSMENT YEARS 1995-96 TO 2006-07. THE PARLIAMEN T USED THE WORDS IN RESPECT OF WHICH DEPRECIATION HAS BEEN AL LOWED UNDER THIS ACT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT WHEN ITA NO.1356/14 :- 5 -: THE DEPRECIATION WAS ALLOWED RIGHTLY OR WRONGLY, TH E ASSET HAS TO BE TREATED AS IF DEPRECIATION HAS BEEN ALLOWED THEN TH E PROFIT ARISING OUT OF THE SALE OF THE ASSET HAS TO BE TREATED AS SHOR T TERM CAPITAL GAINS. WE ARE CONSCIOUS THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME-TAX PROCEEDINGS. HOWEVER, THE ERROR COMMITT ED BY THE ASSESSEE IN CLAIMING DEPRECIATION ON THE LAND AND T HE MISTAKE OF THE ASSESSING OFFICER IN ALLOWING THE CLAIM OF THE AS SESSEE FROM ASSESSMENT YEARS 1995-96 TO 2006-0,7 CANNOT BE RECT IFIED AT THIS STAGE. WE HAVE CAREFULLY GONE THROUGH THE PROVISIO NS OF SECTION 150 OF THE ACT WHICH READS AS FOLLOWS: 150. PROVISION FOR CASES WHERE ASSESSMENT IS IN PURSUANCE OF AN ORDER ON APPEAL, ETC . - (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 149, THE NOTICE UNDER SECTION 148 MAY BE ISSUED AT ANY TIME FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT ON RECOMPUTATION IN CONSEQUENCE OF OR TO GIVE EFFECT T O ANY FINDING OR DIRECTION CONTAINED IN AN ORDER PASSED B Y ANY AUTHORITY IN ANY PROCEEDING UNDER THIS ACT BY WAY O F APPEAL, REFERENCE OR REVISION [OR BY A COURT IN ANY PROCEEDING UNDER ANY OTHER LAW] : (2) THE PROVISIONS OF SUB-SECTION(1) SHALL NOT APPL Y IN ANY CASE WHERE ANY SUCH ASSESSMENT, REASSESSMENT OR RECOMPUTATION AS IS REFERRED TO IN THAT SUB-SECTION RELATES TO AN ASSESSMENT YEAR IN RESPECT OF WHICH A N ASSESSMENT, REASSESSMENT OR RECOMPUTATION COULD NOT HAVE BEEN MADE AT THE TIME THE ORDER WHICH WAS THE SUBJECT MATTER OF HE APPEAL, REFERENCE OR REVISION, AS THE CASE MAY BE, WAS MADE BY REASON OF ANY OTHER PROVIS ION ITA NO.1356/14 :- 6 -: LIMITING THE TIME WITHIN WHICH ANY ACTION FOR ASSES SMENT, REASSESSMENT OR RECOMPUTATOIN MAY BE TAKEN. 8. EVEN FOR REOPENING THE ASSESSMENTS OF THE EARLIER Y EARS, THIS TRIBUNAL WOULD GIVE DIRECTION TO THE AUTHORITIES BE LOW PROVIDED AS ON THE DATE OF THE PASSING OF THE ORDER THE PERIOD OF LIMITATION HAS NOT EXPIRED. IN THIS CASE, ADMITTEDLY, THE LIMITATION PRESCRIBED UNDER THE ACT FOR REOPENING OF ASSESSMENTS FROM ASSESSMENT YE ARS 1995-96 TO 2006-07 HAS ALREADY EXPIRED, THEREFORE, THIS TRIBUN AL CANNOT GIVE ANY DIRECTION TO THE AUTHORITIES BELOW TO REOPEN THE AS SESSMENTS AND WITHDRAW THE DEPRECIATION FOR THE EARLIER ASSESSMEN T YEARS. THEREFORE, EVEN IF THE ASSESSEE IS WILLING TO WITHDRAW ITS CL AIM OF DEPRECIATION, THE ASSESSING OFFICER CANNOT ALLOW THE SAME FOR THE SIMPLE REASON THAT LIMITATION PROVIDED UNDER THE ACT TO REOPEN THE ASS ESSMENT WAS ALREADY EXPIRED. THE FACT REMAINS THAT THE DEPRECI ATION @ 10% WAS ALLOWED ON THE LAND AND IT WAS CONSIDERED AS A BLOC K OF DEPRECIABLE ASSETS. ONCE DEPRECIATION IS ALLOWED, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE ASSESSEE CANNOT TREAT THE GAINS A RISING OUT OF THE SALE OF LAND AS LONG TERM CAPITAL GAINS. THEREFORE, THE CIT(A) HAS RIGHTLY TREATED THE SAME AS SHORT TERM CAPITAL GAINS. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. ITA NO.1356/14 :- 7 -: 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 30 TH JUNE, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF