Sidamshetty Ramesh (HUF), Secunderabad, Secunderabad V. ITO, Ward-10(4), Hyderabad, Hyderabad

ITA 1421/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2521 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-05-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SURESH
• Assessee Lawyers: C SURESH
• Keywords: Capital asset; Depreciation; Audit objection; Assessment record
• Section: 147; 148; 6; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 1421/HYD/2016 ASSESSMENT YEAR: 2003-04 SIDAMSHETTY RAMESH (HUF), SECUNDERABAD. PAN AAHHS 5182 E VS INCOME-TAX OFFICER, WARD 10(4), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI C. SURESH FOR REVENUE : SMT. N. SURESH DATE OF HEARING : 03-05-2017 DATE OF PRONOUNCEMENT : 12-05-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, HYDERABAD, DATED 20-06-2016 FOR THE A.Y. 2003-04. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A HUF FILED ITS RETURN OF INCOME FOR THE AY 2003-04 O N 19/11/2003 ADMITTING LOSS OF RS. 3,47,090/-. APART FROM HOUSE PROPERTY INCOME OF RS. 5,73,694/-, THE ASSESS EE DECLARED LOSS OF RS. 19,28,443/- FROM THE BUSINESS OF RUNNING A PRINTING PRESS, LONG TERM CAPITAL GAINS O F RS. 9,92,793/- AND INCOME OF RS. 14,878/- FROM OTHER SO URCES. THE RETURN WAS PROCESSED U/S 143(3) OF THE ACT ON 19/03/2004 AND REFUND OF RS. 71,663/- ISSUED. I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 2 -: 2.1 THE AO NOTICED FROM THE DETAILS FILED WITH THE RETURN OF INCOME THAT THE ASSESSEE DETERMINED SHORT TERM CAPI TAL LOSS OF RS. 9,87,702/- ON DEMOLITION OF BUILDING AN D SET OFF THE SAME AGAINST THE LONG TERM CAPITAL GAINS. THE L OSS WAS COMPUTED AS UNDER: SALE CONSIDERATION OF SALVAGE VALUE ON DEMOLITION 1,00,000 LESS: WDV AS ON 31/03/02 10,87,702 LOSS 9,87,702 2.2 THE AO OPINED THAT AS DEMOLITION OF ASSET DOES NOT CONSTITUTE TRANSFER OF CAPITAL ASSET, PRIMA FACIE T HE LOSS WAS NOT ALLOWABLE AND INCOME CHARGEABLE TO TAX HAD ESCA PED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT. ACCORDINGLY, NOTICE U/S 148 OF THE ACT WAS ISSUED T O THE ASSESSEE ON 09/03/2010. IN RESPONSE, THE ASSESSEE F ILED A LETTER DATED 15/04/2010 REQUESTING THAT THE RETURN FILED ON 10/11/2003 MAY BE TREATED AS FILED IN RESPONSE TO T HE NOTICE ISSUE. THE AO ISSUES NOTICES U/S 143(2) AND 142(1) AND INFORMED THAT THE CLAIM WAS NOT ALLOWABLE AS TH ERE WAS NO TRANSFER OF CAPITAL ASSET AND THAT IT WAS PROPOS ED TO DISALLOW THE CLAIM AND TO FILE OBJECTIONS IF ANY IN RESPECT OF THE PROPOSED ACTION. THE ASSESSEE SUBMITTED ITS WRI TTEN OBJECTIONS ON 03/09/2010 AND 22/11/2010, STATING AS UNDER: 'WITH REGARD TO THE ABOVE WE INVITE YOUR KIND ATTEN TION TO THE DEPRECIATION STATEMENT SHOWN UNDER ANNEXURE 1 T O THE 3CD TAX AUDIT REPORT FOR THE SAID ASSESSMENT YE AR 2003-04. IN THE SAID STATEMENT, BUILDING HAS BEEN S HOWN AS A DEPRECIABLE ASSET WITH OPENING WRITTEN DOWN VA LUE (WDV) OF RS.10,87,702/- A REFERENCE TO THE DEPRECIA TION STATEMENT OF EARLIER YEARS WOULD ALSO SHOW THAT I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 3 -: DEPRECIATION HAS BEEN CLAIMED ON THE SAID BUILDING EVERY YEAR. THEREFORE THE ASS T UNDER QUESTION IS A DEPRE CIABLE ASSET ONCE AN ASSET IS A DEPRECIABLE ASSET AND FORM S A PART OF A BLOCK, AND SUCH BLOCK OF ASSETS HAS CEASE D TO EXIST AT THE END OF THE PREVIOUS YEAR THE PROVISION S OF SECTION 50 OF THE ACT BECOME APPLICABLE WHICH DEALS WITH CAPITAL GAIN RELATING TO DEPRECIATION ASSETS. THE ASSESSEE WHILE REFERRING TO THE PROVISIONS OF S ECTION 43 SUB SECTION 6 (C) OF THE ACT STATED ' ... IT WOU LD BE CLEAR THAT 'IN CASE OF AN BLOCK OF ASSETS THE AGGREGATE O F THE WRITTEN DOWN VALUE AT THE BEGINNING OF PREVIOUS YEA R SHALL HAVE TO BE CONSIDERED AND DULY ADJUSTED BY TH E REDUCTION OF THE MONEYS PAYABLE IN RESPECT OF ANY A SSET FALLING WITHIN THAT BLOCK WHICH IS SOLD OR DISCARDE D OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR . .... ' FURTHER EXPLANATION TO SECTION 41 DEFINES MONEY PAY ABLE AS INCLUDING ANY INSURANCE, SALVAGE OR COMPENSATION MONEY PAYABLE IN RESPECT THEREOF. THUS A HARMONIOUS READING OF SECTION 43(6)(C) AND SECTION 50 OF THE ACT WOULD BRING OUT THE FACT WHE RE AN ASSET IS DEMOLISHED, AND THE LOCK OF ASSET CEASES T O EXIST THE DIFFERENCE BETWEEN THE WRITTEN DOWN VALUE AND E SALVAGE RECEIVED SHALL HAVE TO BE TREATED AS SHORT TERM CAPITAL GAIN OR SHORT TERM CAPITAL LOSS, AS THE CAS E MAY BE. IN MY INCOME TAX CASE FOR THE ASSESSMENT YEAR 2003- 04 THE LAND HAD BEEN TAKEN ON LEASE AND I HAD CONSTRUC TED THE BUILDING SEVERAL YEAR BACK. ON THE EXPIRY OF TH E LEASE. I WAS UNDER AN OBLIGATION TO RETURN THE LAND TO THE LANDLORD. THUS, AS PER THE CONDITIONS OF THE LEASE I WAS UNDER A LEGAL OBLIGATION TO DEMOLISH THE BUILDING. THUS THE BLOCK OF ASSET 'BUILDING' CEASED TO EXIST ON IT S DEMOLITION DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003-04. . .... THE DIFFERENCE BETW EEN THE SALVAGE VALUE AND THE WDV HAD BEEN TREATED AS SHORT TERM CAPITAL LOSS AS PER LAW AND DULY PORTRAY ED AS SUCH IN MY IT RETURN. I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 4 -: 2.3 REFERRING TO THE ABOVE, THE ASSESSEE SUBMITTED THAT THE QUESTION OF DISALLOWING THE SHORT TERM CAPITAL LOS S OF RS. 9,87,702/- RELATING TO THE BUILDING DOES NOT ARISE. FURTHER, HE SUBMITTED THAT DURING THE REASSESSMENT PROCEEDIN GS, THE AO TOOK THE STAND THAT THERE HAD BEEN DEMOLITION OF AN ASSET AND REALIZATION OF SALVAGE VALUE RESULTING IN THE PARTICULAR BLOCK OF ASSET CEASED TO EXIST, RESULTIN G IN EXTINGUISHMENT OF RIGHTS THERE. HE SUBMITTED THAT T HE SAID EXTINGUISHMENT HAD NOT COME ABOUT CONSEQUENT TO TRA NSFER AS CONTEMPLATED U/S 2(47) AND HENCE SET OFF OF THE RESULTING SHORT TERM CAPITAL LOSS OF (-) RS. 9,87,7 02 AGAINST OTHER LONG TERM CAPITAL GAIN IS INCORRECT. HE SUBMI TTED THAT THE AO HAS REITERATED THIS STAND IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. 2.4 ASSESSEE RELIED ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. GRACE COLLIS [2001] 24 8 ITR 323. 2.5 THE ASSESSEE SUBMITTED THAT DURING THE ASSESSME NT PROCEEDINGS, ASSESSEE WAS INFORMED THAT THE NOTICE U/S 148 HAD BEEN ISSUED ON ACCOUNT OF AN AUDIT OBJECTION RA ISED WITH REGARD TO THE ISSUE RELATING TO SET OFF OF SHO RT TERM CAPITAL LOSS. THUS, THE OPINION OF THE AUDIT PARTY ON THE ISSUE INVOLVED HAS DETERMINED THE ISSUE OF NOTICE U /S 148 IN CASE OF ASSESSEE. HE SUBMITTED THAT ONCE THIS IS TR UE, THE ISSUE OF NOTICE U/S 148 IS ITSELF IS NOT VALID AS H ELD BY THE HONBLE SUPREME COURT IN THE CASE OF INDIAN AND EAS TERN NEWSPAPER SOCIETY VS. CIT, 119 ITR 996. I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 5 -: 2.6 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE AO OBSERVED THAT THE ASSESSEE ARRIVED AT SHORT TERM CAPITAL LOSS OF RS. 9,87,702/- ON DEMOLITION OF BUILDING AN D SET OFF THE SAME AGAINST THE LONG TERM CAPITAL GAINS. THE A O WAS OF THE VIEW THAT SINCE THE DEMOLITION OF ASSET DOES NO T CONSTITUTE TRANSFER OF CAPITAL ASSET, PRIMA FACIE T HE LOSS WAS NOT ALLOWABLE AND INCOME CHARGEABLE TO TAX HAD ESCA PED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. HENCE, THE AO REOPENED THE ASSESSMENT AND DISALLOWE D THE SHORT TERM CAPITAL LOSS OF RS. 9,87,702/-. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE AR OF THE ASSESSEE REITER ATED THE STATEMENT OF FACTS AND STATED THAT THE NOTICE U/S 1 48 WAS ISSUED ON ACCOUNT OF AUDIT OBJECTION. 5. THE CIT(A) OBSERVED THAT IN THE ASSESSMENT ORDER IT WAS NOWHERE STATED THAT THE ASSESSMENT WAS REOPENED U/S 148 ON THE BASIS OF AUDIT OBJECTION. HE, THEREFORE, ISSUED A LETTER TO AO ON 04/01/2016 TO VERIFY THE CONCERNED RECORDS AND FURNISH COMMENTS AS TO WHETHER THE NOTICE U/S 1 48 WAS ISSUED ON THE BASIS OF AUDIT OBJECTION. IN RESPONSE , THE AO VIDE LETTER DATED 01/02/2016 STATED AS UNDER: IT IS HEREBY SUBMITTED THAT AS PER THE ORDER SHEET NOTING DATED 07/03/2010, THE AO HAS RECORDED THE REASONS FOR REOPENING OF THE CONCERNED CASE AND SUBSEQUENTLY ISSUED NOTICE U/S 148 ON 09/03/2010. I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 6 -: THE ASSESSMENT RECORD IN ONE VOLUME IS ENCLOSED FOR READY REFERENCE. ACCORDINGLY, THE APPEAL MAY BE DECIDED ON THE MERITS OF THE MATTER. 5.1 IN VIEW OF THE ABOVE, THE CIT(A) HELD THAT THE REPORT OF THE AO DOES NOT MENTION THAT THE ASSESSMENT HAS BEE N REOPENED ON THE BASIS OF AN AUDIT OBJECTION AND AS SUCH, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AN D THIS GROUND IS THEREFORE DISMISSED. 6. WITH REGARD TO THE DISALLOWING THE SET OFF OF SH ORT TERM CAPITAL LOSS OF RS. 9,87,702/- ON DEMOLITION OF BUI LDING, THE AO OBSERVED AS UNDER: THE ASSESSEE'S CONTENTIONS HAVE BEEN GIVEN CAREFUL CONSIDERATION BUT ARE NOT ACCEPTABLE. UNDER SECTION 43(6) OF THE ACT, 'WDV' OF A DEPRECIABLE ASSET IS DEFINED IN DIFFERENCE SITUATIONS INCLUDING DEMOLITION DESTRUCT ION OF THE ASSET, FOR THE PURPOSE OF COMPUTING DEPRECIATIO N. THE DEFINITION OF WDV AS LAID DOWN IN THIS SECTION IS O NLY FOR THE PURPOSE OF COMPUTING DEPRECIATION. SECTION 50, ON THE OTHER HAND, IS APPLICABLE TO A CASE WHERE THE WDV O F A BLOCK OF ASSETS IS REDUCED TO NIL AND SUBSECTION (2 ) IS SPECIFICALLY APPLICABLE TO A SITUATION WHERE THE BL OCK OF ASSETS CEASES TO EXIST. HOWEVER, FOR ARRIVING AT SH ORT TERM CAPITAL GAIN OR LOSS AS THE CASE MAY BE UNDER SUB SECTION (2), IT IS ESSENTIAL THAT THERE SHOULD BE A 'TRANSFER' OF ALL THE CAPITAL ASSETS FALLING WITHIN THE BLOCK. HERE 'TRANSFER' HAS TO BE UNDERSTOOD IN DEFINITION OF TR ANSFER IN SECTION 2(47) INCLUDES SALE, EXCHANGE AND RELINQUIS HMENT OF THE ASSET OR EXTINGUISHMENT OF ANY RIGHTS THEREI N. DEMOLITION OF AN ASSET WHICH IS EQUIVALENT TO DESTR UCTION OR EXTINGUISHMENT OF AN ASSET IS NOT COVERED BY THE DEFINITION. SINCE THERE IS NO TRANSFER OF ASSET AS CONTEMPLATED UNDER SECTION 2(47) OF THE ACT, THE PROVISIONS OF SECTION 50 WOULD NOT COME INTO PAY HE RE. A HARMONIOUS READING OF THE SECTIONS IS NOT POSSIBLE AS SECTION 50 CAN BE INVOKED ONLY AFTER SECTION 43(6)( C) HAS BEEN APPLIED. THE DECISION CITED BY THE ASSESSEE IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE IN AS MUCH AS THE I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 7 -: DECISIONS IS NOT ABOUT EXTINGUISHMENT OF THE ASSET ITSELF BUT OF EXTINGUISHMENT OF THE RIGHTS THEREIN INDEPEN DENT OF TRANSFER OR CONSEQUENT TO IT. FOR REASONS CITED ABOVE, COMPUTATION OF SHORT TERM CAPITAL LOSS ON DEMOLITION OF THE BUILDING AS DETER MINED BY THE ASSESSEE IS INCORRECT AND NOT ALLOWABLE. SIN CE THE BLOCK OF ASSETS HAS CEASED TO EXIST ON THE LAST DAY OF THE FINANCIAL YEAR NO DEPRECIATION WOULD BE ALLOWABLE. HOWEVER, THE SALVAGE VALUE OF RS. 1,00,000/- RECEIV ED ON DEMOLITION OF THE BUILDINGS IS A PROFIT FROM BUSIN ESS AND IS ACCORDINGLY REDUCED FROM THE NET LOSS RETURNED. 7. ON APPEAL BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY, THE CIT(A) OBSERVED THAT THE ASSESSEE RE LIED ONLY ON STATEMENT OF FACTS AND DID NOT FILE ANY FURTHER SUBMISSIONS ON THIS ISSUE. THE CIT(A) HELD THE ASSE SSING OFFICER HAD RIGHTLY MADE THE ADDITION AND NOT ALLOW ING THE SETOFF OF SHORT TERM CAPITAL LOSS. HE ACCORDINGLY, CONFIRMED THE DISALLOWANCE MADE BY THE AO. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1.THE LEARNED COMMISSIONER OF LNCOME TAX (APPEALS)- 9, HYDERABAD HAS ERRED ON FACTS AND IN LAW IN NOT ALLO WING THE SET OFF OF SHORT TERM CAPITAL LOSS (-) RS. 9877 02 AGAINST OTHER LONG TERM CAPITAL GAIN OF THE ASSESSE E, FAILING TO NOTE THAT ON THE DEMOLITION OF BUILDING BEING DEPRECIABLE ASSET, THE BLOCK OF ASSET BAD CEASED TO EXIST AND THE RIGHTS OF THE ASSESSEE IN THE SAID ASSET ST OOD EXTINGUISHED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -9, HYDERABAD, ERRED IN LAW IN TAKING THE STAND THAT EXTINGUISHMENT OF RIGHTS IN AN ASSET CONSEQUENT TO ITS DEMOLITION DOES NOT FALL WITHIN THE DEFINITION OF T RANSFER' AS PROVIDED FOR IN SECTION 2(47) OF THE ACT. THE LE ARNED I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 8 -: COMMISSIONER OF INCOME TAX (APPEALS)-9, HYDERABAD, FAILED TO APPRECIATE THE FACT THAT, AS HELD BY THE HONOURABLE SUPREME COURT, ONE CANNOT APPROVE THE VI EW THAT THE EXPRESSION 'EXTINGUISHMENT OF ANY RIGHTS T HEREIN' CANNOT BE 'EXTENDED TO MEAN EXTINGUISHMENT OF RIGHT S INDEPENDENT OF (OR) OTHERWISE THAN ON ACCOUNT OF TR ANSFER. IN THE RESULT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-9, HYDERABAD, ERRED IN LAW IN DISALLOWING THE SET OFF OF SHORT TERM CAPITAL LOSS ON THE EXTINGUIS HMENT OF RIGHTS IN THE BUILDING CONSEQUENT TO ITS DEMOLITION . 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -9, HYDERABAD, FAILED TO NOTE THAT LOSS ARISING ON THE DEMOLITION OF A DEPRECIABLE ASSET REPRESENTED BY TH E DIFFERENCE BETWEEN THE WDV OF THE BLOCK AND THE SAL VAGE VALUE RECEIVED CLEARLY REPRESENTS SHORT TERM CAPITA L LOSS THAT QUALIFIES FOR SET OFF AGAINST OTHER LONG TERM CAPITAL GAIN. 8.1 BEFORE US, THE ASSESSEE DID NOT CONTEST REOPENI NG OF ASSESSMENT U/S 147 OF THE ACT. 9. LD. AR SUBMITTED THAT CIT(A) ERRED IN LAW IN TAKING THE STAND THAT EXTINGUISHMENT OF RIGHTS IN AN ASSET CON SEQUENT TO ITS DEMOLITION DOES NOT FALL WITHIN THE DEFINITI ON OF TRANSFER' AS PROVIDED FOR IN SECTION 2(47) OF THE A CT. HE FURTHER SUBMITTED THAT CIT(A) FAILED TO NOTE THAT L OSS ARISING ON THE DEMOLITION OF A DEPRECIABLE ASSET REPRESENTE D BY THE DIFFERENCE BETWEEN THE WDV OF THE BLOCK AND THE SAL VAGE VALUE RECEIVED CLEARLY REPRESENTS SHORT TERM CAPITA L LOSS THAT QUALIFIES FOR SET OFF AGAINST OTHER LONG TERM CAPIT AL GAIN. 10. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES AND RELIED ON THE DECISION OF I TA MUMBAI BENCH IN CASE OF SHRI DILIP MANHAR PAREKH VS . I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 9 -: DCIT, IN ITA NO. 6169/MUM/2013, DATED 15/04/2016, A COPY OF WHICH IS AVAILABLE ON RECORD. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL FACTS ON RECORD. FROM THE DEPREDATION STATEMENT SHOWN UNDER ANNEXURE I TO THE 3CD TAX AUD IT REPORT FOR THE SAID ASSESSMENT YEAR 2003-04, IT IS SEEN THAT BUILDING HAS BEEN SHOWN AS A DEPRECIABLE ASSET WITH OPENING WRITTEN DOWN VALUE (WDV) OF RS.1087702/-. A REFERENCE TO THE DEPRECIATION STATEMENT OF EARLIER YEARS WOULD ALSO SHOW THAT DEPRECIATION HAS BEEN CLAIMED ON THE SAID BUILDING EVERY YEAR. THEREFORE THE ASSET UNDER QUESTION IS A DEPRECIABLE ASSET. ONCE AN ASSET IS A DEPRECIA BLE ASSET AND FORMS APART OF A BLOCK, AND SUCH BLOCK OF ASSET S HAS CEASED TO EXIST AT THE END OF THE PREVIOUS YEAR THE PROVISIONS OF SECTION 50 OF THE ACT BECOME APPLICAB LE WHICH DEALS WITH CAPITAL GAIN RELATING TO DEPRECIABLE ASS ETS. 11.1 THE PROVISIONS OF SECTION 43(6)(C) OF THE ACT READ AS UNDER: ' IN THE CASE OF ANY BLOCK OF ASSETS, IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, THE AGGREGATE OF THE WRITTEN DOWN VALUES OF A LL THE ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT THE B EGINNING OF THE PREVIOUS YEAR AND ADJUSTED. BY THE REDUCTION OF THE MONEYS PAYABLE IN RESPECT O F ANY ASSET FALLING WITHIN THAT BLOCK, WHICH IS SOLD OR D ISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEA R TOGETHER WITH THE AMOUNT OF THE SCRAP VALUE, IF ANY , SO, I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 10 -: HOWEVER, THAT THE AMOUNT OF SUCH 'REDUCTION DOES NO T EXCEED THE WRITTEN DOWN VALUE AS SO INCREASED.' 11.2 FROM THE ABOVE IT WOULD BE CLEAR THAT 'IN CASE OF ANY BLOCK OF ASSETS THE AGGREGATE OF THE WRITTEN DOWN V ALUE AT THE BEGINNING OF PREVIOUS YEAR SHALL HAVE TO BE CON SIDERED AND DULY ADJUSTED BY THE REDUCTION OF THE MONEYS PA YABLE IN RESPECT OF A.NY ASSET FALLING WITHIN THAT BLOCK WHICH IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR ' 11.3 FURTHER EXPLANATION TO SECTION 41 DEFINES MON EY PAYABLE AS 'INCLUDING ANY INSURANCE, SALVAGE OR COMPENSATION MONEY PAYABLE IN RESPECT THEREOF.' 11.4 THUS A HARMONIOUS READING OF SECTIONS 43(6)(C) AND SECTION 50 OF THE ACT WOULD BRING OUT THE FACT WHER E AN ASSET IS DEMOLISHED, AND THE BLOCK OF ASSET CEASES TO EXIST, THE DIFFERENCE BETWEEN THE WRITTEN DOWN VALUE AND T HE SALVAGE RECEIVED SHALL HAVE TO BE TREATED AS SHORT TERM CAPITAL GAIN OR SHORT TERM CAPITAL LOSS, AS THE CAS E MAY BE. 11.5 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER IN ADDING BACK THE SHORT TERM CAPITAL LOSS OF (-) RS.9,87,702/- TO THE INCOME OF THE ASSESSEE IS ERRONEOUS AND IS NOT IN ACCORDANCE WITH THE LAW. THEREFORE, I DIRECT THE AO TO DELETE THE ADDI TION MADE ON THIS COUNT. ACCORDINGLY, THE GROUNDS RAISED BY T HE ASSESSEE ARE ALLOWED. I.T.A. NO. 1421/HYD/2016 SIDDAMSHETTY RAMESH (HUF) :- 11 -: 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2017. SD/- (ASHA V IJAYARAGHAVAIN) JU DICIAL MEMBER HYDERABAD, DATED: 12 TH MAY , 2017. KV COPY TO 1 MR. S. RAMESH (HUF), C/O M/S SEKHAR AND SURESH, C AS., 133/4, RP ROAD, SECUNDERABAD 500 003. 2 ITO, WARD 10(5), HYDERABAD. 3 CIT (A)-9, HYDERABAD. 4 PR. CIT 6, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE