M/s Prakash Retail Pvt Ltd.., Udupi V. The Deputy Commissioner of Income Tax, Circle-1, Udupi

ITA 1538/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5563 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RENUGADEVI
• Assessee Lawyers: SUDHEENDRA B R
• Keywords: Depreciation; Cost of acquisition
• Section: 234B; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS.1537, 1538/BANG/2017 ASSESSMENT YEARS : 2007-08, 2008-09 M/S. PRAKASH RETAIL P LTD OPP:- AMBALPADY POST OFFICE UDUPI 576 103 PAN : AACCP1251H VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, UDUPI APPELLANT RESPONDENT ASSESSEE BY : SHRI. SUDHEENDRA B. R, CA REVENUE BY : SMT. RENUGADEVI, JCIT DATE OF HEARING : 08.02.2018 DATE OF PRONOUNCEMENT : 09.02.2018 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINS T THE RESPECTIVE ORDERS OF CIT(A) FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, ON COMMON GROUNDS. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS RAISED IN ITA NO.1537/BANG/2017 : 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), MANGALORE HAS ERRED IN PASSING THE ORDER IN THE MANNER PASSED BY HIM. THE ORDER BEING BAD IN LAW IS LIABLE TO BE QUASHED. 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ), MANGALORE HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION CLAIMED TO THE EXTENT OF RS. 3,61,925/-. 2.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ), MANGALORE HAS ERRED IN CONFIRMING THE ADOPTION OF THE WDV OF DEPRECIATION ASSETS IN THE HANDS OF THE PREDECESSOR PARTNERSHIP FIRM FOR RECOMPUTING AND PARTIALLY DISA LLOWING THE DEPRECIATION IN THE ITA NOS.1537, 1538/BANG/2017 PAGE 2 OF 4 HANDS OF APPELLANT. 2.3 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), MANGALORE HAS ERRED IN RELYING ON THE DECISION OF THE ITAT, BANGALORE BENCH IN APP ELLANT'S OWN CASE IN SUPPORT OF THE IMPUGNED CONCLUSION THAT DEPRECATION IN THE HANDS O F THE APPELLANT IS ALLOWABLE ON WDV OF ASSETS IN THE HANDS OF THE ERSTWHILE FIRM. 2.4 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ), MANGALORE HAS ERRED IN NOT APPRECIATING THAT THE ITAT, BANGALORE BENCH IN APPELLANT'S OWN C ASE DID NOT GAVE A FINDING THAT DEPRECATION IN THE HANDS OF THE APPELLANT IS ALLOWABLE ON WDV O F ASSETS IN THE HANDS OF THE ERSTWHILE FIRM. 2.5 THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS), MANGALORE HAS ERRED IN NOT APPRECIATING THAT DEPRECIATION IS ALLOWABLE ON THE BASIS OF COST OF THE ASSETS TO THE APPELLANT. THE REVALUED FIGURE BEING THE COST OF THE APPELLANT, THE DEPRECI ATION IS ALLOWABLE ON THE REVALUED FIGURE. 2.6 THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS), MANGALORE HAS ERRED IN NOT APPRECIATING THAT THE FICTION CREATED BY 6 TH PROVISO (ERSTWHILE 5 TH PROVISO) TO SUB- SECTION (1) OF SECTION 32 IS NOT APPLICABLE TO THE APPELLANT AND IN ANY CASE IS NOT APPLICABLE FOR THE YEAR UNDER APPEAL. 2.7 THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS), MANGALORE HAS ERRED IN NOT APPRECIATING THAT THERE IS NO PROVISION OF LAW MANDATING THE ADO PTION OF THE WDV OF THE FIRM FOR THE PROPOSE OF ALLOWING DEPRECIATION IN THE HANDS OF THE COMPAN Y SUCCEEDING THE FIRM'S BUSINESS. 2.8 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE , THE DEPRECIATION OF RS 7,93,222/- IS TO BE ALLOWED AS CLAIMED IN THE RETURN OF INCOME AS AGAIN ST RS 4,31,297/- ALLOWED BY THE ASSESSING OFFICER. 3.1 EVEN OTHERWISE, IN THE ASSESSMENT OF PARTNERSH IP FIRM CAPITAL GAINS HAVE BEEN COMPUTED ON THE BASIS OF THE PRICE PAID FOR THE VAR IOUS ASSETS AFTER REVALUATION AND CONSEQUENTLY THEREFORE, THE PRICE PAID FOR WOULD BE THE COST OF ACQUISITION ON WHICH DEPRECIATION WOULD BE ADMISSIBLE TO THE APPELLANT. 4.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), MANGALORE HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 234B AND 234C. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ADDITIONAL INTEREST LEVIED UNDER SECTION 234B AND 234C IS TO BE DELETED. THE APPELLANT DENIES ITS LIABILITY T O PAY THE ADDITIONAL INTEREST UNDER SECTION 234B AND 234C. 5.1 IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT: (I) THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS), MANGALORE BE QUASHED; OR IN ALTERNATIVE; (II) THE DEPRECIATION BE ALLOWED AS CLAIMED BY THE APPEL LANT; (III) THE ADDITIONAL INTEREST LEVIED UNDER SECTION 234B A ND 234C BE DELETED; 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE INVITED OUR ATTENTION THAT IDENTICAL ISSUE HAS BEEN RAISED IN ASSESSMENT YEARS 2000-01 TO 2003-04 AND THEREAFTER ITA NOS.1537, 1538/BANG/2017 PAGE 3 OF 4 2004-05 AND 2006-07AND IN ALL THESE YEARS, THE ISSU E WAS DECIDED AGAINST THE ASSESSEE BY HOLDING THAT DEPRECIATION IS TO BE ALLOWED ON THE W DV OF THE ASSETS IN THE HANDS OF ERSTWHILE FIRM AND NOT ON THE BASIS OF THE COST OF THE ASSETS TO THE ASSESSEE WHICH HAVE REVALUED THE FIGURES OF THE ASSETS. COPIES OF THE ORDERS OF THE TRIBUNAL ARE PLACED ON RECORD. THE LEARNED DR DID NOT DISPUTE THESE FACTUAL ASPECT S. 3. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT THE ISSUE OF DEPRECIATION IS A RECURRING ISSUE IN EVERY YEAR AND FIRST TIME IN THE ASSESSMENT YEAR 2001-02 TO 2003-04, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS EXTRACT ED HEREUNDER FOR THE SAKE OF REFERENCE: 62. WE HAVE HEARD BOTH THE PARTIES. AS PER SECTIO N 32(1), DEPRECIATION IS TO BE ALLOWED ON THE BLOCK OF ASSETS. SECTION 43(6)(C) G IVES THE METHOD, BY WHICH, WDV IN THE CASE OF BLOCK OF ASSETS IS TO BE DETERMINED. IT IS PROV IDED THAT WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS IS TO BE TAKEN AT WDV AT THE BEGINNING OF TH E PREVIOUS YEAR AND TO BE FURTHER ADJUSTED AS PER CLAUSES (A), (B) AND (C) OF SECTION 43(6)(C) . IN THE IMMEDIATELY PRECEDING YEAR, WDV OF THE ASSETS IN THE HANDS OF COMPANY AT THE CLOSE OF YEAR IS BASED ON THE VALUE OF ASSETS TAKEN BY THE FIRM FOR THE PURPOSE OF DEPRECIATION. HENCE , FOR ASSESSMENT YEAR 2001-02, WDV OF BLOCK OF ASSETS IS TO BE TAKEN AS CLOSING W.D.V. IN THE HANDS OF COMPANY FOR ASSESSMENT YEAR 2000-01 SUBJECT TO ADJUSTMENTS AS MENTIONED IN SECT ION 43(6)(C). SINCE WE HAD ALREADY HELD THAT SECTION 45 IS NOT APPLICABLE FOR CHARGING CAPI TAL GAIN IN THE HANDS OF THE FIRM, THEREFORE, THE COST OF ASSETS AS ACQUIRED BY THE COMPANY CANNO T BE TAKEN AT THE REVALUED FIGURE. HOWEVER, FINALLY IF IT IS HELD THAT CAPITAL GAIN IS CHARGEABLE EITHER IN THE HANDS OF THE FIRM OR IN THE COMPANY, THEN THE ASSESSEE-COMPANY WILL BE E NTITLED TO DEPRECIATION ON THE REVALUED VALUE OF ASSETS. LOOKING TO THE FINDING GIVEN IN T HE CASE OF THE FIRM, IT IS HELD THAT LEARNED CIT(A) IS JUSTIFIED IN HOLDING THE DEPRECIATION WIL L BE ALLOWABLE ON THE VALUE OF THE ASSETS, AS PER THE WRITTEN DOWN VALUE IN THE CASE OF THE FIRM. IN THE RESULT, THE APPEAL IN THE CASE OF THE FIRM IS ALLOWED, WHILE APPEALS IN THE CASE OF THE COMPANY ARE DISMISSED. 4. FOLLOWING THIS ORDER OF THE TRIBUNAL IN THE ASSE SSMENT YEAR 2004-05 TO 2006-07, THE TRIBUNAL AGAIN DECIDED THE ISSUE AGAINST THE ASSESS EES BY HOLDING THAT DEPRECIATION WILL BE ALLOWABLE TO THE ASSESSEE ON THE WDV OF THE ASSETS AS PER THE WRITTEN DOWN VALUE IN THE CASE OF THE FIRM. SINCE THE ISSUE IS SQUARELY COVERED I N THE EARLIER ORDERS OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAVE RE JECTED THE CLAIM OF THE ASSESSEE FOLLOWING ITA NOS.1537, 1538/BANG/2017 PAGE 4 OF 4 THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 09 TH FEBRUARY, 2018. SD/- SD/- ( INTURI RAMA RAO ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE. DATED: 09 TH FEBRUARY, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE.