Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 6423 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 7 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-06-2016
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
29-03-2016
Assessment Year
2009-2010
Appeal Filed On
12-11-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1674/HYD/2012 ASSESSMENT YEAR 2009-2010 DCIT, CIRCLE - 2(1) HYDERABAD. VS. M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI PAN AADCS1460N (APPELLANT) (RESPONDENT) FOR REVENUE : MR. M. SITARAM FOR ASSESSEE : MR. KJD. SRINIVAS DATE OF HEARING : 29.03.2016 DATE OF PRONOUNCEMENT : 27 . 06.2016 ORDER PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), GUNTUR AND IT PERTA INS TO THE A.Y. 2009-2010. THE FOLLOWING GROUNDS WERE URGE D BEFORE US. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS) IS ERRONEOUS BOTH IN LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION UNILATERALLY RELYING UPON THE SUBMISSIONS FURNISHED BY AR OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE IMPUGNED TRANSACTION IE., SALE OF PLANT AND 2 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. MACHINERY IS A SOLITARY TRANSACTION AND INCIDENTAL ACTIVITY TO PURCHASE OF LAND, PLANT AND MACHINERY. THIS IS NOT AN ORGANIZED ACTIVITY AND NOT HAVING ANY SEQUENCY. 4. THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE IS NOT IN THE BUSINESS OF PURCHASE AND SALE OF SCRAP OR PURCHASE AND SALE OF PLANT AND MACHINERY. 5. THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE IMPUGNED PLANT AND MACHINERY IS NOT A PART OF STOCK IN TRADE. 6. THE LD. CIT(A) ERRED IN UNDERSTANDING THE LAW THAT ANY LOSS INCURRED ON SALE OF STOCK IN TRADE IS ONLY TO BE TREATED AS REVENUE LOSS. 7. THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE IMPUGNED PLANT AND MACHINERY TREATED AS SCRAP BY THE LEARNED CIT(A) CANNOT BE CONSIDERED AS THAT SCRAP WHICH EMERGED FROM THE HOTEL BUSINESS. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE HOTEL BUSINESS AND FOR TH E YEAR UNDER CONSIDERATION IT DECLARED TOTAL INCOME OF RS. 1.45 CRORES WHEREAS THE ASSESSMENT WAS COMPLETED BY DETERMINING THE INCOME AT RS.2,68,16,871. IT MAY BE NOTICED THAT THOUGH THE RETURN WAS PROCESSED ORIGIN ALLY UNDER SECTION 143(1) OF THE ACT, IT WAS LATER ON TA KEN-UP FOR SCRUTINY IN CASS ON THE GROUND THAT THE A.O. SH OULD EXAMINE DISALLOWANCE UNDER SECTION 14A OF THE ACT. WHILE EXAMINING THE BOOKS OF ACCOUNT ETC., THE A.O. NOTIC ED THAT THE ASSESSEE DEBITED A SUM OF RS.1,22,78,611 TOWARD S 3 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. LOSS ON SALE OF MACHINERY. WHEN CALLED UPON TO EXPL AIN THE ADMISSIBILITY OF SUCH LOSS THE ASSESSEE CONTEND ED THAT IT HAS PURCHASED CERTAIN PROPERTY AND PLANT AND MACHINERY BELONGING TO M/S. SHYAM VINYLS LTD., FROM THE OFFICIAL LIQUIDATOR, HIGH COURT OF A.P; THE PROPERT Y CONSISTS OF LAND ADMEASURING 7.75 ACRES WITH BUILDI NG, CIVIL WORKS AND PLANT AND MACHINERY. ACCORDING TO T HE A.O. THE PROPERTY HAS NO NEXUS TO THE ASSESSEES BU SINESS WHATSOEVER. THE SAID COMPANY WAS IN LIQUIDATION AND THE OFFICIAL LIQUIDATOR ISSUED A NOTICE FOR SALE QUOTIN G MINIMUM UPSET PRICE AT RS.273.50 LAKHS FOR THE LAND AND BUILDING AND RS.290 LAKHS FOR THE PLANT AND MACHINE RY, AGGREGATING TO RS.527.50 LAKHS. THE ASSESSEE COMPAN Y MADE A CONSOLIDATED OFFER OF RS.502 LAKHS FOR THE E NTIRE PROPERTY WHICH WAS ACCEPTED BY THE OFFICIAL LIQUIDA TOR AND POSSESSION OF THE PROPERTY WAS HANDED-OVER ON 05.07.2007. THEREAFTER, THE ASSESSEE COMPANY SOLD T HE ENTIRE MACHINERY FOR A TOTAL CONSIDERATION OF RS.1. 72 CRORES AND CLAIMED LOSS OF RS.1.22 CRORES. IT APPE ARS THAT, ACCORDING TO THE ASSESSEE THE VALUE OF PLANT AND MACHINERY IS RS.290 LAKHS AND A SUM OF RS.4.78 LAKH S WAS PAID TOWARDS INTEREST ON BELATED PAYMENTS OF TH E SAID SUM AND THUS, THE TOTAL WORKED OUT TO RS.294.78 LAK HS. SINCE THE ENTIRE MACHINERY WAS SOLD FOR A CONSIDERA TION OF RS.1.72 CRORES, THE BALANCE OF RS.1.22 CRORES WAS S HOWN AS LOSS AGAINST THE INCOME OF ITS HOTEL BUSINESS. 2.1. THE A.O. NOTICED THAT THE ASSESSEE IS IN HOTE L BUSINESS WHEREAS M/S. SHYAM VINYLS LTD., WAS ALTOGE THER 4 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. IN A DIFFERENT LINE OF BUSINESS AND THEREFORE, THE PURCHASE OF MACHINERY HAS NO NEXUS WITH THE ASSESSEES BUSIN ESS; IN FACT IT HAS NOT EVEN BROUGHT THE MACHINERY INTO ITS BOOKS OF ACCOUNT THOUGH POSSESSION WAS TAKEN ON 05.07.2007 AND SOLD AFTER MORE THAN ONE YEAR AFTER TAKING POSSESSION AND HENCE, THE LOSS CANNOT BE TREATED AS BUSINESS LOSS. HE ALSO OBSERVED THAT THE SOLE PURPO SE OF PURCHASING THE PROPERTY IS ONLY TO ACQUIRE VAST PIE CE OF LAND ADMEASURING 7.75 ACRES WHICH IS NOTHING BUT ACQUIRING OF CAPITAL ASSET. 2.2. THUS, HE CONCLUDED THAT ANY LOSS ARISING ON SALE OF CAPITAL ASSETS CAN BE SET OFF ONLY AGAINST THE CAPITAL GAIN. SINCE THE ASSESSEE DEBITED LOSS OF RS.1.22 CR ORES THE SAME WAS DISALLOWED BY THE A.O. BY SPECIFICALLY OBS ERVING THAT IT HAS NO CONNECTION WHATSOEVER WITH THE BUSIN ESS ACTIVITY CARRIED ON BY THE ASSESSEE. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE OFFICIAL LIQUIDATOR HAS CALLED FOR A TENDER QUOTING MINIMUM UPSET PRICE OF RS.290 LAKHS FOR THE PLANT AND MACHINERY AND ASSESSEE HAVING NOT PAID TH E AMOUNT INTIME HE HAD TO PAY INTEREST ALSO BUT WHEN THE PLANT AND MACHINERY WAS TO BE SOLD IT CREDITED THE VALUE AND THE DIFFERENTIAL AMOUNT WAS RIGHTLY CLAIMED AS TRADING LOSS. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THA T THE PLANT AND MACHINERY IS A DEPRECIABLE ASSET AND WHEN SUCH AN ASSET IS SOLD IT HAS TO BE REDUCED FROM THE BLOCK OF ASSETS AND THE DIFFERENTIAL AMOUNT HAS TO BE ALL OWED AS 5 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. DEDUCTION. THOUGH THE ASSESSEE COMPANY ADMITS THAT THERE IS NO SUCH BLOCK OF ASSET IN THIS CASE AS THI S PLANT WAS A SCRAP ONE NOT USED AND LYING IDLE FOR THE L AST SEVERAL YEARS THIS ASSET CAN INDEPENDENTLY BE TRE ATED AS A SEPARATE BLOCK AND THE SALE TRANSACTION RESULTING IN PROFIT OR LOSS NEEDS TO BE TRANSFERRED TO THE P & L A/C. IT WAS ALSO CONTENDED THAT THE A.O. WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T. ACT SINCE THERE IS NO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME UNDER THE ACT, DURING THE RELEVANT ASSESSMEN T YEAR. IT WAS ALSO SUBMITTED THAT THE ASSESSEE COMPA NY IS PART OF THE RENOWNED GROUP BY NAME MAYURA, KNOWN FOR HOTEL INDUSTRY SINCE MORE THAN TWO DECADES. DURING THE COURSE OF CARRYING ON ITS MAIN BUSINESS IT IS QUITE NATURAL FOR THE COMPANY TO SELL SCRAP OF VARIOUS ITEMS SUCH AS IRON AND STEEL ITEMS, FURNITURE, PLASTIC BOTTLES ET C., AND THIS SALES REPRESENTS MAJOR REVENUE WHICH IS ORDINA RILY CREDITED TO THE CONCERNED PURCHASE ACCOUNT AND DEBI TED TO THE P & L A/C. SINCE SALE OF SCRAP IS INCIDENTAL AND ANCILLARY TO THE CARRYING ON MAIN OBJECTS OF THE CO MPANY, THE SAME WAS PROVIDED IN THE MEMORANDUM AND ARTICLE S OF THE ASSOCIATION OF THE COMPANY AND IN THE SAME P ROCESS THE ASSESSEE HAVING SOLD THE PLANT AND MACHINERY (I N SCRAP CONDITION), ONLY TO SAVE THE COMPANY FROM LOC KING OF HUGE FUNDS IN THE SAID IDLE ASSET. THE AMOUNT REA LISED ON SALE OF SCRAP SHOULD BE CONSIDERED AS REVENUE IN NA TURE AND DIFFERENTIAL AMOUNT BETWEEN THE COST OF PLANT A ND MACHINERY (SCRAP) AND THE SALE CONSIDERATION REALIS ED WAS CORRECTLY TAKEN INTO CONSIDERATION IN THE P & L A/C . 6 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. 4. LD. CIT(A) OBSERVED THAT THE ASSESSEE IS IN HOTEL BUSINESS FOR THE LAST MORE THAN TWO DECADES A ND AS A PRUDENT BUSINESSMAN HE WAS JUSTIFIED IN LOOKING F OR GOOD PIECE OF LAND FOR EXPANSION OF ITS HOTEL BUSIN ESS; HAVING NOTICED THE ADVERTISEMENT FOR SALE OF THE IM PUGNED PROPERTY THE ASSESSEE PARTICIPATED IN THE BID AND C AME OUT SUCCESSFULLY. IT HAS TO BE REMEMBERED THAT IN T HE HOTEL BUSINESS SCRAP OF VARIOUS ITEMS EMERGE WHICH HAS TO BE SOLD PERIODICALLY. HE ALSO OBSERVED THAT THOUGH THE OFFICIAL LIQUIDATOR HAS QUOTED THE MINIMUM UPSET PR ICE FOR PLANT AND MACHINERY THE FACT REMAINS THAT THE PLANT AND MACHINERY IS NOTHING BUT SCRAP ON WHICH THE ASSESSEE HAD TO PAY RS.294 LAKHS. SINCE THE ASSESSE E TOOK A DECISION TO SELL THE SAME ON AS IS WHERE AS BASI S, THE DIFFERENTIAL AMOUNT HAS TO BE TREATED AS LOSS INCUR RED IN THE COURSE OF BUSINESS WHICH HAS TO BE TREATED AS BUSINESS LOSS. LD. CIT(A) HAD ALSO TAKEN SUPPORT OF THE CLAUSE IN THE MEMORANDUM AND ARTICLES OF ASSOCIATIO N TO HIGHLIGHT THAT THE ASSESSEE COMPANY CAN INDULGE IN ANY OTHER ACTIVITY OTHER THAN HOTEL BUSINESS AND SALE O F SCRAP IS ONE MAIN SOURCE OF INCOME IN ANY HOTEL INDUSTRY AND THE ASSESSEE CANNOT BE AN EXCEPTION TO THAT. HE THE REFORE, CONCLUDED THAT THE SALE OF SCRAP TANTAMOUNTS TO BUS INESS ACTIVITY. HE ALSO NOTICED THAT THE A.O. SELECTED TH E CASE FOR SCRUTINY UNDER THE IMPRESSION THAT THE PROVISIONS O F SECTION 14A ARE ATTRACTED BUT THE FACT REMAINS THAT THERE WAS NO SUCH EXEMPT INCOME. HE ALSO HIGHLIGHTED THAT THE A.O. WAS NOT CORRECT IN ALLEGING THAT THE ASSET WAS NOT BROUGHT INTO BOOKS OF ACCOUNT SINCE THE ASSESSEE PA ID A 7 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. SUM OF RS.1.02 CRORES FOR THE YEAR ENDING 31.03.200 7 WHICH WAS SHOWN IN THE BALANCE SHEET UNDER THE HEAD ADVANCES FOR OTHERS AND ANOTHER SUM OF RS.4.08 CR ORES FOR THE YEAR ENDING 31.03.2008, PAID TO THE COURT W ERE SHOWN IN THE SCHEDULE OF FIXED ASSETS BUT AT THE SA ME TIME IN THE BALANCE SHEET FOR THE YEAR ENDING 31.03 .2009 THE SCRAP (PLANT AND MACHINERY) WAS SHOWN AS SOLD B Y RETAINING, IN THE BALANCE SHEET, LAND AND BUILDING. THEREFORE, THE OBSERVATIONS OF THE A.O. THAT THE IM PUGNED ASSET WAS NOT BROUGHT INTO ITS BOOKS IS ILL-FOUNDED . WITH REGARD TO THE ALLEGATION OF THE A.O. THAT THE REGIS TERED VALUER WAS NOT APPOINTED FOR VALUING THE PLANT AND MACHINERY BEFORE SALE, THE CONCLUSION OF THE LD. CI T(A) WAS THAT SUCH A STEP WOULD IMPEDE THE PROPOSED SALE OF SCRAP IN THE LIGHT OF THE FACT THAT WITH TIME THE S CRAP DETERIORATES FAST AND MAY LESSEN THE VALUE OF THE S CRAP; WITH THE PASSAGE OF TIME NO BODY MAY BE INTERESTED IN PURCHASING SUCH SCRAP AND HENCE, THE ASSESSEE WAS JUSTIFIED IN SELLING THE SAME WITHOUT OBTAINING ANY VALUATION REPORT. HE MAINLY HIGHLIGHTED THAT AS PER THE MEMORANDUM AND ARTICLES OF ASSOCIATION, ASSESSEE CA N INDULGE IN ANY OTHER ACTIVITY OTHER THAN HOTEL BUSI NESS, AND SALE OF SCRAP IS AN ORDINARY FALL-OUT OF THE HO TEL BUSINESS AND THUS THE SAME RULE CAN BE EXTENDED TO THE SALE OF PLANT AND MACHINERY IN THE SCRAP FORM AND H ENCE, THE LOSS THEREOF, HAS TO BE ALLOWED AS SET OFF AGAI NST THE INCOME FROM HOTEL BUSINESS. 8 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. LD. D.R. SUBMITTED THAT THE MAIN OBJECT O F THE ASSESSEE COMPANY WAS ONLY TO CARRY ON THE HOTEL BUS INESS AND THE SCRAP IF ANY, IS NOT EITHER MAIN LINE OF BU SINESS OR EVEN ANCILLARY ACTIVITY. VESSELS, FURNITURE, MACHIN ERY ETC., WHICH WERE USED IN THE HOTEL INDUSTRY MIGHT HAVE BE EN OCCASIONALLY SOLD BUT IT PRECEDES USAGE OF THE ASSE TS FOR THE PURPOSE OF BUSINESS AND EVEN AS PER THE MEMORANDUM AND ARTICLES OF ASSOCIATION THE SCRAP AR ISING OUT OF THE MAIN ACTIVITY I.E., HOTEL BUSINESS CAN B E SOLD WHEREAS, IN THE INSTANT CASE, THE ASSESSEE PURCHASE D THE LAND AND BUILDING AND PLANT AND MACHINERY OF M/S. SHYAM VINYLS LTD., WHICH WAS USEFUL FOR MANUFACTURI NG OF CUSHION VINYL FLOOR COVERING LINE AND IT HAS NO NEX US WHATSOEVER WITH THE LINE OF ACTIVITY CARRIED ON BY THE ASSESSEE. HE FURTHER POINTED OUT THAT THOUGH THE MINIMUM UPSET PRICE FIXED BY THE OFFICIAL LIQUIDATO R, FOR SALE OF PLANT AND MACHINERY AND FOR SALE OF LAND AN D BUILDING, THE ASSESSEE OFFERED A CONSOLIDATED PRICE FOR ASSETS AND THUS IT CANNOT BE SAID THAT THE VALUE OF THE PLANT AND MACHINERY IS WORTH RS.290 LAKHS. THOUGH T HE OFFICIAL LIQUIDATOR ACCEPTED THE CONSOLIDATED SALE CONSIDERATION QUOTED BY THE ASSESSEE A FURTHER CLARIFICATION WAS SOUGHT FOR REGARDING ADOPTION OF PROPORTIONATE VALUE OF RS.212 LAKHS IN RESPECT OF BUILDINGS AND CIVIL WORKS. DURING THE COURSE OF PROCEEDINGS IN COMPANY APPLICATION NO.1888 OF 2009 THE ASSESSEE ACCEPTED THAT PROPORTIONATE VALUE OF AUCTI ONED PROPERTY CAN BE TAKEN AT RS.226 LAKHS (SEE PAGE 27 AND 9 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. 28 OF PAPER BOOK) AND IN FACT, SALE DEED WAS ALSO E XECUTED WITHOUT REFERRING TO THE SPECIFIC PRICE FOR PLANT A ND MACHINERY AND FOR LAND AND BUILDING. THUS, IT IS ON LY AN AFTERTHOUGHT BY THE ASSESSEE TO INCREASE THE VALUE OF THE PLANT AND MACHINERY, AS IF UPSET PRICE WAS ACCEPTED DURING TENDER PROCEEDINGS. HE FURTHER SUBMITTED THA T THE ASSESSEE HAVING NOT BEEN ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SCRAP, EXCEPT SELLING THE SCRA P EMANATING FROM THE HOTEL BUSINESS, THE SALE INSTANC E OF PURCHASE OF LAND AND BUILDING ALONG WITH PLANT AND MACHINERY - THAT TOO OF A COMPANY CARRYING ON A DIF FERENT LINE OF BUSINESS - CANNOT BE LINKED TO THE REGULAR BUSINESS CARRIED ON BY THE ASSESSEE SO AS TO TREAT IT AS BUS INESS LOSS OR BUSINESS EXPENDITURE. HE THUS STRONGLY SUPP ORTED THE ORDER PASSED BY THE A.O. AND OBJECTED TO THE CONCLUSIONS REACHED BY THE CIT(A). 6. THE LD. D.R. ALSO ADVERTED OUR ATTENTION TO PARA 3.2 OF CIT(A) ORDER (PAGE 12) TO SUBMIT THAT T HE ASSESSEE HAVING SHOWN THE PURCHASE COST IN THE BALA NCE SHEET AS PART OF SCHEDULE OF FIXED ASSETS THE SA ME CANNOT BE TREATED AS STOCK-IN-TRADE. IN OTHERWORDS, THE BUILDING AND PLANT AND MACHINERY WAS SHOWN IN THE SCHEDULE OF FIXED ASSETS BUT WHILE SELLING THE PLAN T AND MACHINERY, WHICH IS NOWHERE CONNECTED TO THE MAIN L INE OF THE BUSINESS OF THE ASSESSEE, IT CANNOT BE SAID THAT THE COMPANY WAS SELLING THE SCRAP AS PART OF ITS BUSINE SS ACTIVITY. 10 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. 7. ON THE OTHER HAND, LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE STRONGLY RELIED UPON THE ORD ER PASSED BY THE CIT(A). HE ADVERTED OUR ATTENTION TO PAGES 45 AND 52 OF PAPER BOOK TO SUBMIT THAT THE ASSESSEE WAS MAINLY INTERESTED IN EXPANDING ITS BUSINESS BY ACQU IRING LAND ADMEASURING 7.75 ACRES AND THE PLANT AND MACHINERY WAS PURCHASED FOR SCRAP VALUE. IN ORDER T O LESSEN THE BURDEN OF FURTHER LOSS IT WAS SOLD ON A S IS WHERE AS BASIS IN WHICH EVENT, IT HAS TO BE TREATE D AS INCIDENTAL TO THE MAIN ACTIVITY OF BUSINESS AND SAL E THEREOF, OUGHT TO HAVE BEEN ALLOWED AS BUSINESS LOS S. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE RECORD. AS RIGHTLY POINTED OUT BY THE A SSESSEE AS WELL AS BY THE LD. CIT(A) THE ASSESSEE HAS BEEN WHOLLY AND EXCLUSIVELY ENGAGED IN THE BUSINESS OF RUNNING HOTELS, BOARDING AND LODGING FOR THE PAST TWO DECADES AND T HE SCRAP, IF ANY, GENERATED OUT OF THE MAIN LINE OF AC TIVITY WAS SOLD. THE MATERIAL PRESENTED BEFORE US NOWHERE INDI CATE THAT THE ASSESSEE WAS CARRYING ON THE ACTIVITY OF PURCHASING PLANT AND MACHINERY WITH A VIEW TO RE-SA LE THE SAME. THE ASSESSEE PARTICIPATED IN THE TENDER FOR PURCHASE OF LAND AND BUILDING AND PLANT AND MACHINE RY WITH THE MAIN PURPOSE OF ACQUIRING THE LAND WHICH I S A CAPITAL ASSET AND IN FACT IT WAS SHOWN IN THE BALAN CE SHEET AS ACQUISITION. SUCH BEING THE CASE, PLANT AND MACH INERY CANNOT BE SAID TO HAVE BEEN PURCHASED FOR THE PURPO SE OF CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF SC RAP SINCE IT IS NOT EVEN REMOTELY CONNECTED TO THE MAIN LINE OF 11 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. ACTIVITY. ASSESSEE HAS NOWHERE SPECIFIED AS TO WHAT IS THE PRICE QUOTED TOWARDS PLANT AND MACHINERY AT THE TIM E OF OFFERING ITS TENDER. ON THE CONTRARY, THE FACTS IND ICATE THAT THE DOMINANT OBJECT WAS TO PURCHASE THE CAPITAL ASS ETS AND IN FACT THE ASSESSEE HAS MERELY QUOTED THE LUMP SUM PRICE WHICH WAS ACCEPTED BY THE OFFICIAL LIQUIDATOR . THUS THE BIFURCATION OF VALUE BETWEEN THE PLANT AND MACH INERY AND LAND AND BUILDING IS NOT BACKED/SUPPORTED BY AN Y EVIDENCE ON RECORD. EVEN THE PETITION FILED BEFORE THE HONBLE HIGH COURT OF JUDICATURE OF A.P. WITH REGAR D TO FIXATION OF VALUE FOR THE PLANT AND MACHINERY AND F OR LAND AND BUILDING SEPARATELY ALSO INDICATE THAT AT BEST THE ASSESSEE SEEKS TO ADOPT A PROPORTIONATE VALUE (SEE PAGE 29 OF THE PAPER BOOK) SINCE THE O/O. OFFICIAL LIQUI DATOR ACCEPTED THE QUOTATION BY MERELY STATING THAT THE ASSESSEE HAS GIVEN A CONSOLIDATED OFFER OF RS.502 L AKHS FOR PURCHASE OF LAND, BUILDING AND PLANT AND MACHINERY. THE LAND AND MACHINERY WAS KEPT IDLE FOR MORE THAN ONE YEAR BUT THE ASSESSEE DID NOT CHOOSE TO OBTAIN ANY REPOR T FROM THE REGISTERED VALUER WITH REGARD TO THE VALUE OF S UCH PLANT AND MACHINERY WHICH ALSO INDICATE THAT THE PR ICE NOW SOUGHT TO BE FIXED AT RS.294 LAKHS IS ONLY AN IMAGINARY VALUE SO AS TO CLAIM DEDUCTION FROM THE BUSINESS INCOME OVERLOOKING THE FACT THAT IT WAS PURCHASED AS AN ASSET AND REFLECTED IN THE BALANCE SHEET AS SUCH. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS NOT GIVEN ANY REASONS TO ACCEPT THE CONTENTION OF THE A SSESSEE DESPITE THE FACT THAT NOT EVEN AN IOTA OF EVIDENCE IS PLACED TO SUPPORT SUCH CONTENTION. ON THE OTHER HAND, THE 12 ITA.NO.1674/HYD/2012 M/S. SUDALAGUNTA HOTELS LTD., TIRUPATI. CIRCUMSTANCES, CATEGORICALLY INDICATE THAT THERE IS NO NEXUS BETWEEN PURCHASE OF LAND, BUILDING AND PLANT AND MACHINERY ON ONE HAND AND THE HOTEL BUSINESS BEING CARRIED ON BY THE ASSESSEE FOR THE PAST TWO DECADES . ON A CONSPECTUS OF THE MATTER, WE OF THE FIRM VIEW THAT THE ORDER PASSED BY THE LD. CIT(A) IS CONTRARY TO LAW A ND FACTS OF THE PRESENT CASE AND THEREFORE, DESERVES TO BE S ET ASIDE AND WE DIRECT ACCORDINGLY. IN THE RESULT, WE SET AS IDE THE ORDER PASSED BY THE LD. CIT(A) AND UPHOLD THE VIEW TAKEN BY THE A.O, SINCE THE LOSS CLAIMED BY THE ASSESSEE CANNOT BE TREATED AS REVENUE LOSS OR BUSINESS LOSS. 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.06.2016. SD/- SD/- (S. RIFAUR RAHMAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD DATED 27 TH JUNE, 2016 VBP/- COPY TO 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), 2 ND FLOOR, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. 2. M/S. SUDALAGUNTA HOTELS LTD., NO.209, HOTEL MAYURA, T.P. AREA, TIRUPATI. 3. CIT(A) , GUNTUR. 4. CIT, TIRUPATI . 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE
