M/s Hotel Sampoorna, Anantapur V. ACIT, Anantapur

ITA 177/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9737 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 06-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: U L N SUDHAKAR
• Keywords: Depreciation; Rectification of order; Unabsorbed depreciation
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C. GUPTA, VP & SHRI CHANDRA POOJARI, AM I.T.A. NO. 177/HYD/2009 (ASSESSMENT YEAR 2001-02) M/S. HOTEL SAMPOORNA ANANTAPUR-515 001 PAN: H-302 / A VS. ASST. CIT CIRCLE-I ANANTAPUR APPELLANT RESPONDENT APPELLANT BY: SHRI U.L.N. SUDHAKAR RESPONDENT BY: SHRI K.V.N. CHARYA O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), TIRUPATI DATED 28.11.2008 FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM DERIVING INCOME FROM PROPERTY AND ITS HOTEL BUSINES S AND SHORT TERM CAPITAL GAINS. DURING THE COURSE OF RE- ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS A DOPTED THE WRITTEN DOWN VALUE (WDV) OF THE PROPERTY (HOTEL BUILDING) AS PER THE DEPRECIATION SCHEDULE AVAILABL E WITH THE DEPARTMENT FOR THE RELEVANT PERIOD OF TIME AND WORKED OUT THE SHORT TERM CAPITAL GAINS OF THE ASSESSEE. THE ASSESSEES CLAIMS FOR ADDITIONS AND ALTERATIONS TO THE MANNER IN WHICH THE SAID WDV WAS WORKED OUT WERE I.T.A. NO. 177/HYD/2009 M/S. HOTEL SAMPOORNA ================== 2 REJECTED BY THE ASSESSING OFFICER FOR THE REASONS M ENTIONED IN THE ASSESSMENT ORDER. 3. THE ASSESSEE WAS IN APPEAL BEFORE THE CIT(A) AND TH E CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRI EVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING I NCOME AT RS. 17,91,390. HOWEVER, BOTH THE DEPARTMENT AS WEL L AS THE ASSESSEE FOUND THAT THERE WERE MISTAKE IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER PASSE D RECTIFICATION ORDER U/S. 154 OF THE INCOME-TAX ACT, 1961 ON 1.8.2002. THE ASSESSEE, HOWEVER, WAS NOT IN APPEAL AGAINST THE ORDER PASSED U/S. 154 OF THE ACT. LATE R, THE ASSESSMENT WAS REOPENED AND IN THE REOPENED ASSESSM ENT THE ASSESSING OFFICER RECOMPUTED THE INCOME FROM SH ORT TERM CAPITAL GAINS AT RS. 24,73,537 AND THE INCOME FROM BUSINESS WAS TAKEN AT NIL. HOWEVER, THE ASSESSI NG OFFICER DID NOT THE SET OFF OF UNABSORBED DEPRECIATION AVAI LABLE U/S. 32(2) OF THE ACT AND THE INCOME OF THE ASSESSE E WAS COMPUTED AT RS. 24,90,037 INSTEAD OF RS. 7,37,070. HE SUBMITTED THAT THE ASSESSING OFFICER WRONGLY OBSERV ED THAT U/S. 50A OF THE ACT, THE ONLY AMOUNT THAT IS DEDUCT IBLE FROM THE SALES CONSIDERATION IS WDV OF A PARTICULAR ASSET AT I.T.A. NO. 177/HYD/2009 M/S. HOTEL SAMPOORNA ================== 3 THE BEGINNING OF THE YEAR AND NOTHING ELSE. ACCORD ING TO THE ASSESSEE THE COST OF ASSETS IS TO BE INCREASED BY THE FOLLOWING EXPENDITURES: SR. NO. ITEM AMOUNT (RS.) I) COST OF SHOP 2,76,289 II) RESTAURANT BUILDING 1,72,741 III) INTEREST CAPITALISED 2,00,000 IV) DEPOSITS 2,08,285 V) REPLACEMENT (COST) 4,30,000 (ALL THE ABOVE EXPENDITURES AS PER BOOKS.) VI) AMOUNT NOT CONSIDERED IN BOOKS 92,733 TOTAL 13,80,048 5. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE PROVISIONS OF SECTIONS 50A, 43(6), 48 AND 71 OF THE ACT. FINALLY HE SUBMITTED AN ALTERNATIVE PL EA THAT THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO ARRIVE AT THE CORRECT COST OF THE ASSETS, WDV AND WORKING OF SHORT TERM CAPITAL GAINS. 6. THE LEARNED DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE PARTIES ON EITHER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD. 8. IT IS AN ADMITTED FACT THAT THE COST OF SHOP, RESTAURANT BUILDING, INTEREST CAPITALISED, DEPOSITS AND REPLACEMENT COST ARE APPEARING IN THE BOOKS OF ACCO UNT AND THESE EXPENSES WERE NOT CONSIDERED WHILE ARRIVI NG AT I.T.A. NO. 177/HYD/2009 M/S. HOTEL SAMPOORNA ================== 4 THE WDV OF THE IMPUGNED ASSETS. IN OUR OPINION, TH ESE EXPENSES REQUIRED TO BE EXAMINED WHETHER THEY ARE ACTUALLY IN THE FIELD OF CAPITAL AND THEREAFTER TO BE DECIDED WHETHER THEY SHOULD BE INCLUDED IN THE COST OF CAPI TAL ASSETS OR NOT TO ARRIVE AT THE CAPITAL GAINS. HENC E, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAN D BACK THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFIC ER TO EXAMINE EACH ITEM INDIVIDUALLY ABOUT THE NATURE OF EXPENDITURE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2011. SD/ (G.C. GUPTA) VICE PRESIDENT SD/ (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH MARCH, 2011 TPRAO COPY FORWARDED TO: 1. M/S. HOTEL SAMPOORNA, C/O. JONNA IRON MART, 15/669, KAMALANAGAR, ANANTAPUR-515 001 2. ASST. CIT, CIRCLE-1, ANANTAPUR 3. THE CIT(A), TIRUPATI 4 THE CIT, TIRUPATI CHARGE, TIRUPATI 5. THE DR A BENCH, ITAT, HYDERABAD