The ACIT, Circle-5, Ahmedabad V. M/s. Nirma Industries Pvt.Ltd., Ahmedabad

ITA 1799/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4123 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Capital asset; Depreciation; Cost of acquisition; Unabsorbed depreciation
• Section: 32; 148; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO.1799/AHD/2015 WITH CO NO.143/AHD/2015 / ASSTT. YEAR: 2008-09 ACIT, CIR.5 AHMEDABAD. VS. M/S.NIRMA INDUSTRIES P.LTD. NIRMA HOUSE, ASHRAM ROAD AHMEDABAD. PAN : AAACN 5352 M ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI S.K. DEV, SR.DR ASSESSEE BY : SHRI HIMANSHU SHAH, AR / DATE OF HEARING : 30/01/2019 / DATE OF PRONOUNCEMENT: 14/02/2019 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-9, AHMEDABAD DATED 19.3.2015 PASSED FOR T HE ASSTT.YEAR 2008-09. ON RECEIPT OF NOTICE IN REVENUES APPEAL, THE ASSES SEE FILED CROSS OBJECTION BEARING NO.143/AHD/2015. 2. REVENUE HAS TAKEN THREE GROUNDS OF WHICH CONTAIN ED SUB-GROUNDS. IN BRIEF GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A ) HAS ERRED IN DELETING ADDITION OF RS.1,14,31,477/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 30.9.2008 DECLARING TOTAL LOSS AT RS.24,62,005/- . THE ASSESSMENT ORDER WAS ITA NO.1799/AHD/2015 WITH CO 2 PASSED ON 5.5.2010 UNDER SECTION 143(3) OF THE ACT WHEREBY TOTAL INCOME WAS DETERMINED AT RS.18,35,470/- AND BOOK PROFIT AT RS. 2,36,90,563/-. THE ASSESSMENT WAS REOPENED AFTER ISSUANCE OF NOTICE UN DER SECTION 148 ON 13.3.2013. IN THE RE-ASSESSMENT PROCEEDINGS, THE L D.AO HAS OBSERVED THAT THE ASSESSEE HAD PURCHASED CAPITAL ASSETS DURING THE AS SESSMENT YEAR 2000-01 FOR A CONSIDERATION OF RS.98,08,200/-. IT HAS MADE ADD ITION TO THIS ASSET IN THE ASSTT.YEAR 2001-02. THIS ASSET WAS SOLD DURING THE ACCOUNTING PERIOD RELEVANT TO THIS ASSESSMENT YEAR FOR A CONSIDERATIO N OF RS.1,63,47,000/-. THE AO WAS OF THE VIEW THAT DEPRECIATION WAS CLAIMED IN THE ASSTT.YEAR 2001-02 AND 2002-03. THEREAFTER, IT IS NOT ASCERTAINABLE W HETHER DEPRECIATION WAS CLAIMED OR NOT. IN HIS UNDERSTANDING THE ASSESSEE HAS DISCLOSED SHORT TERM CAPITAL GAIN AT RS.49,15,523/- WHICH IS SHORT BY A SUM OF RS.1,14,31,477/- . HE MADE ADDITION OF THIS AMOUNT. THE DISCUSSION MA DE BY THE AO READS AS UNDER: 3. SCRUTINY OF RECORDS REVEALED THAT THE ASSESSEE COMPANY HAD PURCHASED A CAPITAL ASSET(BUILDING) DURING 12/5/200 0 TO 15/12/2000 AND BROUGHT INTO THE BLOCK ASSET AND WAS CLAIMED DEPREC IATION FROM P.Y. 2000- 01. THE SAID CAPITAL ASSET (BUILDING) WAS SOLD FOR RS.1,63,47,000/- VIDE SALE DEED NO.2496 DATED 8/5/2007. AFTER SALE OF THE ASSE T THE BLOCK, OF BUILDING BECAME NIL. THUS, THE ENTIRE SALE CONSIDERATION WAS LIABLE TO BE TAXED AS STCG. HOWEVER, IT WAS NOTICED THAT WHILE COMPUTING THE CAPITAL GAIN ON SALE OF BUILDING, THE WDV OF THE BLOCK, AS ON 1/4/2 002 WAS CONSIDERED INSTEAD OF THE WDV AS ON 1/4/2007(I.E. NIL). THE WD V AS ON 1/4/2002 WAS RS.1,14,31,477/- AND ACCORDINGLY OFFERED STCG OF RS .49,15,523/-. FURTHER, IT WAS RELEVANT FROM THE ANNEXURE-A OF CLAUSE-14 TO THE 3CD REPORT, CONTAINING DETAILS OF ALLOWABLE DEPRECIATION FOR A. Y. 2008-09, THAT NO SUCH BLOCK OF BUILDING WAS EXISTED AS ON 1/4/2007 AND DU RING THE P.Y. 2007-08 NO SUCH ASSET WAS PURCHASED FALLING WITHIN THE BLOC K-BUILDING. IN VIEW OF THE ABOVE, THE CORRECT CALCULATION OF STCG ON SALE, OF ASSETS SHOULD BE REQUIRED. 4. IN RESPONSE TO THE ISSUE INVOLVED, THE ASSESSEE HAS NOT FILED ANY SUBMISSION IN ITS SUPPORT. SINCE THE ASSESSEE COULD NOT GIVEN ANY SATISFACTORY REPLY IN ITS CLAIM, THEREFORE, IN VIEW OF THE ABOVE FACTS AND AS PER THE PROVISIONS UNDER SECTION 50 OF THE ACT, THE STCG ON SALE OF ASSET IS COMPUTED AS UNDER:- FULL VALUE OF THE CONSIDERATION RECEIVED RS.1.63.47.000/ ITA NO.1799/AHD/2015 WITH CO 3 LESS: (A) EXPENDITURE INCURRED ON SUCH TRANSFER NIL (B) THE WDV OF THE BLOCK AS ON 1/4/2007 NIL (AS MENTIONED IN ANN-A, PARA-14 TO 3CD REP ORT) (C) THE ASSETS ACQUIRED DURING THE P.Y.07-08 NIL S.T.C.G. = RS. 1,63,47,000/- 4. DISSATISFIED WITH THE ACTION OF THE AO, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS ALL OWED APPEAL OF THE ASSESSEE BY RECORDING THE FOLLOWING FINDING: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT. APPELLANT HAD SOLD THE BUILDING LOCATED AT BAPUNAGA R ON 14/05/2007 (A.Y. 2008-09) AND HAD OFFERED SHORT TERM CAPITAL G AIN OF RS.49,15,523/- AFTER REDUCING WDV OF RS.1,14,31,477 /- AS ON 01-04- 2002 FROM THE SALE PRICE OF RS.1,63,47,000/-. APPE LLANT SUBMITTED DETAILS OF PURCHASE, SALE AND CALCULATION OF CAPITA L GAIN ON THE ASSETS SOLD AS PER FOLLOWING DETAILS:- PARTICULARS AMOUNT IN RS. AMOUNT IN RS. COST OF ACQUISITION DURING ASST. YEAR 2000-01 98,08,200 LESS: DEPRECIATION NIL OPENING W.D.V FOR ASSESSMENT YEAR 2001-02 98,08,200 ADD ADDITION DURING ASST. YEAR. PRIOR TO 30-09-2000 35,61,001 AFTER 30-09-2000 8,66,020 44,27,021 LESS: DEPRECIATION 13,80,221 W.D.V. FOR ASST YEAR 2001 -02 1,28,55,000 ITA NO.1799/AHD/2015 WITH CO 4 LESS DEPRECIATION FOR ASST. YEAR 2002-03 1,285,500 W D V FOR ASSESSMENT YEAR 2002-03 1,15,69,500 DEPRECIATION NOT CLAIMED FROM ASST. YEAR 2003- 04 TILL 2008-09 1,14,31,477 SALE VALUE 1,63,47,000 SHORT TERM CAPITAL GAIN 49,15,523 AFTER GOING THROUGH THE ABOVE CALCULATION, I AM OF THE OPINION THAT APPELLANT HAD CONSIDERED THE DEPRECIATION, WHI CH IT HAD NOT CLAIMED FROM A.Y. 2003-04 TILL A.Y. 2008-09 AGGREGA TING RS.1,14,31,477/- ON THE ASSET SOLD AND CORRECTLY OF FERED SHORT CAPITAL GAIN AT RS.49,15,523/- IN ITS RETURN FOR CURRENT A. Y. 2008-09. THEREFORE, THE ADDITION MADE BY THE A.O. FOR RS.1,14,31,477/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE AO HAS ERRED IN RECORDING A FINDING THAT N O DETAILS WERE SUBMITTED BY THE ASSESSEE. THE ASSESSEE HAS REPLIED TO THIS SHO W CAUSE NOTICE AND SUBMITTED DETAILS VIDE LETTER DATED 23.11.2013. CO Y OF THIS LETTER IS AVAILABLE ON PAGE NO.47 OF THE PAPER BOOK. THE ASSESSEE HAS PRODUCED WORKING OF SHORT TERM CAPITAL GAIN AT RS.49,15,523/-. THIS VERY WOR KING HAS BEEN TAKEN INTO CONSIDERATION BY THE LD.CIT(A), IN THE FINDING RECO RDED IN PARA 4.2. 6. THE LD.DR ON THE OTHER HAND CONTENDED THAT AS PE R EXPLANATION-5 TO SECTION 32 OF THE INCOME TAX ACT, THE DEPRECIATION HAS TO BE APPLIED IRRESPECTIVE OF THE FACT WHETHER THE ASSESSEE HAS C LAIMED IT OR NOT. 7. ON DUE CONSIDERATION OF THE ABOVE FACTS, THE ASS ESSEE HAS DEMONSTRATED THAT DEPRECIATION WAS NOT CLAIMED BY IT AFTER THE A SSESSMENT YEAR 2002-03. ITA NO.1799/AHD/2015 WITH CO 5 THE CAPITAL GAIN CANNOT BE COMPUTED BY REDUCING THE COST OF ACQUISITION BY WAY OF CALCULATION OF NOTIONAL DEPRECIATION WHICH O UGHT NOT TO HAVE BEEN CLAIMED BY THE ASSESSEE. THE ACTUAL AMOUNT OF DEPR ECIATION CLAIMED HAS TO BE REDUCED FROM THE COST OF ASSETS, AND THEREAFTER SHO RT TERM CAPITAL GAIN HAS TO BE COMPUTED. BY NOT CLAIMING DEPRECIATION IN EARLI ER YEARS THE ASSESSEE HAS SHOWN MORE INCOME. THERE MAY BE MANY REASONS FOR N OT CLAIMING ANY DEPRECIATION IN EARLIER YEARS. THE LD.CIT(A) HAS N OTED IT AS FACT THAT THIS ASSET BECAME PART OF BLOCK OF ASSETS AND DEPRECIATION HAV ING VALUE OF RS.1,14,31,477/- WAS NOT CLAIMED. IF WE ACCEPT THE CONTENTION OF THE LD.DR, THEN SUB-SECTION (2) OF SECTION 32 WOULD BECOME IRR ELEVANT BECAUSE NO ONE COULD CARRY FORWARD THE UNABSORBED DEPRECIATION FOR FUTURE YEARS. TAKING INTO CONSIDERATION FINDING OF THE LD.CIT(A) AND NON-CLAI M OF DEPRECIATION AT RS.1,14,31,477/- WE ARE OF THE VIEW THAT THIS AMOUN T CANNOT BE REDUCED FROM THE COST OF ACQUISITION ON NOTIONAL BASIS. THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF THIS AMOUNT. 8. SO FAR AS CROSS OBJECTION OF THE ASSESSEE IS CON CERNED, THE LD.COUNSEL DID NOT PRESS THE CO. ACCORDINGLY, THE SAME IS DIS MISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE AND CO OF T HE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 14 TH FEBRUARY, 2019 AT AHMEDABAD. S D / - (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 14/02/2019