Vidarbha Veneer Industries Limited, Nagpur V. Income Tax Officer Ward -7(1), Nagpur

ITA 180/NAG/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1552 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 06-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANITA RUPAVATARAM
• Assessee Lawyers: A G PIMPARKHEDE
• Keywords: Sale consideration of property below Jantri Value; Business income; Depreciation; Fair market value; Bad and doubtful debts; Valuation report; Unabsorbed depreciation
• Section: 43B

Judgement Text

1 ITA NO. 180/NAG/2010 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 180/NAG/2010 ASSESSMENT YEAR : 2005 - 06. VIDARBHA VENEER INDUSTRIES LTD . THE INCOME - TAX OFFICER, (IN LIQUIDATION), NA \ GPUR. VS. WARD - 7(1), NAGPUR. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.G. PIMPARKHEDE. RESPONDENT BY : SMT. ANITA RUPAVATARAM DATE OF HEARING : 0 1 - 12 - 2015. DATE OF PRONOUNCEMENT : 18 TH DEC., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 24 - 09 - 2010 AND PERTAINS TO ASSESSMENT YEAR 2005 - 06. THE GROUNDS OF APPEAL READS AS UNDER: (1) THAT THE LEARNED ASSESSING OFFICER ERRED IN THE LAW AND ON FA CTS IN DETERMINING LONG TERM CAPITAL GAIN ON SALE OF PLOTS BY TAKING STAMP DUTY PRICE AND HAS ERRED IN NOT CONSIDERING THE SALE CONSIDERATION AND REGISTERED VALUERS VALUATION AND THE LEARNED CIT(A) HAS ERRED IN CONSIDERING THE VALUATION OFFICERS VALUAT ION FOR RS. 1,80,88,560/ - AS AGAINST STAMP DUTY PRICE TAKEN BY ASSESSING OFFICER AT RS. 2,61,22 , 000/ - . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AUTHORITIES SHOULD HAVE TAKEN INTO CONSIDERATION THE REGISTERED VALUERS VALUATION BY TAKING INTO CONSIDERATION OF THE FACTS AND CIRCUMSTANCES EXPLAINED BY THE ASSESSEE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION IS NOT JUSTIFIED. (2) THAT THE LEARNED ASSESSING OFF ICER ERRED IN LAW AND ON FACTS IN TAKING 2 ITA NO. 180/NAG/2010 INCOME OF RS. 24,01 , 479/ - WHICH REPRESENTS DEDUCTION IN LOAN OF SALES TAX DEPARTMENT ON ACCOUNT OF PRE PAYMENT SCHEME OF GOVERNMENT AND THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND THE EXPLANATION OFFERED THE ACTION OF THE AUTHORITIES IS NOT JUSTIFIED. (3) THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE WRITTEN OFF AMOUNT OF RS. 5 , 48, 648/ - FOR ALLOWING THE SAME AS BAD DEBTS OR TRADING LOSS AND THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND THE EXPLANAT I ON OFFERED THE ACTION OF THE AUTHORITIES IS NOT JUSTIFIED . (4) THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS I N NOT ADJUSTING DEEMED SHORT TERM CAPITAL GAIN ON DEPRECIABLE ASSETS U/S. 50 AGAINST BROUGHT FORWARD BUSINESS LOSS AND THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE S AME . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION IS NOT JUSTIFIED. (5) THAT THE LEARNED ASSESSING OFFICER ERRED I N LAW AND ON FACTS IN CHARGING INTEREST U/S. 2346 AND 234C AND THE LEARNED CIT (A) ERRED IN CONFIRMING THE SAME . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION IS NOT JUSTIFIED. 2. APROPOS THE ISSUE OF LONG TERM CAPITAL GAIN: IN THIS CASE MIDC PLOTS IDENTIFI ED AS G - 6 & G - 7 AND G - 17 & G - 18 WERE ACQUIRED BY THE ASSESSEE ON LEASE HOLD RIGHTS FROM MIDC FOR THE TERM OF 95 YEARS FROM 1 ST DAY OF SEPTEMBER, 1973 BY EXECUTING LEASE DEED ON 31 - 03 - 1979. THESE PLOTS WERE MEASURING 36000 SQ. METERS. A SUPPLEMENTARY LEASE DEED WAS EXECUTED ON 07.02.1980 FOR THE AREA OF 12000 SQ. METERS MAKING AGGREGATE AREA OF PLOTS AT 48000 SQ. METES. THESE PLOT S WERE EQUALLY SUB DIVIDED BY THE ASSESSEE IN TWO PARTS HAVING 24000 SQ. METERS FOR EACH OF THE PLOTS AS UNDER : PLOTS NO. G - 6 & G7 ADMEASURING ABOUT 24000 SQ. METER PLOTS NOS. G - 17 & G - 18 ADMEASURING ABOUT 24000 SQ. METER 3 ITA NO. 180/NAG/2010 THESE PLOTS WERE SOLD DURIN G THE F.Y. 2004 - 05 BY EXECUTING DEEDS OF ASSIGNMENT DT. 30 TH AUGUST, 2004. PLOTS IDENTIFIED AS G6 & G7 WERE SOLD TO NAGPUR INFOTECH PVT. LTD. FOR TOTAL CONSIDERATION SHOWN AT RS.50.00 LACS WHILE PLOTS MARKED AS G - 17 & G - 18 WERE SOLD TO WOOD PRESERVE PVT. L TD. FOR TOTAL CONSIDERATION SHOWN AT RS.70.00 LACS TOGETHER WITH FACTORY BUILDING AND PLANT AND MACHINERY WHICH WAS VALUED AT RS.20,00,000/ - AND RS.30,00,000/ - RESPECTIVELY. THUS, COST OF LAND WAS SHOWN AT RS.1,20,00,000/ - (RS.50.00 LACS + RS.70.00 LACS). ON THIS TRANSACTION THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN AT RS.27,84,000/ - . THE AO INVOKED THE PROVISIONS OF SECTION 50C. THE AO NOTED THAT THE ASSESSEES AUDITOR HAS ALSO GIVEN NOTE WITH REGARD TO THE APPLICABILITY OF SECTION 50C. THE AO FURTHER NOTED THAT THE ASSESSEE HAS GIVEN REGISTERED VALUERS REPORT AND WANTED THE SAME TO BE ADOPTED. THE AO REJECTED THIS CONTENTION OF THE ASSESSEE AND PROCEEDED TO ADOPT THE RATE OF STAMP VALUATION AUTHORITY. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) R EFERRED THE MATTER TO THE DVO. CONSIDERING THE DVOS REPORT AND ASSESSEES RESPONSE, LEARNED CIT(APPEALS) HELD THAT THE VALUE ADOPTED BY THE VALUATION OFFICER SHOULD BE AFFIRMED BY CONCLUDING AS UNDER : IN THE VALUATION REPORT, THE VALUATION OFFICER HAS STATED THAT SALE INSTANCE METHOD ADOPTED IS BASED ON THE MIDC, HINGNA APPROVED RATES. IT IS ALSO NECESSARY TO NOTE THAT BEFORE THE VALUATION OFFICER, THE ASSESSEE WANTED ONE PARTICULAR SALE INSTANCE TO BE ADOPTED, WHICH IS OF A SALE THAT HAS TAKEN PLACE ON 8 TH JUNE, 2005 SUBSEQUENT TO THE DATE OF SALE IN THE APPELLANTS CASE, WHICH IS 30 TH AUGUST, 2004. THE APPELLANT HAS TAKEN A CONTRADICTORY STAND AT THE TIME OF FURNISHING THE REGISTERED VALUERS REPORT BEFORE THE A.O. IT IS SEEN THAT VIDE SUBMISSIONS DT. 30 TH NOVEMBER, 2009, THE APPELLANTS REPRESENTATIVE MADE OUT A CASE THAT THE REGISTERED VALUERS REPORT HAD TO BE ACCEPTED AS THE REGISTERED VALUER HAS DETERMINED THE FMV CONSIDERING THE SIZE OF THE PLOT AND ITS LOCATION. IN PARA - 4 OF THE SAID SUBMISSION IT HAS ALSO BEEN STATED THAT NO COMPARABLE SALE INSTANCES WERE AVAILABLE WITH THE REGISTERED VALUER AND HENCE THE REGISTERED VALUER HAS ADOPTED THE BEST POSSIBLE METHOD OF VALUATION OF THE IMPUGNED PROPERTY. IT IS, THEREFORE, SEEN THAT THE APPELLANT IS MAK ING CONTRADICTORY 4 ITA NO. 180/NAG/2010 SUBMISSIONS SINCE ACCORDING TO THE APPELLANT THE REGISTERED VALUERS REPORT IS TO BE ACCEPTED IN TOTO. I, THEREFORE, HOLD THAT THE ESTIMATE MADE BY THE VALUATION OFFICER, WHICH WAS DONE AFTER GIVING DUE OPPORTUNITY TO APPELLANT AND AFTER CONSIDERING ALL THE DISADVANTAGE OF THE PROPERTY, SHOULD BE ADOPTED AND THE VALUE IS TO BE TAKEN AS RS .1,80,88,560/ - . THIS IS A REASO NABLE VALUE COMPARED TO THE VALUE ADOPTED IN THE ASSESSMENT ORDER BEING THE STAMP VALUATION RATE OF RS.2,61,22,000/ - . I, TH EREFORE, HOLD THAT THE ESTIMATE OF THE VALUATION OFFICER IS FAIR AND REASONABLE. ACCORDINGLY, A.O. MA ADOPT THE VALUE AS ADOPTED BY THE VALUATION OFFICER. 4. AS AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 5 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT SECTION 50 MANDATES THAT VALUATION RATE AS PER STAMP VALUATION AUTHORITIES SHOULD BE TAKEN INTO ACCOUNT AND THE SAME CAN BE DISREGARDED ONLY WHEN THE DEPARTMENTAL VALUATION REPORT IS OBTA INED. IN THIS CASE THE DEPARTMENTAL VALUATION REPORT HAS BEEN OBTAINED WHICH VALUES THE VALUE OF LAND AT RS.1,80,88,560/ - AS AGAINST THE STAMP VALUATION RATE OF RS.2,61,22,000/ - . THE ASSESSEE HAS OBJECTED TO THE SAME ON THE GROUND THAT THE RATES ADOPTED O F THE SALE INSTANCE REFERRED BY THE ASSESSEE SHOULD HAVE BEEN CONSIDERED. WE FIND THAT THERE IS NO COGENT BASIS ON RECORD AS TO WHY THIS SALE INSTANCE SHOULD BE FOLLOWED WHEN THE STAMP VALUATION AUTHORITIES HAVE DETERMINED IT ALREADY AT RS.2.61 CRORES. THERE IS NO COGENT REASON WHY ANOTHER SALE INSTANCE SHOULD BE GIVEN PREFERENCE. NOTHING IS ON RECORD AS TO WHAT ARE THE FACTS AND CIRCUMSTANCES OF THAT SALE. THE DVO HAS ALREADY CONSIDERED THE ASSESSEES SUBMISSIONS AND FACTORED ALL THE DISADVANTAGES WH ILE DETERMINING THE FMV AT RS.1,80,88,560/ - . T HE ASSESSEE HAS ALREADY GOT A RELIEF OF AROUND RS.80 LAKHS. IN OUR CONSIDERED OPINION LEARNED CIT(APPEALS) IS CORRECT IN HOLDING THAT THE VALUE ADOPTED BY THE DVO SHOULD BE TAKEN INTO ACCOUNT. T HUS WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS).ACCORDINGLY WE UPHOLD THE SAME. 6 . APROPOS GROUND NO.2 PERTAINING TO ADDITION U/S 41(1) OF RS.24,01,479/ - . THIS ISSUE PERTAINS TO ADDITION U/S 41(1) OF RS.24,01,479/ - BEING SALES TAX LIABILITY ON THE PA YMENT OF D EFERRED SALES TAX CONVERTED INTO LOAN BY THE AO. 5 ITA NO. 180/NAG/2010 7 . UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) REFERRED TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS 222 ITR 344. FURTHER LEARNED CIT(APPEALS) DISTING UISHED THE ASSESSEES RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF GEETA PACKAGING HOLDING THAT IN THAT CASE THE ISSUE WAS WHETHER THE ASSESSEE IS ENTITLED TO BENEFIT U/S 43B WHEN THE SALES TAX LIABILITY IS DEFERRED AND CONVERTED INTO A LOAN. HE OBSERVED THAT IN THE PRESENT CASE THE ISSUE IS WHETHER WHEN THE LOAN LIABILITY IS SETTLED AND DISCHARGED FOR A LESSER AMOUNT, THE AMOUNT OF LOAN THUS WAIVED WOULD BE CHARGEABLE AS REMISSION OF LIABILITY U/S 41(1) . IN THIS REGARD LEARNED CIT(APPEALS) REFERRED TO THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF SCHENECTADY SPECIALITIES ASIA (P) LTD. VS. ACIT (2009) 29 SOT 1 WHEREIN IT WAS HELD AS UNDER : ~ . 'ACCORDING TO THE PROVISIONS OF SECTION 41 (1) WHEN AN ALLOWANCE OR DEDUCTION , HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ENY PREVIOUS YEAR THE FIRST MENTIONED PERSON I. E. THE ORIGINAL ASSES SEE 'HAS OBTAINED WHETHER CASH OR ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE FOR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OF CESESSION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF THE BENEFIT ACCRUED BY HIM SHALL BE DEEMED T. BE THE PROFITS OR GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHA~GEABL, TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR WHETHER THE BUSINESS C PROFESSION IN RESPECT OF W HICH ALLOWANCE OR DEDUCTION HAS BEEN MADE IS I. EXISTENCE IN THAT YEAR OR NOT. IN THE INSTANT CASE, ASSE .. SSEE HAS CLAIME DEDUCTION U/S.43B AS PER BOARD'S CIRCULAR NO. 674 READ WITH DEFERRAL SCHEM LAUNCHED BY THE STATE GOVERNMENT AND THIS TRADING REC EIPT WAS CONVERTE INTO A LOAN LIABILITY. THE TOTAL AMOUNT OF LOAN LIABILITY WAS NOT AT ALL PAID BY TH ASSESSEE AS IT WAS SETTLED UNDER THE DIFFERENT SCHEME LAUNCHED BY SICO/ \ SINCE THE ENTIRE LIABILITY WAS SETTLED AND DISCHARGED AT A LESSER AMOUNT, TH E . ASSESSEE GOT CERTAIN BENEFITS IN TERMS OF MONEY AND THE DIFFERENCE BETWEE N . THE SETTLED AMOUNT AND TOTAL LOAN LIABILITIES IS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR. THE LEARNED CIT(APPEALS) FOUND THE ABOVE CASE LAW SQUARELY APPLICABLE AND HENCE CONFIRMED THE AOS ACTION. 8 . AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 6 ITA NO. 180/NAG/2010 9 . LEARNED COUNSEL OF THE ASSESSEE HAS PLEADED THAT THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. SULZER INDIA LTD. 369 ITR 717. HE SUBMITTED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS EXPOUNDED THAT PREPAYMENT OF DEFERRED SALES - TAX LIABILITY ON THE NET PERCENTAGE VALUE OF THE FUTURE LIABILITY CANNOT BE CLASSIFIED AS REMISSION OR CESS ATION OF A TRADING LIABILITY SO AS TO ATTRACT THE PROVISIONS OF SECTION 41(1A) OF THE I.T. ACT. 10 . PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 1 1 . UPON CAREFUL CONSIDERATION WE FIND THAT THE ISSUE IN THE CASE BEFORE US ALSO PE RTAINS TO GAIN ON THE PREPAYMENT OF SALES - TAX LIABILITY. ON IDENTICAL ISSUE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SULZER INDIA LTD. (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE MAY GAINFULLY REFER TO THE CONCLUD ING PARAGR APH OF THE HONBLE JURISDICTIONAL HIGH COURT AS UNDER : 52) 'WE ARE OF THE OPINION THAT THE REVENUE'S ARGUMENT REALLY MISSES THE POINT . T HE INCENTIVE TO ESTABLISH A UNIT OR FACTORY IN A . I NDUSTR I ALLY BACKWARD OR HILLY AREA IS THE CORE OF THE SALES TAX DEFE RRA: SC H EME. SOME TIME H AS TO BE GIVEN TO THE UNIT TO ESTABLISH ITSELF BEFORE IT STARTS GIVING CORRESPONDING BENEFIT TO THE STATE. THAT OPPORTUNITY IS GRANTE D . BY DEFERRING THE REMITTANCE OF THE SALES TAX COLLECTED BY THE UNIT LIKE THE ASSESSEE. IN THAT REGARD, WE HAVE PERUSED THE COMPILATION OF ADMITTED DOCUMENTS PLACED ON RECORD BY SHRI. DASTUR, FR OM A . P ERUSAL THEREOF, IT IS APPARENT THAT THE GOVERNMENT RESOLUTION' DATED 4TH MAY, 1983 E V OLVES A PACKAGE OF INCENTIVES TO DISPERSE THE INDUSTRIES FROM BOMBAY - THANE - PUNE BELT AND TO ATTRACT THEM TO UNDERDEVELOPED AND DEVELOPIN G AREAS OF THE STATE OF MAHARASHTRA. THIS PACKAGE EVOLVES SEVERAL MEASURES TO ACHIEVE TR.LS OBJECT. THEN, THERE IS A NEW PACKAGE SCHEME OF INCENTIVES, 1 988: BOTH SCHEMES HAVE CLAUSES AND PARAS CONTAINING SALES TAX DEFERRAL INCENTIVES. TO CARRY THIS OBJECT FURTHER AND ALSO TO ACHIEVE THE PURPOSE OF EARLY REMITTANCE OF DEFERRED SALES TAX COLLECTED BY THE UNITS AVAILING EF THE SCHEMES, THE STATUTORY OPTION WAS INCORPORATED IN SECTION 38 BY SUBSTITUTING THE 4TH PROV ISO TO SUBSECTION 4 OF SECTION 38 OF THE BOMBAY SALES TAX ACT, 1959 .THAT IS IS INFORMED BY THE TRADE. CIRCULAR DATED 12TH D ECEMBER, 2002 ISSUED BY THE COMMISSIONE R OF SALES TAX, MA~)ARASHTRA. A COMBINED READING OF THE SCHEMES AND THIS CIRCULAR REVE ALS THE !EGISLATIVE INTENT AS NOTED ABOVE. IN SUCH CIRCUMSTANCES, A PROPER UNDERSTANDING OF ALL THIS BY THE TRIBUNAL CANNOT BE TERMED AS PERVERSE. THE VIEW TAKEN BY IT IS IMMINENTLY POSSIBLE. ONCE THIS CONCLUSION IS REACHED, THE OTHER JUDGMENTS CITED BY THE REVENUE ARE OBVIOUSLY DISTINGUISHABLE AND ON FACTS. 53) AS A RESULT OF THE ABOVE DISCUSSION, WE FIND THAT THE QUESTIONS OF LAW FORMULATED BY US AND TERMED AS SUBSTANTIAL WILL HAVE TO BE ANSWERED IN FAVOUR OF THE ASSESSEE ::H1D AGAINST THE REVENUE.' THOSE ARE ANSWERED A CCORDINGLY. THE APPEALS ARE DISMISSED. INSOFAR AS INCOME TAX APPEA! NO. 909 OF 2012 IS CONCERNED, AT PAGE 4 OF THE PAPER BOOK IN THAT APPEAR, TWO ADDITIONAL QUESTIONS IN PARA 4(B) AND 4(T) ARE TERMED AS SUBSTANTIAL QUESTIONS OF LAW. HOWEVER, THE COUNSEL APPEARING FOR THE PARTIES CONCEDED THAT QUESTIONS (.8) AND (C ARE COVERED BY TWO JUDQ M ENTS NOTED BY THE TRIBUNAL, NAMELY, IN THE CASE OF ASSOCIATED CAPSULES PVT: LTD. VS. 7 ITA NO. 180/NAG/2010 DEP UTY COMMISSIONER OF I NCOME TAX AND ANR. REPORTED IN (2011~ 332 ITR 42 (BORN) AND COMMISSIONER OF INCOME' TAX VS. SAUMYA FINANCE AND LE ASING ' CO. PVT. LTD. REPORTED IN (2008) 300 ITR 422 (BOM). THESE ARE JUDGMENTS WHICH URE RENDERED IN FAVOUR OF THE ASSESSEE BY THIS COURT AND AGAINST THE REVENUE. THEREFORE; THE ADDITIONAL ! QUESTIONS ALSO CANNOT BE TERMED AS SUBSTANTLAL QUESTIONS OF LAW. THAT APPEAL IS ALSO DISMISSED ACCORDINGLY. HOWEVER, IN THE FACTS AND C IRCUMSTANCES, THERE WOULD BE NO ORDER AS TO COSTS. 1 2 . WE FIND THAT THE ABOVE CASE LAW IS QUITE APPLICABLE ON THE FACTS OF THE CASE. THE MAIN OBJECT OF PREPAYMENT OF THE SALES - TAX LIABILITY HAS CLEARLY BEEN HELD TO BE NO N INVITING THE R IGOURS OF SECTION 41(1). TO ARRIVE AT THE ABOVE CONCLUSION HONBLE JURISDICTIONAL HIGH COURT HAS TAKEN INTO ACCOUNT HONBLE APEX COURT DECISION CITED BY THE REVENUE AND HAS FOUND IT DISTINGUISHABLE ON FACTS. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINI ON, IN VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION CITED ABOVE, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 1 3 . APROPOS GROUND RELATING TO CLAIM OF BAD DEBT OF RS.5,48,648/ - . LEARNED COU NSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THIS GROUND. HENCE THIS GROUND IS DISMISSED AS NOT PRESSED. 1 4 . APROPOS GROUND PERTAINING TO NON ADJUSTMENT OF DEEMED SHORT TERM CAPITAL GAIN ON DEPRECIATION ASSETS FOR BROUGHT FORWARD BUSINE SS LOSS. ON THIS ISSUE LEARNED CIT(APPEALS) HAS NOTED THAT IT IS THE PLEA OF THE ASSESSEE THAT THE AO HAS ERRED IN NOT ADJUSTING THE DEEMED SHORT TERM CAPITAL GAIN ON DEPRECIABLE ASSETS U/S 50 AGAINST THE BROUGHT FORWARD BUSINESS LOSS. LEARNED CIT(APPEALS) DID FIND THIS CLAIM OF THE ASSESSEE ACCEPTABLE. HE HELD THAT AS PER SECTION 72, THE APPELLANTS CLAIM IS NOT ADMISSIBLE. THAT T HE APPELLANTS CONTENTION THAT SHORT TERM CAPITAL GAIN ON SALE OF DEPRECIABLE ASSETS ARE TO BE TREATED AS BUSINESS LOSS BECAUSE IT IS TO BE DEEMED AS CAPITAL GAINS AND, THEREFORE, FOR PRACTICAL PURPOSES, BUSINESS PROFIT IS NOT BORNE OUT BY THE STATUTORY PROVISIONS. THAT I T IS AN ACCEPTED POSITION IN LAW THAT A LEGAL FICTION CREATED BY 8 ITA NO. 180/NAG/2010 THE ACT, CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHI CH IT IS ENACTED. THAT SECTION 50 HAS CREATED A LEGAL FICTION TO BRING CONSIDERATION RECEIVED ON TRANSFER OF DEPRECIABLE ASSETS TO TAX AS SHORT TERM CAPITAL GAIN. THAT T HERE IS NO SCOPE FOR TREATING THIS AS BUSINESS PROFIT AS CLAIMED BY THE APPELLANT. 1 5 . AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 1 6 . IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH DECISION IN THE CASE OF NIRMAL PLASTIC INDUSTRIES IN ITA NO. 6428/MUM/2011. 1 7 . PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 1 8 . UPON CAREFUL CONSIDERATION WE FIND THAT ON ANALOGICAL ISSUE THE ITAT IN THE CASE OF NIRMAL PLASTIC INDUSTRY (SUPRA) HAS CONSIDERED THE ISSUE AND HELD AS UNDER : 4. WE HAVE PERUSED THE RER RDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISP TE IS REGARDING SET OFF OF BROUGHT .ORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AGAINST THE DEEMED SHO - T TERM CAPITAL GAIN UNDER S ECTION 50 OF THE IT ACT. THERE IS NO DISPUTE THAT BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION CAN BE SET OFF AGAINST BUSINESS INCOME AND, THEREFORE, IN CASE THE SHORT TERM CAPITAL G AIN IS TREATED AS BUSINESS INCOME, THE CLAIM OF THE ASSESSEE HAS TO BE ALLOWED. THE REAL DISPUTE B. THEREFORE, NATURE OF INCOME OR DEEMED SHORT TERM CAPITAL GAIN UNDER SE CTION 50. THIS ISSUE HAS ALREADY BEEN EXAMINED. BY THE VISAKHAPATNAM BENCH OF THE TRIBUR.AL I N . CA .SE OF SRI PADMAVATHI SRINIVASA COTTON GINNING & PRESSING FACTORY (SUPRA) IN WHICH IT WAS HE L D T HAT GAIN ARISING ON SALE OF DEPRECIABLE ASSETS IS TAXED AS SHORT TERM CAPITAL GAIN DUE AY:06 - 07 TO LEGAL FICTION CREATED BY SECTION 50 OF THE ACT BUT OT HERWISE SUCH GAIN ARISING FROM SALE OF DEPRECIABLE ASSETS HAS TO BE TREATED AS PART OF BUSINESS INCOME. THE TRIBUNAL REFERRED TO THE JUDGMENT OF H ON 'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CLT VS. SHRIKISHAN CHANDMAL (60 LTR 303) IN WHICH IT WAS H ELD THAT THE NATURE OF DIVIDEND INCOME RECEIVED FROM SHARES HELD AS STOCK IN TRADE WAS BU SIN ESS. THE SAID JUDGMENT OF THE HON'BLE HIGH COURT WAS APPROVED BY HON'BLE SUPREME COURT IN THE CASE OF WESTERN STATES TRADING CO. P., LTD. VS CIT (80 LTR 21). THE TRIBUNAL, THEREFORE, HELD THAT THE ., NATURE OF GAIN FROM SALE OF DEPRECIABLE ASSETS DEEMED AS SHORT TERM CAPITAL GAIN UNDER SECTION 50 OF [. THE IT ACT HAS TO BE CONSIDERED AS BUSINESS INCOME: THE TRIBUNAL, THEREFORE, HELD THAT UNABSORBED D EPRECIATION AND UNABSORBED BUSINESS LOSS HAS TO BE SET OFF AGAINST SHORT TERM CAPITAL GAIN ARISING FROM DEPRECIABLE ASSETS. FA CTS IN THE CASE OF THE ASSESSEE ARE IDENTICAL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SRI PADMAVATH I SRINIVASA COTTON GINNING & FRESSING FACTORY (SUPRA), ALLOW THE CLAIM OF THE ASSESSEE. THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TIMES GUARANTEE (SUPRA), RELIED UPON BY THE 9 ITA NO. 180/NAG/2010 ID. DR WAS ON A DIFFERENT ISSUE. THE SPECIAL BENCH IN THE S AID CASE HAD HELD THAT CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAS TO BE DEALT WITH IN TERMS OF PROVISIONS APPLICABLE TO THE YEAR TO WHICH THE UNABSORBED DEPRECIATION RELATED. THUS IN TERMS OF THE DECISION OF THE SPECIAL BENCH UNABSORBED DE PRECIATION FOR ASSESSMENT YEARS 1997 - 98 TO 2001 - 02 COULD BE SET OFF ONLY AGAINST BUSINESS INCOME WHEREAS UNABSORBED DEPRECIATION FOR THE PRIOR YEARS AND SUBSEQUENT YEARS CAN BE SET OFF AGAINST A NY INCOME. IN THE A.Y:06 - 07 PRESENT CASE SET OFF IS BEING CONS IDERED AGAINST BUSINESS INCOME AND, THEREFORE, THERE IS NO CONFLICT WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TIMES GUARANTEE (SUPRA). . 19. FROM THE ABOVE WE FIND THAT COORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH THIS ISSU E AND HELD THAT SHORT TERM CAPITAL GAIN OUT OF SALE OF DEPRECIABLE ASSETS CAN BE ADJUSTED AGAINST BROUGHT FORWARD BUSINESS LOSS. HENCE FOLLOWING THE ABOVE DECISION, WE SET ASIDE THE ORDER OF LEARNED CIT(APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSES SEE. 20. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DEC., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 18 TH DEC., 2015. 10 ITA NO. 180/NAG/2010 COPY FORWARDED TO : 1. VIDARBHA VENEER INDUSTRIES LTD. C/O A.G. PIMPARKHEDE & CO., C.AS . M - 2, SANKET APARTMENT, KHARE TOWN, DHARAMPETH, NAGPUR - 10. 2. I.T.O., WARD - 7 (1), NAGPUR. 3. C.I.T. NAGPUR. . 4. CIT(APPEALS) II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.