The Central Scientific Supplies Company Limited, CHENNAI V. ITO (OSD), CHENNAI

ITA 1855/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4617 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 16-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Capital asset; Depreciation; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A. NO. 1855/MDS/2011 ASSESSMENT YEAR : 2004-05 THE CENTRAL SCIENTIFIC SUPPLIES COMPANY LIMITED, HAKIM MANSIONS, P.B.NO. 252, 29, STRINGERS STREET, BOARDWAY, CHENNAI 600 108. [PAN: AAACC 3108 Q] (APPELLANT) VS INCOME TAX OFFICER (OSD), COMPANY CIRCLE-III(1), CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI R.MEENAKSHISUNDARAM, ADVOCATE RESPONDENT BY : SHRI T.N. BETGIRI, JCIT DATE OF HEARING : 13-08-2013 DATE OF PRONOUNCEMENT : 11-09-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-III, CHE NNAI DATED 08-08-2011 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 4-05. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY REGISTE RED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE ASS ESSEE- I.T.A. NO. 1855/MDS/2011 2 COMPANY FILED ITS RETURN OF INCOME FOR THE AY. 2004 -05 ON 30-09-2004 DECLARING ITS INCOME AS ` 96,77,294/- WHICH INCLUDED LONG TERM CAPITAL GAINS ON SALE OF LAND. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 24-08-2005. THE ASSESSIN G OFFICER VIDE ORDER DATED 31-10-2006 MADE ADDITION IN THE LO NG TERM CAPITAL GAINS COMPUTED BY THE ASSESSEE. THE ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT EVEN ADOPTED THE VALUE AS PER VALUATION REPORT SOUGHT BY HIM. THE ASSESSEE HAS N OT BEEN ABLE TO GIVE VALID REASON FOR ADOPTING HIGHER VALUE AS O N 01-04-1981 FOR THE PURPOSE OF WORKING OUT THE INDEXED COST OF ACQU ISITION OF THE PROPERTY IN QUESTION. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE ORDER DATED 08-08-2011, PARTLY ACCEPTED THE GR OUND OF ASSESSEE RELATING TO DETERMINATION OF FAIR MARKET V ALUE (FMV) OF LAND AS ON 01-04-1981 BUT REJECTED THE CONTENTION O F THE ASSESSEE WITH RESPECT TO GRANT OF BENEFIT OF INDEXATION ON B UILDING. AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS), TH E ASSESSEE HAS COME IN SECOND APPEAL BEFORE US. I.T.A. NO. 1855/MDS/2011 3 3. THE FACTS IN BRIEF ARE, THE ASSESSEE HAD SOLD A PROPERTY CONSISTING OF LAND AND BUILDING DURING THE RELEVANT AY. THE ASSESSEE OFFERED LONG TERM CAPITAL GAINS OF ` 1,24,35,457/- AND SHORT TERM CAPITAL GAINS OF ` 10,88,327/- IN THE RETURN OF INCOME FOR THE AY.2004-05. THE ASSESSEE ON THE BASIS OF V ALUATION REPORT OF THE REGISTERED VALUER HAD TAKEN THE FMV OF THE PROPERTY AS ON 01-04-1981 AS ` 13,86,869/-. AS PER THE VALUATION REPORT, THE VALU E OF THE LAND WAS ` 5,77,000/- AND THE VALUE OF THE BUILDING WAS ` 8,09,869/-. THE ASSESSING OFFICER SOUGHT GUIDELINE VALUE OF THE LAND SOLD BY ASSESSEE FROM THE SUB-REGISTRAR, TAMBA RAM. ON THE BASIS OF GUIDELINES PROVIDED BY THE SUB-REGISTRAR, THE ASSESSING OFFICER RE-COMPUTED THE LONG TERM CAPITAL GAIN ON SALE OF LAND. THE ASSESSEE WHILE CALCULATING LONG TERM CAPITAL GA INS HAD ALSO CALCULATED THE INDEXED VALUE OF THE BUILDING. WHER EAS, IT HAS BEEN CLAIMING DEPRECIATION ON THE BUILDING. THE ASSESSI NG OFFICER AND THE CIT(APPEALS) HAD REJECTED THE CLAIM OF THE ASSE SSEE WITH REGARD TO BENEFIT OF INDEXATION ON BUILDING. THE O NLY ISSUE RAISED BEFORE US BY THE LD. AR IS; WHETHER THE ASSESSEE I S ENTITLED TO THE BENEFIT OF INDEXATION ON THE VALUE OF BUILDING? I.T.A. NO. 1855/MDS/2011 4 4. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON PERUSAL OF THE ORDERS AN D SUBMISSIONS MADE BY BOTH THE SIDES, IT IS OBSERVED THAT THE ASS ESSEE HAS BEEN CLAIMING DEPRECIATION ON THE BUILDING AND IS NOW CL AIMING THE BENEFIT OF INDEXATION ON THE SAME. WE ARE OF THE C ONSIDERED OPINION THAT CLAIM OF THE ASSESSEE TO HAVE THE BENE FIT OF INDEXING THE COST OF ACQUISITION BY INVOKING SECTION 48 & 49 OF THE ACT IS NOT TENABLE. THE ASSET I.E., BUILDING SOLD BY THE ASSE SSEE IS DEPRECIABLE AND UNDISPUTEDLY, ASSESSEE HAS BEEN CLA IMING DEPRECIATION ON IT. THE CAPITAL ASSET ON WHICH BENE FIT OF DEPRECIATION HAS BEEN AVAILED IS NOT ENTITLED TO GE T THE BENEFIT OF INDEXING. THE ASSESSEE CANNOT TAKE MULTIPLE BENEFI TS ON THE SAME ASSET. OUR VIEW IS FURTHER FORTIFIED WITH THE JUDG MENT OF THE HONBLE MADRAS HIGH COURT IN TAX CASE NO. 350 OF 2001 TITLE D M. RAGHAVAN VS. ACIT DECIDED ON 10-12-2003. THE HONBLE COURT IN THE AFORESAID CASE HELD AS UNDER: 21.THE ASSESSEES CLAIM THAT HE SHOULD HAVE THE RI GHT TO INDEXING THE COST OF ACQUISITION BY INVOKING SECTIO NS 48 AND 49, IS UNTENABLE. THE ASSETS SOLD BY THE ASSESSEE B EING DEPRECIABLE ASSETS, WHAT IS PROVIDED IN SECTIONS 48 AND 49 IS SUBJECT TO THE MODIFICATIONS SET OUT IN SECTION 50 AND THEREFORE, THE ASSESSEE IS NOT ENTITLED TO ANY INDE XING. I.T.A. NO. 1855/MDS/2011 5 22. IT WOULD APPEAR THAT THE OBJECT OF INTRODUCING SECTION 50 IN ORDER TO PROVIDE DIFFERENT METHOD OF COMPUTATION OF CAPITAL GAIN FOR DEPRECIABLE ASSETS, WAS TO DISENTITLE THE OWNERS OF SUCH DEPRECIABLE ASSETS FROM CLAIMING THE BENEFIT O F INDEXING, AS IF INDEXING WERE TO BE APPLIED, THERE WOULD BE N O CAPITAL GAIN AVAILABLE IN MOST CASES, FOR BEING BROUGHT TO TAXATION. THE VALUE OF DEPRECIABLE ASSET IN MOST CASES COMES DOWN OVER A PERIOD OF TIME, ALTHOUGH THERE ARE CASES WHE RE THE SALE VALUE OF A DEPRECIATED ASSET EXCEEDS THE COST OF AC QUISITION. THE RESULT OF ALLOWING INDEXING, IF IT WERE TO BE A LLOWED, IS TO REGARD THE COST OF ACQUISITION AS BEING VERY MUCH H IGHER THAN WHAT IT ACTUALLY IS, TO THE ASSESSEE. IF SUCH BOOST ED COST OF ACQUISITION IS REQUIRED TO BE DEDUCTED FROM THE AMO UNT REALISED ON SALE, IN MOST CASES, IT WOULD RESULT IN A NEGATIVE FIGURE, RESULTING IN THE ASSESSEE BEING ENABLED TO CLAIM A CAPITAL LOSS. CLEARLY, IT COULD NOT HAVE BEEN THE L EGISLATIVE INTENT TO CONFER SUCH MULTIPLE BENEFITS TO THE ASSE SSEES SELLING DEPRECIABLE ASSETS. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. IN VIEW OF THE ABOVE FINDINGS, THE APPEAL OF THE ASSESSEE IS DISMI SSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON WEDNESDAY, THE11 TH SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 11 TH SEPTEMBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR