Rank Technochem Industries, Godhra V. The Income Tax Officer, Ward-2, Godhra

ITA 2052/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94842 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAMES KURIAN
• Assessee Lawyers: SAKAR SHARMA
• Keywords: Business income; Depreciation; Rectification of order; Additional depreciation
• Section: 32; 154; 143(3)

Judgement Text

I.T.A. NO.: 2052 /AHD/201 4 ASSESSMENT YEAR: 2006 - 07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. : 2052 /AHD/201 4 ASSESSMENT YEAR: 2006 - 07 RANK TECHNOCHEM INDUSTRIES .APPELLANT VAVDI BAZAR, GODHARA 389001 [PAN: AAHER5033K] VS. INCOME TAX OFFICER WARD 2, GODHARA . RESPONDENT APPEARANCES BY: SAKAR SHARMA FOR THE APPELLANT JAMES KURIAN FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 8 , 201 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 7 TH , 201 5 O R D E R PER PRAMOD KUMAR AM : 1. THIS IS AN APPEAL FILED BY THE ASSES SEE AND IS DIRECTED AGAINST LEARNED CIT(A) S ORDER DATED 6 TH MARCH 2013 , IN THE MATTER OF RECTIFICATION OF MISTAKES UNDER SECTION 154 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSES SMENT YEAR 2006 - 07. GRIEVANCE OF THE ASSESSEE IS AS FOLLOWS: LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISAL LOWANCE OF LOSS OF RS 1,97,849, WITHOUT APPRECIATING THE EXPLANATIONS AND SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT AS WELL AS IN THE APPELLATE PROCEEDINGS. 2. TO ADJUDICATE ON THIS GRIEVANCE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. IT WAS NOTED BY THE REVENUE AUDIT PARTY THAT, IN THE COURSE OF SCRUTINY I.T.A. NO.: 2052 /AHD/201 4 ASSESSMENT YEAR: 2006 - 07 PAGE 2 OF 4 ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ALLOWED SET OFF OF CAPITAL LOSS OF RS 1,97,849 AGAINST THE BUSINESS INCOME. WHEN THE ASSESSING OFFICER WAS POINTED OUT THIS ERROR, THE PROCEED INGS UNDER SECTION 154 R.W.S. 143(3) WERE INITIATED. THE ASSESSEE S EXPLANATION WAS THAT THE SAID LOSS WAS ALLOWABLE UNDER SECTION 32(III) OF THE ACT, AND WAS THUS REVENUE NEUTRAL. THIS EXPLANATION WAS REJECTED BY OBSERVING THAT INADVERTENTLY, THE AO, W HILE PASSING THE ORDER, DEDUCTED THE SAID SHORT TERM CAPITAL LOSS FROM THE BUSINESS INCOME AND THUS REDUCED THE TAXABLE INCOME . AN AMOUNT OF RS 1,97,849 WAS THUS ADDED TO THE RETURNED INCOME. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LE ARNED CIT(A) BUT WITHOUT ANY SUCCESS. WHILE REJECTING THE CONTENTIONS OF THE ASSESSEE, LEARNED CIT(A) OBSERVED AS FOLLOWS: 5.2 DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SOLD A MOTOR CAR DURING THE YEAR, FOR WHICH A SEPARATE BLOCK WAS MAINTAINED BY HE ASSESSEE. SINCE AFTER THE SALE OF THE CAR, THE BLOCK TURNED NEGATIVE, AS THE ASSESSEE CLAIMED THE RESULTANT SHORT TERM CAPITAL LOSS OF RS.1,97,849/ - WHICH WAS ALLOWED BY THE ASSESSING OFFICER IN HIS ORDER U/ S 143(3) AND SUBSEQUENTLY WITHDRAWN BY ORDER U/S 154 OF THE ACT. THE ASSESSEE SUBMITTED THAT THE MISTAKE WHICH WAS RECTIFIED U/S. 154. THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS WRONG IN MAINTAINING A SEPARATE BLOCK OF ASSETS FOR MOTOR CAR. ACTUALLY T HE MOTOR CAR WAS PART OF A DISTINCT BLOCK OF ASSETS ON WHICH DEPRECIATION WAS TO BE ALLOWED @ 15% WHICH STILL EXISTED AFTER THE SALE OF THE CAR AND HAD NOT TURNED NEGATIVE AS IT STILL HAD WDV OF RS.22,55,353/ - ON THE LAST DAY OF THE RELEVANT F.Y. THEREFOR E, THE ASSESSEE WAS WRONG IN CLAIMING LOSS OF RS.1,97,849/ - AS BUSINESS LOSS. WHILE CONCEDING ITS OWN MISTAKE AS TO CLAIMING OF LOSS OF RS.1,97,849/ - , THE ASSESSEE ALSO POINTED OUT THAT EVEN THE ASSESSING OFFICE WAS WRONG IN ALLOWING DEPRECIATION OF RS.6, 38,499/ - (WHICH WAS CLAIMED BY THE ASSESSEE), AS AGAINST ALLOWABLE ALLOWANCE ON ACCOUNT OF DEPRECIATION AT RS.6,90,152/ - , WHICH THE ASSESSING OFFICER WAS REQUIRED TO GRANT TO THE ASSESSEE AS PER EXPLANATION 5 TO SECTION 32 OF THE ACT, EVEN THOUGH, THE ASSE SSEE HAD NOT CLAIMED THE SAME. IN VIEW OF THIS, THE ASSESSEE CONTENDED THAT ADDITIONAL DEPRECIATION OF RS.51,653/ - WAS REQUIRED TO BE ALLOWED TO THE ASSESSEE AND IN VIEW OF THIS, THE DISALLOWANCE WAS REQUIRED TO BE RESTRICTED TO RS.1,46,196/ - , INSTEAD OF RS.1,97,849/ - . 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OBSERVATIONS OF THE ASSESSING OFFICER, THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE HAS ITSELF CONCEDED THAT THE BLOCK O F ASSETS HAD NOT CEASED TO EXIST, IT COULD NOT HAVE CLAIMED THE LOSS ON SALE OF CAR AS BUSINESS LOSS. SINCE THERE IS NO DISPUTE ON THIS ACCOUNT, THE ACTION OF THE ASSESSING OFFICER IN THIS REGARD IS CONFIRMED. THE ASSESSEE HAS ALSO TRIED TO LINK ANOTHER ISSUE RELATING TO DEPRECIATION NOT I.T.A. NO.: 2052 /AHD/201 4 ASSESSMENT YEAR: 2006 - 07 PAGE 3 OF 4 CLAIMED BY IT IN THE RETURN OF INCOME, BUT REQUESTED TO BE ALLOWED TO THE ISSUE ARISING OUT OF THE ORDER U/S. 154 OF THE ACT. SINCE THE ASSESSEE HAS NOT TAKEN ANY SUCH GROUND OF APPEAL AND SINCE THE ISSUE DOES NOT EMANAT E FROM THE ORDER U/S. 154 OF THE ASSESSING OFFICER, THIS ISSUE IS NOT ADJUDICATED UPON. IN THE RESULT, THE ASSESSEE FAILS ON THIS GROUND OF APPEAL. 3. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEAR D THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT IT IS NOT EVEN IN DISPUTE THAT WHAT HAS BEEN TERMED AS CAPITAL GAIN ACTUALLY REPRESENTS THE EXCESS OF WRITTEN DOWN VALUE OVER THE AMOUNT REALIZED ON SALE OF THE ASSET AS REFERRED TO UNDER SECTION 32(III) OF THE ACT. THE NOMENCLATURE MAY HAVE BEEN WRONGLY GIVEN BUT THE ACTUAL NATURE OF THIS AMOUNT IS NOT IN DISPUTE. THE FACT THAT IT IS OTHERWISE ADMISSIBLE AS DEDUCTION UNDER SECTION 32(III) DOES INDEED MAKE THE ADJUSTMENT OF THIS LOSS AGAINST BUSINESS INCOME AS REVENUE NEUTRAL. HOWEVER, THAT S NOT EVEN WHAT THE ASSESSEE INFACT PRAYS FOR AT THIS STAGE. THE ASSESSEE DOES ADMIT THAT EVEN THIS CLAIM WAS ERRONEOUS INASMUCH AS THE V ALUE OF THE BLOCK OF ASSET WAS NOT EXHAUSTED. THE ASSESSEE WAS, THEREFORE, ELIGIBLE FOR DEPRECIATION ON THE FULL VALUE OF THE BLOCK OF ASSET , AND HE SEEKS CORRECTION IN THE CLAIM ONLY TO THAT EXTENT AND HE DOES NOT OBJECT TO THE AMOUNT OF THE SAID LOSS, WR ONGLY CLAIMED, THOUGH ELIGIBLE FOR DEDUCTION AS PER THE LAW WHICH MAKES THE SET OFF REVENUE NEUTRAL, MINUS THE CORRECT DEPRECIATION CLAIM . AS FOR THE LEARNED CIT(A) S STAND THAT THE DEPRECIATION WAS NOT EVEN THE ISSUE AND HE MUST CONFINE HIMSELF TO THE ADM ISSIBILITY OF SET OFF OF SHORT TERM CAPITAL LOSS, IF THAT IS THE CASE, NOTHING REALLY REMAINS FOR RECTIFICATION BECAUSE THAT ASPECT OF THE MATTER IS REVENUE NEUTRAL. IT IS IMPORTANT, THEREFORE , THAT THE CLAIM WAS INCORRECT AND THAT IS THE REASON THAT THE PRESENT RECTIFICATION SHOULD HAVE BEEN CARRIED OUT. THIS MISTAKE HAVING BEEN DETECTED SOMEWHAT SERENDIPITOUSLY, IT NEEDS TO BE RECTIFIED NEVERTHELESS AND IT IS ONLY FOR THAT REASON THAT THE IMPUGNED ORDER CAN BE UPHELD. THE DISALLOWANCE, THEREFORE, NEEDS T O BE RESTRICTED TO, WHAT HAS BEEN TERMED AS, SHORT TERM CAPITAL LOSS ON SALE OF CAR MINUS THE ELIGIBLE DEPRECIATION. THIS PL EA OF THE ASSESSEE IS INDEED I.T.A. NO.: 2052 /AHD/201 4 ASSESSMENT YEAR: 2006 - 07 PAGE 4 OF 4 CORRECT AND MERITS OUR APPROVAL. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO GRANT THE RELIEF ACCOR DINGLY. 6. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE TO THE LIMITED EXTENT THAT THE ADJUSTMENT MUST REMAIN CONFINED TO THE NET FIGURES, AS ELABORATED ABOVE. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED AS ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 7 TH DAY OF DECEMBER , 201 5 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD