Ms Kusum Mardia, Delhi V. Addl. CIT, New Delhi

ITA 2092/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6627 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Rule of consistency
• Section: 154; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C , NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR , ACCOUNTANT MEMBER ITA NO. 2092 /DEL/201 6 : ASSTT. YEAR : 2011 - 1 2 M/S KUSUM MARDIA, RAVI GUPTA, ADV., E - 6A, KAILASH COLONY, NEW DELHI - 110048 VS ADDL. CIT, RANGE - 28, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA JPM3453G ASSESSEE BY : SH. RAJESH JAIN, CA REVENUE BY : SH. AMIT KATOCH, SR. DR DATE OF HEAR ING: 25 . 07 .201 9 DATE OF PRONOUNCEMENT: 25 .07 .201 9 ORDER PER DR. B. R. R. KUMAR , A CCOUNTANT M EMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 16 , NEW DELHI DATED 04.01 .2016 . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD CIT (APPEAL) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO, OF TREATING THE PR OFIT ON SALE OF INDUSTRIAL SHED AS SHORT TERM CAPITAL GAIN. 2. THAT THE LD CIT (APPEAL) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO, OF APPLICATION OF SECTION 50 OF THE I T ACT, DESPITE THE FACT THAT THE ASSES T I.E. THE INDUSTRIAL SHED, WAS NEVER PUT TO USE THE ASSESSEE. 3. THAT THE LD. CIT (APPEAL) HAS ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING THE FOLLOWING GROUND NO 1, 2, 3 AND 4 OF THE APPEAL: - 1. THAT THE LD ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN TREATING THE LONG - TERM CAPITAL GAIN OF RS. 5,86,443/ - AS THE BUSINESS INCOME OF THE APPELLANT. ITA NO . 2092 /DEL /20 1 6 KUSUM MARDIA 2 2. THAT THE LD ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN TREATING THE SHORT - TERM CAPITAL GAIN OF RS. 5,31,097/ - AS THE BUSINESS INCOME OF THE APPELLANT. 3. THAT THE LD ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN TREATING THE LONG - TERM CAPITAL GAIN AS W ELL AS SHORT - TERM CAPITAL GAIN AS THE BUSINESS INCOME OF THE APPELLANT IGNORING THE FACT OF THE ASSESSEE S CASE AND ALSO IGNORING THE GUIDELINES PRESCRIBED BY CBDT CIRCULAR NO.4/2007 DATED 15.6.2007. 4. THAT THE LD ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN TREATING THE LONG - TERM CAPITAL GAIN AS WELL AS SHORT - TERM CAPITAL GAIN AS THE BUSINESS INCOME OF THE APPELLANT AND HAS TOTALLY DISREGARDED THE RULE OF CONSISTENCY, WITHOUT THERE BEING ANY CHANGE IN THE WORKING OF THE ASSESSEE 3 . OWING TO THE ORDER U/S 154 R.W.S. 250 OF THE ACT BY THE LD. CIT (A), THE EFFECTIVE GROUND REMAINS TO BE ADJUDICATED IS GROUND NO. 2 WHICH PERTAINS TO APPLICATION OF SECTION 50 OF THE ACT TO THE ASSET OF THE ASSESSEE. 4. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS PURCHASED ASSET CONSISTING OF LAND, BUILDING, PLAN & MACHINERY ON COMPETITIVE BUILDING FROM GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD. ON AS IS WHERE IS BASIS FOR AN AMOUNT OF RS.12,00,000/ - ON 08.03.2002 WHICH WAS SOLD FOR RS.105,25, 000/ - ON 16.03.2011 AND OFFERED LONG TERM CAPITAL GAINS OF RS.76,78,760/ - ON THE TRANSACTION. THE SALE AND PURCHASED TRANSACTION WERE COMPOSITE IN NATURE. THE REVENUE AUTHORITIES HELD THAT THIS IS A BUSINESS TRANSACTION OF ACQUIRING A BUSINESS ASSET FOR BU SINESS PURPOSE. THE REVENUE DISREGARDING THE FACT WHETHER THE ASSET HAS NOT BEEN PUT TO USE, OR TAKEN INTO BLOCK OF ASSET HAS TAXED THE INCOME UNDER SHORT TERM CAPITAL GAINS ON THE PLANT & MACHINERY AND LONG TERM CAPITAL GAINS ON THE SALE OF LAND. 5 . BEF ORE US , THE LD. A R ARGUED AND FILED THE DOCUMENTS PROVING THAT THE ASSET HAS BEEN PURCHASED ENBLOCK AND THE ACTION OF THE REVENUE AUTHORITIES BIFURCATING THE ASSET INTO LAND AND PLANT & MACHINERY CANNOT BE ITA NO . 2092 /DEL /20 1 6 KUSUM MARDIA 3 ACCEPTED. FURTHER, IT WAS ARGUED THAT THE ASSET HA S BEEN TAKEN INTO INVESTMENT IN THE BOOKS OF ACCOUNT AND DEPRECIATION WAS EVER CLAIMED ON THIS ASSET. TO THIS EXTENT, HE HAS FILED THE DEPRECIATION SCHEDULE FOR ALL THE YEARS POST ACQUISITION WHEREIN IT WAS FOUND THAT NO DEPRECIATION HAVE BEEN CLAIMED, THE FACT WHICH WAS NOT REFUTED BY THE REVENUE. 6 . THE LD. D R HAS VEHEMENTLY ARGUED THAT THE SALE OF THE LAND PART IS LIABLE TO THE TAXED UNDER LONG TERM CAPITAL GAINS AND THE PLANT & MACHINERY PART UNDER SHORT TERM CAPITAL GAINS. HE ARGUED THAT THE ENBLOCK PURCHASE AND ENBLCOK SALE OF THE ASSET SHOULD NOT INFLUENCE THE DIFFERENTIAL TAXABILITY OF THE ASSET IN QUESTION. 7 . HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 8 . SECTION 50 READS AS UNDER: SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS. SEC. 50 . NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2, WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOW ED UNDER THIS ACT OR UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922) THE PROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT TO . 9. THUS, THE SECTION 50 OF THE ACT APPLIES TO A . CAPITAL ASSET B . IT SHOULD FORM BLOCK OF ASSET C . DEPRECIATION HAS BEEN ALLOWED IN EARLIER YEARS . WE FIND THAT THE ASSET IS TAKEN INTO INVESTMENTS IN THE BALANCE SHEET AND NEVER FORMED PART OF THE BLOCK OF THE ASSET AND DEPRECIATION HAS NEVER BEEN CLAIMED. HENCE, IT CAN BE SAID THAT THE INSTANT CASE DOES NOT SATISFY ANY OF TH ESE THREE PRE - REQUISITES MENTIONED IN SECTION 50 OF THE ACT AND HENCE PROVISIONS U/S 50 OF THE ACT IS NOT APPLICABLE TO ITA NO . 2092 /DEL /20 1 6 KUSUM MARDIA 4 THE SALE TRANSACTIONS ASSET IN QUESTION . SINCE, THE ACTION OF THE LD. ASSESSING OFFICER IS BASED ON THE PROVISIONS OF THE SECTION 50 OF THE ACT, THE ADDITION MADE BY THE ASSESSING OFFICER DOES NOT STAND THE TEST OF LEGALITY AND IS LIABLE TO BE DELETED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRO N OUNC ED IN THE OPEN COURT ON 25 /0 7 /2019). SD/ - SD/ - ( H. S. SIDHU ) ( DR. B. R. R. KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 /07 /2019 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR