M/s. Sweetoo Apparels, Ahmedabad V. The Dy. CIT, Circle-5(2), Ahmedbad

ITA 2189/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9853 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Capital expenditure

Judgement Text

SMC- ITA NO. 2189/AHD/2017 SWEETOO APPARELS VS. DCIT ASSESSMENT YEAR: 2013-2014 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT ] ITA NO. 2189/AHD/2017 ASSESSMENT YEAR : 2013-14 SWEETOO APPARELS ............APPELL ANT OM COMPLEX, CG ROAD, NAVRANGPURA, AHMEDABAD 380 009 [PAN : AAHFS 1640 K] VS. DEPUTY COMMISSIONER OF INCOME-TAX ..... .......................RESPONDENT CIRCLE-5 (2), AHMEDABAD APPEARANCES BY: CN SHAH, FOR THE APPLICANT ANAND KUMAR, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 20.02.2019 DATE OF PRONOUNCING THE ORDER : 08.05.2019 O R D E R 1. THIS APPEAL CHALLENGES CORRECTNESS OF LEARNED CI T(A)S ORDER DATED 16 TH AUGUST 2017, FOR THE ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG IN READYMADE GARMENTS, HOSIERY AND GIFT ARTICLES. DURING THE COURSE OF SC RUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED DEPRECIATION @ 10% IN RESPECT OF PURCHASE OF CERTAIN COMMERCIAL AREA, IN A BUILDING BY THE NAME OF TURQUOISE, FOR RS. 25,68,24,000/- ON 28.04.2011. T HE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THIS PURCHASE CONSIDERATION INCLUDE S ELEMENT OF PRICE TOWARDS UNDIVIDED SHARE OF PLOT ON WHICH BUILDING IS CONSTR UCTED, TO THAT EXTENT DEPRECIATION IS NOT ADMISSIBLE. AS THE ASSESSEE DID NOT GIVE ANY E VIDENCE IN SUPPORT OF VALUE OF SUCH UNDIVIDED SHARE IN LAND, THE ASSESSING OFFICER ADOPTED THE STAMP DUTY VALUATION FOR SUCH AN UNDIVIDED SHARE IN LAND, AS R EFLECTED IN THE PURCHASE DEED, AS VALUE OF UNDIVIDED SHARE IN LAND AT RS. 3,64,47,500 /-. ACCORDINGLY, DEPRECIATION IN RESPECT OF THIS LAND WAS DECLINED. AGGRIEVED BY TH E RESULTANT DISALLOWANCE OF RS. 36,44,750/-, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. WHILE CONFIRMING THE IMPUGNED DISALLOWANC E, LD. CIT(A) HAS OBSERVED AS FOLLOWS:- 4.3 THE AO HAS NOTICED THAT THE ASSESSEE HAD PURCH ASED A BUILDING FOR AN AMOUNT OF RS. 25,68,24,000/- AND CLAIMED DEPRECIATI ON AMOUNTING TO RS. 2,60,07,262/-. IT IS FURTHER NOTICED THAT THE ABOV E AMOUNT OF PURCHASE ALSO INCLUDED THE VALUE OF LAND WHERE NO DEPRECIATION IS ALLOWABLE. THE AO HAS SMC- ITA NO. 2189/AHD/2017 SWEETOO APPARELS VS. DCIT ASSESSMENT YEAR: 2013-2014 PAGE 2 OF 3 RELIED UPON THE DECISION IN THE CASE OF ALPS THEATR E 65 ITR 377 (SC) WHERE THE HONBLE COURT HAS OBSERVED THAT THE RATE OF DEP RECIATION IS FIXED ON THE NATURE OF STRUCTURE. THE AO HAS FURTHER NOTICED TH AT THE ASSESSEE HAS FAILED TO FURNISH ANY BIFURCATION WITH REGARD TO THE VALUE OF LAND. ACCORDINGLY, THE AO HAS DISALLOWED THE DEPRECIATION OF RS. 36,44,750/- RELATED TO THE LAND AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4.4 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT AHS CONTENDED THAT THE APPELLANT HAS PAID PRICE OF RS. 25,68,24,000/- FOR PURCHASE OF BUILT UP AREA ONLY FOR SHOPS ALONGWITH RIGHT TO USE COMMON AREAS AND AMENITIES OF THE SAID BUILDING AND NOT OWNERSHIP RIGHT AND ONLY UNDIVIDED PROPORTIONATE LAND ADMEASURING 478 SQR. MTRS. IT IS FURTHER CONTENDED THAT DEFINITION OF BUILDING IS INCLUSIVE AND IT INCLUDES ROADS, BRIDGES, CULVERTS AND TUBEWELL BELOW WHICH ALWAYS THERE IS A LAND. THE APPELLANT HAS RELIED U PON THE DECISION OF SUPREME COURT IN THE CASE OF GWALIOR RAYON SILK MAN UFACTURING CO. 196 ITR 149. IT IS ALSO CONTENDED THAT ALL THE 8 SHOPS ARE USED FOR THE PURPOSE OF BUSINESS OF READYMADE GARMENTS. IT IS FURTHER CONT ENDED THAT IN PRECEDING YEARS NO SUCH DISALLOWANCE WAS MADE BY THE AO. IT IS FURTHER CONTENDED THAT THE AO HAS DISALLOWED THE DEPRECIATION UNDIVIDED PO RTION OF LAND OF 478 SQR. MTRS. AS IF OUR FIRM IS ABSOLUTE OWNER OF SAID LAN D. 4.5 THE FACTS OF THE CASE AND THE SUBMISSIONS ARE C ONSIDERED. THE AO HAS DISALLOWED DEPRECIATION ON LAND CLAIMED BY THE APPE LLANT ON THE GROUND THAT IT IS NOT ALLOWABLE AND RELIED UPON THE DECISION IN TH E CASE OF ALPS THEATRE. THE APPELLANT HAS MAINLY CONTENDED THAT THE DECISION OF ALPS THEATRE IS APPLICABLE ONLY IN THE CASE OF ABSOLUTE RIGHT OF OWNER SHIP WI TH A RIGHT TO DISPOSE OF THE SAME. THE APPELLANT HAS RELIED UPON THE DECISION I N THE CASE OF GWALIOR RAYON SILK MANUFACTURING CO. HOWEVER, ON PERUSAL O F THE SAID JUDGMENT IT IS NOTICED THAT THE FACTS OF THE SAID CASE ARE DIFFERE NT FROM THE FACTS OF THE INSTANT CASE. THE FACTS OF THE CASE OF ALPS THEATRE ARE AP PLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT. THEREFORE, THE DISALLOWANCE MADE BY THE AO IS JUSTIFIED AND ACCORDINGLY THE SAME IS CONFIRMED. THUS THE GR OUNDS OF APPEAL ARE DISMISSED. 3. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 5. I FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVE RED AGAINST THE ASSESSEE BY HONBLE SUPREME COURTS DECISION IN THE CASE OF CIT VS. ALPS THEATRE [(1967) 65 ITR 377 (SC)] WHICH HOLDS THAT DEPRECIATION IS NOT ADMI SSIBLE IN RESPECT OF LAND COST OF WHICH IS EMBEDDED IN THE OVERALL COST OF BUILDING. LEARNED COUNSEL, HOWEVER, CONTENDS THAT THIS DECISION IS NOT GOOD LAW IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. COLOUR CHEM LTD. [(1977) 106 ITR 323 (BOM)] WHICH STANDS APPROVED BY HONBLE SUPREME COURT IN T HE JUDGMENT REPORTED AS CIT VS. GWALIOR RAYON SILK MFG. CO. LTD. [(1992) 196 IT R 149 (SC)]. WHILE ON THIS PLEA, I CAN ONLY REFER TO THE FOLLOWING OBSERVATIONS MADE B Y HONBLE BOMBAY HIGH COURT IN THE ABOVE CASE: SMC- ITA NO. 2189/AHD/2017 SWEETOO APPARELS VS. DCIT ASSESSMENT YEAR: 2013-2014 PAGE 3 OF 3 THE SUPREME COURT DECISION ON WHICH MR. HAJARNAVIS HAS RELIED IS, IN OUR VIEW, CLEARLY DISTINGUISHABLE ON FACTS. IN THAT CAS E THE DEPRECIATION WAS CLAIMED NOT MERELY ON THE COST OF ERECTING THE BUIL DING ON THE LAND BUT ALSO ON THE COST OF THE LAND OVER WHICH THE CONSTRUCTION HA D BEEN PUT UP AND IT WAS IN THAT CONTEXT THAT THE SUPREME COURT HELD THAT THE W ORD 'BUILDING' OCCURRING IN THE RELEVANT PROVISION OF SECTION 10(2) OF THE ACT MEANT 'STRUCTURE' AND DID NOT INCLUDE THE SITE. IF, IN THE INSTANT CASE, THE COST OF THE LAND OVER WHICH THE ROADS HAD BEEN LAID OUT WAS SOUGHT TO BE INCLUDED I N THE CAPITAL EXPENDITURE, THE DEPRECIATION CLAIMED BY THE ASSESSEE-COMPANY WO ULD HAVE COME WITHIN THE RATIO OF THE SUPREME COURT DECISION. AS STATED ABOVE, OVER THE LAND WHICH WAS IN EXISTENCE IN THE FACTORY PREMISES, ROADS OR ROADWAYS WERE REQUIRED TO BE LAID OUT AND FOR LAYING OUT SUCH ROADS OR ROADWA YS COST WAS INCURRED OVER WHICH DEPRECIATION HAS BEEN CLAIMED. IN OUR VIEW, T HEREFORE, THE INSTANT CASE IS ENTIRELY DIFFERENT FROM THE FACTS THAT OBTAINED IN THE SUPREME COURT CASE AND, THEREFORE, THE RULING RELIED UPON BY MR. HAJAR NAVIS IS CLEARLY INAPPLICABLE. 6. THE QUESTION WHETHER COST OF ROADS WILL INCLUDE VALUE OF LAND OR NOT IS NOT REALLY RELEVANT FOR OUR PURPOSES. THE DECISION OF ALPS THEATRE (SUPRA) IS CLEAR AND UNAMBIGUOUS, AND DIRECTLY ON THE ISSUE. IT IS NOT OPEN TO US TO ACT IN DEFIANCE OF THE SAME. IN THE ABSENCE OF ANY OTHER MATERIAL RELIED UPON BY THE ASSESSEE, THE ASSESSING OFFICER WAS JUSTIFIED IN ADOPTING STAMP D UTY VALUATION AS VALUE OF LAND. THE CIT(A) RIGHTLY CONFIRMED THE ACTION OF THE ASSE SSING OFFICER ON THIS POINT. I SEE NO REASONS TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 8 TH MAY, 2019. SD/- PRAMOD KUMAR (VICE PRES IDENT) AHMEDABAD, THE 8 TH DAY OF MAY, 2019 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ..... ORDER PREPARED AS PER 4 PAGES MANUSCRIPTS OF HONBLE VP...08.05.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ..... 08.05.2019...... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: .08.05.2019.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 08.05.2019 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 08.05.2019... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......