KASEY METAL INDUSTRIES, MUMBAI V. ACIT 25(3), MUMBAI

ITA 2415/MUM/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0900 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: VINAY SINHA ARS
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2415/MUM/2013 ASSESSMENT YEAR: 2008 - 09 KASEY METAL INDUSTRIES PRATHITA NIWAS, HOUSE NO. 495, SAGADI WADI, VASAI GAON, VASAI (W), THANE - 401203 VS. ACIT - 25(3), C - 11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX MUMBAI - 400051. PAN NO. AAGFK9014N APPELLANT RESPONDENT ASSESSEE BY : MR. MAYUR KISNADWALA & MR. VINAY SINHA, ARS REVENUE BY : MR. SACHCHIDANAND DUBE, DR DATE OF HEARING : 05/09/2018 DATE OF PRONOUNCEMENT : 19/11/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2008 - 09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 35 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF T HE INCOME TAX ACT 1961, (THE ACT). 2. THE SOLE GROUND OF APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A), DISALLOWING ITS CLAIM TO SET OFF BROUGHT FORWARD LOSS OF RS.61,11,900/ - AGAINST THE PROFIT ARISING FROM SLUMP SALE OF ITS FACTOR Y. KASEY METAL INDUSTRIES ITA NO. 2415/MUM/2013 2 3. IN A NUTSHELL, THE FACTS OF THE CASE ARE THAT THE APPELLANT HAS EARNED INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS (STCG) BY SALE OF ASSETS IN A SLUMP SALE AGREEMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) FOUND TH AT AS PER THE EXECUTED AGREEMENT, IT HAD RECEIVED A TOTAL CONSIDERATION OF RS.2,55,00,000/ - . THE CURRENT YEAR BUSINESS LOSS OF THE APPELLANT IS TO THE EXTENT OF (RS.14,82,079/ - ) WHILE THE BROUGHT FORWARD BUSINESS LOSSES AMOUNT TO (RS.61,11,900/ - ). IN THE C OMPUTATION OF INCOME, THE APPELLANT HAS SET OFF CURRENT YEAR BUSINESS LOSS AS WELL AS BROUGHT FORWARD BUSINESS LOSS WITH THE INCOME RECEIVED THROUGH CAPITAL GAINS ON SLUMP SALE. REFERRING TO SECTION 71(2) OF THE ACT, THE AO HELD THAT ONLY CURRENT YEAR LOSS ES CAN BE SET OFF WITH CAPITAL GAINS, BUT NOT CARRIED FORWARD LOSSES. THUS THE AO ADDED BACK THE AMOUNT OF RS.61,11,900/ - TO THE TOTAL INCOME OF THE APPELLANT. HOWEVER, THE AO HELD THAT BROUGHT FORWARD LOSSES ARE ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT ASSESSMENT YEAR. 4. AGGRIEVED BY THE ORDER OF THE AO, THE APPELLANT FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE REASON THAT (I) EVEN THOUGH ENOUGH OPPORTUNITY WA S PROVIDED TO TH E APPELLANT TO E NABLE HIM TO FILE THE DETAILS BEFORE THE AO, IT FAILED TO COMPLY WITH THE SAME AND (II) THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL FACT DURING THE APPELLATE PROCEEDING SO AS TO REBUT THE STAND TAKEN BY THE AO. WITH THE ABOVE REASONS, THE L D. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL RELIES ON THE DECISION IN SHRI PADMAVATHI SRINIVASA COTTON GINNING & PRESSING FACTORY V. DCIT (2009) KASEY METAL INDUSTRIES ITA NO. 2415/MUM/2013 3 318 ITR (A.T.) 156 (ITAT - VISKHA) AND GOURANGA CEMENT PVT. LTD. V. DCIT (ITA NO. 330/KOL/2017 FOR AY 2010 - 11) (ITAT - KOL). ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN PADMAVATHI SRINIVASA COTTON GIN NING & PRES SING FACTORY (SUPRA), IT IS HELD THAT THE GAINS ARISING ON SALE OF DEPRECIABLE ASSETS ARE TAXED AS SHORT - TERM CAPITAL GAINS IN VIEW OF THE LEGAL FICTION CREATED BY SECTION 50 OF THE ACT. OTHERWISE, SUCH GAINS ARE NORMALLY TREATED AS PART OF BUSINESS RECE IPTS. THE ASSESSEE WAS ENTITLED TO CLAIM SET OFF OF UNABSORBED DEPRECIATION AND ELIGIBLE BUSINESS LOSS, IF ANY, AGAINST SHORT TERM CAPITAL GAINS COMPUTED U/S 50 OF THE ACT. IN GAURANGA CEMENT PVT. LTD . (SUPRA), THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2010 - 11 , DISCLOSING BUSINESS INCOME OF RS.13,36,761/ - AND LONG TERM CAPITAL GAINS (LTCG) OF RS.86,30,598/ - . IT CLAIMED UNABSORBED BROUGHT FORWARD BUSINESS LOSS OF RS.16,64,524/ - . T HE ASSESSEE IN ITS RETURN OF INCOME SET OFF THE BUSINESS PROFIT A GAINST THE BROUGHT FORWARD OF UNABSORBED BUSINESS LOSS. HOWEVER, THE AO DISREGARDED THE WORKING OF THE ASSESSEE FOR SETTING OFF THE UNABSORBED BROUGHT FORWARD BUSINESS LOSS. THE AO SET OFF THE BROUGHT FORWARD UNABSORBED BUSINESS LOSS AGAINST THE LTCG INCOM E DECLARED BY THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. IN FURTHER APPEAL, THE TRIBUNAL DIRECTED THE AO TO SET OFF THE BUSINESS LOSS OF RS.13,36,761/ - AGAINST THE BUSINESS INCOME AND THE REMAINING LOSS OF RS.3,27,763/ - BE SET OFF AGAINST THE LTCG. KASEY METAL INDUSTRIES ITA NO. 2415/MUM/2013 4 IN THE INSTANT APPEAL, AS MENTIONED BY THE AO, THE ASSESSEE - FIRM HAS EARNED INCOME UNDER THE HEAD STCG BY SALE OF ASSETS IN A SLUMP SALE AGREEMENT. AS PER THE EXECUTED AGREEMENT, THE ASSESSEE - FIRM HAS RECEIVED A TOTAL CONSIDERATION OF RS.2,55,00,000/ - . THE CURRENT YEAR BUSINESS LOSS OF THE ASSESSEE - FIRM IS RS.14,82,079/ - WHILE THE BROUGHT FORWARD BUSINESS LOSS AMOUNTS TO RS.61,11,900/ - . WE FIND THAT THE THE ORDER OF THE TRIBUNAL IN CASE OF PADMAVATHI SRINIVASA COTTON GINNING & PRESSING FACTORY (SUPRA) SQUAR ELY APPLIES TO THE PRESENT CASE. FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/11/2018. SD/ - SD/ - (SANDEEP GOSAIN) (N .K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 19/11/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI