M/s. Swetha Health Research Private Limited, Bengaluru V. Deputy Commissioner Of Income Tax, Circle- 6(1)(2), Bangalore

ITA 2435/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1143 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-06-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 27-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JCIT
• Assessee Lawyers: S KRISHNA SWAMY
• Keywords: Capital asset; Depreciation; TDS; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : C, BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI P.K.GADALE, JUDICIAL MEMBER ITA NO.2435(BANG)/2019 (ASSESSMENT YEAR : 2016-17) M/S SWETHA HEALTH RESEARCH PVT. LTD., NO.7, SAMYAKTV UTTRADHI MUTT ROAD, NEAR NATIONAL COLLEGE, SHANKARAPURAM, BANGALORE-560 004 PAN NO.AAHCS9486L APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1)(2), BANGALORE RESPONDENT APPELLANT BY: SHRI S. KRISHNASWAMY, CA REVENUE BY : SMT. , JCIT DATE OF HEARING : 27-02-2020 DATE OF PRONOUNCEMENT : 29.05.2020 O R D E R PER A.K.GARODIA, AM: THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-BANGALORE DATED 30-09-2019 FOR THE ASSESSMENT YEAR : 2016-17. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER; 1.THE ORDER OF THE LEARNED CIT (A)/DCIT' IS AGAINST LAW, FACTS AND PROBABILITIES OF THE CASE. 2. RS.16,34,34,975/- (TREATED AS INCOME FROM SHORT TERM CAPITAL GAINS). THE LEARNED DCIT ERRED IN TREATING THE PROFIT ON SALE OF ASSET (VACANT LAND) OF RS.16,34,34,975/- AS SHORT TERM CAPITAL GAINS HOLDING THAT IT FORMED PART OF BLOCK OF ASSETS IN COMPANIES' BOOKS; THE LEARNED CIT(A) ERRED IN CONFIRMING THE ASSESSMENT HOLDING- ITA NO.2435(B)/2019 2 'FROM THE DESCRIPTION OF THE PROPERTY GIVEN IN BOTH THE PARTNERSHIP DEED AND THE SALE DEED, IT IS APPARENT THAT THE PROPERTY IN QUESTION WAS NOT SIMPLY A VACANT SITE AS CLAIMED BY THE APPELLANT BUT HAD A BUILDING CONSTRUCTED ON IT AND CONSEQUENTLY, IT WAS INCLUDED IN THE SCHEDULE OF ASSETS UNDER LAND AND BUILDING. THEREFORE THE DCIT WAS CORRECT IN APPLYING THE PROVISIONS OF SECTION 50 OF THE ACT, WHICH READS- 'SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS. 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 ALLOWED UNDER THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT, 1922 (11 OF 1922)' 3. THE LEARNED C1T (A) WHILE VARYING THE DESCRIPTION OF THE ASSET FROM VACANT LAND AS HELD BY THE DC1T TO VACANT LAND WITH BUILDING DID NOT GIVE ANY OPPORTUNITY TO THE APPELLANT TO DEMONSTRATE THAT THE BUILDING ON THE SAID LAND WAS A TINY STRUCTURE OF 3.5 SQUARES MEANT FOR STORING LUMBER AND SERVICE LINES HAVING BWSSB WATER SUPPLY CONNECTION RR NO.S10-283. 4. THE LEARNED DCIT/CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DEFINITION OF A BLOCK OF ASSETS UNDER SEC.50 OF THE INCOME TAX ACT, 1960 INCLUDES ONLY AN ASSET 'IN RESPECT OF WHICH DEPRECIATION HAS BEEN CLAIMED UNDER THIS ACT' AND HENCE IN THE INSTANT CASE NO DEPRECIATION HAD BEEN CLAIMED ON THE ASSET AS IT WAS A LARGELY A VACANT LAND OF 9600 SQ. FT - FURTHER THE DEFINITION OF BLOCK OF ASSET UNDER 2(11) OF THE INCOME TAX ACT 1961 INTERALIA INCLUDES BUILDINGS, MACHINERY OR PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS PRESCRIBED. THE ASSET IN THE INSTANT CASE DOES NOT CONFORM THE DEFINITION OF A BLOCK OF ASSETS. 5. THE LEARNED ACIT/CIT (A) OUGHT TO HAVE APPRECIATED THAT THE SALE OF LAND HAVING BEEN HELD FOR OVER 3 YEARS CONSTITUTED A LONG TERM CAPITAL ASSETS AS THE GAIN IS ARISING FROM IS A LONG ITA NO.2435(B)/2019 3 TERM CAPITAL GAIN AND THE PROVISIONS OF SEC 50 OF THE INCOME TAX ACT, 1961 DEALING WITH DEPRECIABLE ASSETS HAS BEEN WRONGLY APPLIED IN THE INSTANT CASE. 3. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE ONLY DISPUTE IN THE PRESENT CASE IS REGARDING THIS ASPECT AS TO WHETHER THE PROFIT ON SALE OF IMMOVABLE PROPERTY IS LIABLE TO TAX AS SHORT TERM CAPITAL GAINS STCG OR LONG TERM CAPITAL GAINS LTCG. THE RELEVANT FACTS IN BRIEF AS NOTED BY THE AO IN THE ASSESSMENT ORDER ARE THAT THERE WAS SALE OF AN IMMOVABLE PROPERTY FOR RS.16.90 CRORES FOR WHICH THE ASSESSEE SUBMITTED COPY OF SALE DEED BEFORE THE AO. IT WAS FURTHER NOTED IN PARA-4 OF THE ASSESSMENT ORDER THAT THE SAID ASSET WAS OWNED BY SHRI GADDAM RAMANNA REDDY WHO WAS ONE OF THE PARTNERS IN THE FIRM M/S SWETHA ASSOCIATES. THE SAID PARTNER CONTRIBUTED THIS ASSET AS HIS CAPITAL IN THE PARTNERSHIP FIRM AND LATER ON, THE FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY I.E. M/S SWETHA HEALTH RESEARCH PVT. LTD. IN PARA-5 OF THE ASSESSMENT ORDER, THE AO NOTED THAT THE SAID ASSET IN QUESTION WAS IN THE BLOCK OF ASSETS OF THE ASSESSEE COMPANYS BOOKS. IT WAS FURTHER OBSERVED THAT IN THE COMPUTATION STATEMENT, THE ASSESSEE HAS RIGHTLY DISALLOWED THE PROFIT ON SALE OF ASSETS AT RS.16,34,34,975/- WHICH IS TO BE CONSIDERED SEPARATELY AS A SHORT TERM CAPITAL GAIN BUT IN THE RETURN OF INCOME, THE ASSESSEE HAS NOT DECLARED ANY STCG, BUT THE ASSESSEE HAS DECLARED LTCG OF RS.15,58,45,340/- AFTER CLAIMING INDEXED COST OF PURCHASE. THE AO DID NOT ALLOW THE CLAIM OF THE ASSESSEE THAT THE INCOME IN QUESTION IS LTCG AND HE TAXED THE SAME AS STCG TO THE EXTENT OF RS.16,34,34,975/-. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). 4. BEFORE THE LD. CIT(A), THIS WAS THE SUBMISSION THAT THE ASSET SOLD IN QUESTION WAS LAND AND THEREFORE, SEC.50 IS NOT APPLICABLE BECAUSE THE LAND IS NOT A DEPRECIABLE ASSET. IN PARA-5 OF HIS ORDER, IT IS NOTED ITA NO.2435(B)/2019 4 BY THE LD. CIT(A) THAT FROM THE DETAILS SUBMITTED, IT IS SEEN THAT SHRI GADDAM RAMANNA REDDY HAD CONTRIBUTED CAPITAL IN THE FORM OF IMMOVABLE PROPERTY BEARING NO.736, SITUATED IN SARAKKI VI PHASE EXTENSION, 15 TH CROSS, JP NAGAR, 60/B DIVISION, BANGALORE. ON PAGE-4 OF HIS ORDER, LD. CVIT(A) HAD REPRODUCED THE RELEVANT PORTION OF SALE DEED DATE 25-02-2016 IN WHICH THE PROPERTY SOLD WAS DESCRIBED AND IT STATES THAT THE PROPERTY SOLD TOGETHER WITH RCC BUILDING, BRICK WALL AND MOSAIC FLOORING WITH COMPOUND WALL AROUND THE PROPERTY TOGETHER WITH BWSSP WATER SUPPLY CONNECTION RR NO.S10-283. THEREAFTER, THIS FINDING IS GIVEN BY THE LD. CIT(A) THAT AS PER THE DESCRIPTION OF THE PROPERTY GIVEN IN BOTH PARTNERSHIP DEED AND ALE DEED, IT IS APPARENT THAT THE PROPERTY IN QUESTION WAS NOT VACANT SITE AS CLAIMED BY THE ASSESSEE BUT THE BUILDING IS CONSTRUCTED ON IT AND CONSEQUENTLY, IT WAS INCLUDED IN THE SCHEDULE OF ASSETS UNDER LAND AND BUILDING AND THEREFORE, THE AO WAS CORRECT IN APPLYING SEC. 50 OF THE IT ACT. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6. IN THE COURSE OF HEARING, THE BENCH OBSERVED THAT THE AUDITED ACCOUNTS AND COMPUTATION OF INCOME IS REQUIRED TO APPRECIATE THE ARGUMENTS OF THE LD. AR OF THE ASSESSEE BUT THE LD. AR INSISTED ON HEARING THE APPEAL WITHOUT THE SAID DOCUMENTS. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ASSESEES CLAIM THAT THE PROPERTY SOLD IN QUESTION WAS NOT A DEPRECIABLE ASSET, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (P.K.GADALE) (A.K.GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29.05.2020 *AM ITA NO.2435(B)/2019 5 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR ITA NO.2435(B)/2019 6 ITA NO.2435(B)/2019 7