ACIT, New Delhi V. M/s PBIL- Apex Consortium Ltd., New Delhi

ITA 285/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5089 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 22-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: A K JINDAL; SANJAY ARORA
• Keywords: Business income; Depreciation; Salary income; Unabsorbed depreciation
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 285/DEL/2017 ASSESSMENT YEAR: 2012-13 ACIT, CENTRAL CIRCLE-27, VS. M/S PBIL-APEX CONSORT IUM LTD., NEW DELHI 409-410, PADMA TOWER, ROOM NO. 327, ARA CENTRE, 22, RAJENDRA PLACE, E-2, JHANDEWALAN EXTN., NEW DELHI 11 0008 NEW DELHI 55 (PAN: AACCP5108R) (APPELLANT) (RESPONDENT) REVENUE BY : SH. T. VASANTHAN, SR. DR. ASSESSEE BY : SH. A.K. JINDAL & SH. SANJA Y ARORA, FCA ORDER THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER DATED 28.10.2016 OF THE LD. CIT(A)-30, NEW DELHI PERTAINI NG TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION FROM ANY HEAD OF INCOME (EXCEPT SALARY HEAD), WHEREAS AS PER INCOME TAX IT CAN BE CARRIED FORWARD AND SET OFF AGAINST BUSINESS INCOME ONLY. 2 2. THAT THE ORDER OF THE CIT(A) IS PERVERSE, ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFOR E OR AT THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS E- RETURN OF INCOME FOR THE AY 2012-13 ON 28.9.2012 DE CLARING NIL TAXABLE INCOME. THE CASE OF THE ASSESSEE WAS PICKED UP FOR COMPULSORY SCRUTINY, NOTICE U/S. 143(2) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER REFERRED THE ACT) WAS ISSUED ON 19.8.2 013. DETAILED QUESTIONNAIRE ALONGWITH NOTICE U/S. 142(1) OF THE A CT WAS ISSUED ON 28.7.2014 WHICH WAS DULY SERVED ON THE ASSESSEE COM PANY. IN RESPONSE TO THE SAME, THE AR OF THE ASSESSEE APPEAR ED FROM TIME TO TIME AND FURNISHED THE WRITTEN REPLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION OR INFRASTRUCTURE DE VELOPMENT WORK AND CONSTRUCTION WORKS OF EVERY DESCRIPTION. THE EXAMIN ATION OF DETAILS SUBMITTED BY THE ASSESSEE REVEALS THAT DURING THE Y EAR UNDER CONSIDERATION NO BUSINESS ACTIVITY AS STATED IS CAR RIED OUT. THE ASSESSEE HAS SHOWN ONLY WIP ON WHICH THERE IS NO CH ANGE DURING THE YEAR. THE WIP IS RELATED TO WORK PERFORMED FOR PUNJ AB GOVERNMENT UNDERTAKING WHICH IS NOT RECOGNIZED BY THE CONTRACT EE AND DISPUTE IS PENDING FOR LAST SOME YEARS. AO OBSERVED THAT THE ASSESSEE SOLD THE 3 BLOCK OF PLANT AND MACHINERY FOR RS. 1,04,71,296/-. THE WDV OF SUCH BLOCK WAS RS. 41,25,627/-. THUS, A PROFIT OF RS. 63 ,45,669/- WAS MADE BY THE ASSESSEE ON THIS TRANSACTION. THE BUSI NESS LOSS DURING THE YEAR WAS WORKED OUT AT RS. 32,10,063/-. THE N ET TOTAL INCOME OF RS. 31,35,606/- WAS DECLARED FOR CURRENT YEAR. THE INCOME WAS ADJUSTED AGAINST THE BROUGHT FORWARDS LOSSES RESULT ING IN NIL TOTAL INCOME FOR THE YEAR. THEREAFTER, THE AO COMPLETED T HE ASSESSMENT VIDE ORDER DATED 03.03.2015 U/S. 143(3) OF THE ACT, AT TOTAL INCOME RS. 31,35,610/-, AS AGAINST THE NIL INCOME, AFTER M AKING DISALLOWANCE OF RS. 31,35,606/- ON ACCOUNT OF BROUG HT FORWARD BUSINESS LOSS AGAINST SHORT TERM CAPITAL GAIN ON SA LE OF PLANT AND MACHINERY. AGAINST THE ASSESSMENT ORDER DATED 03.3. 2015, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGN ED ORDER DATED 28.10.2016 HAS DELETED THE ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH IMPUGNED ORDER DATED 28.10.2016, REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE . 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, E SPECIALLY THE 4 CONTENTION RAISED IN THE ORIGINAL GROUNDS OF APPEAL FILED BY THE REVENUE. I FIND THAT THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN PARA NO. 4.4 PAGE NO. 6 & 7 OF THE IMPU GNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARAGRAPHS AR E REPRODUCED AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS, CASE LAW RELIED UPON AND ORAL ARGUMENTS OF THE LD.AR. THE OBJECTION/ARGUMENT OF T HE APPELLANT ARE DISCUSSED AS UNDER:- (I) IN THE ASSESSMENT ORDER, THE A.O. HAS STATED TH AT THE ASSESSEE HAS SOLD THE ASSETS FROM BLOCK OF PLANT AN D MACHINERY FOR RS. 1,04,71,296/- AND THE WDV AS ON 01.4.2011 OF SUCH BLOCK WAS RS. 41,25,627/-. ACCORDINGLY, ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS. 63,45,669/- (RS. 1,04,71,296 - RS. 41,25,627 ). THIS SHORT TERM CAPITAL GAIN WAS PARTLY SET OFF AGA INST CURRENT YEAR'S BUSINESS LOSS OF RS. 32,10,063/- AND BALANCE OF RS.31,35,606/- AGAINST BROUGHT FORWARD BUSINESS LOSS FROM EARLIER YEARS AND INCOME WAS DEC LARED AT NIL BY THE ASSESSEE. (II) IN THE ASSESSMENT PROCEEDINGS, THE A. O. HAS S TATED THAT THE GAIN ARISING FROM SALE OF DEPRECIABLE ASSE T, IS A SHORT TERM CAPITAL GAIN AS PER PROVISION OF SECTION 50 OF THE ACT AND THEREFORE, SET OFF OF BROUGHT FORWARD B USINESS 5 LOSS AGAINST THE SHORT TERM CAPITAL GAIN, IS NOT AL LOWABLE. HOWEVER, IN THE ASSESSMENT PROCEEDINGS, ASSESSEE HA S SUBMITTED THAT THE PLANT AND MACHINERY WAS ALWAYS U SED FOR BUSINESS PURPOSES AND THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE IN THE PRECEDING YEARS, WHI CH WAS ALLOWED. HOWEVER, THE A.O. WAS OF THE VIEW THAT AS PER PROVISION OF SECTION 72 OF THE ACT, BROUGHT FOR WARD BUSINESS LOSS CAN BE SET OFF ONLY AGAINST BUSINESS PROFIT OF THE CURRENT YEAR AND NOT AGAINST INCOME FROM ANY OTHER SOURCE, INCLUDING CAPITAL GAIN. ACCORDINGLY, THE A.O. HAS CONCLUDED THAT SALE OF DEPRECIABLE ASSETS IS TA XABLE AS SHORT TERM CAPITAL GAIN AS PER PROVISION OF SECT ION 50 OF THE ACT AND THEREFORE, BROUGHT FORWARD BUSINESS LOSS CANNOT BE SET OFF AGAINST SHORT TERM CAPITAL GAIN. (III) IN THE APPELLATE PROCEEDINGS, THE APPELLANT H AS SUBMITTED THAT THERE WAS UNABSORBED DEPRECIATION OF RS.76,97,417/-, PERTAINING TO A.Y. 2003-04 AND OUT OF THIS, DEPRECIATION TO THE EXTENT OF SHORT TERM CAPI TAL GAIN OF RS. 31,35,606/-, WAS SET OFF IN TERMS OF SECTION 32(2) OF THE ACT AND THEREFORE, TOTAL INCOME WAS DETERMIN ED AT NIL. IT IS FURTHER SUBMITTED BY THE AR THAT THE SAM E IS ALSO DISCLOSED IN THE COMPUTATION OF INCOME FILED A LONG WITH RETURN OF INCOME. IT WAS FURTHER SUBMITTED BY THE APPELLANT THAT UNABSORBED DEPRECIATION CAN BE SET O FF 6 FROM INCOME UNDER ANY HEAD, EXCEPT AGAINST SALARY INCOME AND THEREFORE, THE APPELLANT HAS CLAIMED THE SET OFF OF DEPRECIATION FROM SHORT TERM CAPITAL GAIN. H OWEVER, THE A.O. HAS WRONGLY UNDERSTOOD THE CLAIM OF SET OF F OF UNABSORBED DEPRECIATION BY THE APPELLANT, AS SET OF F OF BROUGHT FORWARD BUSINESS LOSS AND THEREFORE, DISALL OWED THE CLAIM. IN THESE FACTS, IT IS SUBMITTED BY THE A R THAT THE FINDINGS OF THE A.O. THAT THE APPELLANT HAS CLA IMED SET OFF OF BROUGHT FORWARD BUSINESS LOSS, IS NOT CO RRECT. FROM THE ABOVE, IT IS CLEAR THAT THE APPELLANT HAS SET OFF THE UNABSORBED DEPRECIATION, AGAINST SHORT TERM CAPITAL GAIN IN TERMS OF SECTION 32(2) R.W.S. 72(2) OF THE ACT. IN THESE FACTS AND CIRCUMSTANCES, THE FINDING S OF THE A.O. REGARDING SET OFF OF BROUGHT FORWARD BUSINESS LOSS, IS NOT CORRECT. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OPINION THAT THE CLAIM OF THE APPELLANT OF BROUGHT FORWARD DEPRECIATION AGAINST SHORT TERM CAPITAL GAIN, IS CO RRECT AND ACCORDINGLY, FINDINGS OF THE A.O., ARE ERRONEOU S. THEREFORE, DISALLOWANCE OF RS. 31,56,606/-, IS DELE TED AND AFTER SET OFF OF BROUGHT FORWARD DEPRECIATION O F RS. 31,35,606/-, TOTAL INCOME WILL BE AT NIL, AS CLAIME D BY THE APPELLANT IN THE RETURN OF INCOME. 7 6.1 AFTER GOING THROUGH THE AFORESAID FINDING OF TH E LD. CIT(A), I FIND THAT IN THE ASSESSMENT ORDER, THE A.O. HAS STA TED THAT THE ASSESSEE HAS SOLD THE ASSETS FROM BLOCK OF PLANT AN D MACHINERY FOR RS. 1,04,71,296/- AND THE WDV AS ON 01.4.2011 OF SU CH BLOCK WAS RS. 41,25,627/-. ACCORDINGLY, ASSESSEE HAS SHOWN SH ORT TERM CAPITAL GAIN OF RS. 63,45,669/- (RS. 1,04,71,296 - RS. 41,2 5,627). THIS SHORT TERM CAPITAL GAIN WAS PARTLY SET OFF AGAINST CURREN T YEAR'S BUSINESS LOSS OF RS. 32,10,063/- AND BALANCE OF RS.31,35,606 /- AGAINST BROUGHT FORWARD BUSINESS LOSS FROM EARLIER YEARS AN D INCOME WAS DECLARED AT NIL BY THE ASSESSEE. THE A.O. HAS ALSO STATED THAT THE GAIN ARISING FROM SALE OF DEPRECIABLE ASSET, IS A S HORT TERM CAPITAL GAIN AS PER PROVISION OF SECTION 50 OF THE ACT AND THEREFORE, SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE SHORT TER M CAPITAL GAIN, IS NOT ALLOWABLE. HOWEVER, IN THE ASSESSMENT PROCEEDIN GS, ASSESSEE HAS SUBMITTED THAT THE PLANT AND MACHINERY WAS ALWA YS USED FOR BUSINESS PURPOSES AND THE DEPRECIATION HAS BEEN CLA IMED BY THE ASSESSEE IN THE PRECEDING YEARS, WHICH WAS ALLOWED. HOWEVER, THE A.O. WAS OF THE VIEW THAT AS PER PROVISION OF SECTI ON 72 OF THE ACT, BROUGHT FORWARD BUSINESS LOSS CAN BE SET OFF ONLY A GAINST BUSINESS PROFIT OF THE CURRENT YEAR AND NOT AGAINST INCOME F ROM ANY OTHER SOURCE, INCLUDING CAPITAL GAIN. ACCORDINGLY, THE A. O. HAS CONCLUDED THAT SALE OF DEPRECIABLE ASSETS IS TAXABLE AS SHORT TERM CAPITAL GAIN AS PER PROVISION OF SECTION 50 OF THE ACT AND THERE FORE, BROUGHT FORWARD BUSINESS LOSS CANNOT BE SET OFF AGAINST SHO RT TERM CAPITAL 8 GAIN. HOWEVER, IN THE APPELLATE PROCEEDINGS, THE AS SESSEE HAS SUBMITTED THAT THERE WAS UNABSORBED DEPRECIATION OF RS.76,97,417/-, PERTAINING TO A.Y. 2003-04 AND OUT OF THIS, DEPRECI ATION TO THE EXTENT OF SHORT TERM CAPITAL GAIN OF RS. 31,35,606/-, WAS SET OFF IN TERMS OF SECTION 32(2) OF THE ACT AND THEREFORE, TOTAL INCOM E WAS DETERMINED AT NIL AND THE SAME WAS ALSO DISCLOSED IN THE COMPU TATION OF INCOME FILED ALONG WITH RETURN OF INCOME. IT WAS THE CONTE NTION OF THE ASSESSEE THAT UNABSORBED DEPRECIATION CAN BE SET OF F FROM INCOME UNDER ANY HEAD, EXCEPT AGAINST SALARY INCOME AND TH EREFORE, THE ASSESSEE HAS CLAIMED THE SET OFF OF DEPRECIATION FR OM SHORT TERM CAPITAL GAIN. HOWEVER, THE A.O. HAS WRONGLY UNDERST OOD THE CLAIM OF SET OFF OF UNABSORBED DEPRECIATION BY THE APPELLANT , AS SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND THEREFORE, DISALL OWED THE CLAIM. IN THESE FACTS, THE FINDINGS OF THE A.O. THAT THE APPE LLANT HAS CLAIMED SET OFF OF BROUGHT FORWARD BUSINESS LOSS, IS NOT CO RRECT. IT IS ALSO CLEAR THAT THE ASSESSEE HAS SET OFF THE UNABSORBED DEPRE CIATION, AGAINST SHORT TERM CAPITAL GAIN IN TERMS OF SECTION 32(2) R .W.S. 72(2) OF THE ACT. IN THESE FACTS AND CIRCUMSTANCES, THE FINDING S OF THE A.O. REGARDING SET OFF OF BROUGHT FORWARD BUSINESS LOSS, WAS NOT CORRECT, HENCE, THE CLAIM OF THE ASSESSEE OF BROUGHT FORWARD DEPRECIATION AGAINST SHORT TERM CAPITAL GAIN, IS CORRECT AND ACC ORDINGLY, FINDINGS OF THE A.O., ARE ERRONEOUS, THEREFORE, DISALLOWANCE OF RS. 31,35,606/- WAS RIGHTLY DELETED AND AFTER SET OFF OF BROUGHT FO RWARD DEPRECIATION OF RS. 31,35,606/-, TOTAL INCOME WILL BE AT NIL, AS CLAIMED BY THE 9 ASSESSEE IN THE RETURN OF INCOME, WHICH DOES NOT NE ED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE SAME A ND REJECT THE ISSUE INVOLVED IN THE PRESENT APPEAL RAISED BY TH E REVENUE. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 08-08-2017. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED :08-08-2017 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. 10