MARIE GOLD REALTORS PRIVATE LIMITED, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)-4, MUMBAI

ITA 3495/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6925 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Capital asset; Depreciation; Difference of opinion; Capital receipt; Change of opinion
• Section: 143(3); 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD , JM ITA NO. 3495 /MUM/ 2018 (ASSESSMENT YEAR: 2013 - 14 ) M/S. MARIE GOLD REALTORS PVT. LTD. 21 ST FLOOR, NIRMAL BUILDING, NARIMAN POINT, MUMBAI - 400 021 VS. PR. CIT (CENTRAL) - 4 10 TH FLOOR, R. NO. 1001, CGO BUILDING, ANNEXE, M.K. ROAD, MUMBAI - 400 020 PAN/GIR NO. AAECM 7896 B ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : DR. K. SHIVARAM & SHRI RAHUL HAKANI RESPONDENT BY : SHRI A. K. SRIVASTAVA DATE OF HEARING : 24.10.2018 DATE OF PRONOUNCEMENT : 03.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX ( CENTRAL ) - 4, MUMBAI (CIT FOR SHORT) DATED 15.03.2018 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2013 - 14. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE LEARNED CIT ERRED IN REVISING U/S 263 THE ASSESSMENT ORDER PASSED U/S. 143(3 ) DT. 26/2/2016 WITH RESPECT TO THE ISSUE OF CLAIM OF DEPRECIATION ON TENANCY RIGHTS WITHOUT APPRECIATING THAT THE SAID ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE THE ORDER OF REVISION IS BAD IN LAW. 2. THE LEARNED CIT FAILED TO APPRECIATE THAT ASSESSEE HAD FURNISHED ALL DETAILS PERTAINING TO THE ISSUE OF DEPRECIATION ON TENANCY RIGHTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE LEARNED ASSESSING OFFICER HAD ALLOWED THE CLAIM AFTER APPLICATION OF MIND AND THUS THE ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE HENCE THE ORDER OF REVISION IS BAD IN LAW. 3. THE LEARNED CIT FAILED TO APPRECIATE THAT IN THE FACTS OF THE PRESENT CASE TENANCY RIGHTS FELL WITH IN THE AMBIT OF THE EXPRESSION 'ANY OTHER BUSINESS OR 2 ITA NO. 3495/MUM/2018 COMMERCIAL RIGHTS OF SIMILAR NATURE' AND THUS WAS ENTITLED TO DEPRECIATION U/S. 32 AND HENCE THE ORDER OF REVISION IS BAD IN LAW. 4. THE LEARNED CIT FAILED TO APPRECIATE THAT ON THE ISSUE OF DEPRECI ATION ON TENANCY RIGHTS TWO POSSIBLE VIEWS EXIST AND THUS WHEN TWO VIEWS ARE POSSIBLE THAN THE ASSESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE THE ORDER OF REVISION IS BAD IN LAW. 5 THE LEARNED C IT ERRED IN DECIDING THE ISSUE OF DEPRECIATION ON TENANCY RIGHTS ON MERITS THOUGH HE HELD THAT THE SAID ISSUE WAS NOT DECIDED BY THE LEARNED ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER AND HENCE THE ORDER OF REVISION IS BAD IN LAW. 6. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT HAS NO JURISDICTION TO DECIDE THE ISSUE ON MERIT IN REVISION JURISDICTION BY APPLYING THE WRONG PRINCIPLE OF LAW AND RELYING ON THE CASE LAWS WHICH ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANT. 3. BRIEF FACTS ARE T HAT THE LD. CIT ISSUED NOTICE U/S. 263 THAT O N PERUSAL OF THE COMPUTATION OF INCOME, IT WAS SEEN THAT THE ASSESSEE HAVE CLAIMED DEPRECIATION OF RS.2,49,61,897/ - ON TENANCY RIGHTS (CLAIMED AS BEING INTANGIBLE ASSET) UNDER THE HEAD DEPRECIATION ALLOWABLE AS PER I - T ACT. HOWEVER, THE DEPRECIATION CLAIMED ON THE TENANCY RIGHTS SHOULD, HAVE BEEN DISALLOWED AS THE SAME IS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE I - T ACT . THE TENANCY RIGHTS ACQUIRED BY THE ASSESSEE I S NOT AN INTANGIBLE ASSET AS THEY DO NOT FALL WITHIN THE AMBIT OF THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE OR AKIN LICENSE' U/S 32(1) (II) AND WHICH HAS ALSO BEEN VERY WELL DISCUSSED BY HON'BLE MUMBAI 1TAT IN THE CASE OF DABUR INDIA LTD . (ITA NO, 4679/MUM/2012) . 4. THE ASSESSEE RESPONDED THAT THE ISSUE WAS EXAMINED BY THE A.O. AND PLACED RELIANCE ON THE FOLLOWING CASE LAWS: 1. CIT VS. D.P. SANDU BROS. CHEMBUR (P.) LTD. (APPEAL NO. 2335 OF 2003) (SC); 2. CIT VS. M/S. AREVA T & D INDIA LIMITED (APPEAL NO. 1184, 1185 & 2694 OF 2006) (MADRAS HC); 3. TECHNO SHARES AND STOCKS LTD. VS. CIT (2010) 327 ITR 323 (SC). 5. THE LD. CIT CONSIDERING THE ABOVE HELD THAT THE A.O. HAS NOT EXAMINED THE ISSUE. HE MADE A WEAK EFFORT IN DISREGARDING THE CASE LAWS RELIED UPON THE ASSESSEE. HE PLACE D 3 ITA NO. 3495/MUM/2018 RELIANCE UPON THE DECISION OF ITAT IN THE CASE OF DABUR INDIA LTD . (SUPRA) AND CONCLUDED AS UNDER: 9.1 IT IS CLEAR FROM THE DISCUSSIONS ON FACTS CONTAINED IN THE FOREGOING PARAGRAPHS AND THE ESTABLISHED LEGAL POSITION WHICH ARE BINDING ON SUCH SET OF FA CTS, THAT THE ASSESSMENT ORDER U/S. 143(3) HAS - BEEN PASSED BY THE A.O. WITHOUT VERIFYING THE CLAIM OF DEPRECIATION IN RESPECT OF THE TENANCY RIGHTS. THE ASSESSEE HAD FILED THE ANNUAL REPORT, TAX AUDIT REPORT AND INCOME - TAX RETURN BEFORE THE A.O. BUT DURIN G THE COURSE OF SCRUTINY PROCEEDINGS, THE A.O. HAD NOT VERIFIED AND HAD NOT ASKED ANY SPECIFIC QUESTION PERTAINING TO THE CLAIM OF DEPRECIATION ON TENANCY RIGHTS. BESIDES, THE ASSESSEE HAD ALSO NOT PROVIDED ANY RELEVANT SUBMISSION SUBSTANTIATING ITS CLAIM FOR DEPRECIATION IN THIS REGARD. THIS CLEARLY PROVES THAT APPLICATION OF MIND BY THE A.O. ON THE SPECIFIC ISSUE OF CLAIM OF DEPRECIATION IS NOT THERE AND SINCE THERE IS NO BASIS IN THE PLEA OF THE ASSESSEE THAT THE OPINION HAD ALREADY BEEN FORMED BY THE A. O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR IN HIS ORDER. THERE HAS BEEN NO VERIFICATION OF THIS ISSUE BY THE A.O. AND NO OPINION WAS FORMED ON THIS ISSUE BY THE A.O. SO, THE GROUND OF CHANGE OF OPINION U/S. 263 INVALID. IT IS CLEAR FROM THE ABOVE DI SCUSSIONS THAT THE ORDER PASSED BY THE A.O. IS NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, THE PROCEEDINGS UY*$. 263 IS AS PER THE PROVISIONS OF THE ACT, 9.2 THE ASSESSEE COMPANY HAS CLAIMED THE DEPRECIATION ON TENANCY RIGHTS OF IMMOVEABLE PROPERTY BY CLAIMING THE SAME AS AN INTANGIBLE ASSET ENTITLED FOR THE DEPRECIATION @25% BY CONSIDERING THE SAME TO BE OF THE NATURE OF BRAND, COPYRIGHT, LICENCE OR ANY OTHER RIGHT OF SIMILAR NATURE. IN THE CASE OF DABUR INDIA, IT HAS BEEN HELD BY THE TRIB UNAL THAT DEPRECIATION ON TENANCY RIGHTS WILL NOT BE ALLOWED AS IT IS NOT IN LINE OF INTANGIBLE ASSET TO BE TREATED AS 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS'. ACCORDINGLY, IT IS HELD THAT THE CLAIM OF DEPRECIATION OF RS. 2,49,61,897/ - ON TENANCY RIGHTS ( CLAIMED AS BEING INTANGIBLE ASSET) IS NOT ALLOWABLE AS PER THE ACT AND THE SAME HAS TO BE DISALLOWED TO ASSESS THE TAXABLE INCOME OF THE ASSESSEE COMPANY. THIS WRONG ALLOWANCE OF THE CLAIM OF DEPRECIATION ON TENANCY RIGHTS AS AN INTANGIBLE ASSET HAS RENDER ED THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE, IN TERMS OF EXPLANATION 2 TO SECTION 263 OF THE ACT. IN VIEW OF THIS, THE ASSESSMENT ORDERS FOR ASSESSMENT YEAR 2013 - 14 PA SSED U/S 143(3) BY THE ASSESSING OFFICER ON 26/02/2016 ARE SET ASIDE TO THE ASSESSING OFFICER FOR GIVING EFFECT TO THE ISSUE DECIDED HEREIN. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A.O. HAS MADE DUE ENQUIRY AND THEREAFTER HE HAS ALLOWED THE CLAIM OF DEPRECIATION ON TENANCY RIGHT AS PER THE DEPRECIATION SCHEDULE ALONGWITH THE 4 ITA NO. 3495/MUM/2018 COM PUTATION OF INCOME SUBMITTED. HENCE, HE SUBMITTED THAT ON THE TOUCHSTONE OF THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF STATE BANK OF INDIA VS. ASST. CIT (IN W RIT P ETITION NO. 271 OF 2018 AND OTHERS VIDE ORDER DATED 15.06.2018) IT CAN VE RY WELL BE SAID THAT T H E A.O. HAS APPLIED HIS MIND. HE SUBMITTED THAT WHEN THE A.O. HAS DULY APPLIED HIS MIND AND TAKEN A PERMISSIBLE VIEW, THE LD. CIT CANNOT EX ERCISE THE JURISDICTION U/S. 263 AS HE IS OF ANOTHER VIEW. 8. TH US, TH E LD. COUNSEL OF THE AS SESSEE SUBMITTED THAT THE A.O. HAS ADOPTED LEGALLY PERMISSIBLE VIEW. HE SUBMITTED THAT IN THIS VIEW OF THE MATTER , THE DECISION OF HONOURABLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) DOESN'T PERMIT THE JURISDICTI ON BY THE LEARNED CIT - A UNDER SECTION 263 . T HE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CASE LAWS WHICH WERE DULY SUBMITTED BEFORE THE LEARNED CIT - A DULY SUPPORTED THE CASE OF THE ASSESSEE. HE FURTHER PLACED RELIANCE UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS SMIFS SECURITIES LTD 348 ITR 302 (SC) FOR THE PROPOSITION THAT THE CLAIM OF DEPRECATION BY THE ASSESSEE WAS LEGALLY PERMISSIBLE VIEW. 9. PER CONTRA , THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) RELIED UPON THE ORDER'S OF AUTHORITIES BELOW. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. FIRST OF ALL WE NOTE THAT THE CLAIM OF DEPRECATION ON TENANCY R IGHT WAS VERY MUCH THERE IN THE DEPRECATION SCHEDULE AND THE COMPUTATION OF INCOME. IT WAS ON THE BASIS OF THESE DOCUMENTS THAT THE CLAIM OF DEPRECATION WAS ALLOWED BY THE A.O. IN THIS VIEW OF THE MATTER , THE DECISION OF 5 ITA NO. 3495/MUM/2018 HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA ( SUPRA ) COMES INTO PLAY . THE HONBLE HIGH COURT IN T HIS CASE HAS EXPOUNDED AS UNDER: THUS, IT MUST NECESSARILY BE INFERRED THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AT THE TIME OF PASSING AN ASSESSMENT ORDER TO THIS PARTICULAR CLAIM MADE IN THE BASIC DOCUME NT VIZ. COMPUTATION OF THE INCOME BY NOT DISALLOWING IT IN PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AS HE WAS SATISFIED WITH THE BASIS OF THE CLAIM AS INDICATED IN THAT VERY DOCUMENT. THEREFORE, WHERE HE ACCEPTS THE CLAIM MADE, THE OCCASION TO ASK QUEST IONS ON IT WILL NOT ARISE NOR DOES IT HAVE TO BE INDICATED IN THE ORDER PASSED IN THE REGULAR ASSESSMENT PROCEEDINGS. 11. UNDER THE TOUCHSTONE OF THE ABOVE DECISION OF HONBLE HIGH COURT, IT CAN BE SAID THAT THE A.O. HAS ALLOWED THE CLAIM OF DEPRECATION A FTER PROPER APPLICATION OF MIND. HENCE, THE LD. CIT(A)S VIEW THAT THE A.O. HAS NOT APPLIED HIS MIND ON THIS ISSUE, IS NOT SUSTAINABLE. 12. WE FURTHER NOTE THAT THE A.O.S VIEW IS A LEGALLY PERMISSIBLE VIEW AND IS SUPPORTED BY THE FOLLOWING CASE LAWS : 1. CIT VS. D.P. SANDU BROS. CHEMBUR (P.) LTD. (SUPRA) 2. CIT VS. M/S. AREVA T & D INDIA LIMITED (SUPRA) 3. TECHNO SHARES AND STOCKS LTD. VS. CIT (SUPRA) 4. CIT VS SMIFS SECURITIES LTD 348 ITR 302 (SUPRA) IN THE DECISION OF D.P. SANDU BROS. CHEMBUR (P.) LTD (SUPRA) THE RECEIPT ON TRANSFER OF TENANCY RIGHT HAS BEEN ACCEPTED AS CAPITAL RECEIPT. IN THE DECISION OF M/S. AREVA T & D INDIA LIMITED (SUPRA) TENANCY RIGHT HAS BEEN ACCEPTED AS CAPITAL ASSET ELIGIBLE FOR DEPRECIATION. IN THE DECISION OF TECHNO SHARES AND STO CKS LTD. (SUPRA) DEPRECIATION ON AMOUNT SPEND FOR ACQUISITION OF BSE MEMBERSHIP CARD HAS BEEN ACCEPTED AS E L IGIBLE TO DEPRECIATION. 6 ITA NO. 3495/MUM/2018 IN THE DECISION OF SMIFS SECURITIES LTD (SUPRA) DEPRECIATION ON CLAIM OF GOODWILL HAS BEEN ACCEPTED. 13. HENCE, WE ARE OF THE OPINION THAT THE VIEW ADOPTED BY THE A.O. WAS POSSIBLE ONE. IN THIS REGARD, WE PLACE RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. ( SUPRA ) AND CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) IF THERE ARE TWO VIEWS POSSIBLE AND THE A.O. HAS ADOPTED ONE VIEW, WITH WHICH THE LD. CIT IS NOT IN AGREEMENT, THE ORDER CANNOT BE SAID TO BE LIABLE TO BE VISITED WITH THE REVISIONARY ORDER BY THE LD. CIT. ACCORDINGLY, THE ORDER UNDER 263 PASSED B Y THE LD. CIT IS HEREBY QUASHED. ACCORDINGLY, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 3 . 0 1 . 2 0 1 9 S D / - S D / - ( RAVISH SOOD ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 3 . 0 1 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI