AAKRUTI INVESTMENTS LTD, MUMBAI V. ITO WD 6(1)2, MUMBAI

ITA 3822/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75512 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Capital asset; Depreciation; Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , / , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER . / ITA NO. 3822 /MUM/2011 ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 AAKRUTI INVESTMENTS LTD., 2 ND FLOOR, RAJAN HOUSE, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 025 ' ' ' ' / VS. THE ITO WARD 9(2)(2), AAYKAR BHAVAN, MK ROAD, MUMBAI 400020. $ ./ % ./ PAN/GIR NO. : AABCA 2579C ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI M.L.PERUMAL ' ) *+ / DATE OF HEARING : 20/02/2014 ,# ) *+ / DATE OF PRONOUNCEMENT : 20/02/2014 - / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST AN ORDER PASSED BY LD. CIT (A)-14, MUMBAI DATED 02/12/2010 F OR THE ASSESSMENT YEAR 2007-08. THE GROUND OF APPEAL READS AS UNDER: LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING GAIN ON SALE OF RESIDENTIAL FLAT AS SHORT TERM CAPITAL GAIN U/S.50 OF THE ACT. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE CIRCUMS TANCES OF THE CASE AND IN THE LAW, THE SAID GAIN ON SALE OF RESIDENTIA L FLAT OUT TO HAVE BEEN TREATED AS LONG TERM CAPITAL GAIN . / ITA NO. 3822 /MUM/2011 ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 2 2. THIS APPEAL WAS EARLIER FIXED FOR HEARING ON 23 /1/2014 WHEN IT WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE FOR 20/2/2014. THE DATE WAS DULY NOTED BY THE LD. AR OF THE ASSESSEE. HOWEVER, ON 20/02/2014 WHEN THIS APPEAL WAS CALLED FOR HEARING NOBODY WAS PRESENT ON BEHALF OF THE ASSESSEE. THE REFORE, WE PROCEED TO DECIDE THE PRESENT APPEAL EX-PARTE QUA THE ASSESSEE. 3. THE FACTS WHICH ARE RELEVANT TO DECIDE THE PRES ENT APPEAL ARE THAT A FLAT WAS SOLD BY THE ASSESSEE FOR A SUM OF RS.1,73,75,000/-. IT WAS NOTICED BY THE AO THAT THE DEPRECIATION WAS BEING CLAIMED ON THE VALUE OF TH E SAID FLAT AND ITS WDV AS ON 31/3/2006 WAS RS. 13,96,224/- AND AFTER SELLING THE FLAT, THE WDV OF NET BLOCK WHICH CONSISTED OF THAT FLAT WAS NIL. THE ASSESSEE CLAI MED THAT THE GAIN FROM THE SAID FLAT WAS LIABLE TO BE ASSESSED AS LONG TERM CAPITAL GAI N AS THE FLAT WAS HELD BY THE ASSESSEE FOR MORE THAN 36 MONTHS. AS AGAINST SUCH CLAIM OF THE ASSESSEE IT WAS THE OPINION OF AO THAT SINCE THE DEPRECIATION IS BEING CLAIMED BY THE ASSESSEE ON THE VALUE OF THE FLAT, THE GAIN ARISING FROM SALE OF THE FL AT WAS ASSESSABLE UNDER SECTION 50 OF THE INCOME TAX ACT, 1961 (THE ACT) AND THUS THE GA IN FROM THE FLAT WAS LIABLE TO BE ASSESSED AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, AFTER REDUCING THE WDV OF THE FLAT FROM THE SALE CONSIDERATION OF A SUM OF RS.1,73,75, 000/- THE NET SHORT TERM CAPITAL WAS ASSESSED AT A SUM OF RS.1,59,78,776/-. THE AS SESSEE TOOK THE PLEA BEFORE A.O THAT EVEN IN THE CASE OF DEEMED SHORT TERM CAPITAL GAIN ASSESSABLE UNDER SECTION 50 OF THE ACT, THE BENEFIT OF LONG TERM CAPITAL GAIN WOUL D BE AVAILABLE AND ASSESSEE HAD RELIED UPON THE FOLLOWING DECISIONS: 1. CIT V. ACE BUILDERS PVT. LTD. (195 CTR 1) (BOM) 2. CIT V. ASSAM PETROLEUM INDS. PVT. LTD. , 262 ITR 587) (GAU) 3. WEIKFILED PRODUCTS CO. (I) P. LTD. V. DCIT (71 TTJ 518) ON THESE SUBMISSIONS OF THE ASSESSEE IT WAS THE CAS E OF THE AO THAT THE AFOREMENTIONED DECISIONS WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE AS IT WAS NOT A CASE OF THE ASSESSEE THAT IT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54E ON ACCOUNT OF INVESTMENT IN SPE CIFIED ASSETS AS MENTIONED . / ITA NO. 3822 /MUM/2011 ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 3 IN SECTION 54E. THE TREATMENT GIVEN BY THE AO WA S AGITATED IN AN APPEAL FILED BEFORE LD. CIT(A) WHO HAS CONFIRMED THE ACTION OF AO. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY L D. DR THAT THE MANDATE OF SECTION 50 IS CLEAR. HE SUBMITTED THAT AS PER SECT ION 50, WHERE ANY ASSET ON WHICH DEPRECIATION IS CLAIMED UNDER INCOME TAX ACT THE GAIN SHALL BE LIABLE TO BE ASSESSED AS SHORT TERM CAPITAL GAIN IRRESPECTIVE OF THE PERIOD OF HOLDING OF THE ASSETS. HE SUBMITTED THAT THE FACTS ARE VERY C LEAR AND ASSESSEE WAS CLAIMING DEPRECIATION ON THE VALUE OF THE FLAT. NO INVESTMENT WAS MADE BY THE ASSESSEE IN THE ASSETS SPECIFIED UNDER SECTION 54E TO ENABLE THE ASSESSEE TO CLAIM EXEMPTION UNDER SECTION 54E. THEREFORE, LD. DR PLEADED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE WERE NOT APPLICABLE TO THE FACTS OF THE CASE. THUS HE PLEADED THAT LD. CIT(A) HAS RIGHTLY CONFIRM ED THE ACTION OF THE AO AND HIS ORDER SHOULD BE UPHELD. 5. WE HAVE HEARD LD. DR. WE HAVE ALSO CAREFULLY GO NE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY LD. CIT (A). THE FACTS HAVE BEEN STATED ABOVE. NO INVESTMENT WHATSOEVER HAS BEEN SHOWN TO BE MADE BY THE ASSESSEE IN THE ASSETS SPECIFIED IN SECTION 54E. IT IS NOT EVEN THE CASE OF ASSESSEE THAT IT IS ELIGIBLE FOR EXEMPTION UNDER S ECTION 54E ON ACCOUNT OF INVESTMENT MADE BY IT IN THE SPECIFIED ASSET MENTI ONED UNDER SECTION 54E OF THE ACT. THEREFORE, THE PROVISIONS OF SECTION 50 W OULD BE APPLICABLE TO THE CASE OF THE ASSESSEE. ACCORDING TO THE PROVISIONS OF SE CTION 50, WHERE CAPITAL ASSET BEING AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THE INCOME TAX ACT, THEN THE PROVISIONS OF SECTION 48 AND 49 WILL APPLY SUBJECT TO MODIFICATI ON MENTIONED IN SECTION 50. AS PER PROVISIONS DESCRIBED IN SECTION 50 THE GAI N OF THE ASSESSEE FROM THE SALE OF ASSETS WHICH HAVE BEEN DESCRIBED ABOVE IS A SSESSABLE AS SHORT TERM CAPITAL GAIN IN EXCESS OF THE FOLLOWING AMOUNT: . / ITA NO. 3822 /MUM/2011 ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 4 (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER OR TRANSFERS; (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE BLO CK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR, SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSETS; IN SUB-SECTION (2) IT HAS BEEN MENTIONED THAT WH ERE ANY BLOCK OF ASSETS CEASES TO EXIST AS SUCH, FOR THE REASON THAT ALL THE ASSETS I N THAT BLOCK ARE TRANSFERRED DURING THE PREVIOUS YEAR, THE COST OF ACQUISITION OF THE BLOC K OF ASSET SHALL BE THE WDV OF THE BLOCK OF ASSETS AT THE BEGINNING OF PREVIOUS YEAR, AS INCREASED BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK OF ASSETS, ACQU IRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE INCOME RECEIVED OR ACCRUING A S A RESULT OF SUCH TRANSFER OR TRANSFERS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSETS. 5.1 ACCORDING TO THE FACTS DISCUSSED ABOVE THE BLO CK OF ASSETS RELATING TO FLAT HAD BECOME NIL AS AT THE END OF THE YEAR AND WDV AS AT THE BEGINNING OF THE YEAR HAS BEEN REDUCED FROM THE SALE CONSIDERATION AS DEEMED COST OF ACQUISITION. THEREFORE, COMPUTATION BY THE A.O IS IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 50(2). ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DE CISION GIVEN BY LD. CIT(A). WE UPHELD HIS ORDER AND APPEAL FILED BY THE ASSESSEE I S DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0/02/2014 - ) ,# . /'0 20/02/2014 ) 1 SD/- SD/- ( / SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; /' DATED 20 /02/2014 . / ITA NO. 3822 /MUM/2011 ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 5 - - - - ) )) ) '*2 '*2 '*2 '*2 32#* 32#* 32#* 32#* / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 251 '*' , , / DR, ITAT, MUMBAI 6. 16 7 / GUARD FILE. -' -' -' -' / BY ORDER, (2* '* //TRUE COPY// 8 88 8 / 9 9 9 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS