SHREE VARDHMAN CHEMICALS LTD, MUMBAI V. ACIT CIR 1(3), MUMBAI

ITA 4064/MUM/2012

• Counselvise Citation: 406419914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 13-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 08-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: A P DALAL
• Keywords: Depreciation
• Section: 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.4064/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2004-05 SHREE VARDHAMAN CHEMICALS LTD., B-4, PAREKH MAHAL, V.N.ROAD, CHURCHGATE, MUMBAI -400020 / VS. THE ACIT, CIR. 1(3), AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 # ./ $% ./ PAN/GIR NO. : AAACV 1851H ( #& / APPELLANT ) .. ( '(#& / RESPONDENT ) #& ) / APPELLANT BY: SHRI A.P.DALAL '(#& * ) / RESPONDENT BY : SHRI GIRIJA DAYAL * + / DATE OF HEARING : 13/11/2013 ,-! * + / DATE OF PRONOUNCEMENT : 13/11/2013 . / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-2, MUMBAI DATED 16/4/2012 FOR ASSESSM ENT YEAR 2004-05. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE LEARNED COMMISSIONER OF I.TAX (APPEALS) ERR ED IN CONFIRMING INCLUSION OF INCOME FROM HOUSE PROPERTY AT RS 189210/- U/S 23 WI TH REGARD TO PROPERTY AT GAURI SADAN AT DELHI. . / ITA NO.4064/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2004-05 2 1.1 THE ABOVE PROPERTY AT DELHI WAS COMPANYS OWNE RSHIP RESIDENTIAL PREMISES AND WAS USED FOR THE PURPOSE OF BUSINESS I .E. FOR STORING COMPANYS RECORD AND AS TRANSIT HOUSE FOR EMPLOYEES OF THE CO MPANY WHEN THEY VISIT DELHI. FURTHER IT WAS NEITHER LET OUT PROPERTY NOR ANY REN T WAS CHARGED TO COMPANYS EMPLOYEES AND THEREFORE NATIONAL 1.2 THE COMPANY RELIES ON FOLLOWING CASES. (A) CIT V/S MODI INDUSTRIES (210 ITR I) (B) CIT V/S VAZIR SULTAN TOBACCO CO LTD (173 ITR 29 0) (C) CIT V/S RASIKLAL BALABHAI (119 ITR 303) 2 THE LEARNED COMMISSIONER OF I.TAX (APPEALS) ERRED IN TREATING NEPAL GUEST HOUSE AT KOLKATA AND FLAT AT 109 GUJARAT VIHAR AT D ELHI AS BUSINESS ASSET AND ERRED IN CONFIRMING THE WITHDRAWAL OF DEPRECIATION OF RS.291142/- AND DIRECTING TO RE-COMPUTE THE SHORT TERM CAPITAL GAIN U/S 50 ON BOTH THESE ASSETS. 2.1 YOUR APPELLANTS HAVE NEITHER CLAIMED DEPRECIATI ON NOR IS ALLOWED ON THESE ASSESTS UNDER THE INCOME TAX ACT ,1961. THESE ASSET S HAVE NEVER ENTERED THE DEPRECIATION BLOCK OF BUILDING SINCE ACQUISITION OF THESE FLATS DURING ASST.YR 1995/96 AND 1996/97 .THE DEPRECIATION IN BOOKS OF A CCOUNT IS PROVIDED IN ORDER TO COMPLY WITH THE REQUIREMENTS UNDER COMPANI ES ACT, 1956. 2.2 YOUR APPELLANT SUBMIT THAT ASSESSING OFFICER BE DIRECTED TO DELETE THE ADDITION OF SHORT TERM CAPITAL GAIN OF RS 2857670/- AND RESTORE DEPRECIATION AT RS 291142/- 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT GROUND NO.2 IS NOT PRESSED AND ACCORDINGLY THE SAME IS DISMISSED AS NOT BEING PRESSED. 3. APROPOS GROUND NO.1, THE ASSESSEE IS A DEALER, COMMISSION AGENT, DISTRIBUTOR OF CONSUMER/INDUSTRIAL PRODUCTS AND RE-PACKER OF C ONSUMER PRODUCTS. THE IMPUGNED ORDER HAS BEEN PASSED IN PURSUANCE TO ORDE R PASSED BY CIT UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (THE ACT) D ATED 26/3/2009. SO FAR AS IT RELATES TO GROUND NO.1, DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTICED THAT THOUGH THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN IN RESPECT OF PROPERTY UNDER THE NAME OF GAURI SA DAN AT DELHI AND ASSET WAS NOT USED FOR THE PURPOSE OF BUSINESS, THE DEEMING PROVI SIONS OF SECTION 23 WERE APPLICABLE AND ALV OF THE SAID PROPERTY WAS LIABLE TO BE OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SINCE NO SUCH INCOME WAS OFFERED THE ASSESSEE WAS REQUIRED TO SUBMIT THAT WHY THE ALV OF THE STATED PROPERTY SHOULD NOT . / ITA NO.4064/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2004-05 3 BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROP ERTY. THE ALV WAS DETERMINED AT RS.2,70,300/-. AFTER GIVING 30% DEDU CTION THE NET AMOUNT ADDED TO THE INCOME OF THE ASSESSEE WAS A SUM OF RS.1,89,210 /-. THE FINALLY ASSESSED AMOUNT IS A LOSS OF RS.1,20,63,910/-. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT AS PER STATEMENT OF FACTS FILED BEFORE LD. CIT(A) IN PARA 1.6 IT WAS ME NTIONED AS UNDER: 1.6 THE PROPERTY AT GAURI SADAN, DELHI, NEPAL FLA T AT KOLKATA AND 104, GUJARAT VIHAR FLAT WERE USED FOR STORING GOODS AND FOR TRANSIT QU ARTERS FOR EMPLOYEES WHO VISIT DELHI FOR COMMERCIAL PURPOSE. THESE ASSETS HAS NEVER ENT ERED THE DEPRECIATION ASSETS BLOCK ON WHICH DEPRECIATION WAS CLAIMED. 1.7. THE AFORESAID PROPERTIES WERE COMMERCIAL ASSE TS AND EXPENSES INCURRED THEREON WERE REGULARLY ALLOWED AS REST HOUSE EXPENSES IN T HE ASSESSMENT GROUND OF APPEAL TAKEN BEFORE LD. CIT(A) WAS ALSO A S UNDER: 1.2 YOUR APPELLANT SUBMIT THAT THE PROPERTY WAS US ED FOR STORAGE AND TRANSIT QUARTERS FOR EMPLOYEES WHEN THEY VISIT DELHI FOR OFFICIAL WO RK. THE PROPERTY WAS ALSO USED FOR STORING COMPANYS RECORD AND THERE HAS BEEN NO CHAN GE IN ITS USER FROM EARLIER ASSESSMENT YEARS. THE ASSETS WERE A COMMERCIAL ASS ETS AND THE ADDITIONS OF RS.189210/- IS UNJUSTIFIED, UNWARRANTED AND UNCALL ED FOR. HE SUBMITTED THAT THOUGH THE ASSESSEE HAD CLOSED TH E BUSINESS ON 19/5/2003 BUT THE SAID PREMISES WAS BEING USED FOR STORING COMPA NYS RECORD AND THERE HAS BEEN NO CHANGE IN THE USER. ULTIMATELY, THE SAID PROPER TY WAS ALSO SOLD ON 12/1/2004 I.E. WITHIN FINANCIAL YEAR ON WHICH CAPITAL GAIN WA S SHOWN. HE SUBMITTED THAT UNDER THESE FACTS NO INCOME WAS LIABLE TO BE ASSESSED UND ER SECTION 23 AS HAS BEEN ASSESSED BY LD. AO. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS P ASSED BY A.O AND LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IT WAS THE CASE OF THE ASSESSEE BEFORE LD. CIT(A) THAT THE SAID PROPERTY WAS BEING USED FOR STORING THE COMPANYS RECORD AND USED AS TRANSIT HOUSE FOR . / ITA NO.4064/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2004-05 4 EMPLOYEES OF THE COMPANY WHEN THEY VISIT DELHI. HE SUBMITTED THAT THE SAID PROPERTY WAS NEVER LET OUT AND NO RENT WAS CHARGED FROM COMPANYS EMPLOYEES. THE BUSINESS OF THE ASSESSEE WAS CARRIED ON TILL 19 /5/2003 AND THIS FACT WAS NOT DISPUTED BY LD. DR. DURING THE YEAR ITSELF THIS PR OPERTY WAS SOLD AND ASSESSEE DECLARED CAPITAL GAIN THEREON. IN VIEW THESE FACTS AND CIRCUMSTANCES WE ARE OF THE OPINION THAT SECTION23 WAS NOT APPLICABLE. WE, THE REFORE, DELETE THE ADDITION OF RS.1,89,210/- WHICH WAS NOTIONALLY ASSESSED BY THE AO. GROUND NO.1 IS ALLOWED IN THE MANNER AFORESAID. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 13/11/2013 . * ,-! / 0 1 13/11/2013 - * 2 3 SD/- SD/- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0 DATED 13/11/2013 . . . . * ** * '+45 '+45 '+45 '+45 65!+ 65!+ 65!+ 65!+ / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '(#& / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 582 '+ , , / DR, ITAT, MUMBAI 6. 2 9 / GUARD FILE. . . . . / BY ORDER, (5+ '+ //TRUE COPY// : :: : / ; ; ; ; $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS . / ITA NO.4064/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2004-05 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13/11/2013 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 14/11/2013 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER