Himabindu Cold Storage Pvt. Ltd., Visakhapatnam V. THE CIT , Guntur

ITA 411/VIZ/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6544 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHUPAL REDDY
• Keywords: Capital asset; Depreciation; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO. 411 / VIZ /201 4 (ASST. YEAR : 20 09 - 1 0 ) M/S. HIMA BINDU COLD STORAGE PVT. LTD., C - 135, S.V.N. COLONY, GUNTUR . V S . CIT, GUNTUR. PAN NO. AABCH 1775 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI M. BHUPAL REDDY CIT DR DATE OF HEARING : 07 / 02 /201 7 . DATE OF PRONOUNCEMENT : 14 / 02 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX , GUNTUR , DATED 20 /0 2 /201 4 FOR THE ASSESSMENT YEAR 2009 - 10 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE COMPANY DERIVED INCOME FROM COLD STORAGE, FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF 1,48,42,606/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) BY ACCEPTING THE RETURN FILED BY THE ASSESSEE. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED LONG TERM CAPITAL LOSS OF 32,83,177/ - UNDER SECTION 45(1A) OF THE ACT TOWARDS COMPENSATIO N RECEIVED FROM THE INSURANCE COMPANY BY 2 ITA NO. 411/VIZ/2014 ADOPTING INDEXATION COST OF ACQUISITION ON ACCOUNT OF ASSETS DESTROYED IN A FIRE ACCIDENT IN JANUARY, 2001 . 3 . SUBSEQUENTLY, BY VIRTUE OF POWERS CONFERRED UNDER SECTION 263, THE COMMISSIONER OF INCOME TAX ISSUED A SHOW - CAUSE NOTICE DATED 31/01/2014 TO THE ASSESSEE ON THE GROUND THAT THE ASSESSING OFFICER HAS ALLOWED THE LONG TERM CAPITAL LOSS OF 32,83,177/ - WITHOUT EXAMINING THE FACTS OF THE CASE AND WITHOUT APPLICATION OF MIND . IN RESPONSE TO THE SHOW - CAUSE NOTICE, THE ASSESSEES REPRESENTATIVE APPEARED BEFORE THE COMMISSIONER AND FILED A WRITTEN SUBMISSION. HE SUBMITTED THAT ALL THE ASSETS OF THE COMPANY PLANTS & MACHINERY, BUILDING, ELECTRICAL FITTINGS, FURNITURE ETC. WROTH 1,64,79,068/ - DESTROYED DURING THE FIRE ACCIDENT IN JANUARY, 2001 AND T HE COMPENSATION RECEIVED WAS 2,08,71,658/ - . AS ALL THE ASSETS ARE DESTROYED IN FIRE , THE ASSESSEE CANNOT CLAIM DEPRECIATION AS SUCH IT IS NOT ELIGIBLE TO CLAIM LONG TERM CAPITAL LOSS AVAILING BENEFIT OF INDEXATION. THE COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE ABOVE EXPLANATION OF THE ASSESSEE, OBSERVED TH A T THE ASSESSEE - COMPANY WAS INC ORPORATE D ON 20/09/1999 AND COMMENCED ITS OPERATIONS FROM 01/04/2000 . IT MEANS THAT THE ASSESSEE BEING COLD STORAGE UNIT , T HE ASSESSEE STARTED COLLECTING CHILLIES FROM THE FARMERS FOR STORING THE SAME IN THE COLD STORAGE UNIT AS PER THE REQUIRED PERIOD BY THE FARMERS. THIS IS ALSO EVIDENCED BY THE INSURANCE CLAIM RECEIVED BY THE ASSESSEE FOR THE CHILLIES DESTROYED IN THE FIRE ACCIDENT . IT MEANS THAT THE ASSESSEE COMPANY HAS PUT TO USE ALL ITS MACHINERY FROM 01/04/200 0 TO 3 ITA NO. 411/VIZ/2014 07/01/2001 OR EVEN 08/01/2001 I.E. THE DATE OF FIRE ACCIDENT. SINCE THE MACHINERY WAS PUT TO USE , IT AMOUNTS TO A DEPRECIABLE ASSET AND IT ATTAINS THE CHARACTER OF A DEPRECIABLE ASSET, WHICH IS NOT ENTITLED FOR INDEXATION AND, HENCE, I T CANNOT BE CLAIMED AS A LONG TERM CAPITAL ASSET AS THE SAME WAS ALREADY PUT TO USE. 4 . ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED AN ORDER AFTER CONSIDERING ALL THE FACTS UNDER SECTION 143(3), T HEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER CANNOT BE CONSIDERED THAT IT IS ERRONEOUS ORDER . HE ALSO POINTED OUT IN THE PAPER BOOK AT PAGE NO. 21, WHICH IS AN UNDATED LETTER WRITTEN T O T HE ASSESSING OFFICER IN RESPECT OF DETAILS OF INSURANCE CLAIM UNDER SECTION 45(1A) AND SUBMITTED THAT THE ASSESSING OFFICER AFTER CONSIDERING ALL THE DETAILS, PASS ED THE ORDER, HENCE, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS ORDER. INSOFAR AS MERITS OF THE CASE IS CONCERNED, IT I S SUBMITTED THAT THE ASSESSEE HAS RECEIVED A CLAIM FROM THE INSURANCE COMPANY AND CAPITAL GAIN WAS OFFERED FOR TAXATION AS PER SECTION 45(1A) OF THE INCOME TAX ACT. THE COMMISSIONER OF INCOME TAX WITHOUT EXAMINING THE ELIGIBILITY OF THE CLAIM OF THE ASSESSEE UNDER SECTION 45(1A), HE OBSERVED IN THE ORDER THAT THE GAIN RECEIVED BY THE ASSESSEE IS A SHOR T TERM CAPITAL GAIN WHICH IS CONTRARY TO LAW AND SUBMITTED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX HAS TO BE 4 ITA NO. 411/VIZ/2014 MODIFIED AND DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER TO DECIDE IN ACCORDANCE WITH LAW . 6 . ON THE OTHER HAND , DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT ON CE THE ASSESSEE IS RECEIVED INSURANCE CLAIM ON LOSS OF DEPRECIABLE ASSETS, THE GAIN OR LOSS HAS TO BE TREATED AS SHORT TERM CAPITAL LO SS OR SHORT TERM CAPITAL GAIN AND STRONGLY SUPPORTED THE ORDER PASSED BY THE COMMISSIO NER OF INCOME TAX. 7 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE IS A COLD STORAGE COMPANY . THERE WAS A FIRE ACCIDENT TOOK PLACE ON 08/01/2001 AND SUBSEQUENTLY, THE ASSESSEE MADE AND RECEIVED A CLAIM FROM THE INSURANCE COMPANY . THE ASSESSEE HAD FILED ITS RETURN OF INCOME WHEREIN THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL LOSS OF 32,83,177/ - UNDER SECTION 45(1A) OF THE ACT BY ADOPTING INDEXATI ON COST OF ACQUISITION. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) ON 23/11/2011 BY ACCEPTING THE INCOME RETURN . WE HAVE CAREFULLY CONSIDERED THE ORDER PASSED BY THE ASSESSING OFFICER AND FIND THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE PROVISIONS OF SECTION 45(1A) OF THE ACT OR SECTION 50 OF THE ACT. THE ASSESSING OFFICER SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSEE , ALLOWED CAPITAL LOSS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER NOT ASKED ANY QU ERY IN RESPECT OF CAPITAL LOSS CLAIMED BY THE ASSESSEE. INSOFAR AS THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN PAPER BOOK AT PAGE NO. 21 LETTER SUBMITTED TO THE 5 ITA NO. 411/VIZ/2014 ASSESSING OFFICER WHICH IS U N D ATED , IT CANNOT BE GIVEN MUCH WEIGHT FOR THE SIMPL E REASON THAT WHEN IT IS FILED BEFORE THE ASSESSING OFFICER IS NOT CLEAR. THEREFORE, UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT APPLICATION OF MIND AND ALSO N OT CONSIDERING THE FACTS OF THE CASE. IT IS CLEARLY ERRONEOUS ORDER , T HEREFORE, DESERVES TO BE QUASHED. 8 . INSOFAR AS MERITS OF THE CASE IS CONCERNED, WHEN THE ASSESSEE HAS MADE A CLAIM UNDER SECTION 45(1A), THE COMMISSIONER OF INCOME TAX WITHOUT CONSIDERING THE PROVISIONS, SIMPLY OBSERVED THAT ONCE THE ASSET IS PUT TO USE, I T MEANS , IT AMOUNTS TO A DEPRECIABLE ASSET AND IT ATTAINS THE CHARACTER OF A SHORT TERM CAPITAL ASSET, WHICH IS NOT ENTITLED FOR INDEXATION OF ITS COST AND ALSO IT CAN NOT BE CLAIMED AS A LONG TERM CAPITAL ASSET. INSOFAR AS THE ABOVE OBSERVATION IS CONCERNED, WE FIND THAT THE COMMISSIONER OF INCOME TAX HAS NOT GIVEN ANY BASIS NOT ONLY THAT , HE SIMPLY DIRECTED THE ASSESSING OFFICER TO FOLLOW HIS OBSERVATIONS. WE FIND THAT THE FINDINGS GIVEN BY THE COMMISSIONER OF INCOME TAX IS BASELESS AND THEREFORE, IT DESERVES TO BE SET ASIDE. IN VIEW OF THE ABOVE, WE FIND THAT THE ORDER OF THE COMMISSION ER OF INCOME TAX HAS TO BE MODIFIED . A CCORDING LY WE SET ASIDE THE ORDER PASSE D BY THE COMMISSIONER OF INCOME TAX AND DIRECT THE ASSESSING OFFICER TO RE - DO THE ASSESSMENT IN ACCORDANCE WITH LAW WITHOUT INFLUENC ING THE OBSERV ATIONS OF THE COMMISSIONER OF IN COME TAX AFTER BEING GIVEN REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6 ITA NO. 411/VIZ/2014 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 1 4 T H DAY OF FEBRUARY , 201 7 . S D / - S D / - ( G. MANJUNATHA ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 4 T H FEBRUARY , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE - M/S. HIMA BINDU COLD STORAGE PVT. LTD., C - 135, S.V.N. COLONY, GUNTUR. 2 . THE REVENUE CIT, GUNTUR . 3 . THE D.R . 4 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., VISAKHAPATNAM