THE CIT(APPEALS)-20, MUMBAI V. SWETA DEVELOPER PVT. LTD., MUMBAI

ITA 412/MUM/2011

• Counselvise Citation: 41219914 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: V C SHAH
• Keywords: Capital asset; Depreciation

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER . / ITA NO.412/MUM/2011 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, 9(3)-2, ROOM NO. 227, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS. M/S SWETA DEVELOPER PVT. LTD. GOKUL APARTMENTS, HARIDAS NAGAR, BEHIND KORA KENDRA, SHIMPOLI ROAD, BORIVALI WEST MUMBAI-400092 ( # / REVENUE) ( $%&' / RESPONDENT ) P.A. NUMBER : AAACS5635G # ( ) / REVENUE BY: SHRI NEIL PHILIP $%&' ( ) / RESPONDENT BY : SHRI V.C. SHAH ! ( *+ / DATE OF HEARING : 15/12/2014 ,-' ( *+ / DATE OF PRONOUNCEMENT : 16/12/2014 O R D E R PER JOGINDER SINGH, JM: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 04/11/2010 OF THE LD. FIRST APPELLATE AUTHORITY, MUM BAI. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO DELETING T HE ADDITION OF RS.3,95,627/- AS DEPRECIATION ON FOUR MOTOR CARS AN D INTEREST ON LOAN 2 M/S. SWETA DEVELOPERS PVT. LTD. . AMOUNT TO RS.1,74,360/-. THE CRUX OF ARGUMENT ADVA NCED BY SHRI NEIL PHILIP, LD. DR, IS THAT THE DEPRECIATION WAS A LLOWED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN SPITE OF TH E FINDING BY THE ASSESSING OFFICER THAT THE VEHICLES WERE NOT USED F OR THE BUSINESS OF THE ASSESSEE AND AT THE SAME TIME THE ASSESSEE WAS NOT LEGAL OWNER OF THE ASSET. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI V.C. SHAH, DEFENDED THE CONCLUSION ARRIVED AT BY TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) BY SUBMITTING THAT THE VEHICLES IN QUESTIONS WERE SHOWN AS FIXED ASSETS IN THE FINA NCIAL STATEMENT OF THE ASSESSEE AND EVEN THE INITIAL PAYMENTS WERE MAD E BY THE ASSESSEE BESIDE THE FUNDING THE BALANCE COST THROUGH BANK LO ANS. PLEA WAS ALSO RAISED THAT THESE VEHICLES WERE REGISTERED IN THE NAME OF THE DIRECTORS AFTER PASSING A RESOLUTION IN ORDER TO SA VE ROAD AND ENTRY TAXES. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE C ONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). I HAVE CONSIDERED THE ISSUE. THERE IS NO DISPUTE T HAT THE VEHICLES ARE BENEFICIALLY OWNED BY THE APPELLANT . THE ASSESSING OFFICER HAS NOT DOUBTED THE EXPENSES DEBITE D TO THE P & L A/C AS MOTOR CAR EXPENSES. NON TRANSFER OF THE REGISTRATION OF THE VEHICLES IN THE NAME OF THE APP ELLANT DOES NOT DISENTITLE IT FOR THE DEPRECIATION CLAIMED ON TH EM [SEE 127 ITR 97 (ALL.) 142 ITR 45 (CAL); 143 ITR 39(CAL) ; 185 ITR 669 (KER.); 139 ITR 1055 (BOM) AND 201 ITR 995 (BOM ). SIMILARLY INTEREST PAID ON LOANS TAKEN FOR PURCHASE OF SUCH VEHICLES IS ALSO ADMISSIBLE DEDUCTION AS THE LOANS W ERE TAKEN FOR THE PURPOSE OF BUSINESS. I, THEREFORE, D ELETE THE 3 M/S. SWETA DEVELOPERS PVT. LTD. . TWO ADDITIONS AGGREGATING TO RS.5,69,987/-. THE IS SUE IS DECIDED IN FAVOUR OF THE APPELLANT. 2.1. IF THE OBSERVATION MADE IN THE ASSESSMENT OR DER, DENYING DEPRECIATION ON THE VEHICLE, CONCLUSION DRAWN IN TH E IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD AND THE ASSERTIONS MAD E BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND AN ALYZED, WE FIND THAT THERE IS NO DISPUTE TO THE FACT THAT THE VEHICLES W ERE BENEFICIALLY OWNED BY THE ASSESSEE. AT THE SAME TIME THESE VEHI CLES WERE SHOWN AS FIXED ASSETS IN THE FINANCIAL STATEMENT OF THE A SSESSEE AND THE COST OF THESE VEHICLES RIGHT FROM BEGINNING WERE ALSO MA DE BY THE ASSESSEE. SO FAR AS, NON REGISTRATION OF THE VEHICLES IN THE NAME OF THE ASSESSEE DOES NOT ENTITLE THE ASSESSEE FOR CLAIMING DEPRECIA TION. IDENTICALLY INTEREST PAID ON LOANS TAKEN FOR PURCHASE OF THESE VEHICLES IS AN ALLOWABLE DEDUCTION AS THE LOAN WAS TAKEN FOR BUSIN ESS PURPOSES, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION D RAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, ON THIS GROUND, WE FIND NO MERIT IN THE GROUND OF THE REVENUE. 3 THE NEXT GROUND PERTAINS TO HOLDING THAT THE AMOU NT OF RS.19,79,977/-, BEING PROFIT ON SALE OF ASSET, IS A SSESSABLE AS LONG TERM CAPITAL GAINS. THE CRUX OF ARGUMENT ADVANCED BY LD. DR IS THAT WHILE COMING TO A CONCLUSION, THE LD.CIT(A) IGNORED THE PROVISION OF SECTION 50 OF THE ACT TO THE EFFECT THAT INCOME ON TRANSFER OF DEPRECIABLE ASSET IS TAXABLE AS SHORT TERM CAPITAL GAIN. THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION DR AWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BY CONTENDING THAT NO DEPRECIATION WAS CLAIMED BY THE ASSESSEE AND SINCE THE ASSETS WERE SOLD AFTER 13 YEARS IT SHOULD BE ALLOW AS CAPITAL G AIN. 4 M/S. SWETA DEVELOPERS PVT. LTD. . 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE C ONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). I N VIEW OF THE DISCUSSION AND THE ARGUMENTS ADVANCED FROM BOTH SID ES, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE I MPUGNED ORDER FOR READY REFERENCE: I HAVE CONSIDERED THE ISSUE. I FIND MERIT IN THE CONTENTIONS OF THE APPELLANT. SECTION 50 IS A SPEC IAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS WHICH IS DEEMED TO BE SHORT TERMS CAPITAL GAIN EVEN IF THE ASSETS SOLD WERE LONG TERM CAPITAL ASSETS AS DEFINED IN SECTION 2(42A) OF THE ACT. HOWE VER, SECTION APPLIED ONLY WHEN THE ASSET FORMS PART OF TH E BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THE ACT. ADMITTEDLY THE OFFICE PREMISES IN QUES TION WERE NOT PART OF THE FIXED ASSETS ON WHICH DEPRECIATI ON HAD BEEN ALLOWED UNDER THE ACT. SECTION 50 DOES NOT ATTRA CT THE TRANSFER OF THE IMPUGNED ASSET. THE APPELLANT HAS R IGHTLY OFFERED PROFIT ON SALE AS LONG TERM CAPITAL GAIN AT RS.6,86,585/- THE COMPUTATION OF WHICH HAS NOT BEEN DISPUTED BY THE A.O. THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. 3.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, DENYING THE CLAIMED RELIEF ON THE SALE OF THE ASSET, CONCLU SION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD AND TH E ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSI TION AND ANALYZED, WE FIND THAT THE ASSESSEE SOLD ITS OFFICE PREMISES, DU RING THE CURRENT YEAR, BUT DID NOT SHOW ANY INCOME THERE FROM. THE TAX AU DIT REPORT OF THE 5 M/S. SWETA DEVELOPERS PVT. LTD. . ASSESSEE WAS EXAMINED BY THE CIT(A), WHEREIN IT WAS FOUND THAT NO DEPRECIATION WAS CLAIMED AND THE ASSET WAS HELD FOR THIRTEEN YEARS. SECTION 50 OF THE ACT APPLIES, WHEN ASSET FORMS PAR T OF BLOCK OF ASSET IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED, THUS, SECTION 50 IS NOT APPLICABLE ON THE TRANSFER OF THE ASSET. THUS, THE ASSESSEE RIGHTLY OFFERED THE PROFIT ON SALE OF SUCH ASSET AS LONG TE RM CAPITAL GAIN. THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) IS AFFIRMED. FINALLY, APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION O F THE HEARING ON 15/12/2014. SD/- SD/- (R.C.SHARMA) ( JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED - 16/12/2014 F{X~{T? P.S/. ! . . ( (( ( $*. $*. $*. $*. /.'* /.'* /.'* /.'* / COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. $%&' / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. .12 $*! , , / DR, ITAT, MUMBAI 6. 23 4 / GUARD FILE. ! ! ! ! / BY ORDER, %.* $* //TRUE COPY// 5 55 5 / 6 6 6 6 # # # # (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI