D.C.I.T Cir - 2,kolkata, Kolkata V. M/s Infinity Infotech Parks Ltd, Kolkata

ITA 417/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99884 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIT KR DAS JCIT SRDR
• Assessee Lawyers: D S DAMLE
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 417 / KOL / 2013 ASSESSMENT YEAR :2005-06 DCIT, CIRCLE-2, AAYAKAR BHAWA, P-7, CHOWRINGHEESQUAR, KOLKATA 700 069 V/S . M/S INFINITY INFOTECH PARKS LTD. PLOT-A3, BLOCK-GP, SECTOR-V, KOLKATA 700 091 [ PAN NO. AABCI 0632 J ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJIT KR. DAS, JCIT, SR-DR /BY RESPONDENT SHRI D.S. DAMLE, FCA /DATE OF HEARING 06-10-2015 /DATE OF PRONOUNCEMENT 16 - 10-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XIV, KOLKATA IN APPEAL NO.281/ CIT[A]-XIV/11-12 DATED 18.12.2012. ASSESSMENT WAS FRAMED BY ACIT, CI RCLE-2, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.12.2007 FOR ASSESSMENT YEAR 2005 -06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1) THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE IS ENTITLED TO GET THE BEN EFIT OF DEPRECIATION ON BUILDING AND PLANT & MACHINERY WHILE THE MERE FACT IS THAT AFTER SELLING ITA NO.417/KOL/2013 A.Y.2005-06 DCIT CIR-2, KOL. V. M/S INFINITY INFOTECH PARKS L TD. PAGE 2 OFF A PORTION OF THE PROPERTY WDV OF THE BLOCK OF A SSETS OF BUILDING AND PLANT & MACHINERY HAD NOT BEEN ADJUSTED AS PROVIDED IN THE SUB CLAUSE (II) READ WITH (I)(B) OF CLAUSE (C) OF SUB SECTION (6) OF SECTION 43 OF THE I.T. ACT, 1961. 2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD, CIT(A) HAD ERRED IN DELETING ADDITION ON ACCOUNT OF GRATUITY PAYMENT WITHOUT SHOWING IN SPECIFIC REASON. FIRST ISSUE 2. GROUND RAISED BY REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F EXCESS DEPRECIATION CLAIMED BY ASSESSEE. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A LIMI TED COMPANY AND IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE TECHNOLOGY PARKS AND RELATED INFRASTRUCTURE FACILITIES. THE ASSESSEE HAD ACQUIRED A LAND ON LONG LEASE BASIS FROM THE WEST BENGAL ELECTRONICS INDUST RIES DEVELOPMENT CORPORATION LTD., THE ASSESSEE CONSTRUCTED TWO COMM ERCIAL TOWERS, KNOWN AS INTELLIGENT TOWERS IN SALK LAKE CITY IN KOLKATA. TH E COMMERCIAL PROPERTY CONSISTS OF BUILDING, LAND APPURTENANT THERETO AS W ELL AS PLANT AND MACHINERY INBUILT IN THE BUILDING SUCH AS LIFT, CAR PARKING, WATER SUPPLY, SECURITY MAINTENANCE ETC. THE ASSESSEE TREATED THE COMMERCIA L PROPERTY AND PLANT & MACHINERY INBUILT THERETO AS DEPRECIABLE ASSETS FOR MING PART OF THE BUILDING BLOCK AND PLANT AND MACHINERY BLOCK IN THE BOOKS OF ACCOUNTS AND CLAIMED DEPRECIATION THEREON. DURING THE PREVIOUS YEAR, THE ASSESSEE TRANSFERRED SOME PART OF COMMERCIAL SPACE ON LONG TERM LEASE BA SIS. SOME PART OF COMMERCIAL SPACES WERE LET OUT ON MONTHLY RENTAL BA SIS FOR SHORT DURATION. 4. THE AO NOTICED THAT THE ASSESSEE HAD TRANSFERRED TWO PORTION COMMERCIAL SPACE ON LONG TERM LEASE BASIS. THE AO N OTICED THAT THE CONSIDERATION RECEIVED ON TRANSFER OF THE COMMERCIA L SPACE HAS NOT BEEN REDUCED FROM THE CLOSING WDV OF THE BLOCK OF THE DE PRECIABLE ASSETS IN TERMS OF SECTION 43(6) OF THE ACT. THE AO THEREFORE WAS O F THE VIEW THAT THE ITA NO.417/KOL/2013 A.Y.2005-06 DCIT CIR-2, KOL. V. M/S INFINITY INFOTECH PARKS L TD. PAGE 3 ASSESSEE HAS CLAIMED EXCESSIVE DEPRECIATION ON THE CLOSING WDV OF THE BLOCK OF ASSETS AS THE EFFECT OF THE CONSIDERATION RECEIV ED ON TRANSFER WAS NOT REDUCED FROM THE RESPECTIVE BLOCK OF ASSETS IN THE BOOKS OF ACCOUNTS. ACCORDINGLY THE AO DISALLOWED THE EXCESSIVE DEPRECI ATION CLAIMED BY THE ASSESSEE BY WORKING OUT THE DEPRECIATION ON THE SAL E VALUE OF THE ASSETS. THE COMPOSITE SALE VALUE OF THE ASSETS WAS RS.2,17,59,0 00/- FOR THE COMMERCIAL SPACE AND PLANT AND MACHINERY. THE AO DIVIDED THE S ALE PRICE OF RS. 21,75,89,000/- BEING COMPOSITE PRICE OF COMMERCIAL SPACE AND PLANT & MACHINERY IN THE RATIO OF 1.76:1. THE AO TREATED TH E VALUE OF RS.1,38,75,305/- SALE OF THE BUILDING AND BALANCE 78,83,695/- TREATE D SALE OF PLANT & MACHINERY. THE AO ACCORDINGLY REDUCED THE CLOSING WDV OF THE D EPRECIABLE ASSETS AND ALLOWED DEPRECIATION ON SUCH REDUCED CLOSING WDV. T HE AO WORKED OUT THE DEPRECIATION OF RS.13,87,530/- (10% OF 1,38,75,305/ -) AND DEPRECIATION OF PLANT AND MACHINERY AT RS.19,70,923/- (25% 78,83,89 5/-). THE TOTAL DEPRECIATION AMOUNTING TO RS.33,58,453/- WAS DISALL OWED BY THE AO AND ADDED TO THE INCOME OF ASSESSEE. 5. AGGRIEVED, BY THE ORDER OF AO, THE ASSESSEE PREF ERRED APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) THE LD. AR DEMONSTRAT ED THAT ASSESSEE HAD SOLD OUT ITS COMMERCIAL SPACES FORMING PART OF THE BUILDING BLOCK OF ASSETS ONLY TO M/S BINA NATURAL PRODUCE PVT. LTD. FOR AN A MOUNT OF RS.1,09,50,300/- AND TO M/S BANGUR WELFARE TRUST FOR AN AMOUNT OF RS .1,08,08,700/-. THE ASSESSEE DEMONSTRATED THAT THE WDV OF THE PROPERTY SOLD TO M/S BINA NATURAL PRODUCE PVT. LTD. HAD BEEN DULY REDUCED FORM THE BL OCK OF ASSET AND THE DEPRECIATION HAD BEEN CLAIMED AT THE REDUCED VALUE. THEREFORE, THE CONTENTION OF AO THAT THE DEPRECIATION HAD BEEN CLAIMED EXCESS IVE WAS NOT CORRECT. IN SUPPORT OF THE CLAIM THE ASSESSEE HAD SUBMITTED THE AUDITED BALANCE SHEET WHERE THE TRANSACTION WAS DULY RECORDED. HOWEVER, I N OTHER TRANSACTIONS OF SALE OF PROPERTY, I.E., PROPERTY TRANSFERRED TO M/S BANGUR WELFARE TRUST IT WAS SUBMITTED THAT PROPERTY SOLD TO M/S BANGUR WELFARE WAS PURCHASED DURING THE RELEVANT PREVIOUS YEAR AND IT WAS HELD AS CAPITAL A SSET NOT FORMING THE PART OF ITA NO.417/KOL/2013 A.Y.2005-06 DCIT CIR-2, KOL. V. M/S INFINITY INFOTECH PARKS L TD. PAGE 4 THE BLOCK OF ASSETS. THE SAME PROPERTY WAS SOLD TO M/S BANGUR WELFARE DURING THE RELEVANT FY ITSELF AND THE PROFIT THEREON WAS D ECLARED AS SHORT TERM CAPITAL GAIN. HENCE THIS COMMERCIAL SPACE NEVER FORMED PART OF THE FIXED ASSETS AND THEREFORE ITS EFFECTS HAD NOT BEEN GIVEN IN THE SCH EDULE OF FIXED ASSETS. 6. THE LD. CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE AND DELETED THE DISALLOWANCE OF DEPRECIATION MADE BY THE AO. IN DOING SO, THE LD. CIT(A) FOLLOWED THE SUBMISSION OF THE ORDER OF THIS TRIBUN AL IN ASSESSEES OWN CASE IN ITA NO.1392/KOL//2008 DATED 03-04-2009 ON AN IDENTICAL THE ISSUE DECIDED IN FAVOUR OF ASSESSEE. 7. AGGRIEVED, BY THE ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. SHRI SANJIT KR. DAS, LD. DEPARTMENTAL REP RESENTATIVE APPEARING ON BEHALF OF REVENUE AND SHRI D.S. DAMLE, LD. AUTHORIZ ED REPRESENTATIVE APPEARING ON BEHALF OF ASSESSEE. 8. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. BEFORE US LD. DR VEHEMENTLY SUPPORTED THE O RDER OF AO WHEREAS LD. AR SUPPORTED THE ORDER OF LD. CIT(A) AND SUBMITTED THE AUDITED FINANCIAL STATEMENTS ALONG WITH DEPRECIATION CHART IN SUPPORT OF HIS CLAIM AND RELIED ON THE ORDER OF LD. CIT(A). 9. WE FIND FROM THE AFORESAID DISCUSSION THAT AO HA S DISALLOWED THE DEPRECIATION OF ASSESSEE BY TREATING THE TRANSACTIO N AS SALE OF BUILDING AND PLANT & MACHINERY INBUILT THEREIN. HOWEVER, WE FIND THAT THE ASSESSEE IS FOLLOWING A POLICY OF DEDUCTING THE SALE PROCEEDS O F THE OFFICE FROM THE BUILDING BLOCK ONLY. IT HAS PROPERLY DEDUCTED IN THIS YEAR A LSO AS THE COMMERCIAL SPACE IS A LEASE HOLD PROPERTY. SO THE APPORTIONMENT MADE BY AO BETWEEN THE BUILDING AND PLANT & MACHINERY IS NOT JUSTIFIED. WE ALSO FIND THAT IN ASSESSEES OWN CASE IN ITA NO.1392/KOL/2008 IT WAS HELD BY THIS TRIBUNAL AS UNDER:- ITA NO.417/KOL/2013 A.Y.2005-06 DCIT CIR-2, KOL. V. M/S INFINITY INFOTECH PARKS L TD. PAGE 5 AT THE TIME OF HEARING, THE LD. DR COULD NOT PRODU CE ANY EVIDENCE IN SUPPORT OF THE CONTENTION THAT THE SPACE SOLD BY TH E ASSESSEE WAS INCLUSIVE OF PLANT AND MACHINERY. HE WAS ALSO DIREC TED TO VERIFY WHETHER THE ASSESSEE HAS REDUCED THE SALE CONSIDERATION FOR M THE VALUE OF BUILDING. THE LD DR, AFTER VERIFICATION OF THE ASSE SSMENT RECORDS, CONFIRMED THAT THE ASSESSEE HAS REDUCED THE ENTIRE SALE CONSIDERATION OF RS.1,18,28,900/- FROM THE W.D.V. OF THE BUILDING . SINCE THE REVENUE COULD NOT PRODUCE ANY EVIDENCE THAT THE SALE CONSID ERATION INCLUDES THE SALE OF PLANT AND MACHINERY AND THE ASSESSEE HAS AL READY REDUCED THE VALUE OF SALE CONSIDERATION FROM THE W.D.V. OF THE BUILDING, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THE SAME IS SUSTAINED AND GROUND NOS. 2 AND 3 OF REVENUES APPEAL ARE REJECTE D. THE FACTS IN THE PREVIOUS YEAR ARE IDENTICAL TO THE FACTS AS IT PROVIDED IN THE ASSESSEES CASE AS DECIDED BY THE ITAT. RESPECTFULL Y FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE ARE INCLINE D NOT TO INTERFERE WITH THE ORDER OF LD. CIT(A). ACCORDINGLY, THE RELEVANT GROU ND RAISED BY REVENUE IS DISMISSED. SECOND ISSUE 10. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT LD . CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF PAYM ENT OF GRATUITY WITHOUT SHOWING ANY SPECIFIC REASON. 11. DURING THE YEAR, ASSESSEE HAD CLAIMED EXPENSE O F RS.46,731/- WHICH HAS BEEN DISALLOWED BY AO ON THE GROUND THAT NO GRA TUITY FUND HAS BEEN APPROVED. HOWEVER, LD. CIT(A) DELETED THE ADDITION BY OBSERVING THAT THE EMPLOYEE HAS LEFT THE ORGANIZATION AND THE AMOUNT H AS ACTUALLY BEEN PAID DURING THE YEAR. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION MADE BY AO. 12 AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. SINCE THE PAYMENT HAS ACTUALLY BEEN MADE BY ASSESSEE DURING THE RELEVANT YEAR AT THE TIME OF THE EMPLOYEE LEAVING THE SERVICES OF THE ASSESSEE AND T HE SAME HAS BEEN RECORDED IN ITS REGULAR BOOKS OF ACCOUNT, IT CAN BE INFERRED THAT THE EXPENDITURE ITA NO.417/KOL/2013 A.Y.2005-06 DCIT CIR-2, KOL. V. M/S INFINITY INFOTECH PARKS L TD. PAGE 6 HAS ACTUALLY BEEN INCURRED BY ASSESSEE. HENCE, WE C ONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF REVENUE IS DISMISSED. 13. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 16/10 /2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 16 /10/2015 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-DCIT, CIR-2, AAYAKAR BHAWAN, P-7, CHOW RINGHEEE SQR.KOL-69 2. / RESPONDENT-M/S INFINITY INFOTECH PARKS LTD. PLOT -A-3, BLOCK-GP,SEC-V,KOL-91 3. * +, - - . / CONCERNED CIT KOLKATA 4.- - .- / CIT (A) KOLKATA 5. 012 33+,,- +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,