DY.C.I.T.-8(1), MUMBAI V. M/S. ENPRO FINANCE LTD., MUMBAI

ITA 4428/MUM/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62634 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 28-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 27-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Keywords: Capital asset; Cost of acquisition; Surrender of tenancy right
• Section: 54

Judgement Text

ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO.4428/MUM/2008 (ASSESSMENT YEAR: 2004-05) DY. COMMISSIONER OF INCOME TAX- 8(1) ROOM NO.210 AAYAKAR BHAVAN, MK ROAD VS ENPRO FINANCE LTD BLOCK NO.502, 5 TH FLOOR, PLOT CTS NO.220/23A PATEL ESTATE MUMBAI 400020 ROAD, JOGESHWARI (W) MUMBAI 400 102 PAN AAACE 1146 J (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. RUPINDER BRAR, CIT -DR ASSESSEE BY: SHRI MAYUR KISNADWALA DATE OF HEARING: 28/05/2012 DATE OF PRONOUNCEMENT: 27/06/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDERS OF THE CIT (A)-8 MUMBAI DATED 23.4.2008. THE REVENUE HAS RAISED THE FOLLOWING REVISED CONCISE GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN DIRECTING AO TO AL LOW DEDUCTION UNDER SECTION 54G OF THE ACT, IGNORING TH E FACT THAT ASSESSEE HAS NOT FULFILLED THE CUMULATIVE COND ITIONS LAID DOWN IN SECTION 54G(1) AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT (A) FAILED TO APPRECIATE THE FACT T HAT ASSESSEE HAD CLOSED ITS BUSINESS IN THE FINANCIAL Y EAR 1999-2000 AND HENCE IT CANNOT BE SAID THAT A TRANSF ER WAS EFFECTED IN THE COURSE OF OR IN CONSEQUENCE OF THE SHIFTING OF SUCH INDUSTAIAL UNDERTAKING. ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 2 OF 10 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT (A) FURTHER FAILED TO APPRECIATE TH E FACT THAT THE LAND ACQUIRED BY ASSESSEE IN THE NON URBAN AREA WAS NOT PUT TO USE FOR THE PURPOSE OF ITS BUSI NESS BUT HAD BEEN PUT TO USE FOR ITS BUSINESS OF DEVELOP MENT OF PROPERTY, WHICH BY NO STRETCH OF IMAGINATION COU LD BE TERMED AS THE BUSINESS OF THE INDUSTRIAL UNDERTAKIN G OF ASSESSEE . 2. BRIEFLY STATED, ASSESSEE FILED RETURN OF INCOME DEC LARING TOTAL INCOME AT ` 1,57,02,407/- MAINLY CONSISTING OF CAPITAL GAINS. ASSESSEE SURRENDERED ITS TENANCY RIGHTS AND RECEIVE D AN AMOUNT OF ` 4,12,00,000/-. OUT OF THIS AMOUNT ASSESSEE HAS INVE STED AN AMOUNT OF ` 1,40,00,000/- IN CAPITAL GAIN ACCOUNT SCHEME AND AN AMOUNT OF ` 1,14,21,000/- WAS CLAIMED TO HAVE BEEN INVESTED IN LAND AND BUILDING. IT CLAIMED DEDUCTION UNDER SECTI ON 54G OF THE AMOUNT OF ` 2,54,21,000/- AND OFFERED THE BALANCE AMOUNT AS TAXABLE INCOME. IT WAS AOS CONTENTION THAT ASSESSE E SOLD ITS ENTIRE PLANT & MACHINERY IN FINANCIAL YEAR 1999-2000 AND S INCE THERE IS NO EXISTENCE OF AN UNDERTAKING, HAVING SOLD THE ENT IRE PLANT & MACHINERY, THE CLAIM UNDER SECTION 54G, WHICH PROVI DES FOR EXEMPTION FOR SHIFTING OF INDUSTRIAL UNDERTAKING FR OM URBAN AREA TO OTHER THAN URBAN AREA IS NOT ELIGIBLE TO ASSESSEE. HE MADE ELABORATE DISCUSSION ON THIS ISSUE VIDE PARA 7 OF THE ORDER A ND DID NOT ALLOW THE DEDUCTION TO ASSESSEE. 3. BEFORE THE CIT (A) ASSESSEE SUBMITTED THAT THE COMP ANY DECIDED TO SHIFT FROM URBAN AREA TO RURAL AREA AND ACCORDINGLY SOLD THE PLANT & MACHINERY ON IMMEDIATE BASIS. HOWEVER, AS ASSESSEE WAS RUNNING THE INDUSTRIAL UNDERTAKING FOR THE PAST 45 YEARS OR SO IN THE PREMISES LEASED FROM M/S PATEL ENGINEERING C O. LTD, THE SURRENDER OF LEASE RIGHTS TOOK SOME TIME AND NEGOTI ATIONS WERE GOING ON FROM 1999 ONWARDS WHICH TERMINATED IN GETT ING THE AMOUNT WHICH WAS OFFERED AS RECEIPTS IN REGARD TO S URRENDER OF LEASED PREMISES. ASSESSEE PLACED CORRESPONDENCE WIT H THE SAID ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 3 OF 10 COMPANY, MINUTES OF THE BOARD AND OTHER DOCUMENTS I N SUPPORT OF THE CONTENTION THAT THE AMOUNTS WERE RECEIVED IN CO NNECTION WITH THE SHIFTING OF THE INDUSTRIAL UNDERTAKING FROM URB AN AREA. IT WAS ALSO SUBMITTED THAT THE CAPITAL GAINS ON SUCH TRANS FER HAVE CLEARLY ARISEN FROM THE TRANSFER OF QUALIFYING THE CAPITAL ASSETS UNDER SECTION 54G WHICH ARE BEING USED FOR THE PURPOSE OF BUSINESS OF AN INDUSTRIAL UNDERTAKING SITUATED IN URBAN AREA AND W AS ELIGIBLE FOR DEDUCTION UNDER THAT SECTION. IT WAS SUBMITTED THAT AOS OPINION, THAT THE INDUSTRIAL UNDERTAKING DID NOT EXIST FROM FINANCIAL YEAR 1999-2000 IS NOT CORRECT AS ASSESSEE IS IN EXISTENC E AND CONTINUE TO UNDERTAKE OTHER ACTIVITIES AND ULTIMATELY DECIDED T O DO THE BUSINESS FOR THE DEVELOPMENT OF PROPERTY FOR WHICH AMOUNT WA S SPENT AS PER THE PROVISIONS OF THE ACT. 4. IT WAS FURTHER SUBMITTED THAT ASSESSEE CONSTRUCTED THE BUILDING COSTING ` 1.40 CRORES BY UTILIZING THE AMOUNT IN THE CAPITAL GAINS ACCOUNTS SCHEME. IT ALSO MADE SUBMISSIONS ON THE LEGAL PROVISIONS OF SECTION 54G BEFORE THE CIT (A). AFTER CONSIDERING THE SUBMISSIONS THE CIT (A) ALLOWED THE CLAIM BY STATIN G AS UNDER: THE ISSUE HAS BEEN CAREFULLY EXAMINED. THERE IS ME RIT IN THE ARGUMENTS OF THE APPELLANT. IT IS NOT IN DIS PUTE THAT ON A CONSIDERATION OF ` .4,12,00,000/- RECEIVED ON SURRENDER OF LEASED PREMISES, CAPITAL GAIN OF AN EQUIVALENT AMOUNT ARISE AD THE COST OF ACQUISITION WAS NIL AND THAT THE APPELLANT HAS CLAIMED DEDUCTION UN DER SECTION 54G ONLY OF ` .2,54,21,000/-. THE FACTS ARE THAT AS THE APPELLANT WERE MAKING CONTINUOUS LOSSES, IT DECIDED TO SHIFT IT INDUSTRIA L UNDERTAKING WHICH WAS EXISTING IN AN URBAN AREA FOR MORE THAN 45 YEARS TO A NON-URBAN AREA; CONSEQUENTL Y, IT STARTED THE PROCESS OF DISPOSING OFF THE ASSETS OF THE INDUSTRIAL UNDERTAKING. THE PLANT AND MACHINERY BEI NG MOVABLE OWNED ASSETS COULD BE DISPOSED OFF QUICKLY; THE DISPOSAL OF RIGHTS IN LEASEHOLD PREMISES TOOK SOME TIME. HOWEVER, IT CANNOT THEREFORE BE SAID THAT THE INDUS TRIAL UNDERTAKING CEASED TO EXIST ON SALE OF THE PLANT AN D MACHINERY. THE PROCESS OF SHIFTING COMMENCED WITH T HE ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 4 OF 10 SALE OF PLANT AD MACHINERY AND CONTINUED TILL THE R IGHTS IN THE LEASEHOLD PREMISES WERE SURRENDERED ON WHICH CAPITAL GAINS ACCRUED TO THE APPELLANT. HENCE SURRE NDER OF LEASEHOLD PREMISES WAS EFFECTED IN THE COURSE OF SHIFTING OF THE INDUSTRIAL UNDERTAKING AND THEREFOR E, THE CAPITAL GAINS THEREON ARE ELIGIBLE FOR DEDUCTION UN DER SECTION 54G. CIRCULAR NO.495 CITED BY AO CLEARLY SUPPORTS THE CASE OF THE APPELLANT, AS IT HAS TRANS FERRED ITS ASSETS TO SHIFT ITS INDUSTRIAL UNDERTAKING TO N ON-URBAN AREAS, WHICH IS THE AVOWED INTENTION OF THE STATUTE AND THEREBY ASSIST IN BALANCED REGIONAL GROWTH. APART FROM OPERATING THE SHIFTED INDUSTRIAL UNDERTA KING AS MENTIONED BY AO IN THE ASSESSMENT ORDER, THE APPELLANT HAS ALSO UNDERTAKEN THE BUSINESS OF DEVELOPMENT OF PROPERTY AND PROPERTY PLANNERS FOR W HICH IT HAS PURCHASED TRACTS OF LAND IN NON-URBAN AREA F OR THE PURPOSES OF ITS BUSINESS IN THE SAID AREA. THE APPE LLANT HAS, THEREFORE, USED PART OF THE CAPITAL GAINS ACCR UING ON SHIFTING OF INDUSTRIAL UNDERTAKING FOR ACQUIRING LA ND AND CONSTRUCTING BUILDING IN THE NON-URBAN AREAS, WHICH IS AN ELIGIBLE INVESTMENT TO QUALIFY FOR DEDUCTION UND ER SECTION 54G. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE PLEA OF THE APPELLANT IS ACCEPTED AND THIS GROU ND IS DECIDED IN FAVOUR OF THE APPELLANT. 5. THE LEARNED DR REFERRED TO THE ORDER OF AO TO SUBMI T THAT THERE IS NO INDUSTRIAL UNDERTAKING IN EXISTENCE AND PROVISIONS OF SECTION 54G ARE NOT APPLICABLE. IT WAS HIS CONTENTI ON THAT ON SURRENDER OF TENANCY RIGHTS, THE AMOUNT WAS TO BE O FFERED IN ITS ENTIRETY UNDER THE HEAD CAPITAL GAIN AND CLAIM OF S ECTION 54G IS NOT ALLOWABLE TO ASSESSEE. HE REFERRED TO THE FACTS AS STATED BY AO THAT ASSESSEE HAS SOLD THE ENTIRE PLANT & MACHINERY AND EMPLOYEES HAVE LEFT THE COMPANY WAY BACK IN 1999-2000. THEREFORE, THE ENTIRE RECEIPT WAS TAXABLE AND NO CLAIM CAN BE ALLOWED UND ER SECTION 54G. 6. LEARNED COUNSEL REFERRED TO THE PROVISIONS OF SECTI ON 54G, THE FACTS AS STATED BY AO AND THE ADDITIONAL EVIDEN CES PLACED BEFORE THE CIT (A) WITH REFERENCE TO THE NEGOTIATIONS WITH THE LAND OWNERS ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 5 OF 10 AND OTHER DOCUMENTS ON RECORD TO SUBSTANTIATE ITS C ONTENTIONS. HE RELIED ON THE ORDER OF THE CIT (A). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMIN ED THE DETAILS PLACED ON RECORD. IT IS AN ADMITTED AND UND ISPUTED FACT THAT THE ASSESSEE COMPANY CARRIED ON ITS MANUFACTURING A CTIVITY AND BUSINESS AT ITS LEASED PREMISES AT JOGESHWARI FOR M ORE THAN 45 YEARS. ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANU FACTURING EQUIPMENTS, ELECTRICAL MOTORS AND MACHINERIES. SUB SEQUENTLY, THE COMPANY PURCHASED PLASTIC MOULDING MACHINES AND UND ERTOOK LABOUR JOBS FOR MANUFACTURE OF MOULDING PLASTIC PAR TS. DUE TO SEVERE COMPETITION IN THE PLASTIC INDUSTRY AND HIGH OPERATIONAL OVERHEADS IN MUMBAI, THE COMPANY INCURRED LOSSES AN D THE ACTIVITY WAS COMMERCIALLY NOT FEASIBLE. DURING THE FINANCIAL YEAR 1999-2000 THE COMPANY DECIDED TO SHIFT ITS UNDERTAKING TO A N ON URBAN AREA. AS THE PLANT AND MACHINERY WAS VERY OLD, ASSESSEE S OLD THEM IMMEDIATELY BUT, FOR SURRENDERING THE TENANCY RIGHT S IT TOOK SOMETIME AS IT WAS ENGAGED IN NEGOTIATIONS WITH THE LESSOR AND AFTER PROTRACTED NEGOTIATIONS, THE LEASED PREMISES ON WHI CH THE INDUSTRIAL UNDERTAKING OPERATED WAS FINALLY SURRENDERED ON 1.1 0.2003 AND COMPENSATION WAS RECEIVED. THESE ASPECTS WERE EXAMI NED BY THE CIT (A) WHOSE FINDINGS ARE TO BE UPHELD. THEY ARE I N ACCORDANCE WITH FACTS AND PROVISIONS OF LAW. 8. PROVISIONS OF SECTION 54 ARE AS UNDER: SECTION 54G. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFE R OF A CAPITAL ASSET, BEING MACHINERY OR PLANT OR BUILDING OR LAND OR ANY RIGHTS IN BUILDING OR LAND USED FOR THE PURPOSES OF THE BUSINESS OF AN INDUSTRIAL UNDERTAKI NG SITUATE IN AN URBAN AREA, EFFECTED IN THE COURSE OF , OR IN CONSEQUENCE OF, THE SHIFTING OF SUCH INDUSTRIAL UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) TO ANY AREA (OTHER THAN AN URBAN AR EA) AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BE FORE ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 6 OF 10 OR THREE YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE, (A) PURCHASED NEW MACHINERY OR PLANT FOR THE PURPOSES OF BUSINESS OF THE INDUSTRIAL UNDERTAKING IN THE AREA TO WHICH THE SAID UNDERTAKING IS SHIFTED ; (B) ACQUIRED BUILDING OR LAND OR CONSTRUCTED BUILDING FOR THE PURPOSES OF HIS BUSINESS IN THE SAID AREA ; (C) SHIFTED THE ORIGINAL ASSET AND TRANSFERRED THE ESTABLISHMENT OF SUCH UNDERTAKING TO SUCH AREA; AND (D) INCURRED EXPENSES ON SUCH OTHER PURPOSE AS MAY BE SPECIFIED IN A SCHEME FRAMED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS SECTION, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SA Y, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER T HAN THE COST AND EXPENSES INCURRED IN RELATION TO ALL O R ANY OF THE PURPOSES MENTIONED IN CLAUSES (A) TO (D) (SUCH COST AND EXPENSES BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS BEIN G PURCHASED, ACQUIRED, CONSTRUCTED OR TRANSFERRED, AS THE CASE MAY BE, THE COST SHALL BE NIL ; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO , OR LESS THAN, THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS BEING PURCHASED, ACQUIRED, CONSTRUCTED OR TRANSFERRED, ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 7 OF 10 AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. 9. THE REQUIREMENT OF SECTION 54G IS THAT ASSESSEE SHO ULD APPLY THE CAPITAL GAINS FOR ONE OR MORE OF THE SPEC IFIED PURPOSES/NEW ASSETS WITHIN THE TIME SPECIFIED THERE IN AS UNDER: PURCHASE OF NEW MACHINERY OR PLANT FOR THE PURPOSES OF BUSINESS OF THE INDUSTRIAL UNDERTAKING IN THE AREA WHERE IT IS SHIFTED. ACQUIRE BUILDING OR LAND OF CONSTRUCT BUILDING FOR THE PURPOSES OF HIS BUSINESS IN THE SAID AREA . SHIFTS THE ORIGINAL ASSET AND TRANSFERS THE ESTABLI SHMENT OF SUCH UNDERTAKING TO SUCH AREA. 10. A CLOSE READING OF THIS SECTION BRINGS OUT VERY CLE ARLY THAT WHEREAS UNDER SECTION 54G(1)(A), THE REQUIREMENT IS THAT THE NEW MACHINERY OR PLANT HAS TO BE PURCHASED FOR THE PURPOSES OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING , SECTION 54G(1)(B) MERELY REQUIRES THAT THE ACQUISITION OF BUILDING OR LAND O R CONSTRUCTION OF BUILDING SHOULD BE FOR THE PURPOSES OF ITS BUSINESS IN SUCH NON- URBAN AREA. IN OTHER WORDS, THE PHRASE OF THE INDUSTRIAL UNDERTAKING , WHICH IS THERE IN CLAUSE 1(A) IS CONSPICUOUSLY MISSING IN CLAUSE 1(B). HENCE, THE LAW CLEARLY MAKE S A DISTINCTION BETWEEN THE ELIGIBLE PURPOSES FOR UTILIZATION OF T HE AMOUNT OF CAPITAL GAINS. 11. THE SAID SECTION EXEMPTS CAPITAL GAINS ON COMPULSOR Y ACQUISITION OF LAND OR BUILDING OR ANY RIGHTS IN LA ND OR BUILDING FORMING PART OF THE INDUSTRIAL UNDERTAKING AND USED FOR THE PURPOSES OF THE BUSINESS OF THE INDUSTRIAL UNDERTAK ING, PROVIDED THE AMOUNT OF CAPITAL GAINS ARE USED FOR ACQUIRING ANY OTHER LAND OR BUILDING OR ANY RIGHTS THEREIN OR CONSTRUCTING ANY BUILDING FOR THE PURPOSES OF SHIFTING OR RE-ESTABLISHING THE SAID UN DERTAKING OR ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 8 OF 10 SETTING UP ANOTHER INDUSTRIAL UNDERTAKING. SECTION 54D MANDATES THAT, FOR THE CAPITAL GAINS TO EXEMPT, THE NEW LAND OR BUILDING OR RIGHTS THEREIN ACQUIRED, HAVE TO BE USED ONLY FOR E ITHER SHIFTING OR REESTABLISHING OR ESTABLISHING AN INDUSTRIAL UNDERT AKING (AND NO OTHER PURPOSE). IN CONTRAST, SECTION 54G OF THE ACT PERMITS THE USE OF CAPITAL GAINS FOR ACQUIRING LAND OR BUILDING OR CONSTRUCTING BUILDING FOR THE PURPOSES OF (ANY) BUSINESS IN THE NON-URBAN AREA. 12. FOR THE PURPOSE OF BUSINESS WAS INTERPRETED BY TH E HON'BLE BOMBAY HIGH COURT IN THE CASE OF KRISHNA SAHAKARI S AKHAR KARKHANA LTD V. CIT 229 ITR 577: THE EXPRESSION FOR THE PURPOSE OF THE BUSINESS I S WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. ITS RANGE IS WIDE: IT MAY TAKE IN NOT ONLY THE DAY TO DAY RUNNING OF A BUSINESS BUT ALSO THE RATIONALIZATION OF ITS ADMINISTRATION AND MODERNIZA TION OF ITS MACHINERY; IT MAY INCLUDE MEASURES FOR THE PRESERVATION OF THE BUSINESS AND FOR THE PROTECTION OF ITS ASSETS AND PROPERTY FROM EXPROPRIATION, COERCIVE PR OCESS OR ASSERTION OF HOSTILE TITLE; IT MAY ALSO COMPREHE ND PAYMENT OF STATUTORY DUES AND TAXES IMPOSED AS A PR E- CONDITION TO COMMENCE OR FOR THE CARRYING ON OF A BUSINESS; IT MAY COMPREHEND MANY OTHER ACTS INCIDEN TAL TO THE CARRYING ON OF A BUSINESS. THE ONLY LIMITATI ON IS THAT IT SHOULD BE FOR THE PURPOSE OF THE BUSINESS, THAT IS TO SAY, THE EXPENDITURE INCURRED SHOULD BE FOR THE CARRYING ON OF BUSINESS AND ASSESSEE SHOULD INCUR I T IN HIS CAPACITY AS A PERSON CARRYING ON THE BUSINESS. 13. FURTHER IN THE CASE OF CIT VS. LAKE PALACE HOTELS A ND MOTELS (P) LTD, 251 ITR 0644, THE HON'BLE RAJASTHAN HIGH C OURT INTERPRETED: A PERUSAL OF THE SCHEME OF SECTION 32A OF THE INCOME TAX ACT, 1961, MAKES IT ABUNDANTLY CLEAR THAT INVESTMENT IN ANYTHING WHICH CAN BE TERMED IN A GEN ERIC SENSE AS PLANT AND MACHINERY USED FOR THE PURPOSES OF BUSINESS HAS NOT BEEN MADE ELIGIBLE TO CLAIM INVEST MENT ALLOWANCE AND A DEDUCTION IN RESPECT OF SUCH INVESTMENT, BUT ONLY SUCH PLANT AND MACHINERY USED IN BUSINESS WHICH FULFILS FURTHER ESSENTIAL CONDITIONS AND ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 9 OF 10 REQUIREMENTS REQUIRED FOR LAYING CLAIM TO SUCH DEDUCTIONS. THE KEY WORDS USED IN THIS SECTION ARE FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTUR E OR PRODUCTION OF ANY ARTICLE OR THING. THEREFORE, AS CLAUSE-B OF SUB SECTION (1) OF SECTIO N 54G DOES NOT USE ITS SPECIFIC PHRASE FOR THE PURPOSE OF ITS BUS INESS OF UNDER TAKING EXCEPT THAT THE BUSINESS SHOULD BE IN NON-U RBAN AREA. THEREFORE, IT CAN BE INTERPRETED THAT ASSESSEE SHOU LD CARRY ON ANY BUSINESS IN NON URBAN AREA. IF THE AMOUNTS ARE UTIL IZED FOR ACQUISITION OF ASSETS FOR THE PURPOSE OF ITS BUSINE SS, THIS SHOULD QUALIFY FOR THE PURPOSE OF EXEMPTION UNDER SECTION 54G AS THERE IS NO REQUIREMENT THAT THE LAND AND BUILDINGSHOULD BE USED FOR THE PURPOSE OF THE BUSINESS OF INDUSTRIAL UNDERTAKING. 14. THE ARGUMENT THAT ASSESSEES INDUSTRIAL UNDERTAKING CEASED TO EXIST IN 1999-2000 AS HELD BY AO IS NOT CORRECT AS ASSESSEE IS IN THE PROCESS OF SHIFTING AND EVEN THE SECTION ITSELF PROVIDES THAT SHIFTING WAS IN COURSE OF OR IN CONSEQUENCE OF OF SUCH INDUSTRIAL UNDERTAKING. THE SURRENDER OF TENANCY RIGHTS HAS C ERTAINLY OCCURRED IN CONSEQUENCE OF SHIFTING OF SUCH INDUS TRIAL UNDERTAKING AND DUE TO PROTRACTED NEGOTIATIONS, THERE WAS SOME DELAY BUT THE SURRENDER OF TENANCY RIGHTS CAN BE HELD TO BE IN CO NSEQUENCE OF SHIFTING OF SUCH UNDERTAKING WHICH WAS IN THE BUSIN ESS. THEREFORE, AOS OBSERVATION THAT NO INDUSTRIAL UNDERTAKING WAS IN EXISTENCE AT THE TIME OF SURRENDER OF TENANCY RIGHTS CANNOT BE A CCEPTED. 15. IT IS ALSO SEEN THAT IN HIS ANXIETY TO DISALLOW THE CLAIM AO HAS NOT EVEN CONSIDERED THE AMOUNT OF ` 1.40 CRORES DEPOSITED IN CAPITAL GAINS SCHEME. THIS AMOUNT WAS ELIGIBLE FOR DEDUCTION EVEN UNDER OTHER PROVISIONS OF THE ACT, IF NOT UNDER SEC TION 54G. BE THAT AS IT MAY, THERE IS NO DISPUTE WITH REFERENCE TO TH E FACT THAT ASSESSEE HAS UTILIZED THE FUNDS AS PER THE PROVISIO NS OF SECTION 54G AND ACCORDINGLY THE CIT (A) WAS CORRECT IN ALLOWING THE CLAIM. WE, ITA NO.4428 OF 2008 ENPRO FINANCE LTD MUMBAI PAGE 10 OF 10 THEREFORE, UPHOLD THE ORDER OF THE CIT (A) AND DISM ISS THE REVENUE GROUNDS. 16. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2012. SD/- SD/- (S.S.GODARA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 27 TH JUNE, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI