ITO 10(1)(1), MUMBAI V. DFC ENGINEERS P. LTD, MUMBAI

ITA 5228/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87995 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 25-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: FEROZE ANDHYARUJ INA
• Keywords: Business income; Depreciation; Rectification of order
• Section: 143(3); 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM ! I.T.A. NO. 5228/MUM/2013 ( ASSESSMENT YEAR : 2006-07 ) INCOME TAX OFFICER - 10(1)(1) ROOM NO.453 AAYAKAR BHAVAN MUMBAI. ! VS. M/S. DFC ENGINEERS PVT. LTD. 20, UNITED INDUSTRIAL ESTATE, SHANTI NAGAR, VAKOLA PIPELINE SANTACRUZ (E) MUMBAI-400 055. ' ! # ! PAN/GIR NO. : AABCD 9449 F ( '$ APPELLANT ) .. ( %&'$ ! RESPONDENT ) '$' ! APPELLANT BY : SHRI JEETENDRA KUMAR (DR) %&'$(' / RESPONDENT BY : SHRI FEROZE ANDHYARUJINA - (AR) )*(+ DATE OF HEARING : 25/11/2014 ,-./ ( + / DATE OF PRONOUNCEMENT : 14/01/2015 0! O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 08/05/2013 OF CIT(A ARISING FROM ORDER PASSED U/S. 154 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING ADDITION OF RS. 14,93,574/- REPRESENTING LOSS ON SALE OF FACTORY BU ILDING WITHOUT 2 5228/MUM/13 CONSIDERING THE PROVISION OF SEC 50 AND WITHOUT APP RECIATING THE FACT THAT THE BUILDING SOLD PERTAINS TO THE BLOCK OF ASS ETS AGAINST WHICH DEPRECIATION WAS CLAIMED.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED NOT TAKING INTO CONGN IZANCE OF THE FACT THAT THE ISSUE OF CHANGE IN OPINION IS ABSENT AND O NLY MISTAKE APPARENT FROM RECORD HAS BEEN RECTIFIED.' 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMI T OR SUBSTITUTE AND OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ENGINEER ING CONSULTANCY. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 19/12/2008 COMPUTING BOOK PROFIT U/S. 115JB AT RS.29,29,223/-. LATER ON, THE AO ISS UED A NOTICE U/S. 154 FOR RECTIFICATION OF MISTAKES. THE AO WHILE PASSING THE ORDER U/S. 154 HAD ADDED RS.14,93,574/- AS LOSS INCURRED ON ACCOUNT OF SALE OF FACTORY BUILDING ALLOWED IN THE ORIGINAL ASSESSMENT. WHILE MAKING THE SAID A DDITION THE AO INVOKED SECTION 50 OF THE INCOME TAX ACT. THE ASSESSEE CHAL LENGED THE ACTION OF AO BEFORE CIT(A) AND CONTENDED THAT BY SALE OF FACTO RY BUILDING THE ENTIRE BLOCK OF FACTORY BUILDING WAS SOLD AND THEREBY THE SAID B LOCK OF ASSET CEASED TO EXIST AND REDUCING A NEGATIVE FIGURE OF RS.14,93,574/- F OR WHICH THE ASSESSEE WAS ENTITLED TO CLAIM LOSS. THE CIT(A) ALLOWED THE CLAI M OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO BY FOLLOWING THE DECISI ON OF THIS TRIBUNAL. 4. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ISSUE OF ALLOWANCE OF CLAIM OF LOSS ON SALE OF FACTORY BUILDING WAS DECIDED BY CIT(A) IN PARA 2.3 AS UNDER :- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE. IN THI S CASE APPELLANT HAD SOLD ITS FACTORY BUILDING AND WHOLE B LOCK OF THE ASSET IS EXHAUSTED. ON SELLING THIS FACTORY BUILDIN G IT HAD INCURRED LOSS OF RS.14,93,574/- ON COMPUTING SALE P RICE CONSIDERATION MINUS SALE CONSIDERATION. THUS APPELL ANT TREATED IT AS BUSINESS LOSS BECAUSE THE LOSS HAS OCCURRED IN TRANSACTING A BUSINESS ASSET. HOWEVER, A.O. TREATED THIS LOSS AS SHORT TERM LOSS INVOKING SEC.50. WHEN THE BUSINESS ASSET IS SOLD AND IF LOSS IS INCURRED WHETHER IT HAS TO BE COMPUT ED UNDER 3 5228/MUM/13 CAPITAL GAIN OR UNDER BUSINESS INCOME. THIS ISSUE H AS COME INTO CONSIDERATION OF ITAT MUMBAI BENCH IN THE CASE OF MUKAND GLOBAL FINANCE LTD. VS. DCIT 119 TTJ 467 WHEREIN IT IS HELD AS UNDER: 'CAPITAL GAINS-DEPRECIABLE ASSETS-APPLICABILITY OF S.50 VIS-- VIS S.32 (1)(III)-SEC.50 DEALS WITH THOSE CASES ONL Y WHERE PROFIT ACCRUES TO THE ASSESSEE ON TRANSFER OF ANY B LOCK OF ASSETS-IN CASE OF LOSS ACCRUING TO ASSESSEE ON TRANSFER OF ANY BUILDING, MACHINERY, PLANT AND FURNITURE, THE MATTER IS DEALT WITH UNDER S.32(1)(I II)- ASSESSEE HAVING SOLD ITS FLAT, WHICH WAS THE ONLY ASSET IN THE BLOCK UNDER THE HEAD 'BUILDING' AT A CONSIDERATION LESS THAN ITS WDV, S.50 SHALL HAVE NO APPLICATION AND LOSS ACCRUING TO THE ASSESSEE CAN BE ALLOWED DEDUCTION AGAINST BUSINESS PROFITS UNDER S.32(1)(III), PROVIDED SUCH DEFICIENCY IS ACT UALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT -ASSESSEE HAVIN G NOT WRITTEN OFF THE DEFICIENCY, CLAIM WAS RIGHTLY D ISALLOWED.' PROPOSITION OF THE ABOVE ITAT DECISION IS IF A BUSI NESS ASSET IS SOLD, IF IT HAS INCURRED THE LOSS, THE LOSS HAS TO BE DEA LT AS PER SEC.32(1)(III) AND NOT BY INVOKING_SEC.50. IT FURTHER STATED THAT SEC.50 IS A DEEMING SECTION IT CANNOT EXTEND BEYOND. HENCE, FOL LOWING THE ABOVE DECISION, A.O. IS DIRECTED TO COMPUTE THE LOSS ON S ALE OF BUILDING AS BUSINESS LOSS, THIS ADDITION IS DELETED. RELIEF GRA NTED TO THE APPELLANT IS RS.7,03,083/- . THIS GROUND OF APPEAL IS ALLOWED. 4.1 CIT(A) NOTED THE FACT THAT ON SALE OF FACTORY B UILDING THE BLOCK OF ASSET CEASED TO EXIST AND THEREFORE, THE CLAIM OF LOSS HA S TO BE DEALT WITH U/S. 32(1)(III) OF THE INCOME TAX ACT AND NOT U/S. 50 OF THE ACT. THE CIT(A) FOLLOWED THE DECISION OF THIS TRIBUNAL AND WE CONCUR WITH TH E VIEW OF THE EARLIER DECISION AS RELIED BY THE LD. CIT(A). ACCORDINGLY WE DO NOT FIND ANY ERROR OR IRREGULARITY IN THE IMPUGNED ORDER OF CIT(A) AND SAME IS UPHELD. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14/01/201 5. . 0(,-./) 12 345!64!7648-( 9* SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO ) ACCOUNTANT MEMBER / JUDICIAL MEMBER ) * MUMBAI; 2 DATED 14/01/2015 . . ./ JV, SR. PS 4 5228/MUM/13 !'#' !'#' !'#' !'#' ! COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT. 3. ): ; < / THE CIT(A)- 4. ) : / CIT 5. =9%+> > / ) * / DR, ITAT, MUMBAI 6. 9?@* ! GUARD FILE. $ $ $ $ / BY ORDER, &+%+ //TRUE COPY// % %% % $&' $&' $&' $&' (DY./ASSTT. REGISTRAR) ) * / ITAT, MUMBAI