ADDL CIT RG 19(2), MUMBAI V. PANDURANG K . KORGAONKAR, MUMBAI

ITA 5405/MUM/2011

• Counselvise Citation: 540519914 RSA 2011
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Capital asset; Depreciation; Benefit of exemption

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.5405/MUM/2011 ASSESSMENT YEAR 2006-07 THE ADDL. COMMISSIONER OF INCOME TAX 19(2), R.NO. 315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. VS. PANDURANG K. KORGAONKAR, B-602, GAZDAR APARTMENTS, JUHU TARA ROAD, JUHU, MUMBAI-400 049. PAN: AADPK 8381 R (APPELLANT ) (RESPONDENT) REVENUE BY : SHRI D.S. SUNDER SINGH, DR ASSESSEE BY : NONE DATE OF HEARING : 13-06-2012 DATE OF PRONOUNCEMENT : 27-06-2012 ORDER PER RAJENDRA, AM FOLLOWING GROUNDS OF APPEAL WERE FILED BY THE ASSESSING OFFICER (AO) CHALLENGING THE ORDER DATED 05-05-2011OF THE CIT(A) -35,MUMBAI: I.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE U/S.54EC OF THE I.T. ACT. AFTER FOLLOWING THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF SUDHA S. TRIVEDI (ITA NO.6040 & 6186/MUM/2007 DATED 20/2/200 9) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT ON MERITS OF THE CA SE. II.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. III.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. FACTS OF THE CASE - 2. RETURN OF INCOME WAS FILED ON 31.07.2006 DECLARING TOTAL INCOME OF ITA NO.5405/MUM/2011 PANDURANG K. KORGAONKAR, 2 RS.89,86,410/-.THE RETURN OF INCOME WAS PROCESSED U NDER SECTION 143(1) OF THE INCOME TAX ACT,1961(ACT). SUBSEQUENTLY, THE CAS E WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND U/S.142(1) OF THE ACT WERE ISSUED AND DULY SERVED ON THE ASSESSEE. THE ASSESSEE WAS A DIR ECTOR IN GRANTOOLS PVT. LTD. WHEREIN, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN INCOME UNDER THE HEAD SALARY. THE ASSESSEE WAS A LSO PARTNER IN TWO FIRMS - REVON ENGINEERING CO. AND M/S VINKA INDUSTRIES- E NGAGED IN MANUFACTURING OF DIAMOND TOOLS. 2.1. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER (AO) FOUND THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE H AS CLAIMED EXEMPTION U/S 54EC IN RESPECT OF LONG TERM CAPITAL GAINS AFTE R SETTING OFF CARRIED FORWARD LONG TERM CAPITAL LOSS. THE ASSESSEE WAS AS KED BY THE AO TO FILE SUPPORTING DOCUMENTS ALONG WITH THE AVAILABILITY OF EXEMPTION U/S 54EC IN RESPECT OF THE CAPITAL GAINS ON DEPRECIABLE ASSET A S PER THE PROVISIONS OF THE ACT. THE ASSESSEE THROUGH HIS AUTHORIZED REPRESENT ATIVE VIDE LETTER DATED 15/10/2008 CONTENDED THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD SOLD INDUSTRIAL GALA NO. 26 IN BINDAL INDUSTRIAL ESTATE AND INVESTED THE SALE PROCEEDS N THE BONDS OF RURAL ELE CTRICAL CORPORATION LTD. AND HAD CLAIMED EXEMPTION U/S 54EC OF THE ACT FROM THE SAID LONG TERM CAPITAL GAINS AS PER THE PROVISIONS OF THE ACT. AO ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF SETTI NG OFF LONG TERM CAPITAL LOSS AGAINST THE SAID CAPITAL GAIN ARISING ON THE TRANSFER OF A CAPITAL ASSET ON WHICH DEPRECIATION HAD BEEN ALLOWED IN THE LIGHT OF DEEMING PROVISIONS OF SECTION 50 OF THE ACT WHEREBY CAPITAL GAIN ON DEPRECIABLE ASSET WAS DEEMED AS SHORT TERM CAPITAL GAIN. THE ASSESSEE ACCEPTED THE DISALLOWANCE OF SETTING OFF OF THE LONG TERM CAPITA L LOSS OF RS. 26,257/- AGAINST DEEMED SHORT TERM CAPITAL GAIN. HOWEVER, RE GARDING ALLOWABILITY OF EXEMPTION U/S.54EC OF THE ACT THE ASSESSEE RELIED U PON THE JUDGMENT IN THE CASE OF CIT V. ACE BUILDERS (P)LTD. 281 ITR 210 (BO M.) WHEREIN IT WAS HELD THAT EXEMPTION UNDER SECTION 54E OF THE INCOME-TAX ACT CANNOT BE DENIED TO THE ASSESSEE ON ACCOUNT OF THE FICTION CREATED IN S ECTION 50.AO AGREED THAT IN THE ABOVE REFERRED CASE HONBLE HIGH COURT HAD HELD THAT THE BENEFIT OF EXEMPTION UNDER SECTION 54E OF THE ACT WAS ALLOWABL E TO THE ASSESSEE IN RESPECT OF THE CAPITAL GAINS ARISING ON THE TRANSFE R OF A CAPITAL ASSET ON WHICH DEPRECIATION HAD BEEN ALLOWED. 2.2. AFTER MENTIONING THE FACTUAL POSITION HE HELD THAT THE DECISION OF THE BOMBAY HIGH COURT CITED BY THE ASSESSEE WAS NOT IN CONFORMITY WITH THE AIM AND OBJECT OF SECTION 50 OF THE ACT. AS PER THE AO, BY THE ABOVE REFERRED JUDGMENT, HIGH COURT HAD DILUTED THE RIGORS OF SECT ION 50 OF THE ACT AND HAD HELD THAT THE CONCESSIONS OTHERWISE AVAILABLE COULD NOT BE CURTAILED. ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF THE A O BEFORE THE FAA(FIRST APPELLATE AUTHORITY). RELYING UPON THE ORDER SUDHA S. TRIVEDI (ITA 6040 & 6186/MUM/2007 DT. 20-02-2009) FAA DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE.IN THE CASE OF SUDHA TRIVEDI DECISION OF T HE JURISDICTIONAL HIGH COURT WAS ALSO DISCUSSED. 3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) ADMITTE D THAT ISSUE WAS DECIDED AGAINST THE REVENUE. AUTHORISED REPRESENTA TIVE (AR) RELIED UPON THE ORDER OF THE ACE BUILDERS (SUPRA). ITA NO.5405/MUM/2011 PANDURANG K. KORGAONKAR, 3 4. AFTER HEARING THE RIVAL SUBMISSION AND PERUSAL OF C ASES RELIED UPON BY THE AO, FAA AND AR OF THE ASSESSEE, WE ARE OF THE O PINION THAT ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. HERE, WE WOULD LIKE TO PLACE OUR HUMBLE OPINION THAT ALL QUASI-JUDICIAL AND JUDICIAL AUTHORITIES, INCLUDING THE AO, POSTED IN THE STATE OF IN MAHARASHTRA ARE GOVER NED BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY. TILL THE SAID ORDER OF THE HONBLE BOMBAY HIGH COURT IS REVERSED OR OVERRULED BY APPROPRIATE AUTHORITY, IT IS BINDING ON ALL THE AUTHORITIES DEALING WITH ACT. IN THESE CIR CUMSTANCES TO HOLD THAT THE DECISION OF THE BOMBAY HIGH COURT CITED BY THE ASSE SSEE WAS NOT IN CONFORMITY WITH THE AIM AND OBJECT OF SECTION 50 OF THE ACT IN OUR HUMBLE OPINION IS NOT AS PER THE PROVISIONS OF ESTABLISHED LAW-RATHER IT IS AGAINST THE JUDICIAL DISCIPLINE. AOS ARE NOT THE AUTHORITIES T O DECIDE AS WHETHER THE DECISION OF JURISDICTIONAL HONBLE HIGH COURT IS WI TH CONFORMITY WITH THE AIM AND OBJECTS OF THE ACT OR NOT ? HOWEVER STRONG THE FEELING OF AN AUTHORITY WORKING IN THE STATE OF MAHARASHTRA MAY BE ABOUT D ILUTING THE RIGORS OF THE SECTION 50 BY THE HONBLE HIGH COURT, HE IS BOUND B Y THE DECISION OF THE HONBLE COURT, TILL IT IS REVERSED. APPEAL FILED BY THE AO STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2012. SD/- SD/- (D.K. AGARWAL) (RA JENDRA) JUDICIAL MEMBER AC COUNTANT MEMBER MUMBAI, DATE 27 TH JUNE, 2012 TNMM COPY TO: 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI