HI TECH IMAGING P.LTD, MUMBAI V. DCIT (OSD) RG 8(2), MUMBAI

ITA 5439/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3343 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR SINGH
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Depreciation; Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5439/M/2014 ASSESSMENT YEAR: 2011-12 M/S. HI-TECH IMAGING PVT. LTD., MUKTI, JAI HIND SOCIETY, 12 TH ROAD, JVPD SCHEME, MUMBAI 400 055 PAN: AABCH8336A VS. DCIT (OSD), RANGE 8(2), MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SAMEER G. DALAL, A.R. REVENUE BY : SHRI AMIT KUMAR SINGH, D.R. DATE OF HEARING : 16.03.2016 DATE OF PRONOUNCEMENT : 16 03.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 10.06.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2011-12. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) - 17, MUMBAI, ['ID. CIT (A)'] ERRED IN CONFIRMING THE ACTION OF T HE ASSESSING OFFICER ('THE A.O.') WHEREBY THE A.O. DETERMINE SHORT TERM CAPITA L GAIN ON SALE OF MACHINERY AT RS. 35, 25, 376/- AS AGAINST RS. 10,00 ,000/- DECLARED BY THE APPELLANT. 1.2 WHILE DOING SO, THE ID. CIT (A) FAILED TO APPR ECIATE THAT: (A) THE A.O. HAD DETERMINED THE CAPITAL GAIN BY SUBSTIT UTING THE APPELLANT'S COST OF ACQUISITION OF THE MACHINERY IN A VERY ARBITRARY MANNER, APPLYING AN ARTIFICIAL METHOD; AN D (B) THE METHOD ADOPTED BY THE A.O. FOR DETERMINING THE COST OF ACQUISITION WAS NOT IN ACCORDANCE WITH LAW AND AS SUCH, NOT PER MISSIBLE. 1.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCU MSTANCES OF THE CASE, AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY ITA NO.5439/M/2014 M/S. HI-TECH IMAGING PVT. LTD. 2 THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THE RETU RN OF INCOME, THE ASSESSEE HAD SHOWN CAPITAL GAINS FROM SALE OF MACHINERY AT R S.10 LAKH. THE SALE CONSIDERATION WAS SHOWN AT RS.55 LAKH FROM WHICH TH E COST OF ACQUISITION OF RS.45 LAKH WAS REDUCED AND THE CAPITAL GAINS WERE S HOWN AT RS.10 LAKH. ON BEING ASKED TO EXPLAIN IN THIS RESPECT, THE ASSESSE E SUBMITTED TO THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) THAT IT HAD PURCHASED THE LAND/BUILDING AND MACHINERY OF M/S. DEEPAK MACHINER IES PVT. LTD. THROUGH DEBTS RECOVERY TRIBUNAL ON AS IS WHERE IS BASIS I N AUCTION FOR A SUM OF RS.1.30 CRORES. THE BREAK UP OF THE SALES CONSIDER ATION TOWARDS LAND AND MACHINERY WAS MADE ON THE BASIS OF VALUATION REPORT OF THE APPROVED VALUER OF THE DRT I.E. M/S. BHIDE ASSOCIATES DATED 14.02.06 W HO VALUED THE LAND AND BUILDING AT RS.1.23 CRORES AND PLANT & MACHINERY AT RS.57.10 LAKHS. HOWEVER, SINCE THE SAID VALUATION REPORT WAS OF THE YEAR 200 6 AND WHEREAS THE SALE WAS AFFECTED ON 18.03.10, THE ASSESSEE CONSIDERING THE REASONABLE DECREASE IN THE VALUE OF THE MACHINERY ON ACCOUNT OF PASSAGE OF TIM E TOOK THE COST OF ACQUISITION OF THE MACHINERY AT RS.45 LAKH, THOUGH THE ASSESSEE ACTUALLY HAD PAID THE COST OF THE MACHINERY AT RS.57.10 LAKHS. THE AO HOWEVER DID NOT AGREE WITH THE ABOVE WORKING OF THE COST OF ACQUISI TION OF THE MACHINERY GIVEN BY THE ASSESSEE. HE TOOK THE ORIGINAL COST OF ACQU ISITION OF THE MACHINERY BY THE ORIGINAL PURCHASER M/S. DEEPAK MACHINERIES PVT. LTD. THEREAFTER CALCULATED THE DEPRECIATION ON THE ORIGINAL VALUE OF THE MACHI NERY UP TO THE DATE AND CONSIDERED THE COST OF ACQUISITION OF THE MACHINERY AS THE WRITTEN DOWN VALUE OF THE MACHINERY ON THE DATE OF PURCHASE BY THE ASS ESSEE AT RS.19.74 LAKHS. 4. THE LD. CIT(A) CONFIRMED THE ABOVE ORDER OF THE AO. THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. 5. WE FIND THAT THE ACTION OF THE AO IN TAKING THE WRITTEN DOWN VALUE OF THE MACHINERY BY WAY OF CALCULATING THE DEPRECIATION ON THE MACHINERY AT WHICH IT WAS ORIGINALLY PURCHASED BY THE PREVIOUS OWNER M/S. DEEPAK MACHINERIES PVT. ITA NO.5439/M/2014 M/S. HI-TECH IMAGING PVT. LTD. 3 LTD. IS TOTALLY WRONG AND AGAINST THE SPIRITS OF TH E LAW. IT IS NOT A CASE WHERE THE ASSESSEE HAS TAKEN OVER THE BUSINESS OF THE COM PANY. THE ASSESSEE HAS PURCHASED THE PROPERTY AND A MACHINERY IN AN AUCTIO N. THE ASSESSEE HAS NEITHER CONTINUED THE SAID BUSINESS WHICH WAS DONE BY M/S. DEEPAK MACHINERIES PVT. LTD. NOR HAS EVER USED THE MACHINE RY IN QUESTION. THE ASSESSEE ACTUALLY PAID THE PRICE OF THE MACHINERY A T RS.57.10 LAKHS. HOWEVER, TAKING INTO CONSIDERATION, THE VALUATION OF THE MAC HINERY DONE BY THE APPROVED VALUER IN THE YEAR 2006 AND THE DATE OF ACTUAL PURC HASE OF THE PROPERTY IN THE YEAR 2010, HAS ESTIMATED THE VALUE/COST OF ACQUISIT ION OF THE MACHINERY AT A DECREASED VALUE OF RS.45 LAKHS. THE ABOVE VALUE HA S BEEN DONE ON ADHOC BASIS ONLY. THE LD. A.R. HAS BEEN FAIR ENOUGH TO STATE T HAT EVEN IF THE COST OF ACQUISITION IS ESTIMATED AT ANY OTHER REASONABLE FI GURE, THE ASSESSEE WOULD BE READY TO ACCEPT IT. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ABOVE SUBMISSIONS OF THE LD. A.R., WE DIRECT TH E AO TO TAKE THE COST OF ACQUISITION OF THE MACHINERY AT RS.42 LAKHS INSTEAD OF 45 LAKHS. WE ARE MAKING IT CLEAR THAT WE ARE DIRECTING SO ONLY BECAU SE NEITHER THE AO NOR THE ASSESSEE HAS GIVEN ANY FORMULA OR SCIENTIFIC CALCUL ATION IN CALCULATING THE COST OF ACQUISITION OF THE MACHINERY AND SINCE THE LD. D .R. HAS STRESSED THAT THE COST OF MACHINERY SHOULD BE ESTIMATED AT SOMEWHAT LESS T HAN THE COST OF ACQUISITION AT RS.45 LAKHS AS OFFERED BY THE ASSESSEE, HENCE TA KING INTO THE RESPECTIVE SUBMISSIONS OF THE LD. A.R. AND LD. D.R., THE COST OF ACQUISITION OF MACHINERY IS DIRECTED TO BE ADOPTED AT RS.42 LAKHS. 6. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE A SSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.03.2016. SD/- SD/- (RAJESH KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 05.03.2016. * KISHORE, SR. P.S. ITA NO.5439/M/2014 M/S. HI-TECH IMAGING PVT. LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.