Hotel Ambalakkara, Kottarakkara V. ITO, Kollam

ITA 581/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64961 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 12-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-11-2010
• Court: TRIBUNAL
• Department Lawyers: PARTNERS K BAIJU
• Keywords: Depreciation
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NO. 581/COCH/2010 ASSESSMENT YEAR : 2005-06 M/S. HOTEL AMBALAKKARA, REP. BY PARTNERS K. BAIJU & K. ANIL KUMAR, AMBALAKKARA HOUSE, THRIKKANNAMANGAL, KOTTARAKARA. [PAN: AABFH 9083M] VS. THE INCOME TAX OFFICER, WARD-1, KOLLAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI N.S. RAJAGOPAL, CA REVENUE BY SHRI B. SAJJIEVE, JR. DR DATE OF HEARING 12/09/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.8.2010 PASSED BY LD CIT(A)-I, TRIVANDRUM AND IT RELATES TO THE ASSES SMENT YEAR 2005-06. THE ASSESSEE IS ASSAILING THE DECISION OF LD CIT(A) IN CONFIRMING T HE COMPUTATION OF CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 2. THE FACTS RELATING THERETO ARE STATED IN BRI EF. THE ASSESSEE FIRM WAS RUNNING HOTEL HAVING BAR FACILITY AT KOLLAM UP TO 31.3.2000. THE BUSINESS WAS STOPPED ON THAT DATE. SUBSEQUENTLY, THE HOTEL LAND AND BUILDING ALONG WIT H ALL FITTINGS, FURNITURE ETC. WERE SOLD ON 29-03-2005 FOR A TOTAL CONSIDERATION OF RS.73,45 ,000/-. THE ASSESSEE FILED A RETURN OF INCOME DECLARING A CAPITAL LOSS OF RS.76,298/-. THE AO, HOWEVER, COMPLETED THE ASSESSMENT BY DETERMINING THE CAPITAL GAIN AS UNDER :- I.T.A. NO. 581/COCH/2010 2 A. LONG TERM CAPITAL GAINS ON SALE OF LAND RS.30,21,581/- B. LONG TERM CAPITAL GAINS ON SALE OF HOTEL BUILD ING RS.25,03,765/- THE ASSESSEE CHALLENGED THE COMPUTATIONS MADE BY TH E AO BEFORE LD CIT(A), BUT COULD NOT SUCCEED. HENCE THE ASSESSEE IS IN APPEAL BEFOR E US. 3. IN THE GROUNDS OF APPEAL, THE ASSESSEE IS CO NTENDING THAT THE LONG TERM CAPITAL GAIN ON SALE OF LAND IS NOT ASSESSABLE IN THE HANDS OF THE FIRM. HOWEVER, WE NOTICE THAT THE ASSESSEE HIMSELF HAS COMPUTED LONG TERM CAPITAL GAIN ON SALE OF LAND IN THE RETURN OF INCOME FILED BY IT. HENCE, WE DO NOT FIND ANY M ERIT IN THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD. IN ITS RETURN OF INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION TOWARDS IMPROVEMENT MADE IN THE LAND. HOWEVER, THE AO NOTICED THAT THE BOOKS OF ACCOUNT DID NOT SHOW ANY SUCH IMPROVEMENT EXPENDITU RE. ACCORDINGLY, THE AO REJECTED THE SAID CLAIM. BEFORE US, THE ASSESSEE DID NOT FI LE ANY MATERIAL TO SUPPORT ITS CLAIM OF IMPROVEMENT EXPENDITURE INCURRED ON THE LAND. ACCO RDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE COMPUTATION OF LONG TERM CAPITAL G AIN ON SALE OF LAND MADE BY THE AO. 4. HOWEVER, FOLLOWING MISTAKES WERE POINTED OUT BY LD A.R WITH REGARD TO THE COMPUTATION OF CAPITAL GAIN ON SALE OF BUILDING. (A) THE AO HAS INVOKED SEC. 50 OF THE ACT FOR THE PURPOSE OF COMPUTATION OF GAIN ON SALE OF BUILDING, BUT TREATED THE GAIN AS L ONG TERM CAPITAL GAIN, WHICH IS AGAINST THE PROVISIONS OF SEC. 50. (B) THE AO WAS WRONG IN DEDUCTING DEPRECIATION FO R THE YEARS ENDING 31.3.2001 TO 31.3.2005, AS IT IS VERY MUCH ON RECORD THAT THE ASSESSEE DID NOT CARRY ON BUSINESS IN THOSE YEARS. HE POINTED OUT THAT THE CONDITION FOR ALLOWING DEPRECIATION ON ANY ASSET IS THAT IT MUST HAVE BEEN USED FOR THE PURPOSE OF B USINESS. FURTHER THE AO WAS WRONG IN DEDUCTING DEPRECIATION FOR THE YEAR ENDING 31.3. 2005, I.E., THE YEAR OF SALE. ALTERNATIVELY, IT WAS SUBMITTED THAT, IF THE DEPREC IATION IS TO BE ACTUALLY ALLOWED, THEN THE SAME TAKES THE CHARACTER OF UNABSORBED DEPRECIA TION, WHICH IS ELIGIBLE FOR CARRY FORWARD AND SET OFF AGAINST THE SHORT TERM CAPITAL GAINS. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF DHARAMPAL SATYAPAL LTD VS. DCIT (53 DTR (DEL)(TRIB) 177). I.T.A. NO. 581/COCH/2010 3 (C) THE AO WAS WRONG IN NOT DEDUCTING WDV OF ASSE TS VIZ., PLANT & MACHINERY, ELECTRICAL FITTINGS, FURNITURE AND SANITARY FITTINGS , WHICH WERE ALSO SOLD ALONG WITH THE BUILDING. (D) THE ADDITIONS MADE TO THE BUILDING WERE NOT CO NSIDERED BY THE AO. THE LD CIT(A) HAS WRONGLY INTERPRETED THAT THE ASSESSEE HA S CLAIMED DEDUCTION U/S 54 OF THE ACT, WHERE AS THE CLAIM HAS BEEN MADE U/S 43(6) AND SEC.50 OF THE ACT. 5. WE ALSO HEARD THE LD D.R. WE FIND FORCE IN THE CONTENTIONS OF THE ASSESSEE. THE AO HAS TAKEN CONTRADICTORY STAND WHILE FRAMING THE ASSESSMENT, VIZ., HE HAS COMPUTED LONG TERM CAPITAL GAIN BY INVOKING THE PROVISIONS O F SEC.50, WHICH IS AGAINST THE SCHEME OF SEC. 50 OF THE ACT. THE OTHER MISTAKES/POINTS C ONTENDED BY THE ASSESSEE HAVE NOT BEEN ADDRESSED BY THE AO. UNDER THESE CIRCUMSTANCE S, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SA ME TO THE FILE OF AO WITH THE DIRECTION TO CONSIDER THE CONTENTIONS OF THE ASSESS EE AND THEN TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 16 -11-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH NOVEMBER, 2012 GJ COPY TO: 1. M/S. HOTEL AMBALAKKARA, REP. BY PARTNERS K. BAIJ U & K. ANIL KUMAR, AMBALAKKARA HOUSE, THRIKKANNAMANGAL, KOTTARAKARA. 2.THE INCOME TAX OFFICER, WARD-1, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIV ANDRUM I.T.A. NO. 581/COCH/2010 4 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN