AMRATLAL ASHOK KUMAR & CO, MUMBAI V. ASST CIT CIR 18(1), MUMBAI

ITA 6689/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7127 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: NEHA PARANJPE S
• Keywords: Depreciation; Share purchase agreement; Cost of acquisition; Assessment record; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6689/MUM/2016 (ASSESSMENT YEAR 201 3-14 ) M/S AMRATLAL ASHOKKUMAR & CO. 438, GOPAL GALLI, M.J. MARKET, KALBADEVI ROAD, MUMBAI-400002. PAN: AABFA2727M VS. ACIT-CIRCLE (18)1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY : SHRI K. GOPAL & NEHA PARANJPE - ADVOCATES RESPONDENT BY : SHRI RAJESH KUMAR YADAV (SR.DR) DATE OF HEARING : 01.05.2018 DATE OF PRONOUNCEMEN T : 31.05.2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; 1. THE INSTANT APPEAL BY ASSESSEE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMM ISSIONER OF INCOME-TAX (APPEALS)-29 [LD. CIT(A)], MUMBAI DATED 22.08.2016 IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 26.02.2016 FOR ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 2 9, MUMBAI [HEREINAFTER REFERRED TO AS THE 'LD. CIT(A)'] ERRED IN PASSING T HE ORDER DATED 22.8.16 CONFIRMING THE ADDITIONS MADE BY THE LD. A.O. IN AS SESSMENT ORDER DATED 26.2.16 PASSED UNDER SECTION 143(3) OF THE INCOME T AX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. THE APPELLANT STRONGLY O BJECTS TO THE FOLLOWING ADDITIONS/ DISALLOWANCES CONFIRMED BY THE LD. CIT(A ). 2. ADDITION MADE U/S 50 OF - RS.96,90,874/- ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 2 I. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. A.O. IN MAKING ADDITION OF RS.96,90,874/- ON ACCOUNT OF THE SALE O F PREMISES & CONSIDERING THE EXCESS ABOVE WDV AS TAXABLE U/S 50. WITHOUT APPRECI ATING THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE ADDITION OF R S.96,90,874/- IS UNJUSTIFIED AND THE SAME MAY BE DELETED. II. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PR EMISES SOLD WAS A COMMERCIAL PREMISES ENTITLE TO DEPRECIATION AT 10% & WAS CORRE CTLY CLUBBED WITH ASSETS ENTITLE TO DEPRECIATION AT 10% SINCE THE SAID PREMI SES WAS USED FOR BUSINESS PURPOSES & NOT FOR RESIDENTIAL. THUS, ACCORDINGLY T HE APPELLANT CORRECTLY COMPUTED ITS BLOCK OF ASSET, WHICH REMAINED POSITIV E AT YEAR END. HENCE, THE ADDITION U/S 50 OF RS.96,90,874/- IS UNJUSTIFIED AN D THE SAME MAY BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING, WHOLESALERS OF POTATO, ONI ON AND ALSO COMMISSION AGENTS. THE ASSESSEE FILED ITS RETURN OF INCOME FO R RELEVANT ASSESSMENT YEAR ON 19.03.2013 DECLARING TOTAL INCOME OF RS. 37 ,14,050/-. THE ASSESSMENT WAS COMPLETED ON 26.06.2016 UNDER SECTIO N 143(3) OF THE ACT. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER TAXED THE SALE CONSIDERATION OF FLAT NO. D-12, GRAIN MERCHANT CHS LTD SECTOR-17, VASHI (FLAT), AS SHORT TERM CAPITAL GAIN UNDER SECTION 50 OF THE ACT. THE ASSESSING OFFICER HOLD THAT AFTER SALE OF FLAT NOTH ING WAS LEFT IN THE BLOCK OF ASSET, ON WHICH DEPRICIATION WAS CLAIMED AND ALLOWE D AT 5%. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFI CER WAS CONFIRMED. THEREFORE, FURTHER AGGRIEVED BY THE ORDER OF LD. CI T(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE SUBMITS THAT ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 3 DURING THE FINANCIAL YEAR RELATED TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD PART OF ASSET AND ADDED ONE MORE ASSET IN THE BLOCK OF ASSET DURING THE RELEVANT FINANCIAL YE AR. IN EARLIER ASSESSMENT YEAR 2012-13, THE ASSESSEE CLAIMED DEPRECIATION @ 1 0% IN RESPECT OF ASSET, SOLD DURING THE RELEVANT PERIOD. HOWEVER, DU E TO MISTAKE IN EARLIER ASSESSMENT YEARS IT WAS CLAIMED @ 5%, THOUGH THE AS SESSEE WAS ENTITLED FOR DEPRICIATION @ 10% ON SUCH ASSET. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT SECTION 43(6) DEFINES THE WRITTEN DOWN VALUE (WDV) OF THE ASSET. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE SUBMI TS THAT THERE IS NO PROOF ABOUT THE BLOCK OF ASSET USED FOR COMMERCIAL PURPOSE DURING THE EARLIER YEARS. IN THE EARLIER YEARS, THE ASSESSEE C LAIMED AND ALLOWED DEPRECIATION @ 5% ON THE ASSET (FLAT) SOLD DURING T HE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THE ASSESSEE NOW DURING THE ASSESSMENT YEAR UNDER CONSIDERATION CLAI MED THE DEPRECATION @ 10%. THERE IS NO EVIDENCE ABOUT THE USE OF ASSET FOR COMMERCIAL PURPOSE. MERE ADDITION OF ASSET IN THE BLOCK OF ASS ET FOR WHICH DEPRICIATION WAS CLAIMED @10% IS NOT SUFFICIENT. THE ONUS WAS ON THE ASSESSEE THAT THE FLAT WAS USED FOR COMMERCIAL PURPOSE. THE ASSESSEE FILED AFFIDAVIT FOR USE OF ASSET FOR COMMERCIAL PURPOSE, WHICH IS NOT SUFFI CIENT TO DISCHARGE THE ONUS. IN SUPPORT OF HIS SUBMISSION, THE LD. DR FOR THE REVENUE RELIED UPON ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 4 THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. M/S T. S. KISHAN & COMPANY IN ITA NO. 1270 OF 2011 DATED 16.0 9.2014. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT AN AMOUNT OF RS.1.00 C RORE WAS SHOWN AS CAPITAL RECEIPT. THE ASSESSEE WAS ASKED TO EXPLAIN THE FACTS. THE ASSESSEE FURNISHED ITS REPLY DATED 19.11.2015 AND EXPLAINED THAT THE AMOUNT WAS RECEIPT ON SALE OF VASHI FLAT SOLD DURING THE YEAR AND AMOUNT WAS DEDUCTED FROM THE BOCK OF FIXED ASSET. THE ASSESSIN G OFFICER EXAMINED THE BOCK OF FIXED ASSET FOR ASSESSMENT YEAR 20110 AND 2 012-13 AND NOTED THAT NO DEPRICIATION WAS CLAIMED IN ASSESSMENT YEAR 2011 -12 IN RESPECT OF FLAT SHOWN WHICH THE AMOUNT OF RS.1.00 CRORE WAS REALIZE D. THE WDV OF THIS FLAT AT RS.3,09,168/- WAS CLUBBED WITH ASSET OF OFF ICE PREMISES FOR AY 2011-12 AND IN SUBSEQUENT YEAR (AY 2013-14) THE DEP RICIATION WAS CLAIMED @10% ON THE NET BLOCK OF ASSET. THE ASSESSI NG OFFICER ASKED THE ASSESSEE TO FURNISH THE COST OF ACQUISITION WITH DE TAILS OF PROOF OF SALE CONSIDERATION. THE ASSESSEE FURNISHED ITS REPLY DAT ED 13.10.2015 AND CONTENDED THAT THIS FLAT WAS ALLOTTED BY M/S GAIN M ERCHANT CO-OPRATIVE SOCIETY LTD (SOCIETY) IN 1989. ASSESSEE FILED COP Y OF POSSESSION LETTER, SHARE CERTIFICATE AND RECEIPT MONTHLY MAINTENANCE C HARGES. THE ASSESSEE CONTENDED THAT THEY ARE UNABLE TO PROVIDE THE PURCH ASE AGREEMENT AS THE SAME IS UNTRACEABLE. THE ASSESSEE ALSO FILED COPY O F ASSESSMENT ORDER FOR ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 5 AY 1996-97. ON PERUSAL OF ASSESSMENT RECORDS FURNIS HED BY ASSESSEE, THE AO NOTED THAT THE ASSESSEE CLAIMED /BOOKED DEPRECIA TION @5% ON THE SAID FLAT UP TO AY 1997-98. IN AY 1996-97 THE CLAIM OF D EPRECIATION WAS ALLOWED @5%. THE AO ISSUED NOTICE UNDER SECTION 133 (6) DATED 05.02.2016 TO THE SECRETARY OF M/S GAIN MERCHANT CH S LTD (SOCIETY). THE SOCIETY FILED ITS REPLY DATED 11.02.2016. IN TH E REPLY THE SOCIETY CONTENDED THAT THE PURCHASE AGREEMENT IS NOT AVAILA BLE. HOWEVER, THE COPY OF LEAVE AND LICENSE AGREEMENT SHOWING THAT THE FLA T WAS USED FOR RESIDENTIAL PURPOSE WAS PROVIDED. THE SOCIETY IN IT S REPLY ALSO CONTENDED THAT IT WAS FORMED WITH AN OBJECTIVE TO PROVIDE THE RESIDENTIAL ACCOMMODATION TO ITS MEMBERS. ON THE BASIS OF THE I NQUIRY CARRIED BY THE AO, THE AO TOOK THE VIEW THAT THE FLAT WAS NEVER US ED FOR THE PURPOSE OF BUSINESS ACTIVITY AND THEREFORE, THE ASSET (FLAT) I S ELIGIBLE FOR 5% RATE OF DEPRECIATION. SINCE, THE FLAT WAS NEVER USED FOR CO MMERCIAL PURPOSE A THEREFORE, IT WAS RIGHTLY INCLUDED IN THE BLOCK OF ASSET ELIGIBLE FOR 5% OF DEPRECIATION. THE AFFIDAVIT FILED BY ASSESSEE WAS NOT BELIEVED BY THE ASSESSING OFFICER HOLDING THAT IT WAS FILED BY ASSE SSEE OF ITS OWN AND NO CORROBORATIVE EVIDENCE WAS FILED. THEREFORE, THE A SSESSING OFFICER REJECTED THE CLAIM OF CAPITAL RECEIPT AND TAXED THE RECEIPT AND TREATED IT AS SHORT TERM CAPITAL GAIN UNDER SECTION 50 OF THE ACT. 6. BEFORE THE LD. CIT(A), THE ASSESSEE URGED THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 10% ON THE BLOCK BUILDING, ON OPEN ING WRITTEN DOWN ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 6 VALUE. THE ASSESSEE CORRECTLY CARRIED DOWN THE EARL IER YEARS CLOSING BALANCE. THE ASSESSEE FURTHER CONTENDED THAT THE CO RRECT COMPUTATION SHOULD BE AS FOLLOWS: O PENING WDV OF BUILDING BLOCK 24,25,745 REFER PARA 5 WHEREIN THE AO HAS CONFIRMED THE WDV OF BLOCK AT RS. 24,25,745 ADDITIONS DURING THE YEAR 1,03,73,660 PURCHASE OF PUNE FACTORY DEDUCTIONS DURING THE YEAR 1,00,00,000 SALE OF PREMISES 27,99,405 - DEPRECIATION 2,79,941 DEPRECIATION CLAIMED 10% CLOSING WDV OF BUILDING BLOCK 25,19,464 7. THE ASSESSEE FURTHER URGED THAT TREATMENT OF DEPREC IATION UNDER INCOME-TAX ACT, THE BLOCK OF ASSET VIZ. BUILDING HAS NOT EXTIN GUISHED AND THUS, NOTHING CAN BE TAXED UNDER SECTION 50 OF THE ACT. HOWEVER, THE ASSESSING OFFICER COMPUTED THE SHORT TERM CAPITAL GAIN. THEREFORE, TH E ASSESSING OFFICER HAS CHANGED THE WRITTEN DOWN VALUE OF THE BUILDING OF BLOCK AS DETERMINED IN THE LAST ASSESSMENT FOR ASSESSMENT YEAR 2012-13. THE ASSESSEE ALSO FILED AFFIDAVIT IN SUPPORT AND CONTENDED THAT MERE MISTAKE IN THE CLASSIFICATION IN PASSING CANNOT CHANGE THE RESULT OF FUNCTIONAL TEST. SUCH MISTAKE WAS NOT PREJUDICIAL TO THE REVENUE AND WAS CORRECTED BY ASSESSING OFFICER IN THE PAST. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY LD. CIT(A). THE LD. CIT(A) CONCLUDED THAT THERE IS NO E VIDENCE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE SAID FLAT WAS US ED FOR COMMERCIAL PURPOSE. THE FACT ON RECORD SHOWS THAT THE FLAT HAS BEEN USED FOR RESIDENTIAL PURPOSE. THE SOCIETY HAS BEEN FORMED TO CATER THE NEEDS OF ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 7 MEMBER OF RESIDENTS. THE ONUS WAS UPON THE ASSESSEE TO PROVE THAT IT WAS USED FOR COMMERCIAL PURPOSE, THE ASSESSEE FAILED TO DISCHARGE HIS ONUS. THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION @ 5% KN OWING IT VERY WELL THAT IT IS A RESIDENTIAL FLAT. HENCE, THERE CANNOT BE ANY OCCASION FOR ANY IGNORANCE ON THE PART OF ASSESSEE. THE LD. CIT(A) F URTHER CONCLUDED THAT ASSESSEE HAS BROUGHT HIS FLAT IN THE 10% DEPRECIATI ON BLOCK JUST TO AVOID TAX. THE LD. CIT (A) ALSO NOTED THAT THE ASSESSEE A LSO PURCHASED LAND AT SATARA AND SHOWN THIS AS OFFICE PREMISES IN THE NAM E OF PUNE FACTORY, EVEN THE ASSESSEE CANNOT PRODUCE THE EVIDENCE ON FACTORY BUILDING OR AN OFFICE IN THE SAID LAND AT SATARA. THEREFORE, IT APPEARS T O BE AN ARRANGEMENT TO KEEP THE BALANCE AS BLOCK OF ASSET SO AS TO AVOID T AX ON CAPITAL GAIN ARISING FROM THE SALE OF VASHI FLAT. THE AFFIDAVIT OF ASSES SEE WAS ALSO DISCARDED BY LD. CIT(A) HOLDING THAT THE FLAT HAS BEEN ALLOTTED BY GRAIN MERCHANTS CHS LTD. AND ITS MEANING FOR THE RESIDENTIAL PURPOS E OF THE MEMBER. THE ASSESSEE ALSO CLAIMED THE DEPRECIATION @ 5% WHICH I S RATE APPLICABLE TO RESIDENTIAL FLAT AND THAT IN THE ASSESSMENT YEAR 20 11-12, THE ASSESSEE IS SUDDENLY BROUGHT THE RESIDENTIAL FLAT IN THE BLOCK OF ASSET WITH 10% DEPRECIATION FOR NO REASON. THE CLAIM OF DEPRECIATI ON @ 5% IN EARLIER YEAR WAS CLAIMED WRONG IN FACT THE DEPRECIATION AT 10% N OW CLAIMED IS WRONG. 8. WE HAVE NOTED THAT THE ASSESSEE WAS ALLOWED DEPRECI ATION @10% ON THE BLOCK OF ASSET IN ASSESSMENT YEAR 2012-13. THE BLOC K OF ASSET CONSISTS OF THE FLAT IN DISPUTE. IN OUR VIEW ONCE THE REVENUE HAS ACCEPTED AND ALLOWED ITA NO.6689/M/16- M/S AMRATLAL ASHOKKUMAR & CO. 8 DEPRECIATION @10% ON THE BLOCK OF ASSET IN ASSESSME NT YEAR 2012-13, THE SAME CANNOT BE ALLOWED FOR TREATING IT DIFFERENTLY, WHEN THE PART OF BLOCK WAS SOLD IN SUBSEQUENT YEARS. THE LD. DR FOR THE RE VENUE HAS RELIED UPON THE DECISION OF M/S T.S. MISHAN & CO. LTD. WHEREIN THE HONBLE HIGH COURT HAS HELD THAT MERE AFFIDAVIT IS NOT SUFFICIEN T TO SUBSTANTIATE THE CONTENTION IN ABSENCE OF OTHER EVIDENCE. THE RATIO OF THE DECISION IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS THE REVENUE HAS ALREADY ACCEPTED THE BLOCK OF ASSET WHICH CONSISTS OF THE F LAT IN DISPUTE ALLOWED DEPRECIATION @10% ON THE BLOCK OF ASSET IN ASSESSME NT YEAR 2012-13. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE ASSESSI NG OFFICER TO DELETE THE ADDITION UNDER SECTION 50 OF THE ACT. HENCE, THE GR OUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31.05.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI