BSI SECURITIES INTERNATIONAL LTD, MUMBAI V. ACIT RG 4(1)(1), MUMBAI

ITA 6991/MUM/2008

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8835 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBOTRA SRDR
• Assessee Lawyers: PARESH SAPARIA
• Keywords: Capital asset; Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 145; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 6991/MUM/2008 (ASSESSMENT YEAR 2003-04 ) BSI SECURITIES INTERNATIONAL LTD, 34A, NARIMAN BHAWAN, 227, NARIMAN POINT, MUMBAI- 400021. PAN: AAACB1930D VS. ACIT RANGE - 4(1) AAYAKAR BHAWAN , M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI PARESH SAPARIA (AR) RESPONDENT BY : SH. RAJEEV GUBOTRA ( SR-DR) DATE OF HEARING : 11.10.2018 DATE OF PRONOUNCEMEN T : 12.12.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT P ER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER (APPEALS)-IV, MUMBAI DATED 29 TH OF SEPTEMBER 2008, WHICH IN TURN ARISES FROM THE ORDER OF ASSESSING OFFICER PASSED UNDER SECTION 154 OF THE INCOME TAX ACT (ACT) DATED 1 ST SEPTEMBER 2006 FOR ASSESSMENT YEAR 2003-04.THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL ; (I ) WITHDRAWAL OF SET-OFF OF UNABSORBED BUSINESS LOSSES OF RS. 1556186/- ALREADY GRANTED IN THE EARLIER ORDER UNDE R SECTION 145 DATED 24 JULY 2006. (I) THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING WITHDRAWAL OF SET-OFF OF BROUGHT FORWARD UNABSORBED BUSINESS LOSSES OF RS. 15,61,86/- AGAINST DEEMED SHORT-TERM GAIN WH ICH WAS ALREADY GRANTED VIDE ORDER UNDER SECTION 154 DATED 24 TH OF JULY 2006. (II) THE LEARNED COMMISSIONER (APPEALS) OUGHT NOT TO HAVE CONFIRMED THE WITHDRAWAL OF SET-OFF OF UNABSORBED BUSINESS LO SSES OF RS.1556186/- ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 2 (II) NOT ALLOWING SET OFF OF BROUGHT FORWARD BUSINESS LO SSES OF RS.1556,186/- AGAINST SECTION 50 OF DEEMED SHORT TE RM GAINS (III) LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING NON- ALLOWANCE OF BUSINESS LOSSES OF RS. 1556186/- AGAIN ST SECTION 50 DEEMED SHORT-TERM CAPITAL GAIN (IV) THE LEARNED COMMISSIONER (APPEALS) OUGHT NOT TO HAV E CONFIRMED DISALLOWANCE OF SET-OFF OF BROUGHT FORWARD BUSINESS LOSSES OF RS.15,61,86/- AGAINST THE SHORT TERM GAINS . 2. BRIEF FACTS OF THE CASE ARE THAT FOR ASSESSMENT YEA R 2003-04, THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS AT R S. 8,70,536/-. IN THE RETURN THE ASSESSEE CLAIMED THE CARRY FORWARD L OSSES AND UNABSORBED DEPRECIATION. THE ASSESSMENT WAS COMPLET ED UNDER SECTION 143(3) ON 20 TH MARCH 2006 DETERMINING THE TOTAL INCOME AT RS. 49,67,805/-. THE ASSESSMENT ORDER WAS RECTIF IED UNDER SECTION 154 ON 24 TH JULY 2006 BY ALLOWING SET OFF OF CARRY FORWARD BUSINESS LOSS OF RS. 15,56,186/- AND THE UNABSORBED DEPRECIATION OF RS.6,80,790/- THEREBY DETERMINING TOTAL INCOME A T RS. 27,30,829/-.THE ASSESSEE AGAIN FILED AN APPLICATION DATED 11 TH AUGUST 2006 UNDER SECTION 154 INTERALIA STATING THEREIN THAT UNABSORBED DEPRECIATION OF RS. 2,52,327/- REMAINED TO BE SET OFF AGAINST THE BUSINESS INCOME AS REQUIRED UNDER SECTI ON 32(2) OF THE ACT. THE ASSESSEE ALSO FURNISHED THE BREAKUP OF UNA BSORBED DEPRECIATION OF RS.2,53,327/-.THE ASSESSING OFFICER WHILE CONSIDERING THE APPLICATION OF ASSESSEE DATED 11 TH AUGUST 2006 CONCLUDED THAT BUSINESS LOSS OF EARLIER YEARS OF RS . 15,61,186/- HAS BEEN ERRONEOUSLY ALLOWED SET OFF AGAINST THE IN COME ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 3 CHARGEABLE UNDER THE HEAD CAPITAL GAIN VIDE ORDER DATED 24 TH MAY 2006 PASSED UNDER SECTION 154 OF THE ACT. THE A SSESSING OFFICER DURING THE RECTIFICATION PROCEEDING CONFRON TED THIS FACT TO THE ASSESSEE AS TO WHY THE SET OFF OF BUSINESS LOSS ALLOWED EARLIER BE NOT WITHDRAWN UNDER SECTION 72 AGAINST THE INCOM E CHARGEABLE UNDER SECTION 50 OF THE ACT. THE ASSESSEE OBJECTED ON THE GROUND THAT THE APPLICATION OF SECTION 50 OF THE ACT, RESU LT ONLY IN CHANGE OF HEAD WHEREAS THE SOURCE AND CHARACTER OF THE INC OME REMAINS THE SAME BEING BUSINESS INCOME. THE ASSESSEE ALSO CONTENDED THAT THE INCOME FROM TRANSFER OF THE DEPRECIABLE AS SETS IS A PART OF PROFIT AND GAINS OF BUSINESS AND SET-OFF OF CARRY F ORWARD BUSINESS LOSS IS PERMISSIBLE UNDER SECTION 50 OF THE ACT. TH E CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT NO SUCH SET-OFF OF CARRY FOR WARD BUSINESS LOSS OF EARLIER YEARS HAVE BEEN ALLOWED UNDER SECTI ON 143(3). THE APPLICATION OF THE ASSESSEE FOR ALLOWING OF SET OFF OF BUSINESS LOSS OF EARLIER YEAR WAS ERRONEOUSLY AND INADVERTENTLY A LLOWED, WHICH IS MISTAKE APPARENT ON RECORD. THE ASSESSING OFFICE R ALSO TOOK THE VIEW THAT THE TREATMENT OF SUCH INCOME FROM SAL E OF DEPRECIABLE ASSET AS SHORT-TERM CAPITAL GAIN FROM T RANSFER OF SHORT- TERM CAPITAL ASSET. SECTION 50 OF THE ACT IS APPLIC ABLE ONLY IN CASE OF ASSET FALLING UNDER THE WRITTEN DOWN VALUE METHO D OF ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 4 DEPRECIATION, WHEREAS IN THE CASE OF ASSET FALLING UNDER STRAIGHT- LINE METHOD OF DEPRECIATION, THE STATUE CLEARLY STA TES THAT THE SURPLUS SHALL BE BUSINESS INCOME AS PER SECTION 41( 2) OF THE ACT. THUS, THE ASSESSING OFFICER WITHDREW THE SET OFF OF UNABSORBED BUSINESS LOSS ALLOWED EARLIER. ON APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) THE ACTION OF ASSESSING OFFI CER WAS CONFIRMED. THUS FURTHER AGGRIEVED BY THE ACTION OF LD. COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PRESE NT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF THE LEARNED AUTHORI ZED REPRESENTATIVE OF THE ASSESSEE AND THE LD. LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE SCOPE OF POWER UNDER SECTION 154 IS LIMITED. THE ASSESSING O FFICER IS ENTITLED TO RECTIFY THE MISTAKE WHICH IS APPARENT O N RECORD. THE ASSESSING OFFICER HAS NO JURISDICTION TO REVIEW ITS OWN ORDER BY INVOKING THE PROVISION OF SECTION 154 OF THE ACT. E VEN THE SET OFF OF UNABSORBED BUSINESS LOSS IS A DEBATABLE ISSUE. T HE GAIN OF DEPRECIABLE ASSET ARISES ONLY BECAUSE DEPRECIATION WAS CLAIMED AND ALLOWED AND IF THE SAME HAS NOT BEEN CLAIMED, I T WOULD HAVE BEEN A LOSS RATHER THAN PROFIT. IN SUPPORT OF HIS S UBMISSION THAT BROUGHT FORWARD BUSINESS LOSS CAN BE SET OFF AGAINS T DEEMED ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 5 CAPITAL GAIN RELIED UPON THE DECISION OF DIGITAL EL ECTRONIC LTD. VS. ACIT (16 TAXMANN.COM 316) AND CIT VS. COCANADA RADH ASWAMI BANK LTD. [57 ITR 306 (SC)]. THE LD. AR OF THE ASSE SSEE IN SUPPORT OF HIS SUBMISSION THAT DEBATABLE ISSUE CANN OT BE RECTIFIED UNDER SECTION 154 RELIED UPON THE DECISION OF HONB LE DELHI HIGH COURT IN CIT VS. JINDAL STAINLESS LTD. (337 ITR 495 ) (DEL.) AND HONBLE MADRAS HIGH COURT IN CIT VS. SOORA SUBRAMAN IAN [330 ITR 591) AND IN CIT VS. NONMAG WIRES (P) LTD. 9292 ITR 557). 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT INITIALLY THE ASSESSEE WAS ALLOWED SET OFF CARRY FO RWARD BUSINESS LOSS OF RS. 15,56,186/- ON 24.07.2006. HOWEVER, THE ASSESSING OFFICER WHILE CONSIDERING THE APPLICATION OF ASSESS EE UNDER SECTION 154 WITH REGARD TO THE ALLEGED MISTAKE IN N OT ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION OF RS. 2,53,327/ - WITHDREW THE CARRY FORWARD BUSINESS LOSS HOLDING THAT NO SUCH SE T OFF OF CARRIED FORWARD OF BUSINESS LOSS OF EARLIER YEARS WAS ALLOW ED IN ASSESSMENT ORDER UNDER SECTION 143(3) AND THAT IT W AS ERRONEOUSLY AND INADVERTENTLY ALLOWED TO THE ASSESSEE WHICH MIS TAKE APPARENT ON RECORD. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT SECTION ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 6 50 IS APPLICABLE ONLY IN CASE OF ASSETS FALLING UND ER WRITTEN DOWN VALUE METHOD OF DEPRECIATION WHEREAS IN THE CASE OF ASSETS FALLING STRAIGHT-LINE METHOD OF DEPRECIATION, THE SURPLUS S HALL BE BUSINESS INCOME AS PER SECTION 41(2). THE LD. CIT(A) CONFIRM ED THE ACTION OF ASSESSING OFFICER THAT THE ASSESSEE WAS ALLOWED THE CARRY FORWARD BUSINESS LOSS BY MISTAKE. THE LD. CIT(A) FU RTHER HELD THAT GAIN ON SALE OF DEPRECIABLE ASSET IS PURE AND SIMPL E CAPITAL GAIN. THE TRANSFERRED ASSET OF THE BUSINESS CONNECTED WIT H THE BUSINESS OF THE ASSESSEE IS CLEARLY A CAPITAL ASSET AND TRAN SFER OF WHICH GIVE RISE TO CAPITAL GAIN, THEREFORE, THE CONTENTION OF ASSESSEE THAT PROFIT ARE IN THE CHARACTER OF BUSINESS IS NOT CORR ECT AND CONFIRMED THE ACTION OF ASSESSING OFFICER. THE CO-ORDINATE BE NCH OF MUMBAI TRIBUNAL IN DIGITAL ELECTRONICS LTD. (SUPRA) HELD THAT INCOME EARNED ON SALE OF BUSINESS ASSETS, DO NOT TA XABLE AS PROFIT AND GAIN OF BUSINESS AND PROFESSION IS BUSINESS INC OME AND ASSESSEE CAN SET OFF OF BROUGHT FORWARD BUSINESS LO SSES AGAINST SUCH INCOME. THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE CA PITAL GAIN WAS A DEBATABLE ISSUE. 6. THE HONBLE DELHI HIGH COURT IN CIT VS. JINDAL STAI NLESS LTD. (SUPRA) HELD THAT DEBATABLE POINT OF LAW CANNOT BE TREATED AS A MISTAKE APPARENT ON RECORD. SIMILAR VIEW WAS TAKEN BY HONBLE ITA NO. 6991/MUM/2008- BSI SECURITIES INTERNATIONAL LTD. 7 MADRAS HIGH COURT IN CIT VS. SOORA SUBRAMANIAN (SUP RA). FURTHER MADRAS HIGH COURT IN CIT VS. NONMAG WIRES ( P.) LTD. (SUPRA) HELD THAT WHERE ASSESSMENT WAS TAKEN UP FOR RECTIFICATION ON THE VIEW THAT ASSESSEE COULD SET OFF OF CARRY FO RWARD LOSS ONLY TO THE EXTENT OF BUSINESS INCOME AND THAT ONLY CARR IED FORWARD DEPRECIATION LOSS WOULD BE ADJUSTED AGAINST SHORT T ERM CAPITAL GAIN, SINCE ON THE DATE OF PROCEEDING UNDER SECTION 154, THERE WAS CONFLICTING OPINION ON THE AFORESAID QUESTION P ROCEEDING UNDER SECTION 154 WAS NOT JUSTIFIED. IN VIEW OF TH E FACTUAL AND LEGAL DISCUSSION, WE ARE OF THE VIEW THAT THE ASSES SING OFFICER HAS WRONGLY INVOKED THE PROVISION OF SECTION 154 IN WIT HDRAWING THE SET OFF OF BUSINESS LOSS IN ITS ORDER DATED 01.09.2 006. HENCE, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/12/2018. SD/- S D/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT J UDICIAL MEMBER MUMBAI, DATE: 12.12.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI