GOEL PACKAGING, MUMBAI V. DCIT 24(3), MUMBAI

ITA 7092/MUM/2012

• Counselvise Citation: 709219914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R DSOUZA
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Business income; Opportunity of being heard; Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALG BENCH, MUMB AI BEFORE SHRI D.MANMOHAN, VP AND SHRI D. KARUNAKARA R AO, AM ITA NO. 7092/MUM/2012 ASSESSMENT YEAR-2009-10 M/S GOEL PACKAGING SWAPNA LOK, 187 SHER-E- PUNJAB COLONY, GURU GOBIND SINGH MARG, ANDHERI(E), MUMBAI-400093 / VS. DCIT - 24(3) MUMBAI ./ PAN :AAAFG1284A ( /ASSESSEE ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI SANJAY R. PARIKH / REVENUE BY : SHRI R.. DSOUZA SR. DR / DATE OF HEARING : 22/09/2014 / DATE OF PRONOUNCEMENT : 22/09/2014 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER OF TH E CIT(A)-34, MUMBAI DATED 14/08/2014. 2. ASSESSEE FILED REVISED FORM NO. 36 ALONGWITH REV ISED GROUND. THE ONLY GROUND RAISED IN THE REVISED GROUND RELATE S TO THE APPLICABLE RATE OF TAX ON THE CAPITAL GAINS, COMPUTED U/S 50 O F THE ACT. THE AO TAXED THEM APPLYING THE REGULAR RATE OF TAX APPLICA BLE TO BUSINESS INCOME AS AGAINST THE SPECIAL RATE PROVIDED U/S 112 OF THE ACT AS CLAIMED BY THE BY THE ASSESSEE. 3. AT THE OUTSET, LD. COUNSEL RELIED ON THE DECISIO N OF CO-ORDINATE BENCH IN THE CASE OF M/S SMITA CONDUCTORS LTD. IN I TA NO. 4004/MUM/2011 FOR THE A.Y. 2006-07 DATED 17/09/2013 IN SUPPORT OF THE CLAIM. IN THIS REGARD, HE BROUGHT OUR ATTEN TION TO THE CONTENTS 2 ITA NO.7092/MUM/2012. M/S GOEL PACKAGING OF PARA 2.5 AND 2.6 OF THE IMPUGNED ORDER AND MENTI ONED THAT THE SUCH CAPITAL GAIN COMPUTED U/S 50 OF THE ACT HAS TO BE CHARGED TO TAX AT THE RATE PROVIDED U/S 112 OF THE ACT. THE S AID DECISION WAS TAKEN RELYNG ON THE BINDING JUDGMENT OF HONBLE BOM BAY HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD. 281 ITR 210 (BOM). 4. AFTER HEARING BOTH THE PARTIES, WE HAVE PERUSED THE ORDERS OF REVENUE AND THE SAID PARAGRAPH OF ORDER OF THE TRIB UNAL. FOR THE SAKE OF COMPLETION, THE SAME IS REPRODUCED IN THE ORDER AS UNDER: 2.5. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GR OUND THAT FOR THE PURPOSE OF APPLICATION OF TAX RATE, THE CAPITAL GAIN IN CASE O F THE ASSESSEE HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN AS THE FLAT HAD BEEN HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS. IT HAS BEEN ARGUED THAT PROVISIONS OF SECTIO N 50 DEEMING THE CAPITAL GAIN AS SHORT TERM CAPITAL GAIN IS ONLY FOR THE PURPOSES OF SECTION 48 AND 49 WHICH RELATE TO COMPUTATION OF CAPITAL GAIN. THE DEEMING PROVISIONS HAS, THEREFORE, TO BE RESTRICTED ONLY TO COMPUTATION OF CAPITAL GAIN AND FOR THE PUR POSE OF OTHER PROVISIONS OF THE ACT, THE CAPITAL GAIN HAS TO BE TREATED AS LONG TERM CAP ITAL GAIN. THE VIEW CANVASSED BY THE LEARNED AR IS SUPPORTED BY THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF ACE BUILDERS P. LTD. (SUPRA) IN WHICH IT HAS BEEN H ELD THAT FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT SUCH AS SECTION 54EC THE CAPI TAL GAIN HAS TO BE TREATED AS LONG TERM CAPITAL GAIN, IF THE ASSET IS HELD FOR MORE TH AN THREE YEARS. THE SAME VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF TRIBUNAL IN CASE OF MANALI INVESTMENTS VS. ASSISTANT COMMISSIONER OF INCOME TAX (139 TTJ 411) IN WHICH IT HAS BEEN HELD THAT THE PRESCRIPTIONS OF SECTION 50 ARE TO BE EXTENDED ONLY TO THE STAGE OF COMPUTATION OF CAPITAL GAIN AND, THEREFORE, CAPITAL GAIN RESULTING FROM TRANSFER OF DEPRECIABLE ASSET WHICH WAS HELD FOR MORE THAN THREE YEARS WOULD RETA IN THE CHARACTER OF LONG TERM CAPITAL GAIN FOR THE PURPOSE OF ALL OTHER PROVISION S OF THE ACT. IN THIS CASE THE LD. AR FOR THE ASSESSEE SUBMITTED THAT FLAT HAD BEEN HELD FOR 15 TO 20 YEARS WHICH IS SUPPORTED BY THE FACT THAT COST OF THE FLAT AS SHOW N IN THE BALANCE SHEET WAS ONLY RS. 1,30,000/-. THEREFORE, IF THE FLAT IS HELD FOR MORE THAN THREE YEARS THETA X RATE HAS TO BE APPLIED AS PROVIDED IN SECTION 112 OF THE IT ACT APPLICABLE IN RESPECT OF CAPITAL GAIN ARISING FROM TRANSFER OF LONG TERM CAPITAL ASS ET . 2.6 WE, THEREFORE, HELD THAT, FOR THE PURPOSE OF C OMPUTATION OF CAPITAL GAIN, THE FLAT HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN U/S 50 OF THE IT ACT, BUT FOR THE PURPOSE OF APPLICABILITY OF TAX RATE IT HAS TO BE TREATED AS L ONG TERM CAPITAL GAIN IF HELD FOR MORE THAN THREE YEARS. WE ACCORDINGLY DIRECT THE AO TO C OMPUTE THE CAPITAL GAIN FROM THE SALE OF FLAT AND APPLY THE APPROPRIATE TAX RATE AFT ER NECESSARY VERIFICATION IN THE LIGHT OF OBSERVATIONS MADE IN THIS ORDER. 5. THUS, THE CAPITAL GAINS, COMPUTED U/S 50 OF THE ACT, NEEDS TO BE TAXED AT THE RATE APPLICABLE TO THE CAPITAL GAIN S U/S 112 OF THE ACT. 3 ITA NO.7092/MUM/2012. M/S GOEL PACKAGING IN VIEW OF THE ABOVE SETTLED NATURE OF ISSUE, WE FI ND THAT THE ORDER OF THE CIT(A) IS REQUIRED TO BE REVERSED ON THIS ISSUE . ACCORDINGLY, THE REVISED GROUND RAISED IN THIS APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. 6. ADDL. GROUND: FURTHER, ASSESSEE HAS RAISED AN ADDITIONAL GROUND WHICH ACTUALLY EMANATES FROM THE ASSESSMENT ORDER A ND OF COURSE, NOT RAISED BEFORE THE FIRST APPELLATE AUTHORITY (FAA). ON HEARING BOTH THE PARTIES, WE FIND ADDITIONAL GROUND, WHICH REVOLVES AROUND ALLOWING OF DEDUCTION U/S 40(B) OF THE ACT QUA THE INCLUSION OF THE SAID CAPITAL GAIN (SUPRA), IS TO BE ADMITTED AND ADJUDICATED. IT IS THE CASE OF THE REVENUE THAT THE CAPITAL GAIN SHOULD BE EXCLUDED FROM THE N ET PROFIT FOR THE PURPOSE OF COMPUTATION OF ALLOWABLE DEDUCTION U/S 40(B) OF THE ACT. THE ASSESSING OFFICER DUTIFULLY OPPOSED THE ADDITIONAL GROUND. H OWEVER, CONSIDERING THE FACT THAT THE ISSUE RAISED IS LEGAL IN NATURE THE S AME IS ADMITTED AND ADJUDICATED. 7. IN CONNECTION WITH THE SAID ADDITIONAL GROUND, ASSE SSEE FILED VARIOUS DECISIONS AND DREW PARALLEL TO THE ISSUE RE LATING TO THE INCLUSION OF THE INTEREST RECEIPT. IT IS THE CASE OF THE AO THAT INTEREST INCOME BEING TAXABLE UNDER THE HEAD INCOME FROM O THER SOURCES NEEDS TO BE EXCLUDED FOR COMPUTING DEDUCTION U/S 40 (B) OF THE ACT. IN THIS REGARD, LD. COUNSEL RELIED ON THE DECISION IN THE CASE OF MD. SERAJUDDING & BROTHERS 210 TAXMAN 84 (CAL) . ASSESSEE HAS ALSO FILED A COPY OF THE DECISION OF COORDINATE BEN CH IN THE CASE OF SURESH A. SHROFF & CO. 140 ITD 1 (MUM) AND MENTIONED THAT, WHEN THE INCOME FROM OTHER SOURCES CAN BE INCLUDED IN THE NET PROFIT FOR THE PURPOSE OF COMPUTING THE DEDUCTABLE REMUNERATION U/S 40(B), THE CAPITAL GAIN COMPUTED U/S 50 OF TH E ACT SHALL ALSO FOLLOW THE SUIT. THE CAPITAL GAIN, COMPUTED U/S 50 OF THE ACT, CAN B E ALSO INCLUDED SO THAT HIGHER AMOUNT OF DEDUCTION IS ALLOWABLE U/S 40(B) OF THE ACT TO THE ASSESSEE. FURTHER, ASSESS EE RELIED UPON TH E 4 ITA NO.7092/MUM/2012. M/S GOEL PACKAGING DECISION IN THE CASE OF ALLEN CAREER INSTITUTION 37 DTR (JP)(TRIB) 379 FOR THIS PROPOSITION. THE LD. DR FOR THE REVENUE MENTIONED THAT THE SAID ISSUE WAS NOT RAISED BEFORE THE FIRST APPEL LATE AUTHORITY, AND THEREFORE, IN ALL FAIRNESS TO THE REVENUE, THE CIT(A) SHOULD BE GIVEN A CHANCE TO ADJUDICATE THE ISSUE AFRESH. THER EFORE, HE REQUESTED FOR REMAND OF THIS ADDITIONAL GROUND TO T HE FILE OF THE CIT(A). 8. CONSIDERING THE PRINCIPLE OF NATURAL JUSTICE, WE FIND MERIT IN THE SAID ARGUMENT AND THEREFORE THERE IS A JUSTIFICATIO N IN SUCH DEMAND BY THE LD. DR. ACCORDINGLY, WE REMAND THIS ISSUE T O THE FILE OF THE CIT(A) WITH DIRECTION TO ADJUDICATE THIS ISSUE AFRE SH AFTER CONSIDERING THE DECISIONS ON RELEVANT ISSUE AND ALSO AFTER GRAN TING REASONABLE OPPORTUNITY OF BEING HEARD TO THE REVENUE. ACCORDI NGLY THE ADDITIONAL GROUND IS PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2014. !' # $% &! ' 22ND ()*+),-)./ 2014 0 1 SD/- SD/- D.MANMOHAN D.KARUNAKARA RAO (VICE PRESIDENT) (ACCOUNTANT MEMBER) MUMBAI , DATED: 22/09/2014 F{X~{T? P.S. !'234 54 / COPY OF THE ORDER FORWARDED TO : (1) 2678 / THE ASSESSEE; (2) / THE REVENUE; (3) 9: ; / THE CIT(A); (4) 9 / THE CIT, MUMBAI CITY CONCERNED; (5) 4<022=6/ =6/$ > / THE DR, ITAT, MUMBAI; 5 ITA NO.7092/MUM/2012. M/S GOEL PACKAGING (6) 0?7@ / GUARD FILE. 4 2 / TRUE COPY !' / BY ORDER A / B / (DY./ASSTT. REGISTRAR) =6/$ > / ITAT, MUMBAI,