KENT LABS (BOMBAY ) P. LTD, MUMBAI V. ITO 3(2)(3), MUMBAI

ITA 7783/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48401 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Capital asset; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRIR.S.SYAL, AM AND SHRI R.S.PADVEKAR, JM ITA NO.7783/MUM/2010 : ASST.YEAR 2007-2008 M/S.KENT LABS (BOMBAY) PVT. LTD. E-3, CUFFE CASTLE, CUFFE PARADE COLABA, MUMBAI 400 005. PAN : AAACK2178C. VS. THE INCOME TAX OFFICER WARD 3(2)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHEKHAR GUPTA RESPONDENT BY : SHRI D.SONGATE O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 27.09.2010 IN RELATION TO ASSESSMENT YEAR 2007-2008 . 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE REFUSAL TO RECTIFY THE ORDER U/S.154 AND NOT GRANTING EXEMPTION U/S.54EC. BRIEFL Y STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEES RETURN WAS PROCESSED U/S.14 3(1), BY WHICH EXEMPTION U/S.54EC TOWARDS INVESTMENT IN 120 RURAL ELECTRIFIC ATION CORPORATION LIMITED BONDS, WAS DENIED WHICH WAS CLAIMED BY THE ASSESSE E ON SHORT TERM CAPITAL GAIN OF RS.12 LAKHS. THE ASSESSEE MOVED RECTIFICATION AP PLICATION U/S.154. THE ASSESSING OFFICER REFUSED TO RECTIFY THE INTIMATION ON THE GROUND THAT EXEMPTION U/S.54EC WAS AVAILABLE ONLY IN RESPECT OF LONG TERM CAPITAL GAIN. SINCE THE ASSESSEE RETURNED SHORT TERM CAPITAL GAIN, THE ASSESSING OF FICER DID NOT RECTIFY THE INTIMATION U/S.143(1). DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE JURI SDICTIONAL HIGH COURT IN CIT VS. ACE BUILDERS PVT. LTD. [(2006) 281 ITR 210 (BOM.)] IN SUPPORT OF HER CASE. THE LEARNED CIT(A) OBSERVED THAT THERE WAS NO MISTAKE A PPARENT FROM RECORD IN ITA NO.7783/MUM/2010 M/S.KENT LABS (BOMBAY) PRIVATE LIMITED. 2 DISALLOWING EXEMPTION U/S.54EC ON THE GROUND THAT T HE ASSESSEE HAD MENTIONED THAT IT HAD EARNED SHORT TERM CAPITAL GAIN U/S.50 T O THE TUNE OF RS.12 LAKHS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE ASSESSEE WAS HAVING FA CTORY PREMISES WITH THE OPENING COST AT RS.7,35,660.26 ELIGIBLE FOR DEPRECIATION AT THE RATE OF 10%, ON WHICH DEPRECIATION WAS CLAIMED UP TO THE BEGINNING OF THE YEAR AT RS.6,19,640.36, THEREBY LEAVING OPENING WRITTEN DOWN VALUE AT RS.1, 16,020. THIS BUILDING WAS SOLD FOR RS.12 LAKHS, THEREBY LEAVING NO OTHER ASSET IN THIS BLOCK OF ASSET. THE ASSESSEE INVESTED THE ENTIRE SALE PROCEEDS OF RS.12 LAKHS IN THE ELIGIBLE BONDS U/S.54EC AND CLAIMED EXEMPTION ON THAT ACCOUNT. IT IS NOTICED TH AT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE AFORE-NOTED JUDGEMENT OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD. (SUPRA) IN WHICH IT HAS BEEN HELD THAT FICTION CREATED U/S.50(1) AND 50(2) IS RESTRICTED O NLY TO THE MODE OF COMPUTATION OF CAPITAL GAIN CONTAINED IN SECTIONS 48 AND 49 AND DO ES NOT APPLY TO THE OTHER PROVISIONS AND HENCE ASSESSEE HAS BEEN HELD TO BE E NTITLED TO EXEMPTION U/S.54E IN RESPECT OF CAPITAL GAIN ARISING ON THE TRANSFER OF A LONG TERM CAPITAL ASSET ON WHICH DEPRECIATION HAS BEEN ALLOWED. IN OUR CONSIDERED OP INION, THE FACTS OF THE INSTANT CASE ARE ON ALL FOURS WITH THOSE CONSIDERED AND DEC IDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORE-NOTED CASE. HOWEVER IT IS NOTED THAT THE ASSESSEE IS CLAIMING EXEMPTION FOR THE ENTIRE SUM O F RS.12.00 LACS, WHICH IS NOT THE AMOUNT OF SHORT TERM CAPITAL GAIN. THE AMOUNT O F SHORT TERM CAPITAL GAIN SHALL BE THE AMOUNT LEFT AFTER DEDUCTING THE OPENING W.D. V FROM THE SALE PROCEEDS. THE A.O. IS DIRECTED TO CALCULATE THE CORRECT AMOUNT OF SHORT TERM CAPITAL GAIN AND THE RESULTANT RELIEF ACCORDINGLY. WE, THEREFORE, OVER TURN THE IMPUGNED ORDER ON THIS ISSUE AND ORDER FOR THE GRANT OF EXEMPTION U/S.54EC OF THE ACT, AS PER OUR ABOVE OBSERVATIONS. ITA NO.7783/MUM/2010 M/S.KENT LABS (BOMBAY) PRIVATE LIMITED. 3 4. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 13 TH DAY OF APRIL, 2011 . SD/- SD/- (R.S.PADVEKAR) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 13 TH APRIL, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - VII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.