ACIT,Circle-3, Kolkata, Kolkata V. M/d Meenakshi Properties Pvt. Ltd., Kolkata

ITA 793/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75053 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 17-05-2012
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: J M THARD
• Keywords: Capital asset; Depreciation
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 793/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. M/S. ME ENAKSHI PROPERTIES (P) LTD. CIRCLE-3, KOLKATA. (PAN: AACCM0693C) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 19.02.2014 DATE OF PRONOUNCEMENT: 19.02.2014 FOR THE APPELLANT: SHRI P. DAM KANUNJNA, JCIT, SR. DR FOR THE RESPONDENT: SHRI J. M. THARD, ADVOCATE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-I, KOLKATA IN APPEAL NO. 134/CIT(A)-I/C-3/08-09 DATED 17.02.2012. ASSESSMEN T WAS FRAMED BY DCIT, CIRCLE-3, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 01.10. 2008. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DIRECTING THE AO TO TREAT THE GAIN FROM SALE OF PROPERTY AS LONG TERM CAPITAL GAINS ( LTCG). FOR THIS, REVENUE HAS RAISED FOLLOWING THREE EFFECTIVE GROUND S: 1. THAT THE LD. CIT(A) ERRED IN TREATING THE GAIN FROM SELL CONSIDERATION OF RS.85,33,500/- AS LONG TERM CAPITAL GAIN WITHOUT AP PRECIATING THE FACT THAT THE ASSESSEE COMPANY SHOWN THE ASSETS AS FIXED ASSETS A ND THE DEPRECIATION WAS ALSO CLAIMED ON THAT AND INCOME FROM LETTING OUT WAS SHO WN AS INCOME FROM HOUSE PROPERTY'. 2. THAT THE LD. CIT(A) ERRED WHILE NOT APPRECIATING THE FACT THAT THE RENTAL INCOME WAS THE SOLE SOURCE OF REGULAR EARNING OF THE ASSES SEE COMPANY AND AS PER THE TAX AUDIT REPORT LETTING OUT PROPERTY WAS THE ONLY BUSINESS OF THE ASSESSEE COMPANY. 3.THAT THE LD. CIT(A) ERRED IN TREATING THE SAID GA IN AS LONG TERM CAPITA1 GAIN WITHOUT PROVIDING OPPORTUNITY TO THE ASSESSING OFFI CER TO EXAMINE THE DATE OF CONSTRUCTION OF LAND AND BUILDING. 2 ITA NO.793/K/2012 MEENAKSHI PROPERTIES (P) LTD. AY:2006-07 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE AO DURING THE COURSE OF AS SESSMENT PROCEEDINGS TREATED THE LTCG DECLARED BY ASSESSEE FROM SALE OF PROPERTY AS SHORT TERM CAPITAL GAIN FOR THE REASON THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE PROPERTY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OB SERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF TH E AO AS WELL SUBMISSION OF THE APPELLANT. THE APPELLANT HAD PURCHASED A LAND IN TH E YEAR 1988 THEREAFTER A BUILDING WAS CONSTRUCTED THEREON. THE SAID PROPERTY WAS GIVE N ON RENT, INCOME FROM WHICH WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERT Y. IT HAS ALSO BEEN FOUND THAT IN THE IMMEDIATELY PRECEDING THREE FINANCIAL YEARS THE APPELLANT HAD PROVIDED DEPRECIATION ON THE SAID PROPERTY IN THE BOOKS OF ACCOUNTS FOR M AKING COMPLIANCE TO THE PROVISIONS OF COMPANIES ACT, 1956 BUT DID NOT CLAIM DEPRECIATION IN ITS RETUM OF INCOME FOR LNCOME TAX PURPOSE. ON SALE OF THE PROPERTY IN THE FINANCI AL YEAR 2005-06 THE GAIN WAS TREATED AS LONG TERM CAPITAL GAIN IN THE RETUM OF INCOME. THE A.O. HAS TREATED INCOME FROM TRANSFER OF LAND A ND BUILDING OF RS. 47,15,601/- AS SHORT TERRN CAPITAL GAIN ON THE BASIS THAT LETTING OUT OF PROPERTY WAS THE NATURE OF THE BUSINESS OF THE APPELLANT AS PER TAX AUDIT REPORT A ND RENTAL INCOME FROM LAND & BUILDING WAS OFFERED FOR TAXATION AS INCOME FROM HO USE PROPERTY AND THEREFORE THERE WAS NO SCOPE FOR CLAIMING DEPRECIATION U/S 24 OF TH E INCOME TAX ACT, 1961. THE APPELLANT RELIED ON PRABODH INVESTMENT & TRADIN G COMPANY PVT. LTD. VS. ITO, ITA N. 6557/MUM/2008 BENCH C DT. 28-2-2011 (2011) IN T HAT CASE THE TRIBUNAL HELD THAT THE MOMENT THE ASSESSEE STOPPED CLAIMING DEPRECIATI ON IN RESPECT OF THE FLAT AND EVEN LET OUT THE SAME FOR RENT, IT CEASED TO BE A BUSINESS A SSET. THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ALLOW BENEFIT OF INDEXATION AS CLAIMED BY THE ASSESSEE TREATING THE SALE AS LONG TERM CAPITAL ASSET. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND CONSIDERING THE ABOVE DECISION OF THE HONBLE MUMBAI ITAT, I HAVE CONSIDE RED OPINION THAT THE GAIN ON TRANSFER OF LAND AND BUILDING IS LONG TERM CAPITAL GAIN AND SO THE AO IS DIRECTED TO TREAT THE GAIN ON SALE OF LAND AND BUILDING OF RS.47,15,6 01/- AS LONG TERM CAPITAL GAIN AND BENEFIT OF INDEXATION SHOULD ALSO BE ALLOWED. AGGRIEVED, REVENUE NOW IS IN APPEAL BEFORE US. 4. WE FIND THAT THE ASSESSEE HAS PURCHASED LAND IN THE YEAR 1988 AND THEREAFTER CONSTRUCTED A BUILDING THEREON. THE ASSESSEE HAD GIVEN ITS PRO PERTY ON RENT AND RENTAL INCOME WAS OFFERED FOR TAXATION IN ITS RETURN OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT WAS THE CLAIM OF THE ASSESSEE BEFORE AO AS WELL AS BEFORE C IT(A) THAT NO DEPRECIATION WAS CLAIMED IN ITS RETURN OF INCOME UNDER THE PROVISIONS OF THE AC T. THE CONTENTION OF THE ASSESSEE NOW BEFORE US WAS THAT THE ASSESSEE HAD PROVIDED DEPRECIATION ON THE AFORESAID RENTED PROPERTY ONLY IN BOOKS OF ACCOUNT FOR MAKING COMPLIANCE TO THE PROVI SIONS OF THE COMPANIES ACT, 1956. THIS PROPERTY WAS SOLD BY THE ASSESSEE IN THE FY 2005-06 RELEVANT TO AY 2006-07. THE GAIN OR 3 ITA NO.793/K/2012 MEENAKSHI PROPERTIES (P) LTD. AY:2006-07 SURPLUS ARISING OUT OF SALE OF THIS PROPERTY WAS DE CLARED AS LTCG IN ITS RETURN OF INCOME. WHEN THIS WAS CONFRONTED THAT THE ASSESSEE HAS NEVER CLA IMED DEPRECIATION, THE LD. SR. DR COULD NOT ANSWER. ONCE THIS IS THE POSITION THAT ASSESSEE HAD NEVER CLAIMED DEPRECIATION UNDER THE PROVISIONS OF THE ACT AND RENTAL INCOME IS DECLARED AS INCOME FROM HOUSE PROPERTY AND THIS PROPERTY WAS DECLARED AS FIXED ASSET IN THE BALANCE SHEET, THE AO HAS NO OPTION BUT TO ASSESS THE GAIN AS LONG TERM CAPITAL GAIN ON SALE OF THIS PROPERTY. IN SUCH CIRCUMSTANCES, WE CONFIRM THE ORDER OF CIT(A). THIS ISSUE OF REVENUES APPEA L IS DISMISSED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- ACIT, CIR-3, KOLKATA. 2 ./,- / RESPONDENT M/S. MEENAKSHI PROPERTIES (P) LTD., 9, BRABOURNE ROAD, 35 TH FLOOR, KOLKATA-700 001. 3 . 0' ( )/ THE CIT(A), KOLKATA. 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .