PRINCE MARBLE & GRANITE P. LTD, MUMBAI V. ITO WD 10(3)(2), MUMBAI

ITA 8024/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70934 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADIP KUMAR SINGH
• Assessee Lawyers: NIMESH VORA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 50C; 234B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. . . , , BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RA JENDRA, ACCOUNTANT MEMBER ./ ITA NO.8024/MUM/2010, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2007-08 PRINCE MARBLE AND GRANITE PVT. LTD. GR.FLOOR,MATRU CHAYYA BLDG.SN RD. MULUND(W)MUMBAI-4000080 VS. ITO 10(3)(2) AAYAKAR BHAVAN, M.K.MARG,MUMBAI- 400020 PAN: AABCP4115H ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) #$ #$ #$ #$ ' ' ' ' / APPELLANT BY :SH.NIMESH VORA %&#$ ( ' / RESPONDENT BY :SH.PRADIP KUMAR SINGH ! ! ! ! ( (( ( )* )* )* )* / DATE OF HEARING : 24-08-2013 +,' ( )* / DATE OF PRONOUNCEMENT : 04-09-2013 ! ! ! ! , 1961 ( (( ( 254(1) )-) )-) )-) )-) . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. CHALLENGING THE ORDER DATED 22.09.2010 OF THE CIT(A )-22, MUMBAI ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-22 (CIT(A)- 1.ERRED IN CONFIRMING COMPUTATION OF SHORT TERM CAP ITAL GAIN ON SALE OF DEPRECIABLE ASSET BEING BUILDING AT RS. 36,19,950/ WITHOUT APPRECIATING THE ADDITION TO BLOCK OF ASSET OF RS. 42,94,250, WHICH WAS PUT TO USE FOR THE PURPOSE OF BUSINESS DU RING THE YEAR. 2.ERRED IN CONFIRMING THAT THE NEW ASSET WAS NOT PU T TO USE WITHOUT APPRECIATING THE FACTS CORRECTLY, 3.ERRED IN CONFIRMING DENIAL OF DEPRECIATION CLAIME D ON THE BLOCK OF ASSETS OF RS.38,653/- ON THE PREMISE THAT THE ASSETS WERE NOT PUT TO USE, 4.WITHOUT PREJUDICE TO THE ABOVE, SHOULD HAVE DIREC TED TO GRANT SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION AGAINST THE SHOR T TERM CAPITAL GAINS ASSESSED UNDER SECTION 50 AS SAME IS IN THE NATURE OF BUSINESS INCOME, 5.ERRED IN CONFIRMING LEVY OF INTEREST UNDER SECTIO N 234B OF RS.5,79,960/ AND UNDER SUCTION 234C OF RS. 53,649/- WHICH IS NOT AS PER LAW, THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL.WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD, ALTER, DELETE OR MOD IFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN MARBLE & GRANITES,FILED ITS RETURN OF INCOME,ON 31.10.2007,DECLARING TOTAL INCOME OF RS. 25,94,864/-.ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT U/S. 143(3) OF THE ACT,ON,30.12.2009 ,DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.82,51,510/- 2. FIRST GROUND OF APPEAL PERTAINS TO ADDITION OF 36, 19,950/- ON ACCOUNT OF SHORT TERM CAPITAL 2 ITA NO. 8024/MUM/2010 PRINCE MARBLE AND GRANITE PVT . LTD. GAINS.DURING THE ASSESSMENT PROCEEDINGS AO FOUND TH AT THE ASSESSEE HAD SOLD ITS PROPERTY AT THANE AT RS.1.24 CRORES.THE STAMP DUTY VALUATION OF THE PROPERTY WAS RS.1.46 CRORES.AO INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AN D HELD THAT CAPITAL GAIN IN THE CASE OF THE ASSESSEE AS TO BE COMPUTED ON THE BASIS OF STAMP D UTY VALUATION,THAT VALUE OF THE FACTORY BUILDING WAS RS.37.18 LACS.HE REWORKED THE LONG TERM CAPITAL GAIN ON SALE OF PLOT OF LAND AT RS.6.31 LACS.AS FAR AS FACTORY BUILDING IS CONCERNED,AO WAS OF THE OPINION THAT AFTER SALE OF FACTORY NO NEW ASSET WAS PURCHASED DURING THE YEAR UNDER CONSI DERATION.HE REFERRED TO TWO AGREEMENTS ENTERED IN BY THE ASSSESSEE ON 09.02.2007AND 29.03. 2007.AFTER CONSIDERING THE TERMS OF THE SAID AGREEMENTS HE HELD THAT THE ASSESSEE HAD ENTERED IN TO AN AGREEMENT WITH A CONTRAC -TOR WHEN IT EVEN DID NOT HAVE POSSESSION OF THE LAND.HE HELD TH AT WITHOUT POSSESSION OF LAND THE CONSTRUCTION ACTIVITY COULD NOT HAVE BEEN UNDERTAKEN,THAT THE CL AIM OF ASSESSEE THAT FACTORY BUILDING HAD BEEN PUT TO USE DURING THE RELEVANT PREVIOUS YEAR WAS IN CORRECT AND LIABLE TO BE REJECTED,THAT SINCE NO ADDITION TO THE BLOCK BUILDING HAD BEEN MADE THE AS SESSEE WAS LIABLE FOR SHORT TERM CAPITAL GAINS, THAT ENTIRE BLOCK OF ASSETS UNDER THE HEAD BUILDING HAD BEEN WIPED OFF CONSEQUENT TO THE SALE OF ITS FACTORY BUILDING.FINALLY,AO ASSESSED RS.36,19,950/ AS SHORT-TERM CAPITAL GAINS AND ADDED IT TO THE RETURNED INCOME OF THE ASSESSEE. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT ORDER OF THE AO DID NOT SUFFER FROM ANY INFIRMITY,T HAT ASSESSEE HAD MADE A FACTUALLY INCORRECT AVERMENT WITH REGARD TO ADDITION IN THE BLOCK OF AS SETS ,THAT LAND WAS PURCHASED ON 29.03.2007 AND GODOWN THERE ON WAS TO BE CONSTRUCTED WITHIN 90 DAYS, THAT A BUILDING COULD NOT BE CONSTRUCT - ED ON A PLOT OF LAND BEFORE ITS POSSESSION WAS TAKE N,THAT NO PRUDENT BUSINESSMAN WOULD START CONSTRUCTION ON A LAND THE OWNERSHIP OF WHICH DID N OT VESTS WITH THE CONTRACTEE,THAT BY NO STRETCH OF IMAGINATION IT COULD BE SAID THAT THE CONSTRUCTI ON OF GODOWN WAS COMPLETED WITHIN 3 DAYS I.E. BY 31.03.2007.FINALLY,HE HELD THAT THAT AO HAD RIGH TLY CALCULATED SHORT TERM CAPITAL GAINS AT RS.36,19,950/- .HE ALSO CONCLUDED THAT AO HAD RIGHT LY DISALLOWED DEPRECIATION OF RS 38 650/- SINCE THE BLOCK OF ASSETS UNDER THE HEAD BUILDING HAD BEEN WIPED OUT. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT BEFORE US, AR SUBMITTED THAT ASSESSEE HAD PURCHASED GODOWN AFTER SALE OF FACTORY BUILDING, THAT IT HAD OFFERED SHORT TERM CAPITAL GAIN IN THE RETURN OF INCOME, THAT THE AO A ND FAA HAD NOT TAKEN THE SALE BLOCK OF ASSETS WHILE DETERMINING THE TAX LIABILITIES OF THE ASSESS EE, THAT PROVISIONS OF SECTION 50C WERE APPLICA- BLE ONLY TO COMPUTATION OF INCOME UNDER CAPITAL GAI NS ARISING OUT OF SALE OF CAPITAL ASSETS AND NOT FOR THE COMPUTATION OF INCOME FROM BUSINESS ASSETS. HE RELIED UPON THE FOLLOWING JUDGMENTS: (I) INDERLOK HOTELS (P) LTD. VS. ITO 122 TTJ (MUM T RIBUNAL) 145 (II) CIT VS. THIRUVENGADAM INVESTMENTS (P) LTD. 320 ITR 345 (MAD.) (III) BHATIA NAGAR PREMISES CO-OP. SOC. LTD. VS. UO I WP NO.1305 OF 2009 (BOM HC) HE FURTHER SUBMITTED THAT THE SALE VALUE OF RS. 37. 8 LACS OF FACTORY BUILDING WAS REDUCED FROM THE BLOCK OF ASSETS, THAT SIMULTANEOUSLY THERE WAS ADDI TION IN THE SAID BLOCK AS THE ASSESSEE HAD PURCHASED NEW GODOWN FOR BUSINESS PURPOSES, THAT TH E GODOWNS WERE PURCHASED IN BHIWANDI, THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF LAND ON 29.11.2006 WITH PLINTH WITH M/S HARIHAR CORPORATION AND HAD PAID DEPOSIT F OR THE SAME, THAT AFTERWARDS POSSESSION OF THE LAND WITH PLINTH WAS OBTAINED, THAT ASSESSEE ENTERE D INTO A CONSTRUCTION AGREEMENT ON 09.02. 2007,THAT CONSTRUCTION OF GODOWN WAS COMPLETED IN T HE FIRST WEEK OF MARCH,2007,THAT THEREAFTER M/S HARIHAR CORPORATION AND THE ASSESSEE ENTERED IN TO DEED OF CONVEYANCE DATED 29.03.2007 WHEREBY THE OWNERSHIP OF THE LAND WAS CONVEYED IN F AVOUR OF THE ASSESSEE AND ENTIRE BALANCE CONSIDERATION WAS PAID, THAT AO AND THE FAA HAD NOT CONSIDERED THE FACT THAT THE AGREEMENTS OF PURCHASE OF LAND AND AGREEMENT OF CONSTRUCTION OF G ODOWN WAS WITH THE SAME PARTY, THAT IN THE CONSTRUCTION AGREEMENT DATED 09.02.2007 M/S HARIHAR CORPORATION HAD AGREED TO THE FACT THAT ASSESSEE WAS THE OWNER OF THE PLOT OF LAND IN QUEST ION AND HAD POSSESSION OF PREMISES WITH PLINTH WITH PROPOSED GODOWN NO. 20-22, THAT THE ASSESSEE H AD DISPENSED THE MATERIAL FROM THE SAID GODOWNS TO VARIOUS BUYERS PRIOR TO MARCH 31.02.2010 . HE RELIED UPON THE PAGE NO. 17 TO 19 AND 3 ITA NO. 8024/MUM/2010 PRINCE MARBLE AND GRANITE PVT . LTD. 49,50, 52-56 OF THE PAPER BOOK AS WELL AS ON THE AG REEMENT DATED 09.11. 2006.DR RELIED UPON THE ORDERS OF THE AO AND FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT PAGE NO. 19, 49, 50 AND 51-56 OF THE PAPER BOOK HAVE NOT BEE N CONSIDERED IN PROPER PROSPECTIVE BY THE AO WHILE FINALISING THE ASSESSMENT. FROM THESE PAPERS, IT IS CLEAR THAT ASSESSEE HAD NOT PURCHASED THE LAND ON 29.03.2007 BUT IN THE MONTH OF NOVEMBER,200 6.THEREFORE, WE ARE OF THE OPINION THAT, IN THE INTEREST OF JUSTICE, MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH.HE IS DIRECTED TO AFFORD A REASONABLE OPPORT UNITY OF HEARING TO THE ASSESSEE AND TO CONSIDER ALL THE PAPERS BEFORE TAKING A FINAL DECISION. GROUND NO.1 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 3. EFFECTIVE GROUND OF APPEAL NO.2IS ABOUT SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSOR - BED DEPRECIATION.DURING THE ASSESSMENT PROCEEDINGS, AO DID NOT ALLOW THE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION AGAINST THE SHORT TERM CAPITAL GAINS ASSESSED U/S.50 OF THE ACT.ASSESSEE PREFERRED AN APPEAL BEFO RE THE FAA. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT A SHORT TERM CAPITAL GAIN HAS RIGHTLY BEEN CALCULATED BY THE AO. 3.1. WE FIND THAT FAA HAS NOT GIVEN HIS FINDING ABOUT TH E NATURE OF THE ASSET-IN-QUESTION I.E. WHETHER IT WAS THE CAPITAL ASSET OR BUSINESS ASSET? FOR INVOKING THE PROVISIONS OF SECTION 50 CERTAIN CONDITIONS HAVE TO BE FULFILLED. NEITHER AO NOR FAA HAS DISCUSSED ANYTHING ABOUT EXISTENCE OF SUCH CONDITIONS.THEREFORE, IN THE INTEREST OF JUSTI CE, WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. HE WILL AFFORD A REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.2 IS PARTLY ALLOWED IN FAVOUR OF THE ASSE SSEE COMPANY. LAST GROUND OF APPEAL IS ABOUT LEVIED OF INTEREST U /S. 234B AND 234C OF THE ACT. IN OUR OPINION THE GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND DOE S NOT NEED SEPARATE ADJUDICATION IN VIEW OF OUR ABOVEMENTIONED DISCUSSION. AS A RESULT, APPEAL FILED BY THE ASSESSEE-COMPANY STANDS PARTLY ALLOWED. / )0 !/)-! 2 3 ( - . 5 6 ( ) 78 . ORDER PRONOUNCED IN THE OPEN COU RT AT THE TIME OF HEARING ON 4 TH SEPTEMBER,2013 . . ( +,' 9 :! 4 FLRACJ FLRACJ FLRACJ FLRACJ , 2013 , ( - ; SD/- SD/- ( . < < < < . . B.R.MITTAL ) ( / RAJENDRA ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, :! /DATE: 04.09.2013 SK . . . . ( (( ( %)= %)= %)= %)= >=') >=') >=') >=') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / ? @ , 4. THE CONCERNED CIT / ? @ 5. DR C BENCH, ITAT, MUMBAI / =A- %)! , . . . 4 ITA NO. 8024/MUM/2010 PRINCE MARBLE AND GRANITE PVT . LTD. 6. GUARD FILE/ - B &=) &=) &=) &=) %) %)%) %) //TRUE COPY// .! / BY ORDER, C / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI