Harshad Mehta, Kolkata V. DCIT, CIR-45, KOLKATA, Kolkata

ITA 889/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1628 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN ADDITI ONAL
• Assessee Lawyers: ANIKESH BANERJEE
• Keywords: Capital asset; Depreciation; Business expenditure; Benefit of exemption
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA [BEFORE SRI N.V. VASUDEVAN, JUDICIAL MEMBER & SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER] I.T.A. NO. 889/KOL/2014 ASSESSMENT YEAR: 2008-09 HARSHAD MEHTA... ..APPELLANT 161/1, M.G. ROAD KOLKATA - 700007 [PAN : ADVPM 7278 C] D.C.I.T., CIRCLE-45, KOLKATA..... ..RESPONDENT 3, GOVERNMENT PLACE WEST KOLKATA - 700001 APPEARANCES BY: SHRI ANIKESH BANERJEE, AR APPEARING ON BEHALF OF THE ASSESSEE. SHRI SALLONG YADEN, ADDITIONAL CIT, SR. DR, APPEARI NG ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 16, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 23, 2017 O R D E R PER J. SUDHAKAR REDDY :- THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA ( HEREINAFTER THE LD. CIT(A)), DT. 27/01/2014, PASSED U/S 250 OF THE INC OME TAX ACT, 1961 (THE ACT), FOR THE ASSESSMENT YEAR 2008-09, ON THE FOL LOWING REVISED GROUNDS OF APPEAL:- 1. FOR THAT THE ASSESSMENT ORDER & DEMAND NOTICE W AS SERVED ON 28/01/11 BY LD. ASSESSING OFFICER WHICH IS ILLEGAL & TIME BARRED AS THE LIMITATION TO SERVE THE BOTH EXPIRED ON 31/12/1 0. 2 I.T.A. NO. 889/KOL/2014 ASSESSMENT YEAR: 2008-09 HARSHAD MEHTA 2. FOR THAT LD. CIT(A) WRONGLY DISMISSED THE GROUND NO 1 RELATED SERVICE OF ASSESSMENT ORDER & DEMAND NOTICE WHICH W AS PRESSED IN WRITTEN SUBMISSION OF ASSESSEE, DULY FILED ON 06/05 /2013. WITHOUT PREJUDICE TO GROUND NO.1 & 2: 3. FOR THAT LD. AO DISALLOWED BUSINESS EXPENSES TOT AL AMOUNT OF RS 136,383/-. THE LD. CIT(A) ALLOWED TRAVELLING EXPENS ES AMOUNT OF RS. 23,727/- ONLY. SO, THE DISALLOWANCE OF BALANCE EXPENSES RELATED TO BUSINESS AMOUNT OF RS. 112,656/- IS ARBITRARY & ILLEGAL. PLEASE ALLOW THE BUSINESS EXPENSES AMOUNT OF RS. 112.656/- . 4. FOR THAT PRAYER FOR CALCULATION OF TAX OF DEEMED SHORT TERM CAPITAL GAIN OF DEPRECIABLE ASSETS U/S 50 AMOUNT OF RS. 102,982 IN SPECIAL RATE UNDER SECTION 112 OF THE ACT. 5. FOR THAT DISALLOWANCE U/S 14A AMOUNT OF RS. 1112 /- IS BAD IN LAW. 6. FOR THAT THE APPELLANT PRAYS TO PLACE ANY ADDITI ONAL GROUND/S BEFORE COMPLETION OF HEARING. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUND NOS. 1, 2, 5 & 6. HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. GROUND NO. 3 IS AGAINST THE AD HOC DISALLOWANCE OF EXPENSES TOTALLING TO RS .1,36,383/-. 3. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT THE LEARNED CIT(A), HAS RESTRICTED THE DISALLOWANCE TO RS. 30,000/-. AT PAR A 2.2., OF HIS ORDER HE HELD AS FOLLOWS:- DECISION: THE APPELLANT HAS MERELY FILED WRITTEN SUBMISSION CHALLENGING THE ADDITIONS MADE BY THE A. O. HE HAS NOT BEEN ABLE TO DEMONSTRATE WITH FACTS AS TO H OW THE 3 I.T.A. NO. 889/KOL/2014 ASSESSMENT YEAR: 2008-09 HARSHAD MEHTA ADDITIONS MADE WERE UN-REASONABLE. AS A RESULT, ADD ITIONS ON ACCOUNT OF TELEPHONE, MOTOR CAR, BUSINESS PROMOTION ARE CONFIRMED. ADDITION ON ACCOUNT OF TRAVELLING EXPENSES OF RS.53,723/- IS RESTRICTED TO RS.30,000/-. 3.1. WE FIND THE NO REASON TO INTERFERE IN THIS FAC TUAL FINDING OF THE LD. CIT (A), HENCE WE DISMISS GROUND NO. 3 OF THIS APPEAL. 4. GROUND NO. 4 IS ON THE RATE OF TAX APPLICABLE ON DEEMED SHORT-TERM CAPITAL GAIN OF DEPRECIABLE ASSETS U/S 50 OF THE AC T. THE ASSESSEE RELIES ON THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CIT., BOMBAY VS. M/S. DELITE TIN INDUSTRIES, REPORTED IN [2010] 322 ITR (ST.) 8 AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. ACE BUILDERS PVT. LTD., REPORTED IN [2006] 281 ITR 210. BOTH THESE DECISIONS ARE ON THE ISSUE, AS TO WHETH ER THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 54E OF THE ACT, IN RESPECT OF CAPITAL GAIN ARISING ON TRANSFER OF DEPRECIABLE CAPITAL ASSET. T HE COURT HAS HELD AS FOLLOWS:- THE ASSESSEE CANNOT BE DENIED EXEMPTION UNDER S. 5 4E, BECAUSE, FIRSTLY, THERE IS NOTHING IN S. 50 TO SUGGEST THAT THE FICTION CREATED IN S. 50 IS NOT ONLY RESTRICTED TO SS. 48 AND 49 BUT A LSO APPLIES TO OTHER PROVISIONS. ON THE CONTRARY, S. 50 MAKES IT EXPLICI TLY CLEAR THAT THE DEEMED FICTION CREATED IN SUB-SS. (1) AND (2) OF S. 50 IS RESTRICTED ONLY TO THE MODE OF COMPUTATION OF CAPITAL GAINS CO NTAINED IN SS. 48 AND 49. SECONDLY, IT IS WELL ESTABLISHED IN LAW THAT A FICTION CREATED BY THE LEGISLATURE HAS TO BE CONFINED TO TH E PURPOSE FOR 4 I.T.A. NO. 889/KOL/2014 ASSESSMENT YEAR: 2008-09 HARSHAD MEHTA WHICH IT IS CREATED. THE FICTION CREATED UNDER S. 5 0 IS CONFINED TO THE COMPUTATION OF CAPITAL GAINS ONLY AND CANNOT BE EXTENDED BEYOND THAT. THIRDLY, S. 54E DOES NOT MAKE ANY DIST INCTION BETWEEN DEPRECIABLE ASSET AND NON-DEPRECIABLE ASSET AND, TH EREFORE, THE EXEMPTION AVAILABLE TO THE DEPRECIABLE ASSET UNDER S. 54E CANNOT BE DENIED BY REFERRING TO THE FICTION CREATED UNDER S. 50. SEC. 54E SPECIFICALLY PROVIDES THAT WHERE CAPITAL GAIN ARISI NG ON TRANSFER OF A LONG-TERM CAPITAL ASSET IS INVESTED OR DEPOSITED (WHOLE OR ANY PART OF THE NET CONSIDERATION) IN THE SPECIFIED ASS ETS, THE ASSESSEE SHALL NOT BE CHARGED TO CAPITAL GAINS. THEREFORE, T HE EXEMPTION UNDER S. 54E CANNOT BE DENIED TO THE ASSESSEE ON AC COUNT OF THE FICTION CREATED IN S. 50. IT IS TRUE THAT S. 50 IS ENACTED WITH THE OBJECT OF DENYING MULTIPLE BENEFITS TO THE OWNERS O F DEPRECIABLE ASSETS. HOWEVER, THAT RESTRICTION IS LIMITED TO THE COMPUTATION OF CAPITAL GAINS AND NOT TO THE EXEMPTION PROVISIONS. IN OTHER WORDS, WHERE THE LONG-TERM CAPITAL ASSET HAS AVAILED DEPRE CIATION, THEN THE CAPITAL GAIN HAS TO BE COMPUTED IN THE MANNER P RESCRIBED UNDER S. 50 AND THE CAPITAL GAINS TAX WILL BE CHARG ED AS IF SUCH CAPITAL GAIN HAS ARISEN OUT OF A SHORT-TERM CAPITAL ASSET, BUT IF SUCH CAPITAL GAIN IS INVESTED IN THE MANNER PRESCRIBED I N S. 54E, THEN THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER S. 45. TO P UT IT SIMPLY, THE BENEFIT OF S. 54E WILL BE AVAILABLE TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT THE COMPUTATION OF CAPITAL GAINS IS DONE EITHER UNDER SS. 48 AND 49 OR UNDER S. 50. THE CONTENTION OF THE REV ENUE THAT BY AMENDMENT TO S. 50, THE LONG-TERM CAPITAL ASSET HAS BEEN CONVERTED INTO A SHORT-TERM CAPITAL ASSET IS ALSO W ITHOUT ANY MERIT. AS STATED HEREINABOVE, THE LEGAL FICTION CREATED BY THE STATUTE IS TO DEEM THE CAPITAL GAIN AS SHORT-TERM CAPITAL GAIN AN D NOT TO DEEM 5 I.T.A. NO. 889/KOL/2014 ASSESSMENT YEAR: 2008-09 HARSHAD MEHTA THE ASSET AS SHORT-TERM CAPITAL ASSET. THEREFORE, I T CANNOT BE SAID THAT S. 50 CONVERTS LONG-TERM CAPITAL ASSET INTO A SHORT-TERM CAPITAL ASSET. THE TRIBUNAL WAS JUSTIFIED IN ALLOWI NG THE BENEFIT OF EXEMPTION UNDER S. 54E TO THE ASSESSEE IN RESPECT O F THE CAPITAL GAINS ARISING ON THE TRANSFER OF A CAPITAL ASSET ON WHICH DEPRECIATION HAS BEEN ALLOWED. 5. APPLYING THE PROPOSITIONS LAID DOWN IN THIS CASE LAW TO THE FACTS OF THIS CASE, WE ALLOW THIS GROUND OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. KOLKATA, THE 23 RD DAY OF AUGUST, 2017. SD/- SD/- [N.V. VASUDEVAN] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOU NTANT MEMBER DATED : 23.08.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. HARSHAD MEHTA 161/1, M.G. ROAD KOLKATA - 700007 2. D.C.I.T., CIRCLE-45, KOLKATA 3, GOVERNMENT PLACE WEST KOLKATA - 700001 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES