Trimbak Hatcheries Pvt. Ltd., Nashik V. Additional Commissioner of Income-tax,

MA 97/PUN/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2900 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Cost of acquisition; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER MA NO.97/PN/2014 (ARISING OUT OF ITA NO.521/PN/2013) (ASSESSMENT YEAR : 2007-08) TRIMBAK HATCHERIES PVT. LTD., FLAT NO.4 & 5, ANANDKUNJ, GANGAPUR ROAD, NASHIK. PAN : AABCT0456H . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. . RESPONDENT APPELLANT BY : MR. KISHOR PHADKE RESPONDENT BY : MR. RAJESH DAMOR DATE OF HEARING : 23-01-2015 DATE OF PRONOUNCEMENT : 25-02-2015 ORDER PER G. S. PANNU, AM BY WAY OF THE PRESENT MISCELLANEOUS APPLICATION, AS SESSEE HAS CONTENDED THAT CERTAIN MISTAKES APPARENT FROM RECOR D WITHIN THE MEANING OF SECTION 254(2) OF THE INCOME TAX ACT, 1962 (IN SHOR T THE ACT) HAVE CREPT INTO ORDER OF THE TRIBUNAL DATED 28.08.2014. 2. THE MISCELLANEOUS APPLICATION READS AS UNDER :- WHILE COMING TO THE AFORESAID CONCLUSION IN THE APP ELLATE ORDER, CERTAIN PRIMA-FACIE MISTAKES HAVE CREPT INTO THE ORDER OF T HE HONORABLE ITAT, PUNE. THE SAME ARE AS FOLLOWS. A) ERROR IN HOLDING THAT NET TAXABLE INCOME IS LTCG (INSTEAD STCG) THE APPELLANT SUBMITS THAT THE SET-OFF OF CURRENT Y EAR'S BUSINESS LOSS, BROUGHT FORWARD UNABSORBED DEPRECIATION & BROUGHT FORWARD B USINESS LOSS OF PAST YEARS OUGHT TO BE MADE IN A MANNER WHICH BENEFITS A N ASSESSEE THE MOST. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE T HE LEARNED CIT(A), APPELLANT HAS SOUGHT TO SET-OFF THE LTCG AGAINST TH E BROUGHT FORWARD UNABSORBED DEPRECIATION. THEREAFTER, THE REMINDER I NCOME (EMERGING BEFORE SETTING-OFF OF PAST YEARS BUSINESS LOSS) WAS CLEARL Y STCG (AND NOT LTCG). THE HEAD-WISE INCOMES WORKED OUT BY THE LEARNED CIT (A) ARE REPRODUCED BY THE HONORABLE ITAT AT PAGE-8 OF THE APPELLATE ORDER . THE FINAL WORKING GIVEN THERETO IS WORKED OUT IN A STEP-WISE MANNER AS FOLL OWS: MA NO.97/PN/2014 (RS. IN LACS) PARTICULARS BUSINESS STCG LTCG INCOME TOTAL INCOME FROM OTHER SOURCES HEAD-WISE INCOME AS OBSERVED IN ITAT (45.30) 43.74 58.33 16.20 ORDER AT PAGE-8 STEP-1 - SET-OFF CURRENT YEAR'S BUSINESS 16.20 (16.20) LOSS STEP-2 - SET- OFF CURRENT YEAR'S BUSINESS LOSS AGAINST LTCG 29.10 (29.10) STEP-3 - SET-OFF UNABSORBED DEPRECIATION (4.55) (58.33) SUB-TOTAL NIL 10.09 NIL NIL 10.09 AS SUCH, IT EMERGES THAT THE FINAL EMERGING INCOME FOR A.Y. 2007-08 WAS ONLY STCG (AND NOT LTCG). THAT IS WHY, APPELLANT HAS TAK EN GROUND NO. 3 BEFORE THE HONORABLE ITAT STATING THAT THE CHARACTER OF TH E STCG ARISING ON SALE OF DEPRECIABLE ASSETS IS BUSINESS INCOME FOR THE PURPO SE OF SECTION 72. AS SUCH, BEFORE THE HONORABLE ITAT, APPELLANT HAS NOT SOUGHT TO TREAT THE LTCG AS BUSINESS INCOME FOR THE PURPOSE OF SECTION 72, BUT, SOUGHT TO TREAT STCG AS BUSINESS INCOME. HOWEVER, IN PARA-12 OF THE HONORAB LE ITAT'S ORDER, THE FOLLOWING OBSERVATION IS MADE. IN THIS CONTEXT, THE PLEA OF THE ASSESSEE IS THAT T HE AFORESAID TAXABLE INCOME REFLECTS SURPLUS ARISING FROM THE SA LE OF LAND AND OTHER ASSETS OF IT'S POULTRY BUSINESS, AND THUS, SU CH SURPLUS IS IN THE NATURE OF BUSINESS INCOME. APPELLANT SUBMITS, THE ABOVE OBSERVATION OF THE HON ORABLE ITAT IS BESIDES THE FACTS AND MECHANISM OF SET-OFF OF LOSSES & UNAB SORBED DEPRECIATION. B) LTCG ON SALE OF LAND IN SPECIAL BENCH'S CASE AS AGAINST STCG ON DEPRECIABLE ASSETS IN PRESENT CASE AS PER THE SPECIFIC GROUND NO. 3 (REPRODUCED EARLIE R), THE APPELLANT IS CLAIMING SET-OFF OF PAST YEARS BUSINESS LOSSES AGAI NST SHORT TERM CAPITAL GAINS OF DEPRECIABLE ASSETS SPECIFICALLY. AS AGAINST THIS SITUATION, THE QUESTION BEFORE THE HONORABLE SPECIAL BENCH, STATED IN PARA 4 THEREIN WAS AS UNDER. GROUND NO. 5 - THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS THAT THE APPELLANT IS NOT ENTITLED TO SET-OFF CARRY FORWARD BUSINESS LOSS OF RS.39,99,652 AGAINST THE LONG TERM CAPITAL GAIN ARISING ON SALE OF LAND USED FOR THE PURPOSE OF BUSINESS. THUS, THE HONORABLE SPECIAL BENCH WAS POISED WITH T HE ABOVE SPECIFIC QUESTION AND HENCE, THE DECISION OF THE SPECIAL BEN CH OUGHT TO BE UNDERSTOOD AS ONE, GIVEN FOR THE SPECIFIC QUESTION RAISED BEFO RE THE HONORABLE SPECIAL BENCH, AS PER THE SETTLED PRINCIPLES OF INTERPRETAT ION. THE APPELLANT SUBMITS, THE LTCG ON SALE OF LAND IS NEVER ELIGIBLE FOR SET- OFF AGAINST THE PAST YEARS BUSINESS LOSSES. AS PER FACTUAL MATRIX IN THE SPECI AL BENCH CASE, THE GAIN THEREIN WAS PURELY LONG TERM CAPITAL GAIN. THE SAME WILL TRANSPIRE FROM THE FOLLOWING FIGURES REVEALING THE SAID SPECIAL BENCH DECISION - CONSIDERATION FOR SALE OF LAND, BUILDING & BOREWE LL -RS.155.00 LACS - COST CLAIMED AS DEDUCTION (DERIVED) -RS. 13.3 7 LACS - LONG TERM CAPITAL GAINS -RS.141.63 LACS MA NO.97/PN/2014 - LESS : SET-OFF OF B/F BUSINESS LOSS & DEPRECIATIO N -RS. 43.37 LACS - NET LONG TERM CAPITAL GAINS OFFERED TO TAX -RS. 98.27 LACS FROM THE SAID SPECIAL BENCH DECISION, IT REVEALS, T HE HONORABLE ITAT WAS DEALING WITH AN ISSUE OF LONG TERM CAPITAL GAINS ON SALE OF LAND ALONE. AS AGAINST, IN THE PRESENT CASE, WHAT IS INVOLVED IS S HORT TERM CAPITAL GAIN OF DEPRECIABLE ASSETS, WHICH WILL REVEAL FROM THE GROU ND NO. 3 REPRODUCED EARLIER. THE APPELLANT HAS BEEN CLAIMING SET-OFF OF PAST YEARS BUSINESS LOSSES AGAINST THE STCG ARISING FROM SALE OF DEPRECIABLE A SSETS. THIS DISTINCTION IS QUITE RELEVANT AND THE SAME APPEARS TO HAVE NOT BEE N SO CONSIDERED BY THE HONORABLE ITAT WHILE DECIDING THE MATTER IN PARA-13 OF THE APPELLATE ORDER. AS SUCH, FACTS IN THE PRESENT CASE ARE DIFFERENT TH AN FACTS IN THE SPECIAL BENCH'S CASE. THIS ASPECT REMAINED TO BE SO CONSIDE RED BY THE HONORABLE ITAT IN THE PRESENT CASE. C) STCG IN THE PRESENT CASE AKIN TO BALANCING CHARG E U/S 41(2) APPELLANT SUBMITS THAT THE SHORT-TERM CAPITAL GAIN ARISING FROM THE SALE OF DEPRECIABLE ASSETS IS AKIN TO BALANCING CHARGE ARIS ING ON SALE OF DEPRECIABLE ASSETS AND TAXABLE U/S 41(2) AS IT THEN STOOD PRIOR TO IT'S DELETION (AND AFTER INTRODUCTION OF SECTION 50). APPELLANT SUBMITS FOLL OWING HYPOTHETICAL EXAMPLE TO ELABORATE THE SAID PROPOSITION. CASE-1 - IF COST OF A MACHINE IS (SAY) RS. 100 AND IF DEP RECIATION CHARGED FOR PAST 4-5 YEARS IS (SAY) RS. 60, THEN WD V WILL BE RS. 40. NOW, IF THE SAID ASSET GETS SOLD AT RS. 90, IT WILL LEAD TO A STCG IN THE NATURE OF BUSINESS INCOME AMT TO RS. 50 (I.E. RS. 9 0 - RS. 40). CASE-2 - IF THE SALE VALUE IN THE ABOVE EXAMPLE IS (SAY) RS. 150, IT WILL LEAD TO STCG IN THE NATURE OF BUSINESS INCOME OF RS . 60 AND LTCG OF RS. 50 (RS. 150 - RS. 100 BEING COST OF ACQUISITION ). APPELLANT'S CASE FALLS IN CASE-1 SITUATION AS STATE D ABOVE. IN FOLLOWING VARIOUS ITAT DECISIONS (FILED ON RECORD DURING THE COURSE O F HEARING), IT HAS BEEN HELD THAT SUCH TYPE OF STCG IS BUSINESS INCOME AND ELIGI BLE FOR SET-OFF AGAINST CARRIED FORWARD BUSINESS LOSS. - J K CHEMICALS V. ACIT - ITA NO. 8206/BOM/1989 - SHRI PADMAVATI SRINIVASA COTTON GINNING & PRESSIN G FACTORY 125 TTJ 3 - ACIT V. NIRMAL PLASTIC INDUSTRIES - ITA NO. 6428/ MUM/2009 - ITO V. EVERSHINE PHARMACEUTICALS DISTRIBUTORS P. LTD. - ITA NO. 4922/MUM/2011 - RAJSHREE ROADLINES P. LTD. V. ITO - ITA NO.1627/M UM/2012 - HICKSON & DADAJI P. LTD. V. ACIT- ITA NO. 5882/MU M/2012 THIS IMPORTANT DISTINCTION APPEARS TO HAVE NOT BEEN CONSIDERED BY THE HONORABLE ITAT WHILE DECIDING THE MATTER IN PARA-13 OF THE APPELLATE ORDER. ALSO, ALL THE ABOVE REFERRED DECISIONS DO NOT APPEA R TO HAVE BEEN DELIBERATED. D) TEST OF COMMERCIAL PRINCIPLES NOT APPLIED FOR DE CIDING CHARACTER OF RECEIPT OF RS.43,74,300 THE HONORABLE ITAT HAS OBSERVED IN PARA-9 TO PARA-1 2, THE IMPORTANCE OF DECIDING THE CHARACTER OF ANY INCOME / RECEIPT OF T HE CURRENT YEAR FROM THE ASPECT OF BUSINESS INCOME ON THE TEST OF COMMERCIAL PRINCIPLES. HOWEVER, IN PARA-13, THE HONORABLE ITAT HAS MERELY RELIED ON TH E DECISION OF THE SPECIAL BENCH AND HONORABLE SUPREME COURT DECISION IN CIT V . EXPRESS NEWSPAPER LTD - 53 ITR 250 AND REACHED THE CONCLUSION THAT TH E APPELLANT'S RECEIPTS ARE NOT IN THE NATURE OF BUSINESS INCOME. IT IS SUBMITT ED WITH UTMOST RESPECT THAT THE TEST OF COMMERCIAL PRINCIPLES REMAINED TO BE AP PLIED IN REALITY BEFORE MA NO.97/PN/2014 DECIDING THE ISSUE INVOLVED. THIS IS ALSO A PATENT ERROR WHICH HAS CREPT INTO THE APPELLATE ORDER. 8. CONSIDERING THESE APPARENT MISTAKES IN THE APPEL LATE ORDER, THE APPLICANT SUBMITS THAT, THE HONORABLE ITAT MAY BE PLEASED TO RECALL ITS ORDER DATED 28TH AUGUST 2014 AND PASS A FRESH ORDER AFTER CONSIDERAT ION OF ALL THE PRIMA FACIE ERRORS / MISTAKES AS STATED ABOVE. 3. THE RIVAL COUNSELS HAVE BEEN HEARD WITH RESPECT TO THE MISCELLANEOUS APPLICATION. THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS TAKEN US THROUGH THE MISCELLANEOUS APPLICATION AND SUBMITTED THAT TH E ORDER OF THE TRIBUNAL DATED 28.08.2014 (SUPRA) BE RECALLED. THE LD. DEPA RTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE HAS OPPOSED THE PLEA OF T HE ASSESSEE AND IT IS CONTENDED THAT THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL WITHIN THE MEANING OF SECTION 254(2) OF THE ACT. 4. THE AFORESAID CONTENTS OF THE MISCELLANEOUS APPL ICATION ELUCIDATE THAT WHAT THE ASSESSEE SEEK IS ONLY A REVIEW OF THE ORDE R OF THE TRIBUNAL WHICH IS IMPERMISSIBLE WITHIN THE SCOPE OF SECTION 254(2) OF THE ACT. ACCORDINGLY, THE MISCELLANEOUS APPLICATION OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 25 TH FEBRUARY, 2015. SD/- SD /- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 25 TH FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, NASHIK; 4) THE CIT-II, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE