2000 (8) TMI 233 - AT - Income Tax

Tribunal affirms short-term capital gains, disallows motor car expenses, and orders further examination of interest payments.

The Tribunal upheld the assessment of short-term capital gains under section 50(2) for the assessment year 1993-94, where the surplus on the sale of fixed ... Capital Gains Issues:1. Assessment of short-term capital gains under section 50(2).2. Applicability of provisions of section 50(2) to surplus realized on the sale of block of assets.3. Disallowance of motor car expenses.4. Addition of interest payment.5. Levy of interests under section 234B and 234C of the Act.Issue 1: Assessment of Short-term Capital Gains under Section 50(2):The appeal was filed against the order of the CIT(A) regarding the assessment of short-term capital gains by the Assessing Officer under section 50(2) for the assessment year 1993-94. The assessee transferred assets and liabilities to a company and disclosed the surplus realized on fixed assets as long-term capital gains. The Assessing Officer assessed this surplus as short-term capital gains under section 50(2). The CIT(A) upheld this decision, directing verification of assets with no claimed depreciation. The Tribunal agreed with the Revenue's contention that the surplus on the sale of fixed assets was rightly assessed as short-term capital gains under section 50(2), as the surplus was attributed to the block of assets covered by the section.Issue 2: Applicability of Provisions of Section 50(2) to Surplus Realized on the Sale of Block of Assets:The Tribunal analyzed the computation provided by the assessee, where the surplus on the sale of fixed assets was disclosed as long-term capital gains. The Tribunal found that the surplus resulted from the transfer of fixed assets and was rightly assessed as short-term capital gains under section 50(2). Referring to the decision in Artex Mfg. Co.'s case, the Tribunal emphasized that the surplus amount from the transfer of fixed assets should be treated as long-term capital gains. The Tribunal dismissed the appeal, upholding the CIT(A)'s decision on this issue.Issue 3: Disallowance of Motor Car Expenses:The Tribunal found the disallowance of motor car expenses sustained by the CIT(A) to be fair and reasonable, deciding not to interfere with this decision.Issue 4: Addition of Interest Payment:Regarding the addition of interest payment, the Tribunal noted that the issue of genuineness of cash credits had been restored to the Assessing Officer's file for the preceding assessment year. Consequently, the Tribunal set aside the interest payment issue and restored it to the Assessing Officer's file for further examination.Issue 5: Levy of Interests under Section 234B and 234C of the Act:The Tribunal agreed with the compensatory nature of interest charged under sections 234B and 234C, citing relevant decisions. Therefore, the Tribunal dismissed the ground against the levy of interests under these sections.In conclusion, the appeal was allowed in part for statistical purposes, with the Tribunal upholding the assessment of short-term capital gains under section 50(2) and other decisions made by the lower authorities on various issues raised in the appeal.