TaxTMI 
TaxTMI 
2011 (12) TMI 384
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.... common, for the sake of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. 2. Facts in brief:- The assessee is engaged in the business of manufacture in ball and roller bearings and textile components. The assessee company is also engaged in marketing of SKF imported bearing accessories and maintenance products. 3. We have heard the learned Counsels, Mr. Kanchan Kaushal a/w Mr. Dhanesh Bafna and Ors., representing the assessee and Mrs. Malathi Sridharan, representing the Revenue. We first take up assessee's appeal in ITA no.720/Mum./2006, for assessment year 2001-02. 4. Grounds no.1 and 2, are on the issue of valuation of closing stock under section 145A of the Income Tax Act, 1961 (for short "the Act") 5. Learned Counsel for the assessee submitted before us that the Assessing Officer has, at Para-5.2/Pg.3 of his order, agreed with the assessee that the opening stock for the accounting year should be increased by the MODVAT element in it. He submitted that the Commissioner (Appeals) confirmed this and, hence, he has no grievance and did not wish to press these grounds. Conse....
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....tal gains of Rs.19,57,77,000/- as long term capital gains computed as per section 50 and long term capital gains of Rs.63,87,664/-. The assessee has relied on the decision of Ace Builders (P) Limited v/s ACIT, (2001) 76 ITD 389 and considered capital gains in respect of depreciable assets computed under section 50 as Long term capital gains instead of Short terms capital gains. In support of their contention, assessee has given following note in return of income. "In the case of Ace Builders (P) Lid. V/s ACIT (20O1) 76 ITD 389, the ITAT Mumbai Bench has observed that the assumption of treating/deeming any capital gain arising on transfer of a depreciable asset as short-term capital gain, uncle,- section 50, is for the purpose of section 48 mid 49 only and therefore it cannot be extended to other provisions of the income-tax Act, as if it is so extended, it would amount to extending the deeming provisions beyond its legitimate field. It has, further, been observed that the specialty attached to Section 50 is to be restricted to only for the method of computing the capital gain and not for determining the nature gain. in view of the above decision of the ITAT Mumbai Bench, ....
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....ssumption of treating/deeming any capital gain arising on transfer of a depreciable asset as short term capital gain, under section 48 and 49 only and therefore it cannot be extended to other provisions of the Act, as if it is so extended, it would amount to extending the deeming provisions beyond its legitimate field. It has further been observed that the specialty attached to section 50 is to be restricted to only for the method of computing the capital gain and not for determining the nature gain. In view of the above decision of the ITAT Mumbai Bench, and facts in our case, the capital gain of Rs.19,57,77,000 computed as per provisions of section 50, have been treated as long term capital gain, and accordingly taxed at 20% (plus applicable surcharge) as per section 112(1)(b)." 14. The Assessing Officer did not agree with the contention of the assessee. He held that the amount should be taxed as short term capital gain. 15. When the matter was carried before the Commissioner (Appeals), the findings of the Assessing Officer that the amount in question has to be taxed as short term capital gain was upheld. As there were certain investments, the first ....
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....rd the rival contentions. Section 50 of the Act, reads as follows:- SECTION 50 769 [Special provision for computation of capital gains in case of depreciable assets. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications:- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired d....
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....om transfer of long term capital assets. Section 112, also deals with income arising from transfer of long term capital assets. Section 112(b)(i) and (ii) specifically mentions "long term capital gain". When section 50 deems that income earned from a depreciable asset has to be deemed as short term capital gain, the question of applying the rate of tax specified in section 112(1) does not arise. This is what the Hon'ble Jurisdictional High Court stated at para-26 of its judgment in the case of Ace Builders (supra). We extract the same for ready reference:- "26. It is true that s. 50 is enacted with the object of denying multiple benefits to the owners of depreciable asset. 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 depreciation, then the capital gain has to be computed in the manner prescribed under section 50 and the capital gains tax will be charged 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 in s. 54E, then the capital gain shall not be charged under sectio....
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.... Tata Chemicals Ltd. (256 ITR 395), which has approved the detailed decision by the Tribunal in the same case (72 ITD 1), I delete the addition of Rs.46,21,997 made by the A.O. This ground of appeal stands accordingly allowed." 30. Both the parties submitted that the very same issue has come up before the Tribunal in assessee's own case for assessment years 1994-95, 1995-96, 1997-98 and 1999-2000. The Tribunal allowed the claim of the assessee. In view of the co-ordinate bench decision of the Tribunal, we dismiss this ground of the Revenue. 31. Ground no.2, is on the issue of restricting disallowance under section 14A of the Act. 32. While disposing off ground no.3 in assessee's appeal in ITA no.720/Mum./2006, we restored the matter to the file of Assessing Officer. Consistent with the view taken therein, we set aside the impugned order passed by the Commissioner (Appeals) and restore the issue to the file of Assessing Officer for readjudication in accordance with law. 33. Ground no.3, is on the issue of allowance of benefit of exemption under section 54EC of the Act on the gains arising out of transfer of long term capital asset, which are s....
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....ssed the entire gain of Rs 62,25.38 1 as short term capital gains. It is submitted before me that identical issue came up for consideration before the Hon'ble Bombay Tribunal in the case of Ace Builders (76 ITD 389), copy whereof is placed at Paper Book pages Ml to M14 as well as before Gauhati High court in the case of CIT V. Assam Petroleum industries (P.) Ltd. (262 ITP 587). copy whereof is placed at paper Book pages N1 to N6 and it was contended 'that the fiction of deemed short term gains created by Section 50 should be restricted and confined only and only to Sections 48 and 49 and not carried beyond these express provisions and the appellant should not be denied benefit of Section 54EC. 9.2 I find that this decision of the Hon'ble Tribunal in the case of Ace Builders was carried to High Court and the Hon'ble Jurisdictional High Court has affirmed this aspect of the decision viz., granting of relief, This High Court decision is reported in 195 CTR 1. Respectfully following decision of the Jurisdictional High Court, I delete the addition of deemed short term capital gains of Rs.62,25,381, made in the assessment order and allow the appellant to app....
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....he course of assessment proceedings for this year and copy of this letter filed before the A.O. in the course of assessment proceedings was shown to me. This appears to be an inadvertent omission to consider the claim of the appellant, which according to me, is justified on the facts and the merits of the matter. The A.O. is directed to allow the deduction of a sum of Rs.4,75,725. This ground is, therefore, allowed." 38. The case of Revenue is that the judgment of Hon'ble Supreme Court in Goetze (India) Ltd. 284 ITR 323, applies. The assessee's case is that the facts are on record and the Commissioner (Appeals)'s powers are not affected by the judgment of Hon'ble Supreme Court in Goetze (India) Ltd. (supra). 39. After hearing both the parties, we uphold the findings of the Commissioner (Appeals). The facts are on record. The Commissioner (Appeals) has powers to entertain a claim for deduction made for the first time before him, provided the facts are on record. The learned Counsel rightly relied on the following case laws:- CIT v/s Prabhu Steel Industries Pvt. Ltd., [1988] 171 ITR 0530 (Bom); CIT v/s Jai Parabolic Springs Ltd., [2008] 306 ....
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....e set aside the impugned order passed by the Commissioner (Appeals) and restore the issue to the file of the Assessing Officer for readjudication in accordance with law. This ground is, thus, allowed for statistical purposes. 46. In the result, Revenue's appeal is partly allowed. We now take up assessee's appeal in ITA no.721/Mum./2006, for assessment year 2002-03. 47. Grounds no.1 and 2, are on the issue of valuation of closing stock with reference to section 145A of the Act. 48. Consistent with the view taken in Para-6 above in assessee's own case for assessment year 2001-02, we dismiss these grounds as "not pressed". 49. Ground no.3, is on the issue of rate of tax applicable for capital gains arising out of transfer of depreciable assets which was a long term asset. We have dealt with the issue in ground no.5 in assessee's own case for assessment year 2001-02, consistent with the view taken therein, we dismiss this ground raised by the assessee. 50. Ground no.4, is on the issue of disallowance under section 14A of the Act. 51. Consistent with the view taken by us in this order vide Para-8 to 10, in assessee's ....
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....ter, we do not see appeal giving raise to any substantial question of law. Appeal is, therefore, dismissed in limini with no order as to cost." 61. Respectfully following the aforesaid judgment of the Hon'ble Jurisdictional High Court, we allow the ground raised by the assessee. 62. In the result, assessee's appeal is partly allowed. We now take up Revenue's appeal in ITA no.617/Mum./2006, for assessment year 2002-03 63. Grounds no.1 to 4, read as follows:- "1. Allowance of claim of interest paid on borrowed funds taken for acquisition of capital asset. 2. Restricting disallowance of assessee under section 14A based on the working given by the assessee which was never field before the Assessing Officer. In contravention of Rule-46A. 3. Allowance of benefit of exemption under section 54EC to the short term capital gain under section 50. 4. Claim in respect of prior period expenses, which was not claimed by the assessee in its return of income. 64. Ground no.1, is covered against the Revenue and in favour of the assessee, by the decision of the Tribunal in assessee's own case for assessment year....
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....nbsp; 73. Ground no.4, is with reference to computation of relief under section 80HHC. 74. After hearing rival contentions, we find that the assessee was not in a position to furnish details as well explain the nature of income earned by way of spindle service charges and miscellaneous income by way of sale of catalogue. Thus, as the nature of income and its nexus with the operations of the assessee have not been established, the decision of the Revenue authorities on the matter is upheld. 75. Coming to the issue of sale of scrap and cash discount on purchases, we are of the considered opinion that the Assessing Officer has not adjudicated the matter in accordance with law. 76. The Commissioner (Appeals) has also not applied his mind to the issue. The assessee, in this case, has rightly relied on the decision of the Hon'ble Madras High Court in Fenner (I) Ltd. v/s CIT, 241 ITR 803 (Mad.) and CIT v/s Kar Mobiles Ltd. 333 ITR 478 (Ker.), and other judgments. 77. In our opinion, as the facts have to be verified, both these issues are restored to the file of Assessing Officer for adjudication afresh in accordance with law. This ground is, thus....
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.... off ground no.4, in assessee's appeal for assessment year 2003-04, we set aside the impugned order passed by the Commissioner (Appeals) and restore the issue to the file of Assessing Officer for re-adjudication in accordance with law. This ground is allowed is partly allowed. 88. The next ground is on the issue of computation of relief under section 80HHC of sales tax set-off amounting to Rs.15,60,668. 89. After hearing both the parties, we find that the Tribunal in assessee's own case for assessment years 1997-98 and 1998-99, decided similar issue in favour of the assessee. The Revenue has taken a wrong ground. The Assessing Officer while proposing the appeal and the Commissioner while approving the ground of appeal, have not applied their mind resulting in confusion and wastage of time. In any event, as the issue is decided in favour of the assessee, the ground raised by the Revenue is dismissed. 90. In the result, Revenue's appeal is partly allowed. We now take up assessee's appeal in ITA no.4625/Mum./2008, for assessment year 2004-05. 91. Ground no.1, is on the rate of tax applicable on capital gains, which is arising on sale o....