TaxTMI 
TaxTMI 
2013 (8) TMI 743
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....ing total income of Rs.17,03,508/- under section 115JB. In the meantime, the AO by recording reasons as on 25.01.2007 issued notice under section 148 which was served on 31.01.2007. In response, assessee filed a letter dated 09.02.2007 stating that return filed on 22.01.2007 may be treated as return in pursuance notice under section 148 of the Act. In the course of assessment, AO noticed that the assessee had claimed long term loss on sale of property by custodian. By analyzing the issue and noticing that the building was part of block of assets on which depreciation was claimed in earlier years, AO invoked the provisions of section 50 of the Act and determined the short term capital gain at Rs.1,99,01,079/- . Apart from that, he disallowed interest of Rs.10,81,205/- as contingent in nature and re- computed book profit u/s. 115 JB. He also levied interest under section 234A, 234B, 234C of the Act. Ld. CIT(A) confirmed the order, hence, the present appeal. 3. Ground No.1 and 11 are general in nature and does not require any adjudication. 4. Ground No.2, 3 and 4 are as under :- "2. The ld. CIT(A) has erred in law and in facts in not appreciating that the assessment order pas....
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....ssessed under section 143(3). Therefore, the principles relied on by the ld. Counsel for the assessee does not apply. As submitted by the ld. Special counsel for revenue, on similar facts in the case of Smt. Deepika A. Mehta in ITA No.3177/Mum/2008 dated 29.07.2011, the co-ordinate Bench considered the similar case law relied above and held as under :- "19. On the issue of re-opening, we find that the Assessing Officer has clearly observed that the assessee is in possession of large quantity securities. He also observed that from the assessment records, it can be seen that the assessee is the owner of several assets, on which income accrues every year. In our considered opinion, these two observations of the Assessing Officer are sufficient reasons to believe that, income escaped assessment. These two reasons have a live link with the escapement of income and it cannot be said that the reasons are not based on the relevant material. When the assessee has large quantity of securities and when she has other assets on which income accrues, it cannot be said that the belief drawn by the Assessing Officer is not a bonafide belief and that the reasons are vague or suspicious. It is tr....
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....he grounds are rejected. 5. Ground No.5 and 6 raised by the assessee are as under:- "5. The ld. CIT(A) has erred in law and in facts in confirming the capital asset sold by the appellant as short term capital asset as against long term capital asset claimed by the appellant. 6. The ld. CIT(A) has erred in law and in facts in computing capital gain on sale of capital asset at Rs.1,99,01,079/- treating the same as short term capital gain as against long term capital loss calculated by the appellant at Rs.6,02,19,893/-." 5.1 The issue arises as this. During the year, the custodian has sold the appellant's property at "Gopal Mansion" 51, Queens Road, Mumbai for Rs.6,61,00,000!-. The appellant has accounted for Rs.6,41,00,000/- in the computation of income. After claiming indexation u/s.48, the long term capital loss was worked out as under in the return income filed by assessee:- Income from capital gains (Assessee's computation) Gopal Mansion- Sale value Rs.6,41,00,000/- Less: Cost Rs.5,34,33,388/- Date of purchase 91-92 Indexed cost Rs.12,43,19,893/- Add: Property tax 0 Rs.12,43,19,893/. Long term capital gain (-) Rs.6,02,19,893/- 5.2 T....
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....tal 7416588 5.4 It was further held that since the appellant has claimed depreciation on the property, the capital gains arising from it shall be deemed to be short term capital gain. As such the appellant was not entitled to indexation. 5.5 Before the CIT(A) the assessee claimed that the assessee has not claimed any depreciation from assessment year 2000-01 and so provision of section 50 are not applicable. 5.6 Ld. CIT(A) however rejected the contention and stated as under "17. I have carefully considered the facts of the case, the assessment order and also the written submission of the appellant. In find a major flaw in the arguments of the appellant. From the records, it is crystal clear that the appellant had claimed depreciation on Gopal Mansion for A.Y. 1994-95, 1996-97 up to A.Y. 1999-2000. Depreciation was allowed to the appellant for A.Y. 1994-95 and A.Y. 1999-2000. The appellant has not claimed depreciation thereafter and the returns were also not filed thereafter. The wordings of the provision of section 50 of the Income Tax Act does not envisage a situation where a time gap of three years in claiming depreciation is required to convert a short t....
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....s and persued the case law on the issue. The only co-ordinate bench decision in favour of assessee about gain on sale of business asset as long term capital gain is the case of Sakthi Metal Depot, cochin Bench of ITAT which was reversed by the Hon'ble Kerala high Court in the case of CIT vs. Sakthi Metal Depot (333 ITR 492) wherein it was held :- "The assessee purchased a flat for business purposes in 1974, and depreciation was allowed thereon up to the assessment year 1995-96. However, the assessee discontinued claiming depreciation for the flat for the assessment years 1996-97 and 1997-98. The flat was sold during the year 1997-98, that was in the previous year relevant to the assessment year 1998-99 and after deducting the expenses towards brokerage and legal expenses the assessee returned the profit as long-term capital gains. The Assessing Officer held that the profit arising on transfer of a depreciable asset was assessable as short-term capital gains under section 50 of the Income-tax Act, 1961. The Commissioner (Appeals) held that the building being a depreciable asset and was used for business purposes, and sale thereof attracted tax on short-term capital gains under se....
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....at the exemption under section 54E was allowable to a long term capital asset notwithstanding that it was held as a business asset on which depreciation had been allowed. In other words, it was held that section 50 created a legal fiction only for a limited purpose, namely, for the purpose of sections 48 and 49 and that it cannot be extended to section 54E of the Act. In our humble understanding, the judgment is not of assistance to the assessee in the present case. As pointed out on behalf of the departmental authorities, the ratio of the judgment is that the fiction contained in section 50 only affects the computation of the capital gains in accordance with sections 48 and 49 but does not affect the benefit conferred by section 54E of the Act. However, the judgment also recognized that where the long term capital asset has availed of depreciation, then the capital gain has to be computed in the manner prescribed by section 50 and the capital gains tax will be charged as if such capital gains had arisen out of the transfer of a short term capital asset. If by legal fiction the long term capital gains is to be treated as short term capital gains, then under section 50 there is no s....
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.... appeal to the Special Bench of the Tribunal : Held,_ that a single asset can itself form a block of asset within the meaning of section 2(11) of the Income-tax Act, 1961. Section 50 would be applicable when (i) the capital asset is an asset forming part of a block of assets ; (ii) in respect of such asset, depreciation has been allowed under the 1961 Act or under the Indian Income- tax Act, 1922. When the above two conditions are satisfied, the capital gain on the sale of the asset would be calculated as per the provisions of section 50 and not as per the provisions of sections 48 and 49. The term "block of assets" has been defined in section 2(11). As per the definition "block of assets" means (i) a group of assets ; (ii) which falls within a class of assets, being building, machinery, plant or furniture, (iii) in respect of which the same percentage of depreciation is prescribed. In section 2(11) there is neither any explicit nor implied condition that the asset should be used for the purpose of business during the year under consideration. The user of the asset is important for the purpose of actual allowability of the depreciation, but not for determining whether the asset ....
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....ncome of Rs.4,86,457. The AO rejected the appellant's claim for deduction of interest, for the following reasons:- a. As per records, as on 08/06/92, when the appellant was notified under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992, the Special Auditors appointed by the Special Court in their report, categorically stated that the loans taken from Directors are interest free and there is no terms or condition to pay interest to the creditors for investment. b. As regards the claim of the Custodian, the Hon'ble Special Court has not given its final verdict on the issue, either on the changing of interest or the rate at which it is to be charged. The interest liability now claimed against the term deposit interest is therefore, a contingent liability. Further, there is no direct nexus between the term deposits and the term deposits and the loans taken by the appellant from the directors. In view of this, the interest claim of Rs.10,81,205, against the interest on term deposit was disallowed. The ld. CIT(A) confirmed, eventhough the assessee contended that the claim is allowable. 9.3 It was fairly admitted that the issue is to be r....
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....tion accrued to the assessee during the previous year and that the interest expenses claim relates to the financial year in question and is a legitimate business expenses." 21. The factual position in this case is also identical with the case of M/s. Aatur Holdings Pvt. Ltd. (supra). Following the ratio of the decision of the co-ordinate bench in the case of M/s Aatur Holdings Pvt. Ltd. under identical circumstances, we deem it fit to remand the claim of expenditure by the Assessee by way of interest, Audit fees and depreciation in grounds 5,6,7, back to C.I.T (A) for fresh consideration. In the absence of any distinguishing feature brought on record by the revenue we respectfully following the order of the Tribunal (supra), set aside the issue to the file of the learned CIT(A) who shall decide the same afresh in the light of the directions contained therein and according to law after allowing reasonable opportunity of being heard to the assessee and accordingly the ground taken by the assessee is partly allowed for statistical purposes." 9.4 The factual position in this case also is similar to the above case. In these circumstances, we deem it fit to remand the claim of i....