TaxTMI 
TaxTMI 
2009 (1) TMI 857
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....assessee company and also at the residences of the promoter directors. AO noted in the assessment order that, subsequent to search and seizure operations under s. 132 of the IT Act, 1961, a notice under s. 153C of the IT Act was issued in view of seizure of books of accounts/documents of the assessee, after recording the satisfaction. In response to the notice, assessee admitted nil income. AO finally framed the order under s. 153C/143(3) on a total income of Rs. 5,20,30,517. 2.2 In the assessment order, the AO made the following addition/ disallowances: Profit amounting to Rs. 1,24,04,760 declared by the assessee as business income in relation to slump sale of fixed assets to the sister concern, M/s Harvey Health Care Ltd. (M/s HHCL) was treated by the AO as short-term capital gain (STC 6) within the meaning of the provisions of s. 50(1) of the IT Act and the same was recomputed at Rs. 3,01,70,657. Sale consideration amounting to Rs. 2,18,59,860 received from the sister concern in lieu of transfer of goodwill and brand image and treated by the assessee as a revenue receipt was regarded by the AO as long- term capital gain (LTCG). Advances written off amounting to Rs. 4,15,88....
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....2008] 14 DTR (Kol.)(Trib) 540. 2.5. The learned Departmental Representative on the other hand supported the order of the learned CIT(A). He referred to the provisions of s. 153A. He referred to the proviso to the section whereby it was mentioned that assessment or reassessment falling within a period of six previous years shall abate. Accordingly, the learned Departmental Representative contended that the AO was perfectly well within jurisdiction to assess or reassess the total income in respect of each of the assessment year falling within such six previous assessment years. The learned Departmental Representative further submitted that the decision of the Kolkata Bench of the Tribunal being referred by the assessee's counsel is not applicable. The learned Departmental Representative further placed reliance upon the Tribunal, Delhi Bench decisions in the cases of Ms. Shyam Lata Kaushik v. Asstt. CIT [2008] 114 TTJ (Delhi) 940 : [2008] 4 DTR (Delhi)(Trib) 337: [2008] 114 ITD 305 (Delhi) and Shivnath Rai Harnarain (India) Ltd. v. Dy. CIT [2008] 117 TTJ (Delhi) 480 : (2008) 9 DTR (Delhi)(Trib) 466 : [2008] 304 ITR 271 (Delhi)(AT). 2.6. We have carefully considered the submissio....
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..... 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A: Provided that in case of such other person, the reference to the date of initiation of the search under s. 132 or making of requisition under s. 132A in the second proviso to s. 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-s. (1) has or have been received by the AO having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under s. 132 or requisition is made under s. 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice und....
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....ating documents were found in respect of disallowed amounts in the search proceedings. The Tribunal, Delhi Bench in the case of Ms. Shyam Lata Kaushik v. Asstt. CIT (supra) had held that there is no requirement for an assessment made under s. 153A to be based on any material seized in the course of search. Again Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarain (India) Ltd. v. Dy. CIT (supra) had held that, AO is entitled to make assessment under special provisions even if no material is found during search. 2.10. Hon'ble Madhya Pradesh High Court in the case of Ramballabh Gupta v. Asstt. CIT [2005] 199 CTR (MP) 649 : [2007] 288 ITR 347 (MP) had held in p. 351 as under: "In my opinion, while deciding the legality of notice issued under s. 148. it is not necessary to look to the provisions of s. 153A ibid because both sections operate in different fields and sphere. Admittedly, the assessment year in question, i.e., 1997-98 does not fall within the six years as per the requirement of s. 153A ibid and hence, no action can be taken for making reassessment under s. 153A ibid in respect of the asst. yr. 1997-98. Had it been so, then the question might have arisen a....
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....ed income comprising previous years relating to six assessment years preceding in which the search was conducted, shall apply. It further provides that the AO shall issue notice to such person requiring him to furnish return of income in respect of six assessment years immediately preceding the assessment year relating to the previous year in which the search was conducted under s. 132 or requisition was made under s. 132A of the Act." 2.12 From the above, it is evident that the Hon'ble High Court was of the opinion that under these provisions AO shall issue notice to furnish return of income in respect of the six assessment years and thereafter make assessment or reassessment for those six years. Nowhere the Hon'ble Court had held that the assessment or reassessment as contemplated in this section has to be based upon incriminating materials found during search. It is settled law -that in absence of jurisdictional High Court decision, decisions from the other Hon'ble High Courts are binding upon the Tribunal. It is also settled law that when language of the Act is plain and simple there is no requirement of any interpolation therein. Furthermore, as held by the Hon&#....
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....pened to be the managing director of both the companies. The assessee commenced its business operations in 1996 and had been incurring only losses year after year. Returns declaring net loss were filed by the assessee in consecutive assessment years and carry forward of unabsorbed business loss depreciation was claimed in each year. M/s HHCL started its operation in September, 2002 as a result of which its first return of income was filed in the asst. yr. 2003-04. An agreement dt. 26th July, 2003 was entered into by the assessee with its sister concern M/s HHCL in accordance with which the latter took on lease all the medical equipments (plant and machinery, industrial equipments, hospital equipments and appliances and other capital assets) belonging to the assessee. The lease agreement was to be operationalised w.e.f. 1st Sept., 2003. In this connection M/s HHCL was to pay a lease deposit of Rs. 4 crores which was to be remitted directly to M/s TIIC on behalf of the assessee. M/s HHCL was further required to pay lease rental to the assessee @ 5 per cent of the value of the equipments to be appraised by an official valuer nominated in this behalf by a leading bank. The lease rental....
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....iance upon Tribunal, Chennai Bench decision dt. 17th Feb., 2006 in the case of Chromates & Pigments (P) Ltd. v. Dy. CIT in ITA No. 1076/Mad/1995 and held that AO was justified in rejecting the assessee's contention regarding slump sale and applying the provisions of s. 50 to the impugned transaction. He further held that AO had correctly computed the short-term capital gain under s. 50 by reducing the WDV of the asset as on 1st April, 2004, as per IT Act, from the gross sale consideration. The learned CIT(A) further concluded that AO was justified in disallowing the set off of brought forward unabsorbed depreciation relating to asst. yr. 1997-98 to 2000-01. Accordingly, he confirmed AO's action. 3.5. We have heard both the counsel and perused the relevant records. The learned Departmental Representative contended that the learned CIT(A) has taken a correct decision. He contended that the issue is squarely covered against the assessee by the special provisions of s. 50. He placed reliance upon the decision of the Special Bench of the Tribunal in the case of Southern Travels v. Asstt. CIT [2006] 104 TTJ (Chennai)(SB) 750 : [2006] 103 ITD 198 (Chennai)(SB) and also the Tribun....
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.... in connection with such transfer or transfers; (ii) the WDV 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 during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the WDV of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets." 3.8. In our opinion, the present case clearly falls under the ken of s. 50. It is not disputed that this case pertains to capital gains on depreciable assets, where all fixed assets have been sold. Sec. 41(2) deals with such assets which are sold, discarded, demolished or de....
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.... immediately succeeding the assessment year for which the aforesaid allowance was first computed : Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year: Provided further that the time-limit of eight assessment years specified in sub-cl. (b) shall not apply in the case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-s. (1) of s. 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the net worth of such company becomes equal to or exceeds the accumulated losses." 3.10 These extant provisions of s. 32(2) were considered by the Special Bench of this Tribunal in the case of Southern Travels v. Asstt. CIT (supra) wherein it was held as under : (headnotes only) "A perusal of the amendment of s. 32(2) would show that the position prior to 1st April, 1997 as contained in ss. 32, 70, 71 and 72 has all been incorporated into s. 32(2) itself w....
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....was to be dismissed." 3.11. We do not see how the ratio from the above helps the case of the assessee. It is very much clear that depreciation in the present case pertains to asst. yrs. 1997-98 to 2000-01 which is being sought to be treated as part of depreciation for asst. yr. 2005-06. The Special Bench had clearly held that such depreciation was to be carried forward and must be set off against profits and gains of business only if the assessee was carrying on that business. Therefore, it cannot be said that the Special Bench had held that such depreciation i.e., brought forward depreciation losses of earlier year can be adjusted against capital gains of current year. The learned CIT(A) and learned Departmental Representative are correct in contending that the ratio from this Special Bench decision is in favour of Revenue. It is settled law that Special Bench decisions of Tribunal takes precedence over other Tribunal decisions. 3.12. We further find that the provisions of s. 32(2) as applicable w.e.f. 1st April, 2002 read as under: "(2) Where in the assessment of the assessee full effect cannot be given to any allowance under cl. (ii) of sub-s. (1) in any previous year owing ....
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....ates & Pigment (P) Ltd. v. Dy. CIT in ITA No. 1076/Mad/1995, wherein the Tribunal, by relying on the judgment of the Hon'ble Supreme Court in the case of CIT v. Artex Manufacturing Co. [1997] 141 CTR (SC) 290 : [1997) 227 ITR 260 (SC), has held that in a case where itemized sale of assets and liabilities of an undertaking takes place, the nomenclature of "slump sale" cannot be assigned thereto and that in such a case short-term capital gain is to be computed in accordance with the provisions of s. 50. The facts of the present case also indicate that assessee company sold its fixed assets and goodwill for separate values. No current asset or liability was transferred. Hence the ratio from these decisions as above will apply. 4. The last issue raised pertains to disallowance of bad debts and advances. 4.1. In the course of the assessment proceedings, the AO found that the assessee company had debited a sum of Rs. 63,98,470 to the P&L a/c under the head "Bad debts and advances written off". On perusal of the relevant details, the AO noted that the aforesaid sum comprised two components, i.e., advances written off amounting to Rs. 4,15,883 and the balance sum of Rs. 59,82,587 pe....
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....TR 8 (Mumbai)(SB)(AT); (ii) CIT v. Brilliant Tutorials (P) Ltd. [2007] 210 CTR (Mad) 49 : [2007] 292 ITR 399 (Mad); (iii) CIT v. Morgan Securities & Credits (P) Ltd. [2007] 210 CTR (Delhi) 336 : [2007] 292 ITR 339 (Delhi). 4.5. The learned Departmental Representative on the other hand placed reliance upon the order of the learned CIT(A). 4.6. In Dy. CIT vs. Oman International Bank SAOG case (supra), the Tribunal had held that there was no obligation on the part of assessee to prove that debts written off by him has become a bad debt in the previous year subsequent to amendment in s. 36(1)(vii). In the CIT v. Morgan Securities & Credits (P) Ltd. case (supra ), the Hon'ble Delhi High Court had held that subsequent to amendment, assessee was only required to write off the bad debt as irrecoverable. It was not required to prove that debts have become bad. 4.7. In the CIT vs. Brilliant Tutorials (P) Ltd. case (supra), the Hon'ble Madras High Court had held that, "having regard to the scope of s. 36(1)(vii) and the commercial decision which persuaded the assessee to write off, we do not find any question of law arising from the order of the Tribunal, for admission". The f....