AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 1081
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....in relying upon decision of Hon'ble Bombay High Court in the case of M/s. Ace Builders Ltd. which is on different facts." 3. The background general facts of the case include that the assessee is a company engaged in the manufacturing of Mild steel, Billets from mild steel, Scrap/Sponge Iron in a furnace of 25MT capacity. Assessee filed the return electronically on 29-09-2011 declaring total income of Rs. 1,43,83,520/- including short term/long term capital gain at Rs. 1,96,79,501/-. Rejecting the various explanations given by the assessee the AO assessed the income of the assessee on account of short term/long term capital gains at Rs. 8,72,07,945/- and tax 30% on such gains. CIT(A) allowed the appeal of the assessee directing the AO to tax 20% on such gains. Aggrieved with such order of CIT(A) the Revenue is in appeal before the Tribunal. 4. The facts relating to the issue under consideration include that the assessee sold the depreciable assets which gave rise to the capital gains within the meaning of section 50 of the I.T. Act. As per the provisions, the said gains are required to be deemed as 'short term capital gains'. This is not the case of re-investment of such gains in ....
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.... earned on such sale of such asset is 20% and not 30% which is applicable to the short term capital gains earned on sale of assets held for less than 36 months. 7. Assessee also raised the legal issue of rectifying the order without issuing the notice u/s.154 of the Act and without affording opportunity. Assessee relied on the decision of Mumbai Bench of the Tribunal in the case of M/s. Smita Conductors Ltd., Mumbai Vs. DCIT, Range-3(3), Mumbai in ITA No.4004/Mum/2011 for A.Y. 2006-07 order dated 17-09-2013 for the proposition that the rate of 20% is applicable to the gains earned on sale of depreciable assets. On considering the same, the CIT(A) allowed the appeal of the assessee relying on the said judgment of Hon'ble Bombay High Court in the case of Ace Builders Pvt. Ltd. (Supra). AO was directed to tax the said short term capital gains @20% after verifying the assets transferred were held by the assessee for more than 3 years. While giving the relief to the assessee, the CIT(A) also considered the fact that the issue raised by the assessee is certainly "debatable" one and there exists two views in that case. The provisions of section 154 of the Act has no application. He reli....
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.... assets involved are long term capital assets. 10. Further, Ld. DR filed a copy of the order of the Pune Bench of the Tribunal in the case of M/s.Rathi Brothers Madras Limited Vs. ACIT, Circle-6, Pune for the A.Y. 2008-09 order dated 30-10-2014 and submitted that similar view was taken by the Tribunal in the said order dismissing the appeal of the assessee and upheld the order of the CIT(A). In that case, CIT(A) upheld the AOs decision in computing the tax @30% on the gains attributable to the long term capital assets u/s.50 of the Act. Ld. DR brought our attention to the contents of Para 5.3 of the order of the Tribunal. 11. Thus, it is the case of the Revenue that the Revenue that in case of absence of re-investment of the gains earned by the assessee on sale of long term depreciable assets, the gains relatable to the transfer of the long term capital assets, should be taxed @30%, the rate applicable to short term capital gains. However, the Revenue has not raised any ground on the decision of CIT(A) in granting relief to the assessee on the argument relatable to the debatability of the issue which is outside the scope of provisions of section 154 of the Act. In effect, the Rev....
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....i Invests Vs. ACIT 139 TTJ 411 (Mumbai) 2. CIT Vs. Manali Investment 219 Taxman 113 (Bombay) 3. CIT Vs. V.S. Dempo Company Ltd. 387 ITR 354 (SC) 4. CIT Vs. Parrys (Eastern) (P) Ltd., 384 ITR 264 (Bombay) 5. CIT Vs. Cadbury India Ltd. 229 Taxman 5 (Bombay) 6. CIT Vs. United Paper Industries 42 Taxmann.com 79 (Bombay) 7. Komac Investments & Finance (P) Ltd. Vs. ITO 14. We heard both the parties and perused the order of the Revenue. We have also gone through the decisions cited by both the parties. The limited issue for adjudication before us is whether the rate of 20% is applicable to the gains earned on transfer of the depreciable long term capital assets within the meaning of section 50 of the Act. This is a case where the AO initially applied the tax rate of 20% on such gains and subsequently, rectified by taxing the said gains @30%. CIT(A) granted relief to the assessee relying on the decision of Hon'ble Bombay High Court in the case of Ace Builders Pvt. Ltd. (supra) and held that the issue in question is debatable in nature. In the process, CIT(A) ignored the facts of the present case that the said gains were not reinvested u/s.54 or other provisions for claim of de....
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....at where the consideration received on transfer of all the depreciable assets in the block exceeds the written down value of the block, then the excess is taxable as a deemed short-term capital gains. In other words, even though the entire block of assets transferred are long-term capital assets and the consideration received on such transfer exceeds the written down value, the said excess is liable to be treated as capital gain arising out of a short-term capital asset and taxed accordingly." 16. From the above, it is the ratio of the judgment that long term capital asset linked long term capital gains are eligible for reinvestment in the eligible assets for purpose of claim of deduction u/s.54E of the Act. But in this case, assessee has not re-invested gains for claiming of deduction/exemption under the Act and he paid taxes on such gains. This is the case where assessee preferred to pay the taxed on the gains earned by him on transfer of the depreciable long term capital assets. Therefore, the facts of Ace Builders Pvt. Ltd. (supra) are different as it was a case of claiming of deduction u/s.54E of the Act. The Hon'ble High Court has allowed such exemption in that case. Therefo....
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....ted that flat had been held for 15 to 20 years which is supported by the fact that cost of the flat as shown in the balance sheet was only Rs. 1,30,000/-. Therefore, if the flat is held for more than three years the tax rate has to be applied as provided in section 112 of the IT Act applicable in respect of capital gain arising from transfer of long term capital asset. 2.6 We, therefore, held that, for the purpose of computation of capital gain, the flat has to be treated as short term capital gain u/s.50 of the IT Act, but for the purpose of applicability of tax rate it has to be treated as long term capital gain if held for more than three years. We accordingly direct the AO to compute the capital gain from the sale of flat and apply the appropriate tax rate after necessary verification in the light of observations made in this order." 19. The decision of Tribunal in the case of Smita Conductors Ltd. (supra) is in tune with another decision of the Tribunal in the case of Manali Investments 45 SOT 128. It is also relevant to mention that the said decision in the case of Manali Investments is approved by the jurisdictional High Court. Then, two views exists on the same issue of ....
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....rcumstances of the case, the Ld. CIT(A), Aurangabad has erred in relying upon the Order of the ITAT in the case of SRJ Peety Steels Pvt. Ltd., Jalna for AYs 2007-08 & 2008-09 dt. 16/0112015 wherein such addition has been deleted. 4. On the facts & in the circumstances of the case, the Ld. CIT(A), Aurangabad has erred in not appreciating the fact that the assessee company is engaged in unaccounted production of goods which has been substantiated separately by the CBI in the case against the Director of the company. 5. On the facts & in the circumstances of the case, the order of the Ld. CIT(A), Aurangabad be quashed and that the Order of the AO be restored." 23. Briefly stated relevant facts are that during the course of assessment proceedings, AO noticed that there is huge deviation in electricity unit consumption from min. unit consumption from August, 2010 to December, 2010. In August, 2010, the assessee has shown @1130 units per MT whereas in December, 2010 the assessee has shown @869 units per MT., the variation is about 30%. The AO held that the assessee has not disclosed the consumption of material as well as production of finished goods accurately. The AO called for the....
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....5.3 to 5.6. We find relevant to extract the operational paras of the said CIT(A) which reads as under : "5.5 On perusal of the rival contentions mentioned in the earlier paragraphs it has been observed as under - (i) The first objection raised by the AO. is that there is substantial variation in consumption of electricity for producing 1 MT finished goods in the various months during the year under appeal has been reasonably rebutted by the appellant in the above mentioned submission in para-I & 2, filed during assessment proceedings. In view of various reasons pointed out by the AR. of the appellant, it is evident that the electricity consumption for production cannot remain static during various months of the year (ii) The second objection raised by the AO. is that the appellant company has not correctly disclosed consumption of material as well as production of finished goods. The objection of the AO. is not supported by any corroborative evidence. The books of accounts of the appellant have been regularly maintained and audited and the same have been certified to be reflecting true and fair view of its financial position by a Chartered Accountant. The second objection rai....
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....aries from 1000 units to 1800 units per MT of ingots depending upon the raw material used and quality of the same. In the case of the appellant the electricity consumption is 982.82 units per MT as mentioned by the A.O. in the assessment order which is less than 1026 electricity units per MT as held to be required by the Assessing Officers while assessing income of various steel manufacturing units of Jalna and surrounding area upto A.Y.2010-11. The 'fifth objection raised by the A.O. is, therefore, not justified. In view of the above facts and discussion, I am of the considered view that the A.O. is not justified in rejecting book results by invoking provisions of section 145(3) of the Act. The first issue is decided in favour of the appellant. 5.6 The second issue to be decided is, whether the A.O. is justified in estimating suppressed production by presuming that 944 electricity units are required for producing 1 MT finished goods. In this regard it has been noticed that in the cases of various steel manufacturing units of Jalna and surrounding area, including the appellant company, the Assessing Officers have held upto A.Y.2010-11, on the basis of various technical re....