TaxTMI 
TaxTMI 
2022 (1) TMI 592
X X X X Extracts X X X X
X X X X Extracts X X X X
....on. On examination of the Assessment Order, Ld. Pr.CIT observed as below: - "(i) It is seen that the office premises at Dev Plaza, Andheri (W), Mumbai shown to have been purchased as per the purchase agreement dated 31.03.2015 was registered with the office of the Registrar only on 04.04.2015 and the registration fee was also paid on the same date. Accordingly, the Assessing Officer had disallowed the claim of depreciation of Rs. 47,92,879/- on the said office premise by giving reference to the decision of Hon'ble Supreme Court in the case of R.B. Jodha Mal Kuthala V. CIT (1971) 82 ITR 570. The Apex Court held that the real test was to ascertain whether the assessee was entitled to the income from the property and, hence the owner must be the person who can exercise the rights of the owner not on behalf of the owner but in his own right. In other words, it is only the owner of the assets who is entitled to claim depreciation on them. (ii) It is evident that the new premise purchased cannot be held as acquired during the previous year ended 31.03.2015. Therefore, the assessee ought to have declared the capital gain arising out of the sale transaction of the off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess of providing Services in the nature of arranging corporate finance, syndication of funds, management consultancy and investment activities. The assessee's accounts are audited U/s 44AB of the income Tax Act. The assessee has filed its return of Income on 30.09.2015 declaring total income of Rs. 11,59,34,180/-. The case was selected tor scrutiny and notices u/s. 143(2) and u/s. 142(1) of the I.T. Act, 1961 were issued. All the relevant details were filed during the course of assessment proceeding. Regular assessment U/s 143(3) of the I. T. Act was completed by the Assistant Commissioner of Income Tax - 18(1), Mumbai (AO) vide his order dt. 19.12.2017 determining total taxable income at Rs. 12,07,27,060/-. Now your honour has issued above show cause notice to initiate the proceeding u/s 263 of the Act. In this connection we at the outset submit that the proceedings u/s 263 of the Act can be invoked only if the order of the AO is "erroneous in so far as prejudicial to the interest of the Revenue It is respectfully submitted that all the details/evidences/supporting concerning the issues considered for initiating the proceedings u/s 263 were before the AO. The AO has delib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nacle Corporate Park, Mumbai. During the year, the assessee sold the above office premises for Rs. 14,00,00,000/-. Further, the assessee vide Agreement for Sale dt.31.03.2015 (registered on 04.04.2015 with the Registrar) acquired an office premises at Dev Plaza, S.V. Road, Andheri (West), Mumbai for an aggregate consideration of Rs. 23,29,19,898/- (including stamp duty, registration and other charges) and same is included in block of asset of office premises. Thus, the assessee claimed the depreciation of Rs. 47,92,879/-[i.e.(opening WDV of Rs. 29,37,690 + Addition of Rs. 23,29,19,898 - Sale of Rs. 14,00,00,000) X Depreciation at 10%/2] on block of asset of office premises. During the course of assessment proceedings the AO asked the assessee to show cause as to why the depreciation of Rs. 47,92,879/- claimed on block of office premises shall not be disallowed as the agreement for purchase of office premises at Dev Plaza is registered with the Office of Registrar only on 04.04.2015 i.e. after the year ended 31.03.2015. In response, the Appellant vide its Authorised Representative's letter dt.27.10.2017 filed its detailed submission before the AO and submitted that out of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hased the property vide agreement for sale dt.31.03.2015 the registration of property is merely a formality and the registration relates back to the date of agreement. The assessee respectfully submit that under various judicial pronouncements the court had held that u/s 54 of the Transfer of Property Act, although the title in immovable property is transferred to a person by execution and registration of a sale deed, however, the term "owned" in section 32(1) should be assigned a contextual meaning and keeping in view the underlying object of the provision vesting of a title in the assessee though short of absolute ownership should also entitle the assessee to the benefit of sub-section 32(1), and section 32 of the Income Tax Act confers a benefit on the assessee. The provision should be so interpreted and the word used therein should be assigned such meaning as would enable the assessee securing the benefit intended to be given by the Legislature to the assessee. It is also well settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. The assessee further submit that the term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as Transfer of Property Act and Registration Act, etc. but nevertheless is entitled to hold the property to the exclusion of all others. 13. An overall view of the above said authorities show that the very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset is utilizing the capital asset and thereby losing gradually investment caused by wear and tear, and would need to replace the same by having lost its value fully over a period of time. It is well-settled that there cannot he two owners of the property simultaneously and in the same sense of the term. The intention of the legislature in enacting s. 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation of the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is not applicable in the case of the assessee. It is respectfully submitted that the asset acquired during the year forms part of the block of asset and as a consequence thereof the written down value of the block is to be considered inclusive of addition to the block during the year. As evident from the facts on record even though the block became apy on sale of the asset, however, the same block became positive on acquisition of another asset falling within the same block on its acquisition during the year under consideration. This position is amply clear ag evident from section 50 r.w. section 2(11) and section 43(6) of the IT Act. On the combined reading of these sections it is once again submitted that the AO has rightly considered the block of asset at the end of the previous year as positive and hence he has rightly not invoked section 50 of the Act. The AO has taken a conscious decision after considering the facts and relevant provisions of the Act and therefore exercised his power in deciding the issue which has now been agitated by your honour u/s 263 of the Act. The assessee therefore submits that the order of the AO cannot be termed to be erroneous and prejudicial to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no TDS on professional fees (Export) is either claimed in return of income filed by the assessee or reflected in Form 26AS. In any view of the matter, the deduction of TDS is the responsibility of the payer and the assessee has nothing to do with the deduction of TDS. Hence, the assessee respectfully submits that it has duly filed the relevant details before the AO during the assessment proceeding which has duly been considered by the AO and hence the order passed by the AO cannot be termed as erroneous in s far as it is prejudicial to the interest of the revenue so as to attract provisions of section 263 of the Act. (3). (a) Details in respect of business promotion expenses of Rs. 19,04,585/has not been called for or examined by the AO (b) Non availability on record of loan sanction and disbursement letter in respect of loan of Rs. 12,00,00,000/- availed from HDFC Bank Ltd. In show cause notice issued by your honour to initiate the proceeding u/s 263 of the Act, your honour has stated that no details in respect of business promotion expenses of Rs. 19,04,585/- has been called for or examined by the AO. Your honour has further stated that copy of loan sanction and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the interests of the Revenue. Further, he observed that he has gone through the assessment records and examined the submissions made by the assessee. After careful examination he has come to the conclusion, that the assessee has failed to discharge the onus as regards to disclose the short term capital gain u/s. 50 of the Act on sale of office premises at Pinnacle Corporate Panel. He further observed that Assessing Officer has not examined the genuineness of business promotion expenses, professional receipts received during the year as no TDS was deducted by payer. The Assessing Officer failed to carry out necessary enquiries as warranted by the facts and circumstances of the case and apply the correct provision of Act. Therefore, he came to the conclusion that the assessment is found to be erroneous insofar as it is prejudicial to the interest of Revenue as envisaged in Section 263 of the Act. There is lack of enquiry by the Assessing Officer on the issues raised in the notice issued u/s. 263 of the Act. Accordingly, he set aside the order passed u/s. 143(3) of the Act for the A.Y. 2015-16 and directed the Assessing Officer to assess the same afresh after giving the assessee an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder u/s 143(3) of the Act. The Appellant submits that on the facts and circumstances of the case all the details, evidences and material were on 'record while making the assessment u/s 143(3) and the AO has considered the said issues in the light of the material available with him and has reached a finding for not making any additions/disallowances in the order; hence the order u/s 263 passed by the CIT shall be quashed. 5. The Appellant reserves the right to add, amend, alter or vary all or any of the above grounds of appeal as they or their representatives may think fit" 6. At the time of hearing, Ld. AR submitted as below: - "1. The present appeal challenges the jurisdiction of the CIT in passing order dated 8" March 2021 u/s 263 of the Act revising the order of the AO dated 19" December 2017 passed u/s 143(3) of the Act. 2. The Ld. CIT at pg 16 of his impugned order has exercised his jurisdiction w/s 263 on the ground and by relying upon Explanation 2 to section 263 of the Act that inquiry has not been done on following issues: a. Purchase of commercial property at Andheri vide agreement dated 31% March 2015 registered on 4" Apri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orted in 164 ITD 255 (Mum), Smt. Savita Bhasin v. ITO reported in 186 ITD 195 (Del) and Ayi Vaman Narasimha Acharya v. DCIT reported in 188 ITD 1 (Bgl). 4.5. It is submitted that in section 50 there is no condition that the asset should be put to use and therefore even if the asset is not put to use but acquired during the year then provisions of section 50 would not be applicable. This proposition is directly covered by the decision of the Mumbai Tribunal dated 24" August 2016 reported in Indogem v. ITO reported in 72 taxmann.com 315 and Fluroscent Fixtures (P.) Ltd. v. ITO reported in 34 SOT 48. It is submitted that as on the date of passing the assessment order, i.e. 19% December 2017, the decision dated 24" August 2016 was available and binding on the AO. It is submitted that accepting a view by the AO which is in accordance with the binding decision cannot be termed as erroneous and prejudicial to the interest of the Revenue so as to invoke provisions of section 263 of the Act. Reliance is placed on CIT v, Paul Brothers reported in 216 ITR 548 (Bom) and JP Morgan Chase Bank N.A. v. DCIT reported in 183 ITD 190 (Mum). 4.6. It is submitted that the Hon'ble Bomb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d or not by the payer, the said issue has to be examined in the assessment of the payer and the assessee fails to understand as to how professional receipts on which tax has been paid by the assessee can result into order being erroneous and prejudicial to the interests of the Revenue. The assumption of jurisdiction on this issue is ex facie bad in law. 5.3. The issue of professional receipts and TDS was also examined in the course of the assessment proceedings as evident from pgs 2, 4, 5, 15, 18, 23, 25, 26, 28 and 29. It is submitted that based on these documents it cannot be said that there was no inquiry or examination on this issue. 5.4. The legal submissions made on the scope of section 263 in para 4 above would equally apply on this issue. 5.5. Therefore, it is respectfully submitted that the jurisdictional conditions of section 263 are not satisfied. 6. Business promotion expenses: 6.1. The assessee earned gross receipts of Rs. 13.22 cr. and incurred business promotion expenses of Rs. 19 lakhs which constitutes around 1.4% of the gross receipts. The nature of business of the assessee compels it to incur these expenses, which on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Thakkar to the assessee which indicates that the letter was issued on a specific request made by the assessee and she brought to our notice that the letter was issued only to carrying out fitments and refurbishing the said unit so as to make it ready for use and enjoyment. She also submitted that this letter was issued only 31.03.2015. These informations clearly indicates that the seller never intended to handover the property without receiving the full consideration. She submitted that the revision proposed by the Ld. Pr.CIT is proper and in this regard she relied on CIT v. Emery Stone Mf. Co. (1995) 213 ITR 843 (Raj.). She further submitted that the case law relied on by the assessee are distinguishable to the facts of the present case. With reference to case law relied by the assessee Smt. Savita Bhasin v. ITO [84 ITR (T) 602 (Delhi)], Indogem v. ITO [72 taxmann.com 315 (Bom)], these case law are not relevant for the present case since the assessee has not paid full consideration whereas in the above case law relied in which full consideration was already paid. 8. With regard to second issue she supported the findings of the Ld.Pr.CIT and submitted that Ld. Pr.CIT has only ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a precondition for claiming depreciation. 3. The assessee has relied upon the decision in the case of Gurbax Singh, Ashwin Jariwala and Savita Bhasin for the proposition that by virtue of section 47 of the Registration Act, the document takes a retrospective effect from the date of execution even if registered subsequently. It is submitted that these decisions do not say that if full payment is not made then property cannot be said to have been acquired. In the case of the Appellant, as evident from pg 115, the assessee/Appellant had paid more than 95% of the consideration before the date of execution of the agreement. Therefore, even on this account the distinction sought to be made by the Learned DR is incorrect. 4. Insofar as section 263 proceedings on receipt of income are concerned on the ground that there has been unprecedented increase in the receipts and profit the jurisdiction is justified because the Officer has not examined this issue. It is submitted that the assessee has paid tax on full professional fees received during the year and therefore the assessee/Appellant fails to understand as to how when tax is paid on full receipts, the assessment orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... iii) Genuineness of business promotion expenses. 12. With regard to capital Gain issue u/s. 50 of the Act, during assessment proceedings the Assessing Officer collected the information with regard to additions made on block of asset and verified the aspects relating to section 32 and 50 of the Act. After verifying the aspects relevant for addition and deletion in the block of asset and Assessing Officer denied the claim of depreciation u/s. 32 of the Act on the ground of failure on the part of the assessee to satisfy the utilization of assets having been used during the previous year. No doubt Assessing Officer verified the additions made in the block of asset and not discussed anything on applicability of section 50 of the Act in the present case. From the records submitted before us clearly indicates that Assessing Officer has carried out verification on the aspect of additions/deletions and allowability of depreciation on the fixed assets scheduled. The issue raised by the Ld. Pr.CIT with regard to applicability of the section 50 considering the fact that Registration date as per document is on 04.04.2015 whereas execution of the agreement is dated 31.03.2015. From the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he addition on acquisition of the assets during the year, we noticed that Coordinate Bench of this Tribunal in the case of Indogem v. Income Tax Officer [72 taxmann.com 315 (Mum)] held as under: - "13. When once the entire sale consideration was paid, the terms of agreement are reduced into writing by way of allotment letter and assessee proceeded to take over the building for outfits, all these facts clearly show the state of mind of the builder and the assessee that the rights of the parties are crystallized as on the date of allotment letter itself, but for the legal formalities like execution of a proper covenant and issuance of Occupation Certificate by authorities. When once the proper covenant was executed with due compliance of stamp and registration requirement, it is a settled principle of law that the transaction relates back to the date of original agreement itself, as such, formal execution of the covenant would only evidence and reinforce the rights accrued under the allotment letter. 14. As rightly argued by the learned counsel for the assessee, Sec. 50 of the Act does not contemplate use of property to complete the process of acquisition of propert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rights of both the parties are crystalized as on the date of allotment letter or taking over the possession of the property, for the legal formalities like execution of a proper covenant and issuance of occupation certificate by the authorities. It is only a regular formality, it is a settled principle of law that the transaction relates back to the date original agreement itself, as such, formal execution of the covenant would only evidence and reinforce the rights accrued. As discussed in the above Para that even the Section 53A of the Transfer of Property Act, comes into play and subsequent execution and registration of the property is merely a formality and the rights have already accrued to the assessee. 15. Respectfully following the above decision, in our considered view the facts in the above case applicable mutatis mutandis to the present case. 16. During hearing Ld. DR have argued that this case law is not applicable to the present case considering the fact that the entire sale consideration was paid whereas in the given case only substantial consideration was paid. In our considered view what is relevant is the intentions of the parties and the assessee has occupie....