Income Tax Appellate Tribunal - Mumbai
Skf India Ltd ( Since May 19,2004 Name Has ... vs Assessee
SKF India Ltd
ITA No. 6461/Mum/2009
(Asst Year 2005-06)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI ' H ' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI RAJENDRA SINGH, AM,
AM, & SHRI VIJAY PAL RAO, JM
ITA No. 6461/Mum/2009
(Asst Year 2005-
2005-06)
06)
SKF India Ltd Vs The Addl Commr of Income Tax
(Since May 19th 2004, Name has been changed from Range 4(3), Mumbai
SKF Bearing India Ltd)
M G Memorial Bldg N S Road, Mumbai
(Appellant ) (Respondent)
PAN No. AAACS0684H
Assessee by Sh Dhanesh Bafna & Chirag Doshi
Revenue by Shri Goli Srinivwas Rao
Dt.of hearing 20th Feb 2012
Dt of pronouncement 24th, Feb 2012
ORDER
PER VIJAY PAL RAO, RAO, JM This appeal by the assessee is directed against the order dated 16th Oct 2009 of the CIT(A) for the AY 2005-06.
2 The assessee has raised the following grounds:
"1. In the facts and in the circumstances of the case and in law, the ClT (A)erred in upholding addition to total income on account of adjustment for proportionate element of CENVAT, under Section 1 45A, to the extent of Rs. 10,59,593.
It is prayed that the addition to total income of Rs. 10,59,593 be deleted from the income of the Appellant.
2. On the facts and in the circumstances of the case, the CIT(A) has legally erred in confirming disallowance of Rs. 99,200, being annual membership fees paid to. the clubs.
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SKF India Ltd ITA No. 6461/Mum/2009 (Asst Year 2005-06)
3. On the facts and in the circumstances of the case, the CIT(A) has legally erred in confirming the action of the learned Assessing Officer that the capital gains of Rs. 2,67,28,939 under section 50 of Income-tax Act, 1961, arising on sale of long-term capital asset, is chargeable to tax at the rate applicable to short term capital gains instead of the rate applicable to long term capital gains."
3 At the time of hearing, the ld AR of the assessee has submitted that the assessee has not pressed the ground no.1 and the same may be dismissed as not pressed. The ld DR has no objection, if the ground no.1 is dismissed as not pressed. Accordingly, we dismissed the ground no.1 being not pressed. 4 Ground no.2 is regarding disallowance of Rs. 99,200/- being annual membership fess paid to the clubs.
5 We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The ld AR of the assessee has submitted that this issue has been considered and decided by the Tribunal in assessee's own case for the AYs 1990-91 and 1991-92 whereby the Tribunal vide order dated 16th July 2003 has decided this issue in para 35 as under:
"Grounds of appeal no.3 of both the years relates to disallowance in respect of subscription and payment to club and association amounting to Rs. 1,91,266/- and Rs. 88,356/- for the AYs 1990-91 and 1991-92 respectively. Both the parties admitted that this issue is covered in favour of assessee by the decision of Hon'ble jurisdictional High Court in the case of Otis Elevator reported in 195 ITR 682 (Bom). Therefore, we find no merit in this ground and the same is dismissed."
5.1 We further note that for the AY 1999-00 this issue was again considered and decided by the Tribunal in para 3.2 as under:
"3.2 We find the issue stands covered in favour of the assessee by the decision of Hon'ble Bombay High Court in the case of Otis Elevators Co Ltd vs CIT reported in 195 ITR 682 (Bom) wherein it has been held that club membership fee is an allowable expenditure u/s 37(1) of the act.3
SKF India Ltd ITA No. 6461/Mum/2009 (Asst Year 2005-06) Since the CIT(A) has followed the decision of the jurisdictional High Court and in absence of any contrary material brought to our notice, the ground raised by the revenue is dismissed."
5.2 Thus, it is clear that the issue is covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Otis Elevators Co Ltd reported in 195 ITR 682(Bom), which has been followed by the Tribunal in assessee's own cased for the earlier assessment years. Accordingly, respectfully following the earlier order of the Tribunal, we decide this issue in favour of the assessee and against the revenue.
6 Ground no.3 is regarding capital gain charging to tax by applying provisions of sec.50 of the I T Act.
7 We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material. The ld AR has fairly conceded that this issue has been considered and decided by the Tribunal against the assessee for the AYs 2001-02 to 2004-05.
8 We note that for the AY 2001-02, the Tribunal vide order dated 29th Dec 2012 has decided the issue against the assessee in paras 20 to 22 as under:
"20. We have heard the rival contentions. Section 50 of the Act, reads as follows: -
SECTION 50 769 [Specie! 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 4 SKF India Ltd ITA No. 6461/Mum/2009 (Asst Year 2005-06) 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 ass etc 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 written dawn value of the black 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 trans far of short-term capital assets.
769. Subs. by Taxation Laws (Amendment and Misc. Provisions) Act, 1986, s, 9 (w. e. f 1.4.1986). Prior to that, it stood as under:
"50. Special provision for computing cost of acquisition in the case of depreciable assets. - Where the capital asset is an asset In respect of which a deduction on account of depreciation has been obtained by the assessee in any previous year either under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act or under executive orders issued when the Indian Income-tax Act, 1886 (2 of was in force, the provisions of sections 48 and 49 shall be subject to the following modifications: --
(1) The written down value, as defined in clause (6) of section 43, of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.5
SKF India Ltd ITA No. 6461/Mum/2009 (Asst Year 2005-06) (2) Where under any provision of section 49 read with sub-section (2) of section 55, the fair market value of the asset on the [1st day of April, 1974,] is to be taken into account at the option of the assessee, then, the cost of acquisition of the asset shall, at the option of the assessee, be the fair market value of the asset on the said date, as reduced by the amount of depreciation, If any, allowed to the assessee after the said date, and as adjusted. ". 21 On plain reading of the above section shows that the excess in question shall be deemed to be the capital gains arising from the transfer of a short term capital asset. Both the section 54EC and section 74, do not speak about short term capital gain or long term capital gain. These sections deal with capita gains / loss arising from 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 s what the Hon'hle Jurisdictional High Court stated at para-26 of its judgment n 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 ahs 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 section 45 of the Act. To put is simply, the benefit of s. 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either under section 48 and 49 or under section 50. The contention of the Revenue that by amendment to s.50, the long term capital asset has been converted Into a short term capital asset is also without any merit. As stated hereinabove. the legal fiction created by the statute is to deem the capital gain as short term capital gain and not to deem the asset as short term capital asset, Therefore, it cannot he said that s. 50 converts long term capital asset into a short term capital asset." [emphasis own]
22. Respectfully following the aforesaid 3udgrnent of the Honble Jurisdictional High Court, the ground raised by the assessee is dismissed. "
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SKF India Ltd ITA No. 6461/Mum/2009 (Asst Year 2005-06) 9 Accordingly, respectfully following the order of the Tribunal in assesse's own case for the AY 2001-02, we deicide this issue against the assessee.
10 In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on this 24th, day of Feb 2012 Sd/-
Sd/- Sd/-
Sd/-
( RAJENDRA SINGH ) ( VIJAY PAL RAO )
Accountant Member Judicial Member
Place: Mumbai : Dated: 24th, Feb 2012
Raj*
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai