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Income Tax Appellate Tribunal - Delhi

Ms Kusum Mardia, Delhi vs Addl. Cit, New Delhi on 25 July, 2019

        IN THE INCOME TAX APPELLATE TRIBUNAL
             DELHI BENCHES 'C', NEW DELHI
              Before Sh. H. S. Sidhu, Judicial Member
              Dr. B. R. R. Kumar, Accountant Member

         ITA No. 2092/Del/2016 : Asstt. Year : 2011-12
M/s Kusum Mardia,                       Vs      Addl. CIT,
Ravi Gupta, Adv.,                               Range-28,
E-6A, Kailash Colony,                           New Delhi
New Delhi-110048
(APPELLANT)                                     (RESPONDENT)
PAN No. AAJPM3453G
                      Assessee by : Sh. Rajesh Jain, CA
                      Revenue by : Sh. Amit Katoch, Sr. DR
Date of Hearing: 25.07.2019                  Date of Pronouncement: 25.07.2019


                                             ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been fil ed by the assessee agai nst the order of the Ld. CIT(A)-16, Ne w Del hi dated 04.01.2016.

2. The assessee has rai sed foll owi ng grounds of appeal :

"1 . Th at t h e Ld CI T (A ppeal ) h as erred i n l aw an d on f acts i n conf i rmi n g th e acti on of t h e A O, of t reat i n g t h e prof i t on sal e of i n du st ri al sh ed as Sh ort Term Capi t al G ai n .

2 . Th at th e Ld CI T (A ppeal ) h as erred in l aw an d on f act s i n con f i rm in g th e acti on of th e A O, of appl i cat i on of S ecti on 5 0 of t h e I T A ct , despit e th e f act t h at t h e assest i .e. th e i n du st ri al sh ed, was n ev er put t o use the assessee.

3 . Th at t h e Ld. CI T (A ppeal ) h as erred i n l aw an d on f act s i n n ot adju di cat in g th e f oll owi n g grou n d n o 1 , 2 , 3 an d 4 of t h e appeal :-

1 . Th at t h e Ld A ssessi n g Of fi cer h as erred on f act s an d i n l aw i n t reat in g th e l on g-t erm capit al gain of Rs. 5 ,8 6 ,4 43 /-

as t h e bu sin ess in com e of th e appel l an t .

Kusum Mardia 2 . Th at t h e Ld A ssessi n g Of fi cer h as erred on f act s an d i n l aw i n t reati n g th e sh ort -t erm capi t al gai n of Rs. 5 ,3 1 ,0 9 7 /-as t h e bu sin ess i n com e of t h e appel l an t .

3 . Th at t h e Ld A ssessi n g Of fi cer h as erred on f act s an d i n l aw i n t reat in g t h e l on g-t erm capit al gai n as wel l as sh ort - t erm capi t al gain as t h e bu si n ess i n com e of t h e appel l an t i gn ori n g t h e f act of th e assessee's case an d al so i gn ori n g t h e gu i del in es prescri bed by CB DT ci rcu lar n o.4 /2 0 0 7 dat ed 1 5 .6 .2 0 07 .

4 . Th at t h e Ld A ssessi n g Of fi cer h as erred on f act s an d i n l aw i n t reat in g t h e l on g-t erm capit al gai n as wel l as sh ort - t erm capi t al gain as t h e bu si n ess i n com e of t h e appel l an t an d h as t ot all y di sregarded th e rul e of con si st en cy , wi th ou t t h ere bein g any ch an ge in th e work in g of t h e assessee"

3. Owing to the order u/s 154 r.w.s. 250 of the Act by the ld. CIT (A), the effective ground remains to be adjudicated is ground no. 2 which pertains to application of Section 50 of the Act to the asset of the assessee.

4. Brief facts of the case are that the assessee has purchased asset consisting of land, building, plan & machinery on competitive building from Gujarat Industrial Investment Corporation Ltd. on "as is where is" basis for an amount of Rs.12,00,000/- on 08.03.2002 which was sold for Rs.105,25,000/- on 16.03.2011 and offered long term capital gains of Rs.76,78,760/- on the transaction. The sale and purchased transaction were composite in nature. The Revenue authorities held that this is a business transaction of acquiring a business asset for business purpose. The Revenue disregarding the fact whether the asset has not been put to use, or taken into block of asset has taxed the income under short term capital gains on the plant & machinery and long term capital gains on the sale of land.

5. Before us, the ld. AR argued and filed the documents proving that the asset has been purchased enblock and the action of the Revenue authorities bifurcating the asset into land and plant & machinery cannot be 3 ITA No. 2092/Del/2016 Kusum Mardia accepted. Further, it was argued that the asset has been taken into investment in the books of account and depreciation was ever claimed on this asset. To this extent, he has filed the depreciation schedule for all the years post acquisition wherein it was found that no depreciation have been claimed, the fact which was not refuted by the Revenue.

6. The ld. DR has vehemently argued that the sale of the land part is liable to the taxed under long term capital gains and the plant & machinery part under short term capital gains. He argued that the enblock purchase and enblcok sale of the asset should not influence the differential taxability of the asset in question.

7. Heard the arguments of both the parties and perused the material available on record.

8. Section 50 reads as under:

"Special provision for computation of capital gains in case of depreciable assets.

Sec. 50. 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 of sections 48 and 49 shall be subject to ................"

9. Thus, the Section 50 of the Act applies to a. Capital asset b. It should form block of asset c. Depreciation has been allowed in earlier years. We find that the asset is taken into investments in the balance sheet and never formed part of the block of the asset and depreciation has never been claimed. Hence, it can be said that the instant case does not satisfy any of these three pre-requisites mentioned in Section 50 of the Act and hence provisions u/s 50 of the Act is not applicable to 4 ITA No. 2092/Del/2016 Kusum Mardia the sale transactions asset in question. Since, the action of the ld. Assessing Officer is based on the provisions of the Section 50 of the Act, the addition made by the Assessing Officer does not stand the test of legality and is liable to be deleted.

10. In the result, the appeal of the assessee is allowed. (Order Pron ounced i n the Open Court on 25/07/2019).

            Sd/-                                           Sd/-
  (H. S. Sidhu)                                  (Dr. B. R. R. Kumar)
 Judicial Member                                 Accountant Member
Dated: 25/07/2019
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
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