Income Tax Appellate Tribunal - Mumbai
Amratlal Ashok Kumar & Co, Mumbai vs Asst Cit Cir 18(1), Mumbai on 31 May, 2018
IN THE INCOME-TAX APPELLATE TRIBUNAL "A" BENCH MUMBAI
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No.6689/Mum/2016 (Assessment Year 2013-14)
M/s Amratlal Ashokkumar & ACIT-Circle (18)1),
Co. 438, Gopal Galli, M.J. 2nd Floor, Earnest House,
Market, Kalbadevi Road, Vs. Nariman Point,
Mumbai-400002. Mumbai-400021.
PAN: AABFA2727M
Appellant Respondent
Appellant by : Shri K. Gopal & Neha
Paranjpe - Advocates
Respondent by : Shri Rajesh Kumar Yadav (Sr.DR)
Date of Hearing : 01.05.2018
Date of Pronouncement : 31.05.2018
ORDER
PER PAWAN SINGH, JUDICIAL MEMBER;
1. The instant appeal by assessee under section 253 of the Income-tax Act (the Act) is directed against the order of ld. Commissioner of Income-Tax (Appeals)-29 [ld. CIT(A)], Mumbai dated 22.08.2016 in the matter of assessment order passed under section 143(3) dated 26.02.2016 for Assessment Year 2013-14. The assessee has raised the following grounds of appeal:
1. The Ld. Commissioner of Income Tax (Appeals) - 29, Mumbai [hereinafter referred to as the "Ld. CIT(A)"] erred in passing the order dated 22.8.16 confirming the additions made by the Ld. A.O. in assessment order dated 26.2.16 passed under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as "the Act"]. The Appellant strongly objects to the following additions/ disallowances confirmed by the Ld. CIT(A).
2. Addition made u/s 50 of - Rs.96,90,874/-
ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co.i. The Ld. CIT(A) erred in confirming the action of the Ld. A.O. in making addition of Rs.96,90,874/- on account of the sale of premises & considering the excess above WDV as taxable u/s 50. without appreciating the facts and circumstances of the case. Hence, the addition of Rs.96,90,874/- is unjustified and the same may be deleted.
ii. The Ld. CIT(A) failed to appreciate that the premises sold was a commercial premises entitle to depreciation at 10% & was correctly clubbed with assets entitle to depreciation at 10% since the said premises was used for business purposes & not for residential. Thus, accordingly the Appellant correctly computed its block of asset, which remained positive at year end. Hence, the addition u/s 50 of Rs.96,90,874/- is unjustified and the same may be deleted.
2. Brief facts of the case are that the assessee is a partnership firm engaged in the business of trading, wholesalers of potato, onion and also commission agents. The assessee filed its return of income for relevant Assessment Year on 19.03.2013 declaring total income of Rs. 37,14,050/-. The assessment was completed on 26.06.2016 under section 143(3) of the Act. The Assessing Officer while passing the assessment order taxed the sale consideration of Flat No. D-12, Grain Merchant CHS Ltd Sector-17, Vashi (Flat), as Short Term Capital Gain under section 50 of the Act. The assessing officer hold that after sale of flat nothing was left in the block of asset, on which depriciation was claimed and allowed at 5%. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Therefore, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that 2 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. during the Financial Year related to the Assessment Year under consideration, the assessee sold part of asset and added one more asset in the block of asset during the relevant financial year. In earlier assessment year 2012-13, the assessee claimed depreciation @ 10% in respect of asset, sold during the relevant period. However, due to mistake in earlier Assessment Years it was claimed @ 5%, though the assessee was entitled for depriciation @ 10% on such asset. The ld. AR of the assessee further submits that section 43(6) defines the written down value (WDV) of the asset.
4. On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue submits that there is no proof about the block of asset used for commercial purpose during the earlier years. In the earlier years, the assessee claimed and allowed depreciation @ 5% on the asset (flat) sold during the financial year relevant to the assessment year under consideration. The assessee now during the Assessment Year under consideration claimed the deprecation @ 10%. There is no evidence about the use of asset for commercial purpose. Mere addition of asset in the block of asset for which depriciation was claimed @10% is not sufficient. The onus was on the assessee that the flat was used for commercial purpose. The assessee filed affidavit for use of asset for commercial purpose, which is not sufficient to discharge the onus. In support of his submission, the ld. DR for the Revenue relied upon 3 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. the decision of Hon'ble Delhi High Court in case of CIT vs. M/s T. S. Kishan & Company in ITA No. 1270 of 2011 dated 16.09.2014.
5. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment, the Assessing Officer noted that an amount of Rs.1.00 Crore was shown as Capital receipt. The assessee was asked to explain the facts. The assessee furnished its reply dated 19.11.2015 and explained that the amount was receipt on sale of Vashi Flat sold during the year and amount was deducted from the bock of fixed asset. The assessing officer examined the bock of fixed asset for assessment year 20110 and 2012-13 and noted that no depriciation was claimed in assessment year 2011-12 in respect of flat shown which the amount of Rs.1.00 Crore was realized. The WDV of this Flat at Rs.3,09,168/- was clubbed with asset of office premises for AY 2011-12 and in subsequent year (AY 2013-14) the depriciation was claimed @10% on the net block of asset. The assessing officer asked the assessee to furnish the cost of acquisition with details of proof of sale consideration. The assessee furnished its reply dated 13.10.2015 and contended that this flat was allotted by M/s Gain Merchant Co-oprative Society ltd ('Society') in 1989. Assessee filed copy of possession letter, Share certificate and receipt monthly maintenance charges. The assessee contended that they are unable to provide the purchase agreement as the same is untraceable. The assessee also filed copy of assessment order for 4 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. AY 1996-97. On perusal of assessment records furnished by assessee, the AO noted that the assessee claimed /booked depreciation @5% on the said flat up to AY 1997-98. In AY 1996-97 the claim of depreciation was allowed @5%. The AO issued notice under section 133(6) dated 05.02.2016 to the Secretary of M/s Gain Merchant CHS Ltd (Society). The Society filed its reply dated 11.02.2016. In the reply the Society contended that the purchase agreement is not available. However, the copy of leave and license agreement showing that the flat was used for residential purpose was provided. The society in its reply also contended that it was formed with an objective to provide the residential accommodation to its members. On the basis of the inquiry carried by the AO, the AO took the view that the flat was never used for the purpose of business activity and therefore, the asset (flat) is eligible for 5% rate of depreciation. Since, the flat was never used for commercial purpose a therefore, it was rightly included in the block of asset eligible for 5% of depreciation. The affidavit filed by assessee was not believed by the assessing officer holding that it was filed by assessee of its own and no corroborative evidence was filed. Therefore, the assessing officer rejected the claim of capital receipt and taxed the receipt and treated it as Short Term Capital Gain under section 50 of the Act.
6. Before the ld. CIT(A), the assessee urged that the assessee is entitled for depreciation @ 10% on the block "Building", on opening written down 5 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. value. The assessee correctly carried down the earlier years closing balance. The assessee further contended that the correct computation should be as follows:
Opening WDV of building 24,25,745 Refer para 5 wherein the AO has block confirmed the WDV of block at Rs.
24,25,745 Additions during the year 1,03,73,660 Purchase of Pune Factory Deductions during the year 1,00,00,000 Sale of premises 27,99,405 -
Depreciation 2,79,941 Depreciation claimed 10%
Closing WDV of building 25,19,464
block
7. The assessee further urged that treatment of depreciation under Income-tax Act, the block of asset viz. building has not extinguished and thus, nothing can be taxed under section 50 of the Act. However, the Assessing Officer computed the Short Term Capital Gain. Therefore, the Assessing Officer has changed the written down value of the building of block as determined in the last assessment for Assessment Year 2012-13. The assessee also filed affidavit in support and contended that mere mistake in the classification in passing cannot change the result of functional test. Such mistake was not prejudicial to the revenue and was corrected by Assessing Officer in the past. The contention of assessee was not accepted by ld.
CIT(A). The ld. CIT(A) concluded that there is no evidence to substantiate the claim of the assessee that the said flat was used for commercial purpose. The fact on record shows that the flat has been used for residential purpose. The society has been formed to cater the needs of 6 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. member of residents. The onus was upon the assessee to prove that it was used for commercial purpose, the assessee failed to discharge his onus. The assessee has been claiming depreciation @ 5% knowing it very well that it is a residential flat. Hence, there cannot be any occasion for any ignorance on the part of assessee. The ld. CIT(A) further concluded that assessee has brought his flat in the 10% depreciation block just to avoid tax. The ld. CIT (A) also noted that the assessee also purchased land at Satara and shown this as office premises in the name of Pune factory, even the assessee cannot produce the evidence on factory building or an office in the said land at Satara. Therefore, it appears to be an arrangement to keep the balance as block of asset so as to avoid tax on capital gain arising from the sale of Vashi flat. The affidavit of assessee was also discarded by ld. CIT(A) holding that the flat has been allotted by Grain Merchant's CHS Ltd. and its meaning for the residential purpose of the Member. The assessee also claimed the depreciation @ 5% which is rate applicable to residential flat and that in the Assessment Year 2011-12, the assessee is suddenly brought the residential flat in the block of asset with 10% depreciation for no reason. The claim of depreciation @ 5% in earlier year was claimed wrong in fact the depreciation at 10% now claimed is wrong.
8. We have noted that the assessee was allowed depreciation @10% on the block of asset in Assessment Year 2012-13. The block of asset consists of the flat in dispute. In our view once the revenue has accepted and allowed 7 ITA No.6689/M/16- M/s Amratlal Ashokkumar & Co. depreciation @10% on the block of asset in Assessment Year 2012-13, the same cannot be allowed for treating it differently, when the part of block was sold in subsequent years. The ld. DR for the Revenue has relied upon the decision of M/s T.S. Mishan & Co. Ltd. wherein the Hon'ble High Court has held that mere affidavit is not sufficient to substantiate the contention in absence of other evidence. The ratio of the decision is not applicable on the facts of the present case as the revenue has already accepted the block of asset which consists of the flat in dispute allowed depreciation @10% on the block of asset in Assessment Year 2012-13. In view of the above discussion, we direct the assessing officer to delete the addition under section 50 of the Act. Hence, the grounds of appeal raised by assessee are allowed.
In the result, appeal filed by assessee is allowed.
Order pronounced in the open court on 31.05.2018.
Sd/- Sd/-
G.S. PANNU PAWAN SINGH
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 31.05.2018
SK
Copy of the Order forwarded to :
1. Assessee 2. Respondent
3. The concerned CIT(A) 4.The concerned CIT
5. DR "A" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
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