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2017 (11) TMI 1072 - AT - Income TaxDeduction u/s 80HHC and 80IB - assessee had converted its fixed assets [injection moulds] from the Block of assets into Stock-in-Trade - Held that:- As carefully gone through the orders of the authorities below and found from record that the assessee is a Registered Firm with three partners and is involved in the business of manufacturing and marketing of Plastic Moulded Articles. From the record as found that the assessee had during the year converted the moulds reflected as fixed assets in the block of assets in to Stock-in-Trade at its book value amount of ₹ 34,56,581/-. Consequently, the figure of block of assets of the mould does not include the said amount. Besides, the fresh purchase of moulds, effected by the assessee, during the year have been added to the block of assets at the end of the year which has resulted into positive balance in the block of assets of moulds. What the assessee had sold is the Stock-in-Trade and not the fixed assets as held by the Assessing Officer. Therefore, value of export proceeds cannot be taken as the fair market value of the mould for conversion purposes in order to determine Short Term Capital Gains. Therefore, rejecting the stand of the assessee, the Assessing Officer is not justified to determine the Short Term Capital Gains at a figure of ₹ 19,30,779/-. Particularly when the converted price of mould as effected by the assessee is the book value of impugned assets. As the Stock-in-Trade has been exported by the assessee and export realization in foreign exchange has come to India, the claim of the assessee on the profit earned on such export u/s. 80HHC deserves to be allowed. What the assessee had sold is its Stock-in-Trade and not the assets which had been converted from his investment. As it is not a case of investment conversion and the present case being the saleable capacity of the fixed assets which the assessee had commercially exploited to its full extent by finding a suitable market abroad. Therefore, the action of the Assessing Officer to treat the business income of the assessee as Capital Gains and consequently determining Short Term Capital Gains within the meaning of Section 45(2) r.w.s 50 at a figure of ₹ 19,30,779/- is not at all justified. Assessing Officer was not justified to disallow the claim of depreciation with the premise that block of assets of moulds has been reduced to Rs. NIL. The assessee during the relevant year had made fresh purchase of moulds worth ₹ 29,64,000/- which is reflected in its Balance Sheet and the depreciation has been claimed on the fresh purchase of mould forming part of block of assets and not on the mould which had been converted into Stock-in-Trade. Therefore, the disallowance of depreciation u/s. 32 is uncalled for. Also found that the assessee had claimed deduction u/s. 80IB which the Assessing Officer has allowed the reduced claim for ₹ 2,33,741/- as the result of which the difference amount of ₹ 7,40,401/- has been disallowed. The action of the Assessing Officer is not justified since the deduction u/ss.80HHC and 80IB are independent; AO was not justified to deduct the amount of deduction u/s 80HHC from the eligible profits while computing deduction u/s 80IB. - Decided in favour of assessee.
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