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2015 (6) TMI 634 - AT - Income TaxRevision u/s 263 - CIT(A) directed AO to recompute the short term capital gain after ascertaining the correct cost of acquisition of the wind mill and correct amount of depreciation - Due to huge business losses, the depreciation u/s. 32(1) was not claimed in Assessment Year 1997-98 when this wind mill was acquired by the assessee even not in subsequent year up to 2001-02. and was claimed in Assessment Year 2002-03 when it was made obligatory for the assessee to claim deprecation - depreciation claimed by the assesssee at ₹ 1,14,80,000/- was treated as a capital gain u/s. 50 - Reopening of assessment - Assessing Officer has disallowed the setting off of capital gain against brought forward depreciation losses - Held that:- According to the first proposition of the assessee, the Assessing Officer has re-opened the assessment proceeding in order to find out, whether short term capital gain computed by the assesse can be adjusted against the deprecation losses brought forward from earlier? No doubt, assessment has been re-opened on a little different reason but before considering any issue, whether set off to be allowed or not?, it is but natural that ld. Assessing Officer would first verify the amounts which can be set of with each other. The computation of short term capital gain is one of the components for verifying this factor, therefore, it suggests that ld. Assessing Officer has applied his mind on the figure of the short term capital gain computed by the assesee. He has examined this and only thereafter disallowed this set off against brought forward losses. The Assessing Officer has applied his mind and taken a possible view after going through returns of the assessee for earlier years. Therefore, ld. Commissioner is not justified in taking action against assessment order, where Ld. Assessing Officer had taken a possible view in law The computation of capital gain is linked with the ultimate set off, it is same source of income to be determined in the hands of assessee, therefore, he could have considered the ultimate amount required to be computed as a short term capital gain. The source and the issue related to that source were subject matter of an appeal and therefore to our mind the interdiction available in explanation “C” appended with section 263 sub-section 1 would come in the way of Ld. Commissioner for taking action u/s. 263 against the assessee. The impugned order is not sustainable in view of the second proposition also. Asessee has worked out brought forward deprecation losses of ₹ 1,82,62,722/-. This amount will be increased by addition of Rs. of the depreciation which is to be thrust upon the assessee by a sum of ₹ 1,14,80,000/-. The net result will be again zero. (Rs. 1,82,62,722/- + ₹ 1,14,80,000 depreciation not claimed earlier = 2,97,42,722/-). This amount will be available to the assessee as a brought forward losses. It is more than the sale proceed of wind mill computed at ₹ 2,29,60,000/-. The net result will be zero. The case in hand, even if for the sake of argument, we also assume that ld. Assessing Officer has committed an error by not computing the true capital gain with the application u/s. 50(1) then also ultimately no prejudice has been caused to the revenue. Therefore, the impugned order is not sustainable in law. - Decided in favour of assessee.
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