TMI Blog2012 (8) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... he non-urban area therefore, it can be interpreted that assessee should carry on any business in non urban area and if the amounts are utilized for acquisition of assets for the purpose of its business, this should qualify for the purpose of exemption u/s 54G as there is no requirement that the land and building should be used for the purpose of the business of industrial undertaking - in favour of assessee. - ITA No.4428/Mum/2008 - - - Dated:- 27-6-2012 - Shri B. Ramakotaiah, And Shri S.S. Godara, JJ. Department by: Ms. Rupinder Brar, CIT -DR Assessee by: Shri Mayur Kisnadwala O R D E R Per B. Ramakotaiah, A.M. This is a Revenue appeal against the orders of the CIT (A)-8 Mumbai dated 23.4.2008. The Revenue has raised the following revised concise grounds: 1. On the facts and circumstances of the case and in law the learned CIT (A) erred in directing AO to allow deduction under section 54G of the Act, ignoring the fact that assessee has not fulfilled the cumulative conditions laid down in section 54G(1) and hence not eligible for deduction under the said section . 2. On the facts and circumstances of the case and in law the learned CIT (A) failed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from urban area. It was also submitted that the capital gains on such transfer have clearly arisen from the transfer of qualifying the capital assets under section 54G which are being used for the purpose of business of an industrial undertaking situated in urban area and was eligible for deduction under that section. It was submitted that AO s opinion, that the industrial undertaking did not exist from financial year 1999-2000 is not correct as assessee is in existence and continue to undertake other activities and ultimately decided to do the business for the development of property for which amount was spent as per the provisions of the Act. 4. It was further submitted that assessee constructed the building costing ₹ 1.40 crores by utilizing the amount in the capital gains accounts scheme. It also made submissions on the legal provisions of section 54G before the CIT (A). After considering the submissions the CIT (A) allowed the claim by stating as under: The issue has been carefully examined. There is merit in the arguments of the appellant. It is not in dispute that on a consideration of `.4,12,00,000/- received on surrender of leased premises, capital gain of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. He referred to the facts as stated by AO that assessee has sold the entire Plant Machinery and employees have left the company way back in 1999-2000. Therefore, the entire receipt was taxable and no claim can be allowed under section 54G. 6. Learned Counsel referred to the provisions of section 54G, the facts as stated by AO and the additional evidences placed before the CIT (A) with reference to the negotiations with the land owners and other documents on record to substantiate its contentions. He relied on the order of the CIT (A). 7. We have considered the rival contentions and examined the details placed on record. It is an admitted and undisputed fact that the assessee company carried on its manufacturing activity and business at its leased premises at Jogeshwari for more than 45 years. Assessee was engaged in the business of manufacturing equipments, electrical motors and machineries. Subsequently, the company purchased plastic moulding machines and undertook labour jobs for manufacture of moulding plastic parts. Due to severe competition in the plastic industry and high operational overheads in Mumbai, the company incurred losses and the activity was commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil ; or (ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain. 9. The requirement of section 54G is that assessee should apply the capital gains for one or more of the specified purposes/new assets within the time specified therein as under: Purchase of new machinery or plant for the purposes of business of the industrial undertaking in the area where it is shifted. Acquire building or land of construct building for the purposes of his business in the said area. Shifts the original asset and transfers the establishment of such undertaking to such area. 10. A close reading of this section brings out very clearly that whereas under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, that is to say, the expenditure incurred should be for the carrying on of business and assessee should incur it in his capacity as a person carrying on the business . 13. Further in the case of CIT vs. Lake Palace Hotels and Motels (P) Ltd, 251 ITR 0644, the Hon'ble Rajasthan High Court interpreted: a perusal of the scheme of section 32A of the Income Tax Act, 1961, makes it abundantly clear that investment in anything which can be termed in a generic sense as plant and machinery used for the purposes of business has not been made eligible to claim investment allowance and a deduction in respect of such investment, but only such plant and machinery used in business which fulfils further essential conditions and requirements required for laying claim to such deductions. The key words used in this section are for the purpose of business of construction, manufacture or production of any article or thing . Therefore, as clause-b of sub section (1) of section 54G does not use its specific phrase for the purpose of its business of under taking except that the business should be in non-urban area. Therefore, it can be interpreted that assessee should carry on any busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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