TMI Blog2013 (12) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowable even if assets were not using during the year under consideration - This aspect has not been looked into by the AO/FAA - If moulds were available to be used, AO should allow the depreciation as per the provisions of the Act - The issue was restored for fresh adjudication. - ITA No. 4971/Mum/2008 - - - Dated:- 23-10-2013 - Sh. I. P. Bansal And Rajendra, JJ. For the Petitioner : Shri Pramod Kumar Parida Ms. Sanjukta Chowdhary For the Respondent : Shri Sanjeev Jain ORDER Per Rajendra, AM:- Challenging the order dated 20. 05. 2008 of the CIT(A)-XX, Mumbai, assessee has raised following Grounds of Appeal: 1. Business Income Vs. Capital Gains and Disallowance of Sec. 80 HHC-Claim Rs. 12, 81, 329: a)The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave to add, amend or alter all or any of the above Grounds of Appeal. Assessee-firm, engaged in the business of manufacturing of moulded plastic articles, filed its return of income on 27. 11. 2003 declaring total income of Rs. 13. 85 lacs. Assessment was finalised by the Assessing Officer(AO)on 23. 03. 2006determining the total income of the assessee at Rs. 29. 98 lacs. 2. First ground of appeal is about head of income under which income has to assessed and denial of deduction claimed u/s. 80HHC of the Act. During the assessment proceedings, AO found that assessee had claimed deduction of Rs. 14. 56 lacs u/s. 80HHC, that it had made the export of Rs. 93. 12 lacs, that the same included export proceeds of sale of moulds. He asked the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had been all along using the moulds as fixed assets, that the assets were so treated in some cases from as far as back January 1995, that sudden conversion of the assets into stock-in-trade defied prudent and established business practice, that assessee had not established the need for suddenly conversing the assets into stock-in-trade, that the conversion was nothing but a vehicle claimed deduction u/s. 80HHC of the Act the transaction in question was not real, that a purely superimposed and artificial process of conversion had been brought into play to claim deduction u/s. 80HHC, that there was no commercial compulsion or expediency in the conversion, that the act of conversion was designed to create a window which made it possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 45(2) r. w. s. 50 were applicable in the case under consideration, that the block of assets had seized to exist, that income was rightly assessed by the AO under the head Capital Gains, that the assessee was not entitled to claim deduction u/s. 80HHC of the Act. 2. 3. We have heard the rival submissions and perused the material on record. In our opinion undisputed fact of the case under consideration can be summarised as under: i. assessee is engaged in the business of manufacturing of moulded plastic things. ii. it was showing moulds as fixed assets till last assessment year. (As per Pg. 11 of the Paper book cost of the moulds as on 01. 04. 2002 was 89. 72 lacs. ) iii. during the year under consideration assessee converted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. " On a plain reading of the aforesaid section, it is clear that this provision was enacted for computing capital gains in respect of transfer of converted asset into stock-in-trade of a business. It has been provided therein that such profit arising from the transfer by way of conversion as stock-in-trade shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by an assessee. Considering the scheme of Act, in case of conversion of investment into stock-in-trade, there may be three separate years involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income - on conversion of fixed assets in to stock in trade- as per the provisions of section 45(2) of the Act. He should afford a reasonable opportunity of hearing to the assessee. We find that AO has not doubted the export of moulds. In these circumstances, assessee cannot be denied the benefit of section 80HHC of the Act on export proceeds of moulds. Similary, if assesee has fulfilled all the conditions stipulated as per the provisions of section 80HHC for the other exports, it should be allowed deductions as per rules. Matter is restored back to the file of the AO to determine the quantum of deduction with regard to exports other than moulds. Ground no. 1 is partly allowed in favour of the assessee. 3. Ground no. 2 has become aca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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