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TMI Blog2013 (12) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of Sec. 80HHC without appreciating to the fact that it is the stock-in-trade of moulds which had been disposed off by way of export sales in the relevant year. b)The ld. CIT (A) failed to appreciate that the provision of sec. 45(2) r. w. s. 50 is applicable to the facts of the Appellant. c)The ld. CIT (A) erred in not granting 80HHC benefit on the export of other manufactured items valuing Rs. 21, 74, 125/-. 2. Without Prejudice to Merits The Ld. CIT (A) erred in confirming the estimation and determination the fair market value of the stock-in- trade at Rs. 71, 11, 978/-being the deemed value of moulds for Capital Gains tax purposes. 3. Disallowance of claim u/s 80IB-Rs. 9, 74, 1421- The Ld. CIT(A) erred in confirming the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by it u/s. 80HHC should not be disallowed. After considering the submission of the assessee, AO held that assessee was not engaged in the business of sale of moulds that the moulds had been previously held as fixed assets, that the moulds had been used in the business, that assessee was claiming depreciation on them, that form no. 3CD mentioned the business of the assessee as manufacturing of moulded articles and not moulds, that assessee had sold fixed assets only, that the moulds were part of block of assets, that the consideration received on transfer/sale of moulds was to be taxed under the head Capital Gain in view of provisions of section 45(2) r. w. s 50 of the Act. Accordingly, AO computed the Short Term Capital Gains (STCG) at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A held that conversion was a colourable device. He further relied upon the cases of Durgaprasad More (82 ITR 540) and Sumati Dayal (214 ITR 801)and held that case of the assessee was covered by the provisions of section 50(1) of the Act, that section 50(2) did not come into play in the case under consideration, that assets which had been added were also sold during the year itself, that the assets were purchased only to circumvent the provisions of section 50(2) of the Act. Finally, he held that sale of the mould had been rightly taken at Rs. 71. 11 lacs by the AO. 2. 2. Before us, Authorised Representative(AR)submitted that the assessee-firm had converted the fixed assets into stock-in-trade during the year under consideration, that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had also purchased new moulds, amounting to Rs. 29. 64 lacs, during the year under consideration, vi. it had claimed deduction u/s. 80HHC, amounting to Rs. 12. 81 lacs of the Act and same was disallowed by the AO/FAA. Before proceeding further, we will like to discuss the provisions of sections 45 of the Act that deals with capital gains. Sub-section (1) of the section provides for the charging to tax the capital gains. According to this sub-section, any profits/gains arising from transfer of capital asset effected in the previous year shall be chargeable to income-tax under the head, Capital gains and shall be deemed to be the income of the previous year in which the transfer takes place. In other words by virtue of this provision, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old. It is possible that all years are may be separate assessment years. As a result capital gains related transaction may be examined in one or more years for different purposes. Whereas genuineness of the transaction can be examined only in the year of the purchase of assets, genuineness of conversion of assets from investment into stock-in-trade and calculation of capital gain by taking the fair market value of the capital assets on the date on which it was converted or treated as stock-in-trade as the same is to be deemed as full value of the consideration received as a result of the transfer of capital assets, can be examined only in the year of conversion. In other words, as per the provisions of section 45(2) of the Act, transfer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Therefore, GOA 2 is allowed for statistical purposes. 4. Next effective ground is about disallowance of depreciation on mould purchased during the year. Before us, AR submitted that moulds were ready for use and depreciation is allowable even if assets were not using during the year under consideration, we find that this aspect has not been looked into by the AO/FAA. Therefore, matter is restored back to the file of the AO to decide the issue afresh. Assessee is directed to produce the evidence of readiness of the assets during the year under consideration. If moulds were available to be used, AO should allow the depreciation as per the provisions of the Act. Rest of the grounds, being academic or consequential nature, are allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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