TMI Blog2011 (5) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the appeal of the appellant which is illegal and against the facts of the case. 2. That the Ld. CIT (Appeals) has wrongly held that the A.O. has rightly disallowed the claim of the appellant that the mistake is covered for rectification u/s 154. It is a legal mistake and is rectifiable u/s 154. 3. That Ld. CIT (Appeals) on merits has wrongly held that the assets sold is part of block of assets, whereas this Plant and Machinery was kept separate and was not installed and was never put to use and as such no depreciation was ever claimed or allowed. In the depreciation chart it was clearly mentioned that not put to use thus the Ld. CIT (Appeals) has wrongly held that it was part of depreciation assets. 4. That assets sold never lost its identity as through out it was kept separate from the depreciable assets. 5. Ld. CIT (Appeals) has wrongly held that section 50 is applicable whereas section 50 is only applicable where the depreciation on the asset has been allowed. 6. That the order of the Ld. CIT (Appeals) is liable to be cancelled and the Ld.A.O. be directed to allow the indexation being long term asset. 3. Both the appeals relating to the same assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the cost inflation index of the plant machinery sold by it. The assessee had shown income from business and profession. In the return of income and as per Schedule-G of the balance sheet the assessee had shown profit on sale of fixed assets under the head other income . The Assessing Officer was of the view that the provisions of section 50 of the Act are to be applied on transfer of assets within block of assets in case the sale value exceeds the written down value of the assets. The Assessing Officer thus held that the assessee was not entitled to the benefit of indexation of cost of the assets. The Assessing Officer further held that even otherwise the issue raised by the assessee by way of rectification could not be said to be a mistake apparent from record as the same could not be decided without detailed deliberations. The rectification application moved by the assessee under section 154 of the Act was thus dismissed. 5. In appeal the CIT(A) vide para 4.5 confirmed the order of the Assessing Officer that there was no error apparent from record of the proceedings and the claim of the assessee was an after-though attempt to claim the benefit of cost of indexat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed by the Assessing Officer. 7. Before the CIT(A) the learned counsel for the assessee stated that the main appeal was filed against the order passed under section 154 of the Income-tax Act and the main ground was contested in the said appeal. The CIT(A) vide para 3 noted as under: 3. In the case of hearing the Ld.Consel for the appellant has stated that the main appeal has been filed in A.No.26/IT/CIT(A)/09-10, in which the appellant has contested the order of the A.O. passed u/s 154 of the I.T.Act. He states that the main ground has already been contested in that appeal which was also fixed for hearing today. The outcome in that appeal decides the issue and if the same is in his favour, he does not press for this appeal. In such an eventuality he has requested that the same may be treated as withdrawn. The assessee stated that the main ground had already been contested in the appeal filed against the order under section 154 of the Act, which has been heard and the outcome in the said appeal would decide the issue and if the same is in favour of the assessee, the appeal is not pressed. The CIT(A) thus held that the issue has been adjudicated in another appeal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost indexation. The Assessing Officer also held that the issue raised by the assessee could not be said to be a mistake apparent from record and hence, could not be rectified under section 154 of the Act. The assessee filed an appeal before the CIT(A) against the order of the Assessing Officer passed under section 143 (3) of the Act and another appeal against the order passed under section 154 of the Act. The CIT(A) in the quantum appeal noted the assessee to have filed the appeal against the order passed under section 143 (3) of the Act belatedly and the same was intimated to the assessee. In response thereof, an application for condonation of delay was moved before the CIT(A) stating the reason for the late filing of appeal; that the assessee was under the bonafide belief that application moved by it for rectification under section 154 of the Act shall be allowed by the Assessing Officer and once the same was rejected, the present appeal in addition to the appeal filed against the order under section 154 of the Act was filed. The CIT(A) vide para 3.1 observed as under : 3.1 The merits of the appellant s case have been discussed by me in the main appeal No.26/IT/CIT(A)/PTA/09- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iberty to seek any further redressal. The issue regarding the merits of the addition having been adjudicated by the CIT(A) is now in further appeal before us. 12. The assessee claims that while computing the income from capital gains the cost of acquisition of the assets had to be indexed as the assessee had purchased the said assets in the earlier years and the assets sold by the assessee is a long term capital assets, entitled to the benefit of cost inflation index of the cost of acquisition of the assets sold by the assessee. Admittedly, the asset sold by the assessee was acquired partly in financial year 1997-98 and partly in assessment year 1998-99 and had been sold in the financial year 2005-06. The issue raised in connection with the computation of the gains on the sale of the said capital asset revolves around whether the asset sold by the assessee is a long term capital asset or a short term capital asset. The assessee claims that the said asset owned by it was never put to use and no depreciation was claimed on the said asset ever and was distinguished from the other plant and machinery reflected by the assessee in the list of fixed asset, on which depreciation was all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1.19 crores for the financial year 1997-98. The addition in the plant and machinery of 43.03 lacs was reflected separately under the head plant machinery (not in use) on which no depreciation was claimed. In the succeeding year i.e. year ending 31.3.2009 the assessee had claimed depreciation @ 25% on plant and machinery. However, though an addition of ₹ 80.03 lacs was made to the plant and machinery (not in use) but no depreciation was claimed on the total machinery of ₹ 1.23 crores under this head. Thereafter from year to year the assessee was claiming depreciation @ 25% on the first head on plant and machinery in addition to the other assets owned by the assessee, on which depreciation was claimed, but no depreciation was claimed on the plant and machinery capitalized under the head plant machinery (not in use). Even for the assessment year 2005-06 the value of the said plant and machinery (not in use) is reflected at ₹ 1.23 crores. Only in the financial year 2005-06 the said plant and machinery has been reflected to have been sold for ₹ 2.33 crores, resulting in profit of ₹ 1.10 crores. The above-said facts reveals that the assessee for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of plant and machinery. The assessee having not claimed any depreciation on the same cannot be burdened with the provisions of section 50 of the Income-tax Act as the basic requirement for the applicability of section 50 of the Act is the assets forming part of block of assets in respect of depreciation had been allowed under the Act. In the absence of any depreciation being allowed to the assessee in any of the previous years on the said plant and machinery (not in use), the gain arising on the transfer of the said asset being a long term capital asset in turn is long term capital gain. While computing the long term capital gain on the sale of the asset, the provisions of section 48 are applicable for computing the income chargeable under the head capital gains and the assessee is entitled to the benefit of indexed cost of acquisition, which working out the gain arising on the transfer of the said capital asset. Accordingly the order of the CIT(A) is set aside and the Assessing Officer is directed to allow the claim of the assessee by adopting the indexed cost of acquisition in determining the income from long term capital gain on sale of plant and machinery (not in use) Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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