TMI Blog2016 (11) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 263 of the Act under the “Guise” of AO’s failure to conduct any further enquiry. The learned CIT has passed his order on this issue on the ground that no enquiry at all was conducted by the AO. After perusal of the record, we noticed that the stand taken by CIT is incorrect. The records of assessment establishes that an enquiry was conducted by the AO and the assessee had also participated and filed reply before the AO on this issue. We are of the considered view that in the present case on the issue of computation of capital gains and depreciation, the AO has conducted enquiries and the assessee had also submitted the detailed explanations and evidently the claim was allowed by the AO on being satisfied with the explanations of the assessee. Therefore, the learned CIT in the present case has wrongly assumed jurisdiction u/s 263 of the Act on all the issues raised by the assessee - Decided in favour of assessee - ITA No.3989/Mum/2013 - - - Dated:- 28-9-2016 - SHRI B.R. BASKARAN, AM AND SHRI SANDEEP GOSAIN, JM For The Appellant : Shri F. B. Irani , AR For The Respondent : Shri Abhinay Kumbhar, DR ORDER PER SANDEEP GOSAIN,JUDICIAL MEMBER : The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for assessment year 2007-08 on 30-10-2007 declaring total income of ₹ 14,09,29,031/- after claiming deduction u/s 10A of ₹ 4,09,14,952/-. The return was processed u/s 143(1) of the Act on 29-08-2008 and subsequently the case was selected for scrutiny. Notices were issued notices u/s 143(2) and 142(1) of the Act seeking replies and after receipt of replies from the assessee the draft of the proposed order of assessment was prepared u/s 144C(1) of the Act at an assessed income of ₹ 15,55,83,590 wherein disallowance of ₹ 1,43,30,864/- u/s 92CA(3) and deduction u/s 10A of the Act of ₹ 4,05,91,252/- was proposed on 26-12-2010 under normal provisions of the Act. The aforesaid draft proposed order of assessment proposing total variation of ₹ 1,46,54,564/- to be made in the income returned by the assessee was held to be prejudicial to the interest of the assessee and hence, the AO sent the copy of the same to the assessee requiring it u/s 144C(2) of the Act within thirty days of receipt of the same for (a) acceptance of the proposed variation or (b) to file objection if any to such variation before the Dispute Resolution Panel or before the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced below: (C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduceda) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the India Income-tax Act 1922 in respect of any previous year relevant to the assessment commencing before the 1st day of April1988 and b) by the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April 1988 as if the block asset was the only asset in the relevant block of assets. So, however, that the amount of such decrease not exceed the written down value: The above mode of computation has been reiterated in the case of DCIT v. Warner Lambert (India)(P) Ltd. reported in 56 DTR 121 by the ITAT, Mumbai. Accordingly, the net worth of the undertaking should have been computated as under: Sale consideration 14,15,00,000 Less: 1.Fixed Assets(wdv) 6,26,71,984 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) 3 ITR (Trib.) 760 (Patna). (b) Net worth of the undertaking was computed by the assessee in accordance with the provisions of section 50B read with section 43(6)(c) of the Act, by increasing the opening Written Down Value(WDV) of the block of assets sold under slump sale with the additions made during the year. In computing the net worth, the assessee did not claim and reduce depreciation for the year in which the sale took place (i.e. previous year relevant to AY 2007-08), based on the provisions of the sections 50B read with 43(6)(c) and 32. (c) In reply to the assessing officer s query, the assessee filed detailed submissions on 9th December 2010 explaining the interpretation taken and computation of Capital Gains for the relevant year. After proper enquiry and due consideration of the prevailing legislation, the Assessing Officer was convinced with the stand taken by the assessee. (II) With regard to the computation of capital gains the assessee contended as under: (a) As per the provisions of section 50B of the Act, any profit or gain arising from slump sale effected during the previous year shall be chargeable to tax as capital gain in the year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of DIT vs. Warner Lambert India Private Limited 56 DTR 121 (Mum). In other words, WDV of the block arrived at after making the aforementioned adjustments shall be WDV of the block of assets as on the first day of the relevant assessment year (hereinafter referred to as the adjusted WDV ). The adjusted WDV is the figure on which depreciation is to be calculated at the rates applicable on the first day of the relevant assessment year. This aspect also remained unexamined in the case of DIT vs. Warner Lambert India Private Limited 56 DTR 121 (Mum). (g) Since 4the assets sold on slump sale are not in existence on the first day of the relevant assesmsen5t year and since the WDV of the assets sold on slump sale is already reduced from the opening WDV of the relevant block, the question of computing deprecation on the assets sold on slump sale does not arise. (h) It is submitted that it is a well settled judicial position that law applicable and to be applied shall be the law as on the 1st day of April of the relevant assessment year. This is a universally accepted proposition, which was upheld by the Supreme Court in the case of Reliance Jute and Industries Limited vs .C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, the AO made reasonable enquiries on the issues in response to which the assessee submitted detailed explanation for the stand taken by the assessee along with Accountant s report showing the computation for Slump Sale, working on sales consideration for Slump Sale and copy of the Transfer Agreement. The AO after perusing the above submissions was satisfied with the same. It was further submitted that the CIT has mentioned in the notice that the AO has erred while passing the order but has not provided the fulcrum for such a claim or justify why such a claim has been made. Therefore, this issue also does not warrant passing of any order u/s 263 of the Act. The learned DR representing the Revenue has supported the order of the learned CIT passed u/s 263 of the Act, with regard. 7. We have heard rival submissions and perused the materials placed on record before us. After considering the order passed by the learned CIT as well as hearing the parties at length we are of the considered view that since the assessee itself has submitted all the details as required by the AO with regard to the issue in question, therefore, any order u/s 263 of the Act in this regard is unwarr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany had transactions with the Associated Enterprises exceeding ₹ 15crores, therefore a reference was made to the Transfer Pricing Officer, Mumbai to ascertain the Arms Length Price. Vide order u/s 92CA(3) of the I.T. Act 1961 dated 28.10.2010, the Transfer Pricing Officer-I(6), Mumbai, has proposed an upward adjustment of ₹ 1,43,30,864/- on account of Arms Length price in respect of International transactions. The Transfer Pricing Officer-I(6) has held as under; In view of the above, the arguments provided by the assessee are not acceptable. Accordingly, the assessee s arguments are rejected and the operating margin has been considered at 27.96% is applied to the total cost of the assessee, which will give the operating margin of ₹ 3,38,28,638/-. The assessee has shown the operating margin of ₹ 1,94,97,774/-. Thus, the difference of ₹ 1,43,30,864/- would be adjusted to the international transaction relating tot his activity to arrive at an Arms Length Price of the transaction. Thus, the AO would require to make an adjustment of ₹ 1,43,30,864/- in the said activity of the assessee and the total income of the assessee would according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed are worked out as under: Expenses Total amount 10A Unit (24.90%) Non 10A Unit (75.10%) Audit fees 13,00,000 323700 976300 In view of the above discussion, the Profit u/s 10A is reworked out as under: Net profit of Section 10A Unit Rs.4,09,14,952 Less: Appportionable expenses ₹ 3,23,700 Profit from Section 10A Unit Rs.4,05,91,252 In view of the above, the deduction u/s 10A is allowed at ₹ 4,05,91,252- as against ₹ 4,09,14,952/- claimed by the assessee. The proportionate expenditure related to a non 10A unit is required to be allowed at ₹ 9,76,300/- as against ₹ 13,00,000/-, thereby an increase of profit of ₹ 3,23,700/- in non 10A unit. However, as the total income is computed after taking net profit of whole unit, no separate working of non 10a unit is made. 10. After considering the details filed by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Advocates appearing for the Revenue as well as Assessee. In the instant case as recorded earlier, the ITO had by his order dated 30th October, 1996 sought details/explanation from the assessee which the assessee had given by his letter dated 5th November, 1996. It is evident from the order of the Assessing Officer that he has considered aIl detailed particulars filed before him and after discussion allowed the deduction of the entire profit earned by the assessee pertaining to his export business. We are in complete agreement with the decision of this Court in the case of Commissioner of Income Tax v. Gabriel India Ltd. (supra) and we reject the submission of the revenue that the order of the Assessing Officer is erroneous or is passed without application of mind because in his order he has not made elaborate discussion in that regard. In any event the Revenue has admittedly not argued before the CIT or before the Tribunal that the order passed by the Assessing Officer was without application of mind. CIT(A) has set aside the order of the Assessing Officer only on the ground that the CIT did not agree with the view taken by the Assessing Officer and took a view different than th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
