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TMI Blog2015 (3) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Income Tax Act, 1961 and rules made there under. 3.The Learned CIT(A) has further grossly erred in confirming the charging of interest u/s.220(2) of Rs. 10,60,465/- from 7th October, 1997 which is totally wrong instead of order u/s. 143(3) r.w.s.263 passed on30-1 1-2011 and the reasons assigned by him in doing so are wrong and are contrary to the provisions of the Income Tax Act, 1961 and rules made there under. 4.The appellant craves leave to add, amend or alter any of the above grounds on or before the date of hearing of the appeal. 5.All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another. Vide its letter,dated .04.08.2014,the assessee has raised following additional ground of appeal: i.)Without prejudice and in any event, learned Assessing Officer [AO] be directed to apply the rate of tax applicable to long term capital gains instead of short term gains while computing capital gains tax liability concerning depreciable assets adverted to in original ground no 1. ii.)Appellant craves leave to add to and/or amend and/or modify and/or alter and/or delete aforesaid additional ground of appeal. iii).The aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 with direction to the AO to adopt the WDV of the depreciable asset as cost of acquisition for computation of capital gains u/s 50. The CIT-7 Mumbai also directed the AO to examine the applicability of section 50C in the case. In pursuance of CIT-7 Mumbai directions, the AO initiated re-assessment proceedings. During the re-assessment proceedings, the assessee agreed that for the purpose of computing capital gain, the cost of acquisition should be restricted to WDV of Rs. 74,902/- as per section 50 (1) & (2) instead of deduction of actual cost of Rs. 4,87,034/-.However, in its exhaustive submissions, the assessee argued that while computing the capital gain u/s 50 of the Act, the provisions of section 50 C were not applicable. In its submissions before AO, the assessee reiterated the above facts stating that section 50 and section 50C both have independent applications. The assessee also relied on the provisions of section 43 (6) (c) defining block of assets. The assessee also relied on the provisions of explanation below section 41(4). In support of its argument that the provisions of section 50 C were not applicable on sale of depreciable assets, the assessee relied on the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciable assets was to be computed as per provisions of section 50 of the Act, that the cost of acquisition of the depreciable assets was admittedly at Rs. 74,902/- i.e. WDV of assets, that as per the assessee, the sale consideration was required to be considered the value as per sale agreement i.e. at Rs. 46,53,000/-.Referring to the decision of the ITAT Mumbai bench in the case of ETC Industries Ltd.(79 DTR-Ind, Trib 391)order dated 10/05/2012 wherein it was held that the provisions of section 50C would be applicable on sale of depreciable assets. Following the decision of ACIT Vs. ETC Industries Ltd. the FAA held that the AO was justified in considering the sale consideration of depreciable assets at Rs. 70,14,442/- u/s.50C of the Act as per the valuation made by stamp duty authorities. 5.Before us, the AR fairly conceded that the issue raised by the assessee was covered against it, that in the matter of United Marine Academy(130ITD113)the Tribunal has decided the issue in favour of the department. However, he contended that the AO should be directed to apply the rate for tax applicable to Long Term Capital Gains(LTCG)instead of Short Term Capital Gains (STCG )while computing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off against brought forward loss of long term capital gain. Reference was also made to another decision of Mumbai bench of Tribunal in case of Prabodh Investment & Trading Company Vs. ITO in (ITA No. 6557/Mum/2008) in which following the judgment of Hon'ble High Court of Bombay in case of Ace Builders P. Ltd, (Supra) the Tribunal held that section 50 created a legal fiction only for a limited purpose i.e. for the purpose of section 48 and 49 and for the purposes of section 54E, the capital has to be treated as long term capital gain. The Tribunal also accepted the arguments of the assessee that in case capital gain is assessed as long term capital gain the rate of tax would apply as provided in section 112 of the IT Act. It was, therefore, argued that in case of assessee, rate of tax applicable to long term capital gain had to be applied as per the provisions of section 112 of the IT Act. 2.3 The learned DR on the other hand placed reliance on the orders of authorities below. 2.4. We have perused the records and considered the matter carefully. The dispute is regarding applicability of provisions of section 50C to the computation of capital gain in case of depreciable asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported by the fact that cost of the flat as shown in the balance sheet was only Rs. 1,30,000/-. Therefore, if the flat is held for more than three years the M/s Smita Conductors Ltd tax rate has to be applied as provided in section 112 of the IT Act applicable in respect of capital gain arising from transfer of long term capital asset. 2.6 We, therefore, held that, for the purpose of computation of capital gain, the flat has to be treated as short term capital gain u/s 50 of the IT Act, but for the purpose of applicability of tax rate it has to be treated as long term capital gain if held for more than three years. We accordingly direct the AO to compute the capital gain from the sale of flat and apply the appropriate tax rate after necessary verification in the light of observations made in this order. Respectfully, following the above we direct the AO to compute the capital gain from sale of industrial units and apply the appropriate tax rate after necessary verification,as the assets have been claimed to have been owned for more than three years. Ground no.1is decided against the assessee. Additional ground stands decided in favour of the assessee, in part. 7. Last ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice pursuant to such fresh assessment order. (ii) Where the assessment made originally by the Income Tax Officer is either varied or even set aside by one appellate authority but, on appeal, the original order of the Income Tax Officer is restored either in part or wholly, the interest payable under section 220(2) will be computed with reference to the due date reckoned from the original demand notice and with reference to the tax finally determined. The fact that during an intervening period, there was no tax payable by the assessee under any operative order would make no difference to this position. (3) The foregoing legal position will apply mutatis mutandis to the proceedings under other direct taxes also." 3.3 In view of the Circular No.334 Dt.3.4.1982 of CBDT, in case, the assessment is set aside by CIT(A) and setting aside become final, interest under section 220(2) has to be charged only after expiry of 35 days from the date of service of demand notice pursuant to the fresh assessment order. But in case the order of CIT(A) is subject matter of further appeal and the Tribunal has restored the order of Assessing Officer either in part or wholly, the interest payable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d raising demand of Rs. 1,24,56,311 which included interest under section 220(2) of Rs. 11,83,631 charged from the date of default as per the original assessment order. The demand had arisen vide order under section 154 and therefore it was held by the Hon'ble High Court that interest under section 220(2) will be charged from date of default as per the demand notice issued pursuant to section 154 order. The said judgment is therefore not applicable to the facts of the present case in which the original assessment order has been set aside by the Tribunal and matter restored to the Assessing Officer for fresh assessment and therefore in view of the circular of CBDT (supra), the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order. The order of CIT(A) holding that interest under section 220(2) has to be levied from the date of default as per the original assessment order therefore cannot be sustained. The same is set aside and the claim of the assessee is allowed. 4. In the result the appeal of assessee is partly allowed." Respectfully, following the order of the Hon'ble Bombay High Court and the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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