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2015 (3) TMI 1299

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..... Act,1961(Act) Per Rajendra, AM Challenging the order dated 19.10.2009 of the CIT(A)-13,Mumbai the Assessing Officer(AO) has raised following ground of appeal: 1.The Learned CIT(A) has grossly erred in conf irming stamp duty valuation of ₹ 70,14,442/- u/s.50C for the sale of depreciable assets instead of adopting agreement value of ₹ 46,53,000/- u/s.50 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. 2.The Learned CIT(A) has further erred in confirming the disallowance of deduct ion of ₹ 37,500/ - from capital gains u/s 48(1) being payment towards welfare fund of society for transfer of depreciable assets and 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. 3.The Learned CIT(A) has further grossly erred in confirming the charging of interest u/s.220(2) of ₹ 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 provisio .....

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..... under consideration, the assessee sold three units bearing number 412,413 and 414 in industrial estate. The market value of the same was ₹ 70,14,442/-. The three units were depreciable assets u/s 50 and the WDV as on 01.04.2005 was ₹ 74,902/- and the cost of purchase was ₹ 4,87,034/-.These units were sold for a consideration of ₹ 46,53,000/- and this was the value which was taken by the assessee as sale price for computation of capital gain instead of the market value of the property as per section 50C. It was also seen from the return of income that while computing the taxable gain u/s 50 the cost of purchase i.e. ₹ 4,87,034/- was deducted from the sale consideration of ₹ 46,53,000/- when it was the WDV of ₹ 74,902/-which only deserved to be reduced. In view of those facts, the CIT-7 Mumbai passed order u/s.263 on 01.02.2011 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. Durin .....

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..... ₹ 16,39,540/- less Deduction u/s 54 EC Rs.40,92,965/- Taxable STCG Rs.28,46,575/- 4.Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. During appellate proceedings the assessee reiterated its argument taken before AO during re-assessment proceedings and also relied on the decisions of tribunals as mentioned above.It was argued that the sale price of depreciable assets should be taken as per the agreement for sale for computing the capital gains u/s.50 of the Act. After considering the submissions of the assessee and the assessment order, the FAA held that during the year under consideration the assessee had sold its three units located in the industrial estate, that same were assessee's business assets forming part of the depreciation chart,that the assests in question were depreciable assets, that the sale consideration as per the sale agreement was ₹ 46, 53,000/-,that market value of the units as per stamp duty authorities was ₹ 70, 14, 442/-,that the capital gain on sale of those d .....

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..... Ltd. (281 ITR 410) in which it has been held that the factum of deemed short term capital gain u/s 50 of the IT Act was applicable only to computation of capital gain and for the purpose of other provisions of the Act such as 54EC the capital gain had to be treated as long term capital gain if the asset was held for more than three years. The learned AR pointed out that section 50(1) made it quite clear that the capital gain in respect of depreciable asset was deemed as short term capital gain for the purposes of section 48 and 49 of the IT Act which related to computation of capital gain. Therefore, the deeming provision was only limited to the provisions for computation of capital gain. He also referred to the decision of the Mumbai bench of Tribunal in case of Mahindra Freight Carriers Vs. DCIT (139 TTJ 422) in which it has been held that prescriptions of section 50 are to be extended only to stage of computation of capital gain and, therefore, capital gain resulting from transfer of depreciable asset which M/s Smita Conductors Ltd was held from more than period of three years would retain the character of long term capital gain for all other provisions of the Act and consequent .....

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..... ection 48 and 49 which relate to computation of capital gain. The deeming provisions has, therefore, to be restricted only to computation of capital gain and for the purpose of other provisions of the Act, the capital gain has to be treated as long term capital gain. The view canvassed by the learned AR is supported by the judgment of Hon'ble High Court of Bombay in case of Ace Builders P. Ltd. (Supra) in which it has been held that for the purpose of other provisions of the Act such as section 54EC the capital gain has to be treated as long term capital gain, if the asset is held for more than three years. The same view has been taken by the Mumbai bench of Tribunal in case of Manali Investments Vs. Assistant Commissioner of Income Tax (139 TTJ 411) in which it has been held that the prescriptions of section 50 are to be extended only to the stage of computation of capital gain and, therefore, capital gain resulting from transfer of depreciable asset which was held for more than three years would retain the character of long term capital gain for the purpose of all other provisions of the Act. In this case the Ld. AR for the assessee submitted that flat had been held for 15 to .....

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..... n the assessee as per the demand notice is not paid within the time allowed in the notice. The issue raised in this ground is as to when the original assessment has been set aside by Tribunal and fresh assessment has been made by the A.O., the period for levy of interest u/s.220(2) should be reckoned from the date of default as per the original assessment order or as per the fresh assessment order. We find that this issue has already been examined by the CBDT who had clarified the issue vide Circle No.334 Dt.3.4.1982, the relevant portion of which is reproduced below for ready reference : (2) These issues were comprehensively examined in consultation with the Ministry of Law and the Board has been advised : (i) Where an assessment order is cancelled under section 146 or cancelled / set aside by an appellate/revisional authority and the cancellation / setting aside becomes final (i.e. it is not varied as a result of further appeals / revisions), no interest under section 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 d .....

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..... from the date of original order. Obviously, the case is not applicable to the present situation as the assessment order in this case has not been restored by the Tribunal but the matter has been sent back to the Assessing Officer for fresh assessment and therefore the demand in terms of the circular of CBDT has to be levied from the date of the fresh assessment order. Similarly, in the case of Super Spinning (supra), the addition made by Assessing Officer in assessment had been deleted by CIT(A) but on further appeal, the Tribunal set aside the order of CIT(A) which meant that the order of Assessing Officer was restored. It was therefore held by the Hon'ble High Court of Madras that the original assessment got revived due to the order of Tribunal and the interest ITA No.3360/Mum/2010 under section 220(2) would be levied from the date of original assessment order. This is the position as per the CBDT circular also on which the assessee has relied. Similarly, the judgment of Hon'ble High Court of Delhi in case of Bharat Commerce Industries Ltd. (supra) is also distinguishable. In that case, as per the original assessment under section 143(3), there was no demand raised and .....

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