TMI Blog2021 (4) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... from the memorandum of association. As such the assessee got inserted new objects in the main object clause of memorandum of association by passing special resolution dated 13th November 2013. We also note that the assessee has declared interest income as business income which was also accepted by the revenue. This interest income of ₹ 85,30,962/- was declared in the year under consideration. It seems that the assessee was carrying on the business activities and therefore the depreciation claimed by the assessee on the cars cannot be disallowed on the ground that there was no business activity carried out by the assessee in the year under consideration. AO during the assessment proceedings have carried out necessary verification after applying his mind. Thereafter he has taken a conscious decision by accepting the income declared by the assessee in the revised return of income. Once the AO has taken a view after necessary verification then the learned Pr. CIT cannot substitute the view taken by the AO by his own view on the ground of non-verification. We hold that there is no infirmity in the order of the AO which requires to be revised by the learned Pr. CIT und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 63,27,320/- comprising of the following income: i. Business income of ₹ 52,18,327/- ii. STCG of ₹ 11,08,989/- and iii. LTCG of ₹ 97295/- 4.2. The income declared by the assessee in the revised return of income was accepted in the assessment framed under section 143(3) of the Act vide order dated 02-11-2016 except for some adjustment in the book profit on account of exempted income. 4.3. The assessee in the original return of income has shown short-term capital gain amounting to ₹ 1,41,19,885/- under section 50 of the Act which was generated on the sale of entire block of assets i.e. plant and machineries which was eligible for depreciation at the rate of 15% on the written down value. However the assessee subsequently revised its return of income and declared short-term capital gain at ₹ 11,08,989/- only. As per the assessee there was the addition in the block of assets i.e. plant and machineries on account of the purchase of 3 new vehicles of ₹ 1,30,10,896/- and the same was not shown in the relevant block of assets i.e. plant and machineries in the original return of income. Thus the assessee in the revised return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal return, both the assets were treated separately. Therefore it rectified the mistake by revising the return. Further the assessee claimed that the above explanation were furnished before the AO during assessment proceeding. The AO after considering and verifying all the details accepted the income declared in the revised return including the amount of depreciation. Therefore the assessment order is neither erroneous nor prejudicial to the interest of revenue as alleged. The assessee also contended that the Learned Pr. CIT cannot overturn the assessment order in the case on hand as the AO, after due verification and examination, has taken one of the possible view under the provisions of law. 5. However, the learned Pr. CIT disagreed with the contention of the assessee and held that the order passed by the AO under section 143(3) of the Act is erroneous insofar prejudicial to the interest of revenue by observing as under: 3. I have considered the facts of the case and the submissions made. The assessed has not disputed that the business is closed. It has submitted that the A.O. has examined all the facts properly before the completing the assessment and therefore, jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not examined this aspect at all while considering the revised return of the assessee and completed the assessment. The assessee also in its submission has clubbed the two distinct blocks of machinery and plant and motor car together merely on the basis of same rate of depreciation 15% for which they are eligible but overlooked that they are two different and distinct blocks and merely on the basis of depreciation rates being the same, they cannot be said to be forming part of the same block. Since, the A.O. has not considered this express provision in new Appendix-I of the Income Tax Rule governing the depreciation rates and formation of blocks as provided therein, the assessment passed by the A.O. is erroneous in a manner that it is prejudicial to the interest of the revenue. 4. Therefore, the assessment order dated 02/11/2016 passed by the A.O. u/s. 143(3) of the Act in the case of the assessee is set aside and the A.O. is directed to make a fresh assessment after making all necessary enquiries properly and verification in respect of all relevant aspects including those indentified in this order supra. 6. Being aggrieved by the order of the learned Pr. CIT, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed; 9.1. From the above definition, it is revealed that different assets will fall in the same block of assets category, if they are carrying same rate of depreciation. There is no dispute qua the fact that plant and machineries viz-a-viz. motor cars are carrying same rate of depreciation. This fact was also admitted by the learned Pr. CIT which is reproduced as under: No doubt, both the items machinery and plant and motor cars are eligible for depreciation @ 15%. 9.2. We also find that the Hon'ble ITAT Delhi bench in case of Panchila Hospitality Ventures Ltd. in ITA No-5984/Del/2016 reported in 85 taxmann.com 350 held that the assets carrying same rate of depreciation will fall under the same block of assets. The relevant finding of the Hon'ble bench reads as under: After perusing sections 50 and 2(11), more specifically section 2(11), one thing that evidently becomes clear is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, of the section is to make certain modifications in the deductions to be allowed under sections 48 and 49 from the consideration received as a result of the transfer. Thus, in the case of depreciable assets, instead of the deductions allowed by sections 48 and 49, the deductions permitted under section 50(1)(i), (ii) and (iii) would be allowable. The section also says that even though the particular depreciable asset has been held by the assessee for more than 36 months, still the capital gains would be considered and dealt with as short-term capital gains only and not as long-term capital gains. That is the effect of the non obstante clause which rules out the applicability of section 2(42A). Though some modifications or changes have been made in the computation of the capital gains on transfer of depreciable assets, the nature and content of the subject matter of taxation remains the same, viz., capital gains. The rules relating to the computation of business income are not incorporated or worked into the rules relating to the computation of capital gains. Therefore, while examining the applicability of the provisions of section 50, the Tribunal is not to be influenced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of a building, the new building purchased should be one in respect of which the same rate of depreciation, as is prescribed in respect of the other buildings, has been prescribed by the rules. If the assessee carries on a business, in that case he would also be eligible for an allowance on account of depreciation at that rate. In the case of an assessee who does not carry on a business, the result would be that he would not be entitled to any allowance on account of depreciation in respect of the asset. If at a future date he decides to commence a business, he would be entitled to the depreciation allowance in respect of the new asset, provided he satisfies the authorities that the new asset was used in that business. In the absence of any express requirement in the statutory provision or the justification to read into it a built in requirement, it is not possible to uphold the contention of the Department that the assessee should be found to have been carrying on a business in the year in which the new asset was purchased. For the aforesaid reasons, it was to be held that the assessee was entitled to the deduction of the cost of the flat in New Bombay under section 50(1)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 50 states that notwithstanding anything contained in section 2(42A) where capital asset is an asset forming part of the block of assets on which depreciation has been allowed, then provisions of sections 48 and 49 will be applicable, subject to the modification made by the section. The full value of the consideration received or accruing as a result of the transfer of the said asset or any other asset falling within block of the asset shall be taxable as short-term capital gain if it exceeds the aggregate value of the following: (1) expenditure incurred wholly and exclusively in connection with the transfer of the assets. (2) Written down value of block of assets at the beginning of the previous year. (3) actual cost of the assets falling within the block of assets acquired during the previous year. [Para 15] Thus, under section 50 short-term capital gains is payable in case after adding the three amounts/values and subtracting the same from the value of consideration received/accruing on the transfer of asset and other assets in the block of assets, there is an excess or surplus. In case there is no excess, then nothing is payable as short-term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To buy, sell, export, import, deal in all kinds of commodities and derivatives transactions in gold, silver, platinum, other precious metals, and to deal on any commodity exchange and for this purpose take membership of any commodity exchange or with any bullion bank or any canalizing agency or similar organization whether in India or abroad. For this purpose to enter into transactions in nature of hedging, spot trading, forward commodity contracts, rate swaps, commodity future/swaps, commodity futures and options and in derivatives of such commodities, whether for the purpose of trading, investment, hedging, arbitrage, or any other purpose, whether in India or abroad in relation to the attainment of the main objects of the Company. 9.7. In addition to the above we also note that the assessee has declared interest income as business income which was also accepted by the revenue. This interest income of ₹ 85,30,962/- was declared in the year under consideration. 9.8. In view of the above, it seems that the assessee was carrying on the business activities and therefore the depreciation claimed by the assessee on the cars cannot be disallowed on the ground that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Pr. CIT cannot substitute the view taken by the AO by his own view on the ground of non-verification. In holding so we draw support and guidance from the order of the Coordinate bench of this tribunal in case of Smt. Minal Nayan Shah vs. Pr. CIT in ITA No. 643/Ahd/2019 reported in: 111 taxmann.com 516, where it was held as under: In the instant case, it is demonstrated on behalf of the assessee that necessary inquiries were made towards computation of long term capital gain and claim of deduction under section 54F. The issue of eligibility of claim of deduction was thus present to the mind of the Assessing Officer. Relevant documents were also shown to have been filed in the assessment proceedings. Expression 'a residential house' would encompass different residential units located on the different floors of the same building. On facts, it is noted that all the three units are located on the different floors of the same structure and purchased by the assessee by a common deed of conveyance. In the facts and circumstances, plurality of opinion about the allowability of deduction surely exists even if it is presumed for a moment that view adopted by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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