2011 (5) TMI 933 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Applicability of section 50 for computation of capital gains.
3. Entitlement to indexed cost of acquisition for long-term capital gains.
4. Rectification of mistake apparent from record u/s 154.

Summary:

Condonation of Delay:
The assessee filed an appeal against the order passed u/s 143(3) of the Income-tax Act, which was treated as non-est by the CIT(A) due to delay. The assessee contended that the delay was due to a bona fide belief that the rectification application u/s 154 would be allowed. The Tribunal found that the CIT(A) failed to give any finding on the application for condonation of delay and held that the assessee was prevented by sufficient cause from filing the appeal in time. Consequently, the condonation application was allowed.

Applicability of Section 50:
The assessee sold plant and machinery, which was never put to use and no depreciation was claimed on it. The CIT(A) upheld the Assessing Officer's view that the asset formed part of the block of assets and thus, the gain should be treated as short-term capital gain u/s 50. However, the Tribunal found that the asset was separately capitalized as "plant and machinery (not in use)" and no depreciation was claimed on it. Therefore, the provisions of section 50 were not applicable as the basic requirement of depreciation being allowed was not met.

Indexed Cost of Acquisition:
The Tribunal held that the asset sold by the assessee was a long-term capital asset as it was held for more than 36 months and no depreciation was claimed on it. Therefore, the assessee was entitled to the benefit of indexed cost of acquisition while computing the long-term capital gains. The Tribunal directed the Assessing Officer to allow the claim of the assessee by adopting the indexed cost of acquisition.

Rectification u/s 154:
The assessee's application for rectification u/s 154 was dismissed by the Assessing Officer on the grounds that the issue raised was not a mistake apparent from the record. The CIT(A) upheld this view. The Tribunal found no merit in the grounds of appeal raised by the assessee against the rejection of the claim u/s 154, as the issue required detailed deliberations and was not a mistake apparent from the record.

Conclusion:
The appeal of the assessee in I.T.A.No.1397/Chd/2010 was allowed, and the appeal in I.T.A.No.1398/Chd/2010 was dismissed. The Tribunal directed the Assessing Officer to compute the income from long-term capital gains by adopting the indexed cost of acquisition.