2013 (5) TMI 975 - AT - Income Tax

Summary

Issues involved:
The judgment involves the rejection of addition made by the Assessing Officer as Long Term Capital Gain and Short Term Capital Gain, and the consideration of unabsorbed depreciation for requisite set off.

Long Term Capital Gain:
The Assessee transferred fixed assets for land, plant, machinery, and office equipment without offering capital gains. The Assessing Officer proposed short term capital gains of Rs. 65.55 lacs, with unabsorbed depreciation of Rs. 200,31,133/-. The Department accepted carry forward depreciation for certain years but did not allow set off for the current year's capital gains. The Tribunal found that land sale should be considered long term capital gains, not depreciable assets. The matter was sent back to the Assessing Officer for proper consideration.

Short Term Capital Gain:
The Assessing Officer computed short term capital gains based on the asset's written down value (WDV) at the beginning of the year. The Tribunal noted that the WDV of assets indicated short term capital gains of Rs. 2,45,109/-. The Assessing Officer disallowed set off of unabsorbed depreciation from previous years, citing provisions of sections 70 to 80 of the Act. The Commissioner affirmed this decision, stating that the Assessee's failure to file returns for certain years prevented the allowance of set off.

Unabsorbed Depreciation Set Off:
The Assessee argued for the adjustment of unabsorbed depreciation against current year's capital gains u/s 32(2) of the Act. The Commissioner upheld the disallowance, citing the Assessee's failure to file returns for specific years. The Assessee contended that the decision in the case of Haryana Hotels Ltd. supported the allowance of unabsorbed depreciation set off. The Tribunal agreed, stating that there is no mandatory provision requiring the Assessee to file returns for unabsorbed depreciation set off. Consequently, the orders of the lower authorities were set aside in favor of the Assessee.