1990 (10) TMI 166 - AT - Income Tax

Summary

Issues:
1. Computation of long-term capital gains and claim for carry forward of unabsorbed depreciation.

Analysis:
The appeal before the Appellate Tribunal ITAT MADRAS-D involved the computation of long-term capital gains and the claim for carry forward of unabsorbed depreciation. The assessee, an HUF, had a complex genealogy with partitions in the family. The dispute arose from the sale of a rice mill by the assessee-HUF to the Tamil Nadu Civil Supplies Corporation. The transaction involved payments to family members who had interests in the property. The ITAT considered whether a payment made to one family member should be deducted in computing capital gains. The CIT(A) had earlier directed the ITO to treat the payment as a capital expenditure. The Tribunal held that the expenditure was genuine and eligible for deduction in computing capital gains as it was incurred to perfect the title transferred by the assessee.

The second issue revolved around the claim for relief under section 54E of the Income Tax Act. The assessee had invested a portion of the consideration received from the sale of the rice mill in National Rural Development Bonds. The ITO denied the relief, stating that the entire consideration should have been invested. However, the Tribunal disagreed, holding that the investment in specified assets, such as the National Rural Development Bond, made the assessee eligible for relief. The Tribunal analyzed the relevant provisions and amendments to support its decision, directing the ITO to grant the admissible relief under section 54E.

Lastly, the Tribunal addressed the claim for setting off losses carried forward from earlier years. The assessee had accumulated depreciation and business losses carried forward, totaling a significant amount. The ITO had disallowed a portion of the claim, citing a time limit on losses related to a period earlier than eight years. However, the Tribunal found that the business loss subject to lapse was different from the unabsorbed depreciation, which had no time limit for carry forward. Consequently, the Tribunal directed the ITO to recompute the total income of the assessee considering the unabsorbed depreciation for carry forward. In conclusion, the Tribunal allowed the appeal in favor of the assessee on all three issues, highlighting the eligibility of certain expenditures for deduction and the correct interpretation of provisions related to relief under section 54E and setting off of losses carried forward.