2008 (5) TMI 233 - HC - Income Tax

In original return assessee claimed deduction u/s 32A - Revised return claiming deduction u/s 32AB - Tribunal was correct in holding that mere intimation u/s 143(1)(a) could not be equated with an Assessment Order hence, claim for deduction u/s 32AB, on the basis of revised Return of income is allowable further, since question regarding quantum of loss was not in issue before AO or CIT(A), tribunal is not allowed/empowered to consider such question regarding quantum of loss

Issues Involved:
1. Monetary value of detachable warrants.
2. Quantification of loss on sale of non-convertible debentures.
3. Depreciation claim on factory and office buildings.
4. Deduction under Section 32AB vs. Section 32A of the Income-Tax Act.

Detailed Analysis:

1. Monetary Value of Detachable Warrants:
Issue: Whether the detachable warrants, which authorized holders to obtain equity shares after four years, had a monetary value.

Analysis: The Tribunal held that the detachable warrants had a monetary value. The assessee challenged this, arguing that the Tribunal had no materials on record to support this finding and that irrelevant and extraneous material was considered. The Tribunal was expected to decide whether the transaction was genuine or a colorable device to reduce taxable income. The Tribunal's focus on quantifying the loss based on the cost of detachable warrants was deemed inappropriate, as this issue was not raised by the parties.

Conclusion: The Tribunal's approach to quantifying the loss without first addressing the genuineness of the transaction was incorrect. The Tribunal should have focused on whether the loss was genuine or a colorable transaction.

2. Quantification of Loss on Sale of Non-Convertible Debentures:
Issue: Whether the Tribunal was justified in restoring the question of quantification of loss on the sale of the non-convertible portion of debentures to the Assessing Officer.

Analysis: The Tribunal directed the Assessing Officer to take the cost of the non-convertible portion of the debentures as Rs.50/- minus the cost of detachable warrants and work out the capital gain/loss. The Tribunal's decision to restore the matter for fresh adjudication was based on the need to determine the cost of detachable warrants, which was not transferred to the Unit Trust of India.

Conclusion: The Tribunal's direction to the Assessing Officer was found to be premature as the primary issue of whether the transaction was genuine or colorable was not addressed. The Tribunal should have resolved this primary issue before addressing quantification.

3. Depreciation Claim on Factory and Office Buildings:
Issue: Whether the Tribunal was right in allowing the assessee's claim for depreciation on factory and office buildings not transferred to the assessee.

Analysis: The Tribunal followed its earlier decision in the assessee's own case for previous years, which was upheld by the High Court in Commissioner of Income-tax v. Deepak Nitrite Ltd., 243 ITR 825. The Tribunal concluded that the assessee was entitled to claim depreciation on the buildings in question.

Conclusion: The Tribunal's decision was upheld, and the question was answered in favor of the assessee, affirming the right to claim depreciation.

4. Deduction under Section 32AB vs. Section 32A:
Issue: Whether the Tribunal was right in allowing the assessee's claim for deduction under Section 32AB in a revised return, replacing the original claim under Section 32A.

Analysis: The Tribunal concluded that an intimation under Section 143(1)(a) is not an assessment order, allowing the assessee to file a revised return under Section 139(5). The original return was filed within the permissible time, and the revised return claimed deduction under Section 32AB instead of 32A. The Tribunal upheld the Commissioner (Appeals)'s decision allowing the revised claim.

Conclusion: The Tribunal's decision was upheld, affirming that the assessee was entitled to file a revised return and claim deduction under Section 32AB.

Summary:
The High Court addressed multiple issues in this judgment, focusing on the genuineness of transactions, the quantification of losses, and the validity of revised claims for deductions. The Tribunal's premature focus on quantification without resolving the primary issue of transaction genuineness was corrected. The decisions on depreciation claims and revised deduction claims were upheld in favor of the assessee. The references were disposed of accordingly, with no order as to costs.

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