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TMI Blog2011 (8) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal is wrong in computing the capital gains under sub section 2 of Section 50 without applying its mind?" 2. The assessee is an individual engaged in the business of rig operation, transportation of LPG gas, marbles etc. The assessee had an export oriented unit run under the name and style of 'GTP Granites'. On the expiry of the term of the benefit available to 100% export oriented unit under Section 10B of the Income Tax Act, 1996, during the year relevant to the assessment year 1993-94, on 2.7.1992, the assessee transferred the said unit to the closely held company called 'GTP Granites (P) Limited'. On a comparison of the value of the assets, as per the balance sheet as on 2.7.1992 and the value of the assets adopted by the closely held company, the Officer found that there was different in value of the assets to the extent of Rs.71,42,904/-. The Assessing Officer completed the assessment treating the difference as short term capital gains, the assets being block of assets transferred by the assessee. 3. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who held that the assessee's business numbering seven h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be given in favour of the assessee. He pointed out that there is no dispute on the side of the Revenue that the assets transferred and the asset purchased carry the same percentage of depreciation as given under the Rule to form 'block of assets'. That being so, when the assets in the block are transferred during the previous year, the cost of the assets have to be taken as written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of assets which are purchased or acquired by the assessee during the previous year. The only requirement is that they fall within the meaning of 'block of assets'. Thus, going by sub section (2) of Section 50, the Assessing Officer should have considered the depreciation available in respect of the block of assets transferred and the assets purchased forming part of the same block of assets was much more than the sale consideration attributable to the assets transferred from the block on 2.7.1992. He further pointed out to Section 10B, sub section (4), sub clause (iv) and submitted that the scheme under sub section (4) of Section 10B, recognises that the assessee would be entitled to what would othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short term capital assets. " 11. The only controversy raised in this Tax Case Appeal is as regards the computation of short term capital gains in terms of Section 50 of the Act. It is admitted by the assessee as well as by the Revenue that the assessee had 100% Export Oriented Unit under the name and style of GTP granites. It is also admitted by the Revenue that apart from 100% export oriented unit in the name of GTP granites, the assessee had other business too, which are as follows:- "1. GRP Granites 2. Share income from Gounder Finance Corporation 3. Sabari Finance 4. GTP Transport Company 5. GTP Drilling Contractors 6. GTP Marbles & Granites 7. GTP Marbles. " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of Section 10B, the export is referred to as the business of the undertaking, which must satisfy the requirement under Section 10B(2) to qualify for exemption and the income is excluded from the total income of the assessee, the assets of the undertaking are subject to the working of depreciation as per Section 32, that the WDV of any asset used for the purpose of the business of the undertaking is taken as if the claim on depreciation was actually allowed under each of the relevant assessment years. Thus, going by sub Section (4) of Section 10B, the various benefits under the Act available under the normal procedure has to be worked on the machineries and plant as if the claim had been considered and granted in spite of the fact that the income of the 100% Export Undertaking is exempted from tax. 15. As seen from the section, even though the assessee might have been engaged in 100% export, on the expiry of the term specified therein, the undertaking comes in automatically for regular assessment that the income chargeable has to be computed to tax in accordance with the provisions contained therein. When that being the case, the question is on the expiry of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'block of assets', we find that the assessee is justified in its claim on capital gains, that with the cost of the new machinery added to the written down value of the machinery and the sale of the machinery during the relevant previous year, the Commissioner of Income Tax (Appeals) rightly considered the said aspect and granted relief to the assessee. Going by the provisions under Section 10B, we do not think the Revenue would be justified in treating the assets of an Export Oriented Unit in isolation on the expiry of the tax holiday period, particularly when Section 10B(4)(iv) recognised the deemed granting of the depreciation allowance during the currency of tax holiday, which means at the expiry of the period of five years, the WDV on the plant and machinery continued to be available for the business of the assessee which goes for normal assessment under various provisions of the Act. To hold that on the expiry of tax holiday period, the business of the assessee comes to a close would only mean the statutory closing of the business, thereby causing violence to the provisions under Section 10B(4). We are at a loss to understand how any such view could be projected by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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