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TMI Blog2013 (8) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... o consider that asset was not used for business - , the contention of the assessee that asset was deemed to be 'capital asset' and not 'business asset' cannot be accepted. - Decided against the assessee. Interest u/s. 234B, 234C and 234D - Interest u/s. 234B, 234C and 234D cannot be levied as the assessee is a notified person and the provisions of the Special Court (Trial of offences relating to transactions in Securities) Act 1992 will prevail – Held that:- Reliance has been placed upon the judgment in the case of CIT vs. Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT] - levy of interest u/s. 234A, 234B and 234C is mandatory – Decided against the Assessee. - ITA No. 6810/Mum/2008 - - - Dated:- 23-8-2013 - Shri B. Ramakotaiah And Dr. S. T. M. Pavalan,JJ. For the Petitioner : Shri Vijay Mehta For the Respondent : Dr. Daniel (Spl. Counsel) ORDER Per B. Ramakotaiah, AM:- This is an appeal by assessee against the order of CIT(A), Central IV, Mumbai, dated 15.09.2008. Assessee raised various grounds in its appeal. We have heard the ld. Counsel Shri Vijay Mehta and Dr. Daniel, Special Counsel for the revenue in detail. We have also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opened merely because assessee has taxable income in earlier year. He relied on the judgment of the Hon'ble High Court of Bombay in the case of Prashant S. Joshi vs. ITO (324 ITR 154). He also relied on the judgment of Hon'ble Bombay High Court in the case of Ramkrishna Ramnath vs. ITO (77 ITR 995), wherein it is was held that the information relating to other year could not be said to be prima facie belief that income of the impugned has escaped assessment. Reliance was also placed on Circular No.440 dated 15th Nov. 1995, wherein it was held that income of earlier year can not be a basis for holding that income has escaped in the year. He also submitted that AO did not identify the income escaped and relying on the decision of CIT vs Jet Airways (I) Ltd 331 ITR 236( Bom) it was submitted that unless AO identifies the income the wording 'such income' and 'other income' can not be considered. He submitted that re- opening is bad in law. 4.2 Ld. Special Counsel for the revenue distinguished the cases on facts and submitted that on similar facts the co-ordinate Bench in the case of Smt. Deepika A. Mehta vs. DCIT in ITA No.3177/Mum/2008 dated 29.07.2011 has upheld the re-opening of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly assessee has book profits under section 115JB in the year. Provisions of Explanation 2(a) of section 147 are applicable to the case. Said provision is as under :- "Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; ***(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E ; (c) where an assessment has been made, but-- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the balance payment was finally made and the sale deed was registered. For the year 1993-94, premises was shown for the first time as the company's fixed asset. Till that time, it was only shown as advance for premises. The AO held that the appellant is entitled to indexation from 1993-94. 5.3 Further, AO proceeded to treat the income from capital gains as short term capital gain in terms of section 50 of the I.T. Act. Section 50 of the I.T. Act deals with the special provisions for computation of capital gain in respect of depreciable assets. The AO noted that from A.Y.1994- 95 onwards the appellant had claimed depreciation on the above mentioned property at Gopal Mansion, Queens Road, Mumbai. The AO has discussed this in page 4 5 of the assessment order. The AO noted that in assessment year 1994-95 depreciation on the property was allowed at Rs.53,43,339/-. However, for want of sufficient business profits, the unabsorbed depreciation was carried forward. From A.Y.1995-96 onwards upto A.Y.1998-99, depreciation was claimed by the appellant but was disallowed by AO. In A.Y.1999-2000, the depreciation was claimed by the appellant but disallowed by the AO and was directed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,61,00,000 Less Cost/Expenses incidental to sale i) Property tax 1,12,161 ii) Professional fee paid 69,660 1,82,121 Written down value Cost of acquisition 5,34,33,388 Less Depreciation allowed 74,16,588 4,60,16,800 Short term capital gain 1,99,01,079 6. Ld. Counsel submitted that assessee's business is closed so the asset no longer can be considered as business asset. It was the submission that section 50 applies to assets forming part of block of assets and since asset is not in the block the same can not be considered u/s. 50. He then referred to section 2(11) to submit that the definition is similar to section 32 and since the assessee is no longer in business the assets have been moved out of block of assets. In the absence of assets in the block of assets, the provision of section 50 are not applicable. Since depreciation was not claimed or allowed from assessment year 2000-01, the asset was deemed to have been considered as investment and so relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assets and a depreciable asset, no matter that the non-user disentitled the assessee for depreciation for two years prior to the date of sale. The depreciable asset forming a part of block of assets within the meaning section 2(11) of the Act would not cease to be part of the block of assets. The description of the asset by the assessee in the balance-sheet as an investment asset was meaningless and was only to avoid payment of tax on short- term capital gains on sale of the building. So long as the assessee continued business, the building forming part of the block of assets would retain its character as such, no matter that one or two of the assets in one or two years not used for business purposes disentitled the assessee for depreciation for those years. If the assessee, instead of selling the building, started using the building after two years for business purposes the assessee could continue to claim depreciation based on the written down value available as on the date of ending of the previous year in which depreciation was allowed last. The order of the Tribunal was to be set aside and the assessment on the profit on sale of the building as short-term capital gains was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ationship between section 50 and section 54E of the Act. At page 218, the question was posed as to whether the deeming fiction created under section 50 is restricted to section 50 only or is it applicable to section 54E of the Act as well? We accordingly hold that the assessee cannot rely on the judgment of the Hon'ble Bombay High Court in the case of Ace Builders P. Ltd. (supra) to contend that the cost indexation benefit should be given even in the case of computation of short term capital gains under section 50 of the Act." The co-ordinate Bench followed the principles laid down by the Hon'ble Bombay High Court in the case of Ace builders P. Ltd. (282 ITR 210). 8.3 ITAT Special bench in the case of Chhabria Trust vs. ACIT [264 ITR (AT) 12(Mum)(SB)] has considered similar issue which is also binding on us. It was held : "Prior to the assessment year 1985-86, the assessee-trust was carrying on the business of manufacturing of Fiat car accessories. From assessment year 1985-86, the assessee-trust ceased to carry on its business but continued to remain in possession of the assets. One of the assets owned by the trust was a factory building acquired by it in 1978. After the clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even under the Indian Income- tax Act and the above provision clearly establishes the intention of the Legislature that the user of the asset during the year under consideration is not necessary. Section 50 would be applicable in respect of the premises sold by the assessee during the previous year relevant to the assessment year 1988-89 even though the assessee had not carried on the business from the assessment year 1985-86. The Assessing Officer was fully justified in assessing the profit from the sale of building as short-term capital gain under section 50." 8.4 Respectfully following the principles laid down above, we reject assessee's contentions and uphold the orders of Assessing Officer and CIT(A) on this issue. Infact, the contention of the assessee cannot be accepted otherwise also as assessee contended that the asset was being used for business in earlier years and on the basis of such submissions depreciation was allowed by CIT(A)/ITAT. From the year 2000-01 assessee neither filed returns nor offered income under 'house property', so as to consider that asset was not used for business. In the absence of any evidence, the contention of the assessee that asset was dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal in the appeal in Orion Travels Pvt. Ltd. (supra). With regard to the sustenance of disallowance of interest the Tribunal supra, while following the order of the Tribunal in M/s. Aatur Holdings Pvt. Ltd. Vs. DCIT in ITA No.147/Mum/2008 for Assessment Year 2000-01 dated 13.6.2008 has observed and held vide para 20 and 21 of its order dated 9th Oct. 2009 as under : "20. Aggrieved on the above issues the appellant is in appeal before us and reiterated the contentions submitted before the lower authorities. We find that similar issues were before the Hon'ble Tribunal in ITA No.147/Mum/2008 for Asst. Year 2000-2001 in the case of group concern namely M/s Aatur Holdings Pvt. Ltd V DCIT. In that case also the Assessee who was a s a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 and all its assets including bank accounts were attached and vested in the hands of the Custodian appointed under the said Act. In that case also the Assessee had claimed deduction of interest, depreciation and other administrative expenses. The tribunal in that case held: "As far as claim of audit fees and depreciation is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit u/s. 115JB amounting to Rs.3,43,13,580/- ." As regards ground No.9, regarding computation of book profits u/s. 115JB, we find that the assessee has been taxed under the normal provisions of the Act and not on the book profit u/s. 115JB. In the circumstances, we are not considering this issue and dismiss the ground as infructuous with a direction that in case assessee at a later stage is assessed on this book profit u/s. 115JB, it will be open for the assessee to raise the contentions at that time. Ground is rejected as academic in nature. 12. Ground No.10 is as under :- "10. The ld. CIT(A) has erred in law and in facts in not appreciating that the interest charged u/s. 234A, 234B and 234C of the Act are incorrect." 12.1 As regards this ground, in other group cases, the ITAT held that interest u/s. 234B, 234C and 234D cannot be levied as the assessee is a notified person and the provisions of the Special Court (Trial of offences relating to transactions in Securities) Act 1992 will prevail. Revenue has carried the matter to Hon'ble High Court which upheld the revenue contention. It held vide para 14 in the case of CIT vs. Divine Holdings Pvt. Ltd. in ITA No.3334 of 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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