9911796707
TMI Blog2015 (1) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of sundry balance written off u/s. 36(ii) - Held that:- AR drew our attention to the paper book where the breakup of assessee's income for an amount of ₹ 2,87,472/- was shown pertaining to the sundry balance written off. From the aforesaid discussion, we find that assessee has duly shown its income in earlier year of the balance written off in the relevant year. Ld. DR has not brought anything on record contrary to the finding of Ld. AR. On the other hand the ld. DR relied on the order of authorities below. In view of the above discussion, we reverse the order of Authorities Below and this ground raised by assessee is allowed.- Decided in favour of assessee - ITA No. 793-794/Kol /2011 - - - Dated:- 20-1-2015 - N. V. Vasudevan, JM And Waseem Ahmed, AM For the Appellant : Mrs Varsha Jalan, Adv For the Respondent : Shri Shital C Das, JCIT SR. DR ORDER Per Waseem Ahmed, Accountant Member Both appeals by the assessee is against order of Commissioner of Income Tax (Appeals)-I, Kolkata dated 18.03.2011. Assessments were framed by ACIT, Central Circle-XX Kolkata u/s 143(3)/154 of the Income Tax Act, 1961 (hereinafter referred to as the Act') for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our new cars out of the 7 new cars purchased during the year. As a result of sale the block of assets of the cars were reduced by the amount of sale consideration. However AO opined that the transaction of sale of cars from the block of fixed assets was a trading transaction in nature on the basis of following observation. 1) The invoice for the purchase of fixed assets was common as of purchase of cars for trading. 2) The cars sold were purchased within the same year. It means the cars were held for a short period of time. 3) There was sufficient number of cars in stock for the similar make then why the cars were sold from the block of assets. 4) No road tax has been paid in respect of these cars. 5) No insurance was made for these cars. 6) Only some expenditures have been incurred for test derive. 3.2 The AO sought explanation from the assessee for selling the cars from the block of assets of car and not from stock-in-trade. According to the AO, the assessee failed to reply in this regard. Accordingly the AO held the transaction of sale purchase of cars as trading in nature. So the profit arrived from the sale and purchase of the cars was treated as busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the block of assets. So on sale of depreciable assets the provisions of section 50 of the Act will be attracted. The assessee has reduced the block of assets by the sale proceeds hence now lower depreciation will be claimed. The accounts of the assessee were duly audited by a qualified chartered account and no defect in the accounts has been reported in the audit report. The learned DR relied on the order of the CIT(A). 8. From the aforesaid discussion we find that the AO has treated the sale of depreciable cars as trading transaction and taxed the same as business profit accordingly. However the ld. AR contended that there is no provision under the Act to treat the particular assets as part of the block of assets or stock in trade. It is the policy of the Assessee and decision of the management to treat a particular asset as part of the block of asset and vice versa. In the instant case the assessee has treated the cars as part of block of assets and sold subsequently during the year under consideration. The Assessee is at liberty to treat items which are trading asset as part of the depreciable asset also. In such cases the accounting entries in the books of accounts wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock of assets. However the AO during the assessment proceedings held that the transaction is in the nature of trading business. Hence, AO treated the purchase and sale of cars as trading transactions and balance four cars were treated as stock-in-trade. As a result of this the block of assets of the cars were brought down by the value of the cars treated as stock in trade. Now the assessee sold certain cars from the block of assets for an amount of ₹ 19,54,022/- and the opening balance of WDV was ₹ 1,43,704/- and difference between the sale value of the assets and WDV was treated as Short Term Capital Gains for an amount of ₹ 18,10,318/-. 15. Aggrieved assessee preferred an appeal before Ld. CIT(A) who upheld the action of AO by observing as under:- 13.1 I have carefully considered the submission of the L.d A.r. The assessee is involved in the trading business of car and spare parts. During the course of assessment proceeding on perusal of the Fixed asset schedule, it was noted by the AO that during the year under consideration, 7 new vehicles were purchased by the assessee, out of which 4 were sold. It was further noted that the car shown under the head f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 24. During the year assessee has written off sundry balance for an amount of ₹ 2,87,472/- by debiting in its profit and loss account. During the course of assessment proceedings, AO sought clarification regarding the declaration of income pertaining to the sundry balance written off in the relevant year i.e. in which previous year the written off balance were shown as income. Assessee could not explain the income when it was offered for taxation. Therefore, AO disallowed the same and added it to the income of assessee. 25. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who upheld the action of AO. 26. Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 27. We have heard the rival submissions of both the parties and perused the materials available on record. Before us Ld. AR drew our attention on page No. 32 of the paper book where the breakup of assessee's income for an amount of ₹ 2,87,472/- was shown pertaining to the sundry balance written off. From the aforesaid discussion, we find that assessee has duly shown its income in earlier year of the balance written off in the relevant year. Ld. DR has not br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee could not explain the income when it was offered for taxation. Therefore, AO disallowed the same and added it to the income of assessee. 36. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who upheld the action of AO. 37. Bing aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 38. We have heard the rival submissions of both the parties and perused the materials available on record. Before us Ld. AR drew our attention on page No. 68 of the paper book where the breakup of assessee's income for an amount of ₹ 3,99,730/- was shown pertaining to the sundry balance written off. From the aforesaid discussion, we find that assessee has duly shown its income in earlier year of the balance written off in the relevant year. Ld. DR has not brought anything on record contrary to the submission of Ld. AR. On the other hand the ld. DR relied on the order of authorities below. In view of the above discussion, we reverse the order of Authorities Below and allow assessee's ground. 39. In the result, assessee's appeal in ITA No.793/Kol/2011 is partly allowed and ITA No. 794/Kol/2011 is allowed. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
