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TMI Blog2016 (9) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of purchase and sale of scrap or purchase and sale of plant and machinery. 5. The Ld. CIT(A) erred in appreciating the fact that the impugned plant and machinery is not a part of stock in trade. 6. The Ld. CIT(A) erred in understanding the law that any loss incurred on sale of stock in trade is only to be treated as revenue loss. 7. The Ld. CIT(A) erred in appreciating the fact that the impugned plant and machinery treated as scrap by the learned CIT(A) cannot be considered as that scrap which emerged from the hotel business. 8. Any other ground that may be urged at the time of hearing." 2. The facts in brief are that the assessee company is engaged in the hotel business and for the year under consideration it declared total income of Rs. 1.45 crores whereas the assessment was completed by determining the income at Rs. 2,68,16,871. It may be noticed that though the return was processed originally under section 143(1) of the Act, it was later on taken-up for scrutiny in CASS on the ground that the A.O. should examine disallowance under section 14A of the Act. While examining the books of account etc., the A.O. noticed that the assessee debited a sum of Rs. 1,22,78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved, assessee contended before the Ld. CIT(A) that the Official Liquidator has called for a tender quoting minimum upset price of Rs. 290 lakhs for the plant and machinery and assessee having not paid the amount intime he had to pay interest also but when the plant and machinery was to be sold it credited the value and the differential amount was rightly claimed as trading loss. Before the CIT(A), the assessee contended that the plant and machinery is a depreciable asset and when such an asset is sold it has to be reduced from the block of assets and the differential amount has to be allowed as deduction. Though the assessee company admits that there is no such block of asset in this case as this plant was a scrap one - not used and lying idle for the last several years - this asset can independently be treated as a separate block and the sale transaction resulting in profit or loss needs to be transferred to the P & L A/c. It was also contended that the A.O. was not justified in invoking the provisions of section 14A of the I.T. Act since there is no income which does not form part of total income under the Act, during the relevant assessment year. It was also submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impression that the provisions of section 14A are attracted but the fact remains that there was no such exempt income. He also highlighted that the A.O. was not correct in alleging that the asset was not brought into books of account since the assessee paid a sum of Rs. 1.02 crores for the year ending 31.03.2007 which was shown in the balance sheet under the head "Advances for Others" and another sum of Rs. 4.08 crores for the year ending 31.03.2008, paid to the Court were shown in the schedule of fixed assets but at the same time in the balance sheet for the year ending 31.03.2009 the scrap (plant and machinery) was shown as sold by retaining, in the balance sheet, land and building. Therefore, the observations of the A.O. that the impugned asset was not brought into its books is ill-founded. With regard to the allegation of the A.O. that the registered valuer was not appointed for valuing the plant and machinery before sale, the conclusion of the Ld. CIT(A) was that such a step would impede the proposed sale of scrap in the light of the fact that with time the scrap deteriorates fast and may lessen the value of the scrap; with the passage of time no body may be interested in purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that the assessee having not been engaged in the business of purchase and sale of scrap, except selling the scrap emanating from the hotel business, the sale instance of purchase of land and building along with plant and machinery - that too of a company carrying on a different line of business - cannot be linked to the regular business carried on by the assessee so as to treat it as business loss or business expenditure. He thus strongly supported the order passed by the A.O. and objected to the conclusions reached by the CIT(A). 6. The Ld. D.R. also adverted our attention to para 3.2 of CIT(A) order (page 12) to submit that the assessee having shown the purchase cost in the balance sheet as part of schedule of "fixed assets" the same cannot be treated as stock-in-trade. In otherwords, the building and plant and machinery was shown in the schedule of fixed assets but while selling the plant and machinery, which is nowhere connected to the main line of the business of the assessee, it cannot be said that the company was selling the scrap as part of its business activity. 7. On the other hand, Ld. Counsel appearing on behalf of the assessee strongly relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The land and machinery was kept idle for more than one year but the assessee did not choose to obtain any report from the registered valuer with regard to the value of such plant and machinery which also indicate that the price now sought to be fixed at Rs. 294 lakhs is only an imaginary value so as to claim deduction from the business income overlooking the fact that it was purchased as an asset and reflected in the balance sheet as such. In our considered opinion, the Ld. CIT(A) has not given any reasons to accept the contention of the assessee despite the fact that not even an iota of evidence is placed to support such contention. On the other hand, the circumstances, categorically indicate that there is no nexus between purchase of land, building and plant and machinery on one hand and the hotel business being carried on by the assessee for the past two decades. On a conspectus of the matter, we of the firm view that the order passed by the Ld. CIT(A) is contrary to law and facts of the present case and therefore, deserves to be set aside and we direct accordingly. In the result, we set aside the order passed by the Ld. CIT(A) and uphold the view taken by the A.O, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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