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TMI Blog2021 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... al questions of law:- "(a) Whether the Hon'ble ITAT is right in ignoring the provisions of Section 263 wherein the Hon'ble Pr. CIT, Panaji rightly invoked the proceedings under Section 263 in respect of the Assessment Order which was erroneous and prejudicial to the interest of revenue? (b) Whether the Hon'ble ITAT is right in ignoring the settled legal position on the issue involved in the case and without taking into consideration the decision of Special Bench Bengaluru ITAT Bench in the case of Nandi Steels Limited (2012) 17 Taxmann.co. 93(Bang.)(SB) and Hon'ble Supreme Court's decision in the case of Express Newspapers Ltd., on the identical facts of the instant case?" 4. The respondent-assessee in the present case is a firm involved in the business of building and property development as also the manufacture of ground granulated blast furnace slab (GGBS), microfine slag, microfine cement, and cement products. 5. For the assessment year 2011-12, the assessee filed a return of income declaring total income of Rs. 23,28,174/- after setting off the brought forward loss of Rs. 4,45,36,935/-. The assessment officer (AO) vide order dated 31.03.2014 assessed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Express Newspapers Ltd. (supra) , the substantial questions of law as framed may be answered in favour of the Revenue and against the assessee. 9. Mr. Pardiwala, the learned senior advocate for the respondent-assessee submitted that the decision of the Hon'ble Supreme Court in Express Newspapers Ltd. (supra) was in the context of provisions of Section 26(2) of the Income Tax Act, 1922 and the same, has been explained by the Hon'ble Supreme Court in the subsequent decisions in CIT v. Chugandas and Co. - (1965) 55 ITR 17 (SC) and CIT v. Cocanada Radhaswami Bank Ltd. - (1965) 57 ITR 306 (SC). He, therefore, submits that the ITAT's order dated 15.09.2016 is not contrary to the law laid down in Express Newspapers Ltd. (supra) but rather is consistent with the decisions of the Hon'ble Supreme Court in Chugandas and Co. (supra) and Cocanada Radhaswami Bank Ltd. (supra). 10. Mr. Pardiwala also pointed out that the ITAT's decision is entirely consistent with the decision of the ITAT in Digital Electronics Ltd. v. Additional CIT - 135 TTJ (Mumbai) 419, in which it is held that the unabsorbed business losses could be set off against the capital gains char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking was Rs. 2,84,31,062/-. Based thereon, the respondent-assessee had claimed that from out of the income of Rs. 4,74,16,156/- from the sale of the GGBS business undertaking, at least an amount of Rs. 2,84,31,062/- was nothing but the recoupment of depreciation charged in respect of that business undertaking and therefore, the same was like business income which was quite correctly set off during the relevant assessment year. 16. The ITAT in its impugned order dated 15.09.2016 has accepted the aforesaid contention of the respondent-assessee by relying on Express Newspapers Ltd. (supra) , which has explained that if the sale price exceeds the written down value, but does not exceed the original cost price, the difference between the original cost and the written down value shall be deemed to be profits of the year previous to that in which the sale takes place, that is to say, the difference between the price fetched at the sale and the written down value is deemed to be the escaped profits for which the assessee is made liable to tax. As the sale price was higher than the written down value, the difference represents the excess depreciation mistakenly granted to the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee were its stock in trade and interest on those securities was received from time to time. The Revenue had relied upon Express Newspapers Ltd. (supra) and the Hon'ble Supreme Court, after quoting the very passage relied upon by Ms. Linhares in the present matter held that it was quite obvious having regard to special nature of "capital gains" which are not in truth income but are deemed income for the purpose of taxation and the phraseology used, the liability of the successor under the proviso to Section 26(2) is only in respect of tax on income, profit, and gains of the business strictly so-called, to be computed under section 10 read with section 6(iv) and not in respect of all receipts which may be regarded as income of the business. The schemes of section 25(3) and section 26(2), proviso, are different. The first grants an exemption because there has been a double levy of tax, and an intention to exempt all income, profits, and gains of business from taxation may be attributed to the legislature. Section 26(2) fastens liability of the predecessor, if he cannot be found, upon the successor and must be strictly construed. The legislature has imposed by sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om interest on securities held by the assessee. 24. Therefore, upon taking into consideration the decisions of the Hon'ble Supreme Court in the case of Chugandas & Co. (supra) and Cocanada Radhaswami Bank Ltd. (supra) explaining the limited scope of the decision in Express Newspapers Ltd. (supra) , we are afraid, we cannot accept the submissions of Ms. Linhares that the ITAT's order is contrary to the law laid down by the Hon'ble Supreme Court in Express Newspapers Ltd. (supra). 25. Digital Electronics Ltd. (supra) was cited on behalf of the assessee before the PCIT who made the order dated 23.03.2016 invoking his revisional jurisdiction under Section 263 of the said Act. However, the PCIT, held that the decision of the ITAT in Digital Electronics Ltd. (supra) was made "without taking into consideration the Apex Court decision given in identical factual text in the case of Express Newspapers Ltd.". The PCIT further relied upon the decision of the Special Bench Bengaluru in Nandi Steels Ltd. (supra), which had again relied upon Express Newspapers Ltd. (supra) and chosen to interpret the said decision widely and not restrictively. 26. In Hickson and Dadajee (P.) Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e set off against theshort-term capital gains on the sale of building, plant, and machinery. This is yet another reason not to accept the submissions of Ms. Linhares and to answer the substantial questions of law against the Revenue and in favour of the assessee. 29. Although, we may not be entirely in agreement with the ITAT on the aspect of invocation of the revisional jurisdiction under Section 263 of the said Act by the PCIT, we feel that the impugned order made by the ITAT warrants no interference because there is nothing fundamentally wrong in the view taken by the ITAT having regard to the decisions of the Hon'ble Supreme Court in the case of Chugandas & Co. (supra), Cocanada Radhaswami Bank Ltd. (supra) and the decision of this Court in Hickson and Dadajee (P.) Ltd. (supra) . Therefore, there is no point in dilating on the first substantial question of law when the second substantial question of law which relates to the merits will have to be answered against the Revenue and in favour of the assessee. 30. Besides, Mr. Pardiwala, the learned counsel for the assessee based on instructions from the assessee has fairly stated that the assessee will pay proportionate tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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