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TMI Blog2023 (7) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AO regarding disallowing the claim of the assessee for impairment loss, in the interest of justice, the entitlement of depreciation which should have been allowed to the assessee according to the provisions of section 32 of the Income Tax Act, is hereby directed to be allowed. Appeal of the Revenue is partly allowed for statistical purposes. - ITA No. 142/RPR/2018 AND Cross Objection No.14/RPR/2018 (Arising out of ITA No.142/RPR/2018) - - - Dated:- 19-7-2023 - Shri Ravish Sood, JM And Shri Arun Khodpia, AM For the Assessee : Shri R. B. Doshi, CA For the Revenue : Smt. Ila M. Parmar, CIT-DR ORDER PER ARUN KHODPIA, AM : The present appeal by the assessee is directed against the order passed by the CIT(A)-I, Raipur, dated 01.02.2018 for the assessment year 2014-2015, on the following grounds:- 1. Whether on points of law and on points of facts circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,73,76,465/- made by the A.O on account of loss claimed under the head of impairment loss? 2. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in allowing the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of hearing, ld. AR did not press the additional ground. Accordingly, the additional ground raised by the assessee is dismissed as not pressed. 3. The assessee has also filed cross objection wherein the assessee has supported the addition deleted by the ld. CIT(A) of Rs. 1,73,76,465/- made by the AO under the head impairment loss. However, the assessee has agitated the sustenance of addition of Rs. 17,877/- made by the AO u/s. 36(1)(va) of the Act representing employees contribution to PF/ESIC. The grounds raised in the cross objection are as under :- 1. Ld. CIT(A) was not justified in confirming the addition of Rs. 17.877/- u/s 36(l)(va) representing employee s contribution to PF/ESIC. The addition of Rs. 17,877/- made by AO and sustained by CIT(A) is arbitrary, illegal and not justified. 2. Ld. CIT(A) erred in not allowing the deduction of Rs. 1,73,76,465/- as a business loss. 4. First, we shall decide the appeal of the Revenue. 5. Brief facts of the case are that the assessee is a company having income from manufacturing of steel shots Grits, C.I. Shots Grits, M.S. Ingot mould and trading of Iron and steel. The assessee has filed its return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. Therefore, the claim of higher business loss to the extent of capital loss incurred by the assessee was disallowed and added back to the returned income of the assessee. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A) wherein the issue was deliberated at length by the ld. CIT(A) and after considering the submissions of the assessee, ld. CIT(A) has held that in the present case, since the entire block has been exhausted then the net amount of consideration minus WDV will be taxed as short-term capital gain. Such observation of the ld. CIT(A) was alleged by the department as erroneous on facts and bad in law, therefore, the department has filed this appeal to represent its case before the Tribunal. 8. Ld. CIT-DR at the outset, reiterated the facts of the case. It was the submission of the ld. CIT-DR that impairment loss on disposal of fixed assets was claimed by the assessee by showing the same in its profit and loss account since the said loss was not a real loss, actually incurred by the assessee, the assessee s fixed assets are impaired resulting into unrealistic value being shown in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r destroyed, but not the case where the assessee continue to hold the fixed assets and loss or impairment in the value of asset is calculated on the registered valuer report. The case cited by the Ld. A.R. before us namely Indowind Energy Ltd. v. Dy. CIT [IT Appeal No. 938 (MDS) of 2015, dated 27-10-2016] is not applicable as the said decisions was rendered in the context of book profit u/s 115JB of the Act. Under these circumstances we are inclined to reverse the order of the Ld. CIT(A) by allowing the ground no. 1 raised by the revenue. 9. Further, It was the submission of Ld CIT-DR that the ld. CIT(A) was not justified in deleting the addition of Rs. 1,73,76,465/- made by the AO on account of loss incurred under the head impairment loss. Ld. CIT(A) was unjustified while allowing the relief to the assessee by giving a finding that the loss is allowable as short-term capital loss as per Section 50 of the Act without appreciating the fact that the assessee has not incurred any actual loss rather had claimed deduction on notional basis merely by making book entry which is disallowable u/s. 37 of the Act. Therefore, the order of the ld. CIT(A) on this issue deserves to be revers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preclude assessee from following other Accounting Standards. Further in that case, AO had disallowed provision for foreseeable loss created in accordance with Accounting Standard 7. The loss claimed by that assessee had not arisen in the year under dispute but was claimed as per Accounting Standard-7. It was held by Hon ble ITAT that where the assessee claims allowance of provision for foreseeable loss created in accordance with Accounting Standard, same is allowable in nature. A copy of this decision is enclosed herewith. 11. Based on the aforesaid submission, it was the contention of learned AR that since the assets were sold during the year and on the date of sale, the written down value of the asset was Rs. 2,02,14,153/-, whereas the asset was sold/discarded for total sum of Rs. 28,37,688/-. Therefore, the difference of Rs. 1,73,76,465/- was charged to profit and loss account, which is according to accounting norms prescribed in Accounting Standard and as per the accounting policy regularly and consistently followed by the assessee. The assessee, being a company, is mandatorily required to follow the Accounting Standards as prescribed under section 211 of the erstwhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS-10 issued by the Chartered Accountants of India and accounting policy being consistently adopted by the assessee company. Regarding the claim of assessee of impairment loss, it was the contention of the Revenue that the same is not allowable as per the provisions of section 41(2) of the Act. Provisions of section 41(2) of the Act are furnished hereunder for ready reference: 41. (1) (2) Where any building, machinery, plant or furniture, (a) which is owned by the assessee; (b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32; and (c) which was or has been used for the purposes of business, is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year in which the moneys payable for the building, machinery, plant or furniture became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is directed to submit necessary information with supporting evidence before the Ld AO to avail benefit of depreciation which is allowable to it. 17. In the result, the appeal of the Revenue is partly allowed for statistical purposes. C.O. No.14/RPR/2018 18. The cross objection filed by the assessee is directed against the appeal of the revenue in ITA 142/RPR/2018 filed against the order dated 01.02.2018 passed by learned Commissioner of Income Tax (Appeals)-I, Raipur, for assessment year 2014-15. The assessee has raised the following ground in its cross objections: 1. Ld. CIT(A) was not justified in confirming the addition of Rs. 17,877/- u/s 36(1)(va) representing employees contribution to PF/ESIC. The addition of Rs. 17,877/- made by AO and sustained by CIT(A) is arbitrary, illegal and not justified. 2. Learned CIT(A) erred in not allowing the deduction of Rs. 1,73,76,465/- as a business loss. 3. The cross objector reserves the right to add, amend or alter any of the ground(s) of cross objection. 19. Ground no. 1 of the cross objections regarding the addition of employees contribution to PF/ESIC is not pressed by learned AR of the assessee. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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