Commissioner Of Income Taxrohtak v. M S Kaushico Machine Tools Pvt Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- -Income tax Appeal No. 149 of 1999Date of decision: 26.8.2010 Commissioner of Income TaxRohtak --- Appellant Versus M s Kaushico Machine Tools Pvt Ltd/ . . . --- Respondent ’CORAM:HON BLE MR JUSTICE ADARSH KUMAR GOEL. ’’HON BLE MR JUSTICE AJAY KUMAR MITTAL. ------ Present:Ms Urvashi Dhugga Advocate. , for the appellant. . -None for the respondent assessee -. --- AJAY KUMAR MITTAL J, . , . This appeal under Section - 260 A of the Income tax Act, 1961 (for short “the Act’” has been filed by the assessee against the order) dated 22.3.1999, passed by the Income Tax Appellate Tribunal Delhi, Bench “B” New Delhi, (in short “the Tribunal” in ITA No) . 777/Del/93, for the assessment year 1990-91. The question herein is whether provisions of Section , 50 of the Act would apply to the case of the assessee or not . The assessee Company filed its return on 31.12.1990 for the assessment year 1990-91, declaring an income of Rs. 18,61,180/-. Caseof the assessee was processed under Section 143(1) of the Act on11.3.1991 at an income of Rs.19,91,010/-. The assessing officer there afterframed assessment under Section 143(3) on 25.9.1992 at an income ofRs. 25,17,680/- making an addition of Rs. 1,61,300/- on account of profitearned by the assessee on the sale of machinery treating the same tobe short term capital gain. As per the observations of the assessingofficer provisions of Section, 50 of the Act were not applicable in thecase of the assessee as such no benefit was admissible. The-Commissioner of Income tax Appeals () {in short “CIT A ”( ) } affirmed thefinding of the assessing officer and dismissed the assessee’s appealby order dated 15.12.1992. However both sides were aggrieved by the, order of the CIT A and thus two appeals were preferred before the( ) , , Tribunal one by the assessee and other on behalf of the Revenue, . The Tribunal held that the addition of the above amountcould not have been made. Consequently the appeal of the assessee, was partly allowed whereas the one preferred by the revenue wasdismissed vide order, 22.3.1999. TheRevenuehas, thus, preferredtheinstant appeal proposing the following substantial question of law for determination by this Court which can be perceived in the following manner, : “- -Whether the Income tax Appellate Tribunal was right in law in deleting the addition made on account of profit on sale of fixedassetspurchasedandsoldduringtherelevant previous year itself even when the assets were not covered under Section 50 short term gains only ”? 50 of the Act and the gains involved were ? We have heard learned counsel for the Revenue and. perused the record The assessing officer as well as the CIT A had come to( ) theconclusionthattheassesseewhohadpurchasedcertainmachinery in the year under consideration and had sold it during thesame year without using for the business purposes was not entitled to, deduction under Section 50 of the Act. However on appeal by the, assessee, the Tribunal following its earlier order for the assessmentyear 1989-90 in the case of the assessee allowed the appeal vide order,Annexure A -1. Accordingly the revenue was directed to place order of, the Tribunal for the assessment year 1989-90 on record A perusal of. the order of the Tribunal for the assessment year 1989-90 shows thatthe Tribunal was therein considering the issue where the assessee hadpurchased the machinery and after using it for some time sold it in thesame year. It was in those circumstances the assessee was heldentitled to the benefit of the provisions of Section 50 of the Act. Learned counsel for the Revenue submitted that the factsand circumstances of the present case are different inasmuch as in, the case in hand the machinery which was purchased by the assessee, during the year under reference was sold in the same year without putting it to use even for some time before it was sold . According to Learned counsel for the Revenue submitted that the factsand circumstances of the present case are different inasmuch as in, the case in hand the machinery which was purchased by the assessee, during the year under reference was sold in the same year without putting it to use even for some time before it was sold . According to the learned counsel the assessee was not entitled to the deduction, under Section 32 as no depreciation could be claimed by it in termsthereof Further according to the learned counsel once the benefit of. , , depreciation on the machinery was not admissible question of invoking, the provisions of Section 50 by the assessee did not arise. Section 50 makes a special provision in the case of-depreciable assets over riding the provisions of Sections 2(42 ), 48 Aand 49. A plain reading of Section 50 would spell out that once the capitalasset that has been transferred forms part of block of assets in respect, of which depreciation has been allowed under the 1961 or the 1922 Act,the surplus if any computed under this provision will be treated as, , short term capital gains The essential ingredient for applicability of the-. aforesaid provision is that the assessee must have claimed deductionon account of depreciation from the capital asset. In other words,absence of deduction of depreciation from the value of the asset woulddisentitle an assessee to benefit of this provision. . From the perusal of the order of the Tribunal it is discerned, that the Tribunal has not recorded any finding with regard to the usageof the machinery which was sold during the year under consideration.In this view of the matter we consider it appropriate to remit the matter, to the Tribunal to look into it and dispose of the matter afresh afterexaminingtheadmissibilityofdepreciationonthemachinery inquestion. However, it is clarified that in case it is found that themachinery was not put to use during the year under consideration,which was sold in the same year the assessee would not be entitled to, the benefit of Section 50 of the Act. The appeal is disposed of with the observations indicated above . (AJAY KUMAR MITTALJUDGE ) August 26, 2010*rkmalik* ADARSH KUMAR GOEL)JUDGE (