Itta/83/2015 Of Principale Commissioner Of Income Tax-2 v. Hotel Kamal Private Limited

THE HON'BLE SRI JUSTICE G. CHANDRAIAHANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A.No.83 of 2015 JUDGMENT: (per Hon’ble Sri Justice G. Chandraiah) This appeal under Section 260A of the Income Tax Act, 1961(for short ‘the Act’) is filed by the Department, feeling aggrieved by theorder dated 02.01.2015 passed in I.T.A.No.619/Hyd/2013 by theIncome Tax Appellate Tribunal, Hyderabad Bench-B, Hyderabad (forshort ‘the Tribunal’) relating to the Assessment year 2007-2008. Brief facts of the case are that the respondent is a companyrunning restaurants and hotel. In response to notice under Section153A of the Act, it filed its return of income for the assessment year2007-08 on 30.10.2007. The Assessing Officer noticed that during thefinancial year the respondent along with family members hadpurchased a building and after three months of purchase it sold thefourth floor and reduced the cost of acquisition from the fixed assetsand claimed depreciation in respect of the newly acquired asset. TheAssessing Officer by order dated 29.12.2011 held that the transactionof purchase of property and selling of one floor of that property was inthe nature of business and trade, and accordingly brought the profits totax and disallowed the depreciation and completed the assessmentdetermining the total income. Aggrieved by the same, the respondentfiled an appeal before the Commissioner of Income Tax (Appeals)-III,Hyderabad. The Commissioner of Income Tax through order dated05.02.2013 while observing that the transaction of purchase of buildingand the sale of only one floor of the building cannot be taken as abusiness transaction i.e., adventure in the nature of trade, allowed theappeal in favour of the respondent/appellant. Aggrieved by the same, the Department filed I.T.A.No.619/HYd/2013 before the Tribunal. The Tribunal after considering the rival contentions held that itwas not in dispute that the property was purchased for businesspurposes and used as such. It was also not in dispute that theassessee sold 4[th] floor and accounted the gain as profit on sale offixed assets in P & L account. However, in income tax computation, thegain was adjusted in the depreciation schedule as part of block ofassets thereby claiming depreciation only on the balance amount. Thisworking adopted by the assessee in I.T., computation is in accordancewith the provisions of Income Tax Act, more particularly, Section 43(6)of the Act, and upheld the order of Commissioner of Income Tax anddismissed the Revenue grounds vide impugned order. Aggrieved bythe same, the Department filed the present I.T.T.A. The contention of the appellant herein is that the saleconsideration received by the respondents is a revenue receipt andhence the same has been treated as business income. We are unable to accept the said contention since both theauthorities after analysing the facts concurrently held that the workingadopted by the respondent in I.T. computation was in accordance withthe provisions of the Act and that the purchase of property and sellingof one floor is for the purpose of repaying a portion of high interestbank loan to lower its interest burden but not as a vendor in real estatebusiness. Therefore we see no reason to interfere with the concurrentfindings of the Courts below. We therefore dismissed the appeal. Pending miscellaneouspetitions, if any, shall stand closed. No order as to costs. __________________ G. CHANDRAIAH, J. _____________________ 9[th] July, 2015Js CHALLA KODANDA RAM, J.