Itxa/672/2011 Of The Commissioner Of Income Tax -11 Mumbai v. New Era Talkies

kps IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.672 OF 2011WITHINCOME TAX APPEAL NO.553 OF 2012 The Commissioner of Income Tax-II...Appellant-Versus-New Era Talkies...Respondent ........... Mr.P.C. Chhotaray, for the Appellant/ Revenue.Mr.K.Shivram, Senior Advocate with Mr.Ajay R. Singh and Paras S. Savla, for the Respondent/ Assessee. ........... CORAM: S.C. DHARMADHIKARIAND GIRISH S. KULKARNI, JJ. DATE :- 08[th] April, 2014 P.C.: 1These two Appeals are filed by the Revenue and we are sorry to state that the approach of the Revenue appears to be that so long as the Revenue's stand will not be accepted, it will continue to file Appeals and invoking jurisdiction of this Court under Section 260A of the Income Tax Act, 1961. 2These Appeals project the same grievance as dealt with earlier. 3In the case of the present Assessee, in ITA/2066/Mum/2009 relating to the Assessment Year 2004-2005 the Income Tax Appellate Tribunal made the first order. The ITAT allowed the Assessee's appeal on 22.03.2010. In allowing that Appeal, the Tribunal set aside the order dated 02.03.2009 of the Commissioner of Income Tax-11, Mumbai passed under Section 263 of the Income Tax Act, 1961. The Commissioner of Income Tax-11 had set aside the Assessment Order for the Assessment Year 2004-2005 passed under Section 143(3) of the Income Tax Act, 1961 dated 20.10.2006. This Tribunal Order has been followed and applied in the case of the very Assessee for the Assessment Year 2004-2005 and by the order dated 07.09.2011 the Appeal preferred by the Revenue against this further exercise was dismissed by the ITAT. 4The Assessee was engaged in the business of exhibition of cine films. It filed the return of income for the Assessment Year 2004-2005 on 15.10.2004 declaring the total income at Rs.2,56,59,461/-. The Assessee's assessment was completed vide order dated 20.10.2006 by accepting a long term capital gain declared by the Assessee on the sale of land at Rs.2,15,75,356/-. The Commissioner of Income Tax-11 issued the notice under Section 263 holding that a long term capital gain declared by the Assessee on the sale of land was not correct as the land sold was part of the block of the asset along with the building and the Assessee has claimed depreciation. Hence, the gain on sale of land was a short term capital gain. The Assessee resisted all this by urging that the Assessment Order was not erroneous nor was prejudicial to the interest of the Revenue. Hence, the Commissioner of Income Tax has no jurisdiction and he could not have invoked Section 263 of the Income Tax Act, 1961. On merit, the Assessee contended that the land is not a depreciable asset, therefore, Section 50 does not apply. Though the depreciation was claimed by the Assessee on a composite value of the land and building, but it was wrongly claimed. The Assessee surrendered the amount of depreciation on the value of land in the Assessment Year 2001-2002 and that was also accepted by the Assessing Officer. Even otherwise, Section 50 was not applicable and that was the stand throughout of the Assessee. *3*itxa.672.11.553.12.3.con 5It is this stand of the Assessee which has been accepted by the Tribunal in both orders impugned before us. 6Taking assistance of Section 50 of the Income Tax Act, 1961, Mr.Chhotaray would urge that these Appeals raise a substantial question of law because there is nothing in law by which assistance the Assessee could have surrendered the depreciation. The law does not recognize any such concept, therefore, jurisdiction under Section 263 was rightly exercised. Even on merits, the stand of the Assessee that Section 50 was not applicable has been erroneously accepted. These are fundamental issues. Therefore, these Appeals raise a substantial question of law and deserve to be admitted. *3*itxa.672.11.553.12.3.con 5It is this stand of the Assessee which has been accepted by the Tribunal in both orders impugned before us. 6Taking assistance of Section 50 of the Income Tax Act, 1961, Mr.Chhotaray would urge that these Appeals raise a substantial question of law because there is nothing in law by which assistance the Assessee could have surrendered the depreciation. The law does not recognize any such concept, therefore, jurisdiction under Section 263 was rightly exercised. Even on merits, the stand of the Assessee that Section 50 was not applicable has been erroneously accepted. These are fundamental issues. Therefore, these Appeals raise a substantial question of law and deserve to be admitted. 7With the assistance of Mr.Chhotaray, we have perused both orders and impugned in both Appeals. In a detailed order passed on the prior date, namely, 22.03.2010, the Income Tax Appellate Tribunal has discussed the above aspects in detail. It found on facts that the power under Section 263 should not have been invoked. The requisite satisfaction has not been reached. On merits, it has been found by the Tribunal that the Assessee while purchasing the assets, namely, cinema building and land, executed a single document. It was a single composite transaction of purchase and undertaken in the year 1981. The Assessee consistently claimed the depreciation on the entire asset including the value of land upto the Assessment Year 2000-2001, but in the Assessment Year 2001-2002 the Assessee made the valuation of land and building independently as on 01.04.1981. The purchase price was thus, bifurcated and with reference to the date of transaction, namely, 01.04.1981. The Assessee offered the amount of depreciation pursuant to the valuation worked out by the Assessee's Valuer. That was disclosed as income by stating that by mistake the depreciation was claimed on the element of land. In these circumstances and in the facts peculiar to this Assessee's case that the Income Tax Appellate Tribunal examined applicability of Section 50 of the Income Tax Act, 1961. The ITAT answered this question in favour of the Assessee because it referred to the undisputed facts that the Assessing Officer right upto the Assessment Year 2000-2001 allowed the depreciation. However, in the Assessment Year 2001-2002, the entire amount was taken as income and disclosed and offered for taxation. That is how the Assessing Officer accepted this course. It is in these circumstances that the ITAT arrived at a conclusion that the view taken was possible and probable in the given facts and circumstances of the case. It, therefore, allowed the Assessee's appeals. The powers under Section 263, therefore, could not have been invoked, is the conclusion reached coupled with merits. 8We are of the view that in the facts and circumstances peculiar to the Assessee's case and when the land has been transferred by offering the amount of depreciation claimed earlier as income and which has been also assessed, then, the Appeals do not raise any substantial question of law. Any wider question or larger controversy need not be gone into. The Appeals are, therefore, dismissed. No costs. (GIRISH S. KULKARNI, J.) (S.C. DHARMADHIKARI, J.)