Principal Commissioner Of Income Tax 4 v. Stovec Industries Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1274 of 2018 ==========================================================PRINCIPAL COMMISSIONER OF INCOME TAX 4VersusSTOVEC INDUSTRIES LTD. ========================================================== Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIand HONOURABLE MR.JUSTICE UMESH TRIVEDI Date : 29/10/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.Revenue has filed this appeal challenging the judgment of ITAT dated 11.4.2018 raising the following question for our consideration: “[A] Whether the Appellate Tribunal has erred in law and on facts in conforming the decision of CIT(A) in deleting the addition on account of Short Term Capital gain on account of sale of land and building of Rs.4,89,24,276/-?” [B] Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of CIT(A) on disallowance of provision of Warranty expenses of Rs.21,10,038/-?” 2. The question (A) arises out of the action of the assessee of sale of land and building during the period relevant to the Assessment Year 2009-10. The assessee had sold the factory building situated at GIDC, Narol, for a total sale consideration of Rs.5.75 crores. In the return, the assessee declared the proceeds as long term capital gain. The Assessing Officer was of the opinion that the property was a depreciable assets. The assessee had shown the land and building as one asset. He therefore assessed the tax on the basis of the transaction being one of short term capital gain. 3.CIT(Appeals) granted relief to the assessee by treating the sale consideration arising out of the land as long term capital gain and that arising out of the sale of building as short term capital gain. He, therefore, restricted the addition made by the Assessing Officer. The Tribunal confirmed the view of the CIT(Appeals) observing that he has rightly treated the sale consideration arising out of the sale of land as long term capital gain. With this view, we are in broadly agreement. No question of law therefore arises. 4.The second question pertains to disallowance of a sum of Rs.20.10 lakhs which was by way of provision of warranty expenses. CIT(Appeals) and the Tribunal noted that the assessee had been making such claim consistent with the past which was never disallowed by the assessing officer in scrutiny the assessment order except the one which was reversed by the CIT(Appeals). The Tribunal relied on the decision of the Supreme Court in the case of Rotork Controls India Private Limited v. Commissioner of Income Tax [314 ITR 62 SC] and Bharat Earth Movers v. Commissioner of Income Tax [245 ITR 428] and observed that the provision for the warranty was estimated by the assessing officer by scientific basis and was therefore allowable. 5.In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) syed/ (UMESH TRIVEDI, J)