Dfc Engineers P. Ltd, Mumbai vs Department Of Income Tax

आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई ᭠यायपीठ 'डी ' मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, MUMBAI ᮰ी िवजय पाल राव, ᭠याियक सद᭭य, एवं ᮰ी एन. के . िबलै᭦या, लेखा सद᭭य. के समᭃ । BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM आयकर अपील सं./I.T.A. No. 5228/Mum/2013 ( िनधाᭅरण वषᭅ / Assessment Year : 2006-07 )

Income tax Officer- बनाम/ बनाम M/s. DFC Engineers Pvt. 10(1)(1) Vs. Ltd. Room No.453 20, United Industrial Aayakar Bhavan Estate, Shanti Nagar, Mumbai. Vakola Pipeline Santacruz (E) Mumbai-400 055. ᭭थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCD 9449 F (अपीलाथᱮ /Appellant) .. (ᮧ᭜यथᱮ / Respondent)

अपीलाथᱮ ओर से / Appellant by : Shri Jeetendra Kumar - (DR) ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Feroze Andhyarujina- (AR)

सुनवाई कᳱ तारीख / Date of 25/11/2014 Hearing : घोषणा कᳱ तारीख /Date of 14/01/2015 Pronouncement :

आदेश / O R D E R

PER VIJAY PAL RAO, JM:

This appeal by the Revenue is directed against the order dated 08/05/2013 of CIT(A arising from order passed u/s. 154 of the Income tax Act for the assessment year 2006-07.

2. The Revenue has raised the following grounds:-

"On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:

1. "on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting addition of Rs.

14,93,574/- representing loss on sale of factory building without 2 5228/Mum/13 considering the provision of sec 50 and without appreciating the fact that the building sold pertains to the block of assets against which depreciation was claimed."

2. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred not taking into congnizance of the fact that the issue of change in opinion is absent and only mistake apparent from record has been rectified."

3. The appellant craves leave to add, amend, vary, omit or substitute and of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.

4. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored."

3. The assessee is engaged in the business of engineering consultancy. The assessment was completed u/s. 143(3) on 19/12/2008 computing book profit u/s. 115JB at Rs.29,29,223/-. Later on, the AO issued a notice u/s. 154 for rectification of mistakes. The AO while passing the order u/s. 154 had added Rs.14,93,574/- as loss incurred on account of sale of factory building allowed in the original assessment. While making the said addition the AO invoked Section 50 of the Income tax Act. The assessee challenged the action of AO before CIT(A) and contended that by sale of factory building the entire block of factory building was sold and thereby the said block of asset ceased to exist and reducing a negative figure of Rs.14,93,574/- for which the assessee was entitled to claim loss. The CIT(A) allowed the claim of the assessee and deleted the addition made by the AO by following the decision of this Tribunal.

4. We have heard the ld. DR as well as the ld. AR and considered the relevant material on record. The issue of allowance of claim of loss on sale of factory building was decided by CIT(A) in para 2.3 as under :-

2.3 I have considered the facts of the case. In this case appellant had sold its factory building and whole block of the asset is exhausted. On selling this factory building it had incurred loss of Rs.14,93,574/- on computing sale price consideration minus sale consideration. Thus appellant treated it as business loss because the loss has occurred in transacting a business asset. However, A.O. treated this loss as short term loss invoking sec.50. When the business asset is sold and if loss is incurred whether it has to be computed under 3 5228/Mum/13 capital gain or under business income. This issue has come into consideration of ITAT Mumbai Bench in the case of Mukand Global Finance Ltd. vs. DCIT 119 TTJ 467 wherein it is held as under:

"Capital Gains-Depreciable assets-applicability of s.50 vis-â- vis s.32 (1)(iii)-Sec.50 deals with those cases only where profit accrues to the assessee on transfer of any block of assets-In case of loss accruing to as s e s s e e o n tr an sf e r of an y b u il d in g , mac h i n e r y, p l an t an d furniture, the matter is dealt with under s.32(1)(iii)- Assessee having sold its flat, which was the only asset in the block under the head "building" at a consideration less than its WDV, s.50 shall have no application and loss accruing to the assessee c a n b e a l l o we d deduction against business profits under s.32(1)(iii), provided such deficiency is actually written off in the books of account -Assessee having not written off the deficiency, claim was rightly disallowed."

Proposition of the above ITAT decision is if a business asset is sold, if it has incurred the loss, the loss has to be dealt as per sec.32(1)(iii) and not by invoking_sec.50. It further stated that sec.50 is a deeming section it cannot extend beyond. Hence, following the above decision, A.O. is directed to compute the loss on sale of building as business loss, this addition is deleted. Relief granted to the appellant is Rs.7,03,083/- . This ground of appeal is allowed."

4.1 CIT(A) noted the fact that on sale of factory building the block of asset ceased to exist and therefore, the claim of loss has to be dealt with u/s. 32(1)(iii) of the Income tax Act and not u/s. 50 of the Act. The CIT(A) followed the decision of this Tribunal and we concur with the view of the earlier decision as relied by the ld. CIT(A). Accordingly we do not find any error or irregularity in the impugned order of CIT(A) and same is upheld.

5. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 14/01/2015. . आदेश कᳱ घोषणा खुले ᭠यायालय मᱶ ᳰदनांकः 14/01/2015 को कᳱ गई ।

Sd/- Sd/- (N.K. Billaiya) (Vijay Pal Rao ) ACCOUNTANT MEMBER ᭠याियक सद᭭य / JUDICIAL MEMBER मुंबई Mumbai; ᳰदनांक Dated 14/01/2015 व.िन.स./ Jv, Sr. PS 4 5228/Mum/13

आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy षत of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. आयकर आयुᲦ(अपील) / The CIT(A)- 4. आयकर आयुᲦ / CIT

5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाडᭅ फाईल / Guard file.

आदेशानुसार/ ार BY ORDER, स᭜यािपत ᮧित //True Copy// उप/ उप/सहायक पंजीकार (Dy./Asstt.

Registrar) आयकर अपीलीय अिधकरण, अिधकरण, मुंबई / ITAT, Mumbai