K.P. Dewani for the Assessee.: Gitesh Kumar for the Revenue

The present appeal filed the assessee is against the impugned order dated 2nd December 2016, passed by the learned Commissioner (Appeals)–1, Nagpur, relevant to the assessment year 2011–12.

2. The grounds raised by the assessee is reproduced below:–

“1. The addition of Rs.2,88,986/- on account of depreciation upheld by CIT(A) is unjustified, unwarranted and bad in law.

2. The depreciation claim of Rs.2,88,986/- on Plant & Machinery at M/s. Jadhao Cotex ought to have been allowed as claimed.

3. The claim of assessee as regard to exemption u/s 54B (of Income Tax Act, 1961) of I.T. 4. The learned CIT(A) erred in upholding the denial of exemption u/s 54B (of Income Tax Act, 1961).

5. The assessee denies liability to pay interest under section 234A (of Income Tax Act, 1961), 234B (of Income Tax Act, 1961) and 2340 of IT Act 1961. Without prejudice, levy of interest under section 234A (of Income Tax Act, 1961), 234B and 234C of l.T Act 1961 is unjustified, unwarranted and excessive.

2. Apropos ground relating to disallowance of claim of ` 2,88,986 on plant and machinery.

3. The assessee, in this case, is a proprietor of several businesses. The Assessing Officer, during the course of assessment proceedings, noted that in case of one of its business concerns namely M/s. Jadhao Cotex, no business activity had been undertaken during the year. It was also noted that the business activity was closed since the assessment year 2008–09. The Assessing Officer disallowed administrative expenditure and depreciation totaling to ` 3,13,584 on this account.

4. Upon assessee’s appeal, the learned CIT(A) allowed the administrative expenditure but disallowed depreciation expenses amounting to ` 2,88,986. The learned CIT(A) did not accept assessee’s contention that there was a temporary suspension, hence, he distinguished the decision of the Hon’ble Supreme Court in CIT v/s Vikram Cotton Mills Ltd., [1988] 169 ITR 597 (SC), which was relied upon by the learned Counsel for assessee. Against the above order, assessee being aggrieved is in appeal before us.

5. Learned Counsel for assessee made following submissions:–

“C) It is undisputed fact that plant and machinery on which depreciation is claimed at ` 2,88,986 is part of block of assets of the opening written down value;

D) It is settled proposition of law that individual use of asset of block of asset is not the condition precedent for allowance of depreciation at the hands of assessee. Issue covered in favour of the assessee by decision of Hon’ble Delhi High Court in the case of Oswal Agro Mills. Ltd.

i) CIT v/s Oswal Agro Mills Ltd., [2012] 341 ITR 467 (Del).

E) The financial statement of Jadhao Cotex placed in paper book at Page–1 to 5 would indicate that assessee had opening stock as well as closing stock and has also debtors and creditors in respect to this business. The business is temporarily suspended and not closed and therefore allowance of expenses and depreciation cannot be disputed.

F) Reliance on:

i) Hon’ble Delhi High Court order in ITA no.530/ 2011 in the case of Integrated Technologies Ltd., vide order dated 16.12.2011;

ii) CIT v/s Vikram Cotton Mills Ltd., [1988] 169 ITR 597 (SC);

iii) DCIT v/s Dempo Industries Pvt. Ltd., [2015] 45 CCH 105 (Panaji) (Trib.);

iv) ITO v/s Mokul Finance Pvt. Ltd., [2007] 110 TTJ 445.”

6. Per–contra, the learned Departmental Representative relied upon the orders of the authorities below.

7. We have heard rival contentions and perused the material available on record. Upon careful consideration, we find that in the present case, the assessee runs several business concerns and has combined block of assets. In such a situation, the decision of the Hon’ble Delhi High Court in Oswal Agro Ltd. (supra) has been rightly relied upon by the learned Counsel for assessee. When a particular asset is added into the particular block of assets irrespective of the fact that an individual item in the said block remains unutilized depreciation in the block of asset has to be granted. This position duly follow the decision of the Hon’ble Delhi High Court in Oswal Agro Ltd. (supra). Furthermore, the assessee has claimed that the business was temporarily suspended and opening and closing stock as well as debtors and creditors continued to be in the business. In such circumstances, the claim of depreciation is further allowable on the touch stone of the decision of the Hon’ble Supreme Court in Vikram Cotton Mills Ltd. (supra). Consequently, following the precedent, we set aside the impugned order passed by the learned CIT(A) and decide the issue in favour of the assessee. This ground is allowed.

8. Apropos the issue of exemption under section 54B (of Income Tax Act, 1961) amounting to ` 67,90,180.

9. In this case, assessee has not disclosed its sale and purchase of agricultural land in its original return of income. It came to be noticed by the Assessing Officer during the course of assessment. Assessee filed belated revised return of income. The Assessing Officer added capital gain on sale of land but did not grant any benefit under section 54B (of Income Tax Act, 1961) for purchase of agricultural land on the ground that the same was not based on the original return of income but raised in the revised return of income upon placing relied on the decision of the Hon’ble Supreme Court in Goetz India Ltd. v/s CIT, 284 ITR 323 (SC).

10. Before us, the learned Counsel for assessee has made submissions which are summarized as under:–

“A) The assessee submitted revised return claiming exemption under section 54B (of Income Tax Act, 1961) in respect to investment in agricultural land.

A.O. held that original return is not in time and therefore, no valid revised return can be submitted. The exemption u/s 54B (of Income Tax Act, 1961) was therefore rejected on this technical ground.

In the case of assessee long term capital gain on sale of agricultural land has been assessed to tax at Rs.92,57024/-. The investment has been made in respect to agricultural land to the tune of Rs.65 lacs for which exemption has been claimed u/s 54B (of Income Tax Act, 1961) along with expenses incurred on registration to the tune of Rs.2,90180/-. Eligibility to claim exemption u/s 54B (of Income Tax Act, 1961) has not been disputed by A.O. as well as by CIT(A).

A.O. has not allowed the exemption as according to him the same was not claimed in the original return and there is no valid revised return submitted by the assessee.

The CIT(A) has not accepted the claim of assessee as according to her assessee could not have legally made claim before A.O. The decision of Hon'ble 011(A) is contrary to the decision of Hon'ble Bombay High Court in case of M/s Pruthvi Brokers and Shareholders Pvt. Ltd. reported at 349 ITR 336 (Bom.).

The details of purchase and sale of agricultural land are placed in paper books at page 7 to 29.”

11. Per–contra, the learned Departmental Representative relied upon the orders of the authorities below.

12. We have heard the rival contentions and perused the material available on record. Upon careful consideration, we find that the assessee has not been able to make the claim of exemption under section 54B (of Income Tax Act, 1961) in the original return of income. The Assessing Officer has failed to entertain the same by placing reliance on the decision of the Hon’ble Supreme Court in Goetz India Ltd. (supra).

However, in the same case of Goetz India Ltd. (supra) the Hon’ble Supreme Court had expounded that the said decision will not impinge upon the appellate authorities’ right to entertain additional grounds. Furthermore, to the same effect, there is exposition of the Hon’ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd. (supra). Consequently, in our considered opinion, when the assessee has duly submitted the documents regarding purchase of agricultural land and the same are already on record before the Assessing Officer, the Assessing Officer has not find any fault in the purchase documents. Accordingly, being all the necessary purchase documents are on record, in our considered opinion, the assessee deserves to succeed on this count. Hence, we are of the considered opinion that assessee’s claim of exemption under section 54B (of Income Tax Act, 1961) is to be allowed. Accordingly, we set aside the impugned order passed by the learned CIT(A) and decide the issue in favour of the assessee. This ground is allowed.

13. In the result, assessee’s appeal stands allowed.

Order pronounced in the open Court on 08.05.2018

Sd/-

RAM LAL NEGI

JUDICIAL MEMBER

Sd/-

SHAMIM YAHYA

ACCOUNTANT MEMBER

NAGPUR, DATED: 08.05.2018