Case Law Details
DCIT Vs Bharti Realty Holdings Ltd (ITAT Delhi)
Introduction: The recent case of DCIT Vs Bharti Realty Holdings Ltd, brought before the Income Tax Appellate Tribunal (ITAT) Delhi, revolves around the allowance of losses that were initially disallowed. This disallowance stemmed from an alleged incorrect comprehension of Section 43(6) provisions. The appeal, directed against the Commissioner of Income Tax (Appeals)-2, New Delhi’s order for the Assessment Year 2016-17, prompted a detailed examination by the ITAT.
Detailed Analysis: The Revenue raised specific grounds of appeal, primarily contesting the deletion of disallowance totaling Rs.5,36,65,783/- for short-term capital loss on the sale of depreciable assets. The Assessing Officer’s stance was that the ‘mutual adjustment’ between the assessee and its group entity led to a short-term capital loss. The AO substituted the Written Down Value (WDV) with Fair Market Value (FMV) and rejected the claimed loss. The Learned CIT(A), however, deleted the addition, emphasizing the incorrect comprehension of Section 43(6) and the absence of a valid basis for substituting ‘money payable’ with WDV.
In response, the Assessee’s Representative argued that the assets were sold to the group entity due to the assessee no longer requiring them. The AR highlighted the lack of reasoning by the AO in substituting ‘money payable’ with WDV and questioned the prevailing ‘mutual understanding theory.’ The AR presented detailed financials, demonstrating the disclosed values matching the sale value. The ITAT, after careful consideration, upheld the CIT(A)’s decision, dismissing the Revenue’s appeal.
Another ground of appeal focused on the disallowance of depreciation of Rs.6,20,107/- on part of the third block of assets. The AO’s position was challenged by the AR, asserting the absence of a sale and disputing the ‘mutual understanding’ value. The CIT(A) granted relief, emphasizing the AO’s failure to deny the actual sale consideration. The ITAT concurred with the CIT(A)’s decision, dismissing the Revenue’s appeal on this ground as well.
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