After perusing the above provisions of the Act, more specifically section 2(11) of the Act, one thing that evidently becomes clear is that in the Income Tax Act, there are only two categories of class of assets i.e., Tangible and Intangible and within the same class, various block of assets are covered. In the instant case, on going through the order of learned Commissioner (Appeals), it is observed that he has failed to appreciate the fact that section 2(11) of the Indian Income Tax Act, 1961 specifies as only two class of assets i.e., tangible and intangible assets and within these two classes of assets, assets having same rate of depreciation are prescribed and they fall within the same block. Whereas, the concept of an asset falling within the same block is driven by the same rate of depreciation once it falls in the same class of assets and namely there are only two classes of assets tangible assets and intangible assets.
Full Text of the ITAT Order is as follows:-
This appeal by the assessee is against the order of the learned Commissioner (Appeals) dated 7-10-2016, which order has been passed after the order of the ITAT in the first round of proceedings dated 13-2-2016. In the first round of proceedings, the learned Commissioner (Appeals) has not admitted the appeal of the assesse company on account of delay in filing the appeal, however pursuant to the directions of the ITAT in the first round of proceedings, the learned Commissioner (Appeals) has condoned the said delay and has decided the issue on merits and as such, the impugned appeal is filed pertaining to assessment year 2007-08 on the following grounds :–
1. That the learned Commissioner (Appeals) has grossly erred in sustaining the short term capital gain assessed by assessing officer at Rs. 72,81,594 as against short term capital gain of Rs. 7,87,982, as declared by the appellant.
1.1 That in doing so, the learned Commissioner (Appeals) has arrived at the erroneous conclusion that the full value of consideration of Rs. 1.15 crores received by the appellant towards sale of its restaurant consisting of Building, Furniture and Fixtures (Rs 1,00,00,000) and Plant and Machinery (Rs 15,00,000) has been split on account of sale of building, furniture & fixtures, (under one block) and plant & machinery (under different block).
1.2 That the learned Commissioner (Appeals) has further misunderstood and misread the concept of block of assets and in the process has treated the particular block of assets as a different ‘class or assets’ within the same block, which concept is alien to the scheme of block of Assets under the Indian Income Tax Act, 1961.
1.3 That the learned Commissioner (Appeals) has further erred in ignoring the evidence filed by the appellant though admitted as additional evidence during the proceedings before him a Board Resolution and confirmation from the buyer and break-up of sale of assets disclosed in the depreciation chart forming part of computation and income tax return disclosing building (Rs 70,00,000) furniture & fixture (Rs 30,00,000) and machinery (to the tune of Rs. 15,00,000.
1.4 That the learned Commissioner (Appeals) has grossly erred in not appreciating the fact that the value of entire block of assets of building and furniture & fixture, on transfer of any asset in the block needs to be set off against full value of the block and the surplus of the sale proceeds v. the value of block is to be treated as short term capital gain, as computed by the appellant company.
1.5 That the learned Commissioner (Appeals) has further grossly erred in relying on the provisions and judgments totally inapplicable to the facts of the case of the appellant company.
2. That the learned Commissioner (Appeals) has erred in sustaining the addition under section 14A to the extent of 0.5% of the investment although no satisfaction had been recorded by the assessing officer and the facts that the appellant had not incurred any expenses in relation to the exempt income.
3. That the learned Commissioner (Appeals) has erred sustaining the levy of interest under section 234B and 234C of the Act.
2. The brief facts of the case are that the assessee company has sold during the year under consideration a running restaurant at commercial space B-247, Supermart-I, DLF Phase-IV, Gurgaon on “as is where is” basis including all interior work, civil work, electrical work, kitchen equipment, utensils, Furniture & Fixtures attached to the said premises for a sale consideration of Rs. 1,15,00,000 (comprising of Rs. 70,00,000 for building and Rs. 30,00,000 for Furniture and Rs. 15,00,000 for Plant & Machinery) for which necessary documents confirming the said sale of assets was filed before the lower authorities. Apart from the above sale of Rs. 1,15,00,000, the assessee has sold Plant & Machinery for Rs. 3,00,000 and Vehicles for Rs. 80,000 during the year under consideration.
2.1 In the return of income filed by the assessee company, for the assessment year 2007-08 the assessee had shown a short term capital gain of Rs. 7,87,982 which was assessed and enhanced by the assessing officer as short term capital gain of Rs. 77,81,594 instead of the short term capital gain of Rs. 7,87,982 so claimed by the assessee company. The aforesaid claim by assessee company and so recomputed by assessing officer in assessment order dated 21-12-2009, has been worked out as follows :–
Claim of Assessee
