ASHWANI GUPTA,CHANDIGARH vs. INCOME TAX OFFICER, WARD-5(4), CHANDIGARH

Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 20-06-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 19-12-2019. The sole grievance of the assessee is confirmation of disallowance of short term capital loss of Rs.47.33 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.

In the assessment order, Ld. AO disallowed short-term capital loss (STCL) as arising on sale of certain machineries on the ground that as per relevant sales agreements, the sale consideration was not received by the assessee on or before 31-03-2017. These machineries were held as business assets on which depreciation was being claimed by the assessee. The machineries had written down value of Rs.92.73 Lacs and sold for Rs.45.40 Lacs which resulted into STCL of Rs.47.33 Lacs. 3. During appellate proceedings, the assessee stated that it had sold the assets and parted with the physical possession. The items sold were cranes and trucks which were previously used in business operations. The assessee received advances and balance sales proceeds were received in next year. Due to termination of various contracts, the assessee was left with no option but to start up winding up of the business. For this purpose, machineries had to be disposed- off as there was no further contract awarded to the assessee. The stock yard was to be vacated and it was not possible to transfer such non-usable assets to some other locations. The assessee stated that the genuineness of the agreement as well as sale transactions was not in doubt. However, Ld. CIT(A) rejected the same on the ground that sale would take place only when the full consideration is received. Though the possession was given, the ownership was not parted with. Accordingly the assessment was confirmed against which the assessee is in further appeal before us.

From the facts, it emerges that the assessee has sold machineries which have been used for the business. The assessee has claimed depreciation on the same and the same form part of block of asset which has ceased to exist during the year. In this situation, the resultant gains / loss would be in the nature of short term gains / losses. It is undisputed fact that the assessee has entered into sale agreements with the buyers and received part of the sale consideration in this year. The assessee has parted with the possession. In case of moveable properties, the transfer is affected by mere delivery thereof. If the buyers default in payment, the only remedy before the assessee would be to seek recovery of balance consideration. Nevertheless, the transaction stood completed in this year by parting with the possession. Therefore, the claim of the assessee could not be denied. The Ld. AO is directed to grant the same and re-compute the income of the assessee. 5. The appeal stand allowed. Order pronounced on 13-03-2025. (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT लेखा सद˟ /ACCOUNTANT MEMBER