MANGESH KRISHNATH EKBOTE,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 3,, PUNE

आदेश / ORDER PER R.S. SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A)-2, Pune on 17-03-2017 in relation to the assessment year 2010-11. 2. The first issue raised in this appeal is against the confirmation of disallowance of depreciation amounting to Rs.45,909/- on fixed assets. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of Software Management consultancy

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and trading in Futures and Options (F&O). A return was filed

declaring total income of Rs.1.23 crore. During the course of

assessment proceedings, the Assessing Officer (AO) observed

that the assessee claimed depreciation on new additions

amounting to Rs.2,08,761/-. Since the assessee failed to

furnish proof of the purchase of new fixed assets, the AO

disallowed the depreciation on such additions. During the first

appellate proceedings, the assessee submitted necessary details

of additions to fixed assets, as have been captured at page 7 of

the impugned order. The ld. CIT(A) called for the remand

report from the AO. One of the additions to the fixed assets

was gift of Swift car amounting to Rs.3,06,059/- received from

the assessee’s brother, Sh. Rajesh Ekbote. The assessee

submitted that the gift of car was recorded in his books at the

written down value (WDV) in the hands of his brother. The

ld. CIT(A) affirmed the action of the AO on the ground that no

depreciation could be allowed as the assessee had not spent

any amount on its purchase.

the relevant material on record. Section 43(1) defines the term

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‘actual cost’ in relation to assets. Explanation 2 to section

43(1) states that where an asset is acquired by the assessee by

way of gift, the actual cost of the asset to the assessee shall be

the actual cost to the previous owner, as reduced by the

amount of depreciation actually allowed in respect of any

previous year commencing before the 01-04-1988 and the

amount of depreciation that would have been allowable to the

assessee if the asset was the only asset in the assessment year

commencing on or after 01-04-1988. This shows that the

written down value of the asset in the hands of the donor is

considered as the `actual cost’ of the asset in the hands of the

donee for the purpose of allowing depreciation. The assessee

furnished necessary details before the ld. CIT(A) to the effect

that the actual cost of the car received as gift from his brother

was recorded at its written down value in the hands of the

donor. The ld. CIT(A) has admitted this fact but refused to

allow depreciation on the ground that there was no `actual

cost’ as the car was received in Gift. In view of the clear

mandate of Explanation 2 to section 43(1), we hold that the

authorities below were not justified in disallowing

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depreciation on fixed assets to the extent of Rs.45,909/-. The

impugned order is overturned to this extent.

against treating profit on sale and purchase of shares

amounting to Rs.34,62,194/- as ‘Business income’. The AO

observed that the assessee had shown short term capital gain

of Rs.34,62,194/-. On being called upon to justify the amount

of capital gain, the assessee did not furnish any explanation,

which led to the passing of the assessment order u/s.144 of the

Act. In view of the fact that the assessee could not justify its

claim of short term capital gain, the AO treated the same as

unexplained cash credit u/s.68 of the Act. During the course

of the first appellate proceedings, the assessee furnished

necessary details of share-wise purchase and sale and the

resultant capital gain which has been set out at page 19 of the

impugned order. The ld. CIT(A) observed that the assessee

had himself treated income from share trading as ‘Business

income’ in the subsequent assessment year. In view of the fact

that there were frequent transactions of purchase and sale

within a very short span of time, the ld. CIT(A) treated the

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sum under consideration as ‘Business income’. Aggrieved

thereby, the assessee has come up in appeal before the

Tribunal.

relevant material on record, it is seen as an admitted position

that the assessee had shown shares as `Investment’ in its

balance sheet as at the end of the year with a nominal balance.

The shares purchased and sold during the year indicate that

these were held for a very short time before their sale. On a

pertinent query, the ld. AR admitted that income from sale and

purchase of shares was treated as ‘Business income’ by the

assessee in the immediately preceding assessment year. The

ld. CIT(A) has also recorded that the assessee offered such

income ‘Business income’ in the subsequent year as well,

which fact has not been controverted on behalf of the assessee.

Since the income from purchase and sale of shares has been

treated by the assessee as `Business income’ in the

immediately preceding and subsequent assessment years and

further nothing has been shown, except their depiction in the

balance sheet as Investment, as to how, the shares were so

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held, we hold that the ld. CIT(A) was justified in treating

income from share trading as ‘Business income’. This ground

fails.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 25th May, 2022 Satish

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to: 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. The CIT(A)-2, Pune 4. The Pr. CIT-2, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “B” / 5. DR ‘B’, ITAT, Pune गाड� फाईल / Guard file 6.

आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

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Date 1. Draft dictated on 24-05-2022 Sr.PS 2. Draft placed before author 25-05-2022 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.

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