Income Tax Appellate Tribunal - Ahmedabad
M/S. Shankar Kapda Niryat Pvt.Ltd., ... vs The Income Tax Officer,Ward-4(3),, ... on 12 May, 2017
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'SMC/B' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC/B" BENCH, AHMEDABAD
BEFORESHRI S.S. GODARA, JUDICIAL MEMBER
AND SHRI MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.2275/Ahd/2012
नधा रणवष /Assessment Year: 2009-10
M/s. Shankar KapdaNiryat Vs. The ITO,
Pvt Ltd, Ward 4(3),
C/o. Shah, Mehta &Bakshi, 2nd Vadodara
Floor, Prasanna House,
Associated Society, Nr. Akota
Stadium, Baroda-390020
PAN : AAACS 4066 R
[
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : ShriMilan Mehta, CA
Revenue by : ShriParveen Kumar, Sr DR
सु न वा ई क ता र ख/ Date
of Hearing : 15/03/2017
घोषणा क तार ख / Date of Pronouncement: /05/2017
आदे श/O R D E R
PER MANISH BORAD, ACCOUNTANT MEMBER:
This appeal of the assessee for Assessment Year 2009-10 is directed against the order of the Commissioner of Income-tax (Appeals)-III, Baroda dated 18.07.2012 vide appeal No.CAB/III-181/11-12, arising out of order u/s 143(3) dated 30.11.2011 framed by the ITO, Ward-4(3), Baroda.
2. Briefly stated facts, as culled out from the assessment records are that the assessee is a registered company engaged in the business of manufacturing of Grey Cotton Fabric. It filed its return of income on 21.08.2009 declaring total income at Rs. Nil. The case of assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") was framed vide order dated 30.11.2011. While framing the assessment, the Assessing Officer assessed the total income at Rs. Nil and Long Term Capital Gain at ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -2- Rs.27,82,016/-. Learned Assessing Officer disallowed expenses of Rs. 10,84,203/- on the ground that no business was carried out during the year. He also calculated the sale consideration of land and building sold during the year at Rs. 39,03,346/- u/s. 50C of the Act as against sale consideration of Rs. 20,11,000/- shown by the assessee and accordingly reduced block of assets by an amount of Rs. 7,89,950/- and computed long term capital gain on sale of land at Rs. 27,82,016/-. Learned Assessing Officer also did not allow setoff unabsorbed depreciation u/s. 32 of the Act as against long term capital gain for sale of land at Rs. 27,82,016/-.
3. Aggrieved assessee went in appeal before learned Commissioner of Income Tax (Appeals) and partly succeeded as learned Commissioner of Income Tax (Appeals) confirmed all the addition except one relating to setoff of brought forward unabsorbed depreciation for which the direction were given to the Assessing Officer to verify the claim of balance unabsorbed depreciation brought forward to the previous year relevant to Assessment Year 2009-10 and if found correct should be allowed setoffof such unabsorbed depreciation with the income under the head long term capital gain as per law.
4. Aggrieved assessee is now in appeal before the Tribunal raising following grounds of appeal :-
1. The Id. CIT(A) erred in fact and in law in confirming the action of AO in making a disallowance of Rs.10,84,203/- on the ground that no business activity was carried out by the assessee during the year.
2. The learned CIT(A) erred in fact and in law in confirming the action of the AO in segregating the transaction of sale of office building into sale of land and sale of building and thereby assessing the capital gains separately.
3. The learned CIT(A) erred in fact and in law in confirming the action of the AO in applying the provision of section 50C to sale of land and thereby computing the sale consideration at Rs.39,03,346/-.ITA No. 2275/Ahd/2012
Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -3-
4. The learned CIT(A) erred in fact and in law in confirming the action of the AO in applying the provision of section 50C to sale of building and thereby reducing the block of asset by an amount of Rs.7,89,950/-
5. The learned CIT(A) erred in fact and in law in computing long term capital gain at Rs.27,82,016/- on sale of land.
6. The learned CIT(A) erred in fact and in law in initiating penalty proceeding u/s 271(1)(c).
5. Ground No. 1 relates to disallowance of expenses of Rs. 10,84,203/- made by Assessing officer by taking the basis that no business activity was carried out by assesse during the year. Learned Authorised Representative submitted that" The assessing officer has disallowed the entire business expenditure claimed by the assessee amounting to Rs. 10,84,203/- . While disallowing the saidamount, the AO has stated that 'the assessee has not carried any businessactivity during the year under consideration. If manufacturing activity is notundertaken, then how expenses relating to manufacturing, administrative &selling and financial charges are allowable? The assessee vide submission dtd 07/07/2011 has stated that the company has dosed down its productionactivity but-company has not yet been dissolved. So these expenses arenecessary to maintain the existence of the company and company's assetsare fixed in nature. The submission of the assessee is perused & the same isnot tenable in nature for the reasons that that the assessee has shown income from rent, interest, etc. Against this income, expenses such asmanufacturing, administrative & selling expense and financial charges are notallowable as no manufacturing activity was carried out and no sale was madeduring the year. It is also mentioned that the office premises and plant &machinery are also sold during the year, and the premises is given on rent,then how these expenses are claimed to be allowed?'
6. Learned Authorised Representative further relied on the decision of Hon'ble High Court of Kolkata in the case CIT vs. Ganga Properties Ltd. 199 ITR 94 (Cal.) and another judgment of Hon'ble Kolkata High Court in the case of CIT vs. New Savan Sugar and Gur refining Co. Ltd. 185 ITR 564 (Cal.).
ITA No. 2275/Ahd/2012Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -4-
7. On the other hand learned Departmental Representative vehemently argued supporting the order of lower authorities and added that no business activity has been carried out by the assessee during the year and therefore such expenses of Rs. 10,84,203/- has been rightly disallowed by the learned Assessing Officer and confirmed by learned Commissioner of Income Tax (Appeals).
8. We have heard the rival contentions and perused the record placed before us and gone through the judgment relied by the learned counsel. The issue raised in this ground is against the disallowance of expenses of Rs. 10,84,203/- made by learned Assessing Officer and further confirmed by Commissioner of Income Tax (Appeals).
9. From perusal of the computation of income we notice that assessee company was incorporated a long back on 11.02.1994 and is engaged in the business of manufacturing of tiles and power looms. Its authorized paid up capital is Rs. 2 crore, balance of reserve &surplus as on 31.03.2009 is at Rs. 1,09,34,134/- . Further from perusing audited balance sheet we notice that in the immediately previous financial year i.e. financial year 2007-08 , assessee has carried out manufacturing activity and has incurred Rs. 22,57,833/- including cost of raw material consumed at Rs. 60,91,823/- and written down value of net block of asset was at Rs. 3,22,99,515/-. The reason for mentioning all the above figures is to have a look on the financial transactions and the consistent conducting of business by the assessee company. It has not been disputed by the revenue that assessee was regularly involved in running business activity up to the immediately previous financial year i.e. financial year 2007-08. It is only for the year under appeal wherein the assessee is unable to carry out any business activity due to slowing down of the business and incurred heavy losses. The short question before us is "whether the learned Commissioner of Income Tax (Appeals) was justified in confirming the disallowance of expenses of Rs. 10,84,203/-on the ground that no business was carried out during the year"? Before moving ahead to adjudicate this issue, let us go through the ratio of decision held in the case CIT vs. Ganga Properties Ltd. (supra) wherein Hon'ble Court has held that:-
ITA No. 2275/Ahd/2012Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -5- "A company, even if it derives4 income from "other sources", has to maintain its establishment for complyingwith statutory obligations so long it is in operation and its name is not struck off the register of companies or unless the company is dissolved which means cessation of all corporate activities of the company for all practical purposes. So long as it is in operation, it has to maintain its status as a company and it has to discharge certain legal obligations and, for that purpose, it is necessary to appoint clerical staff and a secretary or accountant and incur incidental expenses. In this background, the conclusion of the Tribunal that the expenses incurred were wholly and exclusively for the activities to earn income was a reasonable conclusion. The expenses were therefore deductible."
10. We further observe that Hon'ble court in the case CIT vs. New Savan Sugar and Gur Refining Co. Ltd. (supra) has held that:-
"Company - not carrying on any business - deriving income from "Other sources"
only - has to maintain its establishment and comply with statutory obligations - expenditure there is in connection with the earning of income from "Other sources" - deductible even if unremunerative."
11. The common view taken in both the above judgments is that a Private Ltd. company which is running business since last many years has to incur minimum expenses for maintaining the establishment and day to day expense and they are therefore part of business expenditure even if no revenue is generated from business activities. In the case of assessee even though there is no revenue from sales operations but it has sold some of its assets during the year and has shown loss on sale of assets at Rs. 1,19,64,510/-. In our view even the activity of selling the business assets is also a part of business activity only. In the given case assessee has sold office premises, plant machinery, and office equipment and complete these transactions successfully assessee needs to have establishment minimum staff, expenditure on electricity, water, travelling expenditure etc. In the given case also, the impugned expenses of Rs. 10,84,203/- includes day to day routine expenses incurred in the business towards running office establishment such as telephone expense, security charge, legal fees, physical expenses of office and entertainment expenses etc. water charges, payment to employees etc. ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -6-
12. In the light of the judgments referred above and detailed discussion made by us in the preceding paragraphs, we are of the confirmed view that as the assessee has been running business in precedingyears and even though it has carried outlittle or no business activity of purchase and sale during the year, still it is entitled to claim loss of expenses incurred for selling its assets and running the office establishment smoothly. We accordingly allow the assessee's ground and direct the Assessing Officer to allow the claim of revenue expense of Rs.10,84,203/- as business expenditure for the year under appeal.
13. Now we take up ground No. 2 and 5, which relates to transactions of sale of office premises. Brief facts in this regard are during the year assessee sold office premises situated at A-1, Mars Co-operative Housing Society Ltd. Chitrakut Park, Ellorapark, Subhanpura, Vadodara on 23.03.2009 for a sale consideration of Rs. 20,11,000/- by way of agreement to sale. Learned Assessing Officer enquired about the Jantri rates from the office of Sub- Registrar for giving fair market value of the land. Necessary details were made available by the Sub-Registrar relating to land measuring2100 square feet. Learned Assessing Officer accordingly applied the rate of 195.16 sq. mtrs.and calculated the fair market value of land at Rs. 39,03,346/-. Learned Assessing Officer also observed that the business premises on which assessee was regularly claiming depreciation is having two components namely land and structure thereon and learned Assessing Officer, was of the view that land being a non- depreciable assets needs to be excluded from the calculation of short term capital gain for sale of depreciable assets provided in section 50C of the Income Tax Act. The learned Assessing Officer further went ahead to calculate the cost of land and building separately which were purchased in the year 1994. He calculated the cost of land at Rs. 4,99,011/- and building at Rs. 1,00,989/-. For giving the benefit of indexation the cost of acquisition of land was computed at Rs. 11,21,330/- and thereby calculated long term capital gain from the land at Rs.27,82,016/-(Rs. 39,03,346/- Less Rs.11,21,330/-). As regards the building, being a depreciable assets, learned Assessing Officer calculated fair market value of the building at Rs.
ITA No. 2275/Ahd/2012Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -7- 7,89,950/- and reduced it from the opening WDV of building. As theWDV of Block of assets of building was left with a positive value after deducting Rs. 7,89,950/-, short term capital gain/loss did not arised.
14. Aggrieved assessee went in appeal before the learned Commissioner of Income Tax (Appeals). Learned Commissioner of Income Tax (Appeals) confirmed the view of learned Assessing Officer of bifurcating the impugned property into land and building and also confirmed the long term capital gain on sale of land at Rs. 27,82,016/- and also confirmed the separate valuation of impugned building at Rs. 7,89,950/- by observing as follows:-
5.2 I have considered the appellants submissions and the AO's observations. So far as the appellant's contention that section 50C Is not applicable to depreciable assets is concerned, same is not acceptable in view of the decision of the special Bench of HAT Mumbai Bench in the case of [2011] 130 ITD 113 (Mum.)(SB), Income-tax Officer-22(3)(4) v. United Marine Academy. In this decisioln, the special bench has held that the provision of section 50C are applicable to the transfer of depreciable capital assets covered by section 50 and in computing the capital gain arising from the said transfer by adopting the stamp duty valuation. Hence, this contention of the appellant is rejected.
5.3 The appellant has relied upon the decision in the case of M/s. Rajesh Exports Limited (Supra) to claim that where the price paid for building and larip1 is a composite one, and no distinction in the consideration paid to vendor can be made, then the entire amount qualifies for depreciation. But there are decisions which states that since land is not depreciable assets, hence no part of the sale consideration received on account of land can be taxed u/s 50 of the Act. Similarly, where consolidated payment is made for land and building, then depreciation cannot be claimed on the entire purchase value. These decisions are as follows:ITA No. 2275/Ahd/2012
Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -8-
1. [2008] 114 ITD 286 (DELHI), Deputy Commissioner of Income-tax, Circle 3(1), New Delhi, v. Capital Cars (P.) Ltd.
2. [2010] 7 taxmann.com 68 (Delhi), Income-tax Officer, Ward-1, Pa nip at, v, Kapursco Cold Storage (P.) Ltd.
3. [2011] 129 ITD 1 (Delhi), Vashti Management Services (P.) Ltd. ,v. Income-tax Officer, Ward 17(2),
4. [2012] 20taxmann.com 197 (Delhi), Commissioner of Income-tax~IV, v. I.K. International (P.) Ltd.
5.4 So far as reliance placed by the appellant on the decision in the case of Rajesh Exports reported in 2006, 9 SOT 28 (BANG.)(URO), is concerned,, in this decisions the consideration paid for (and and building were separately shown and hence, the Bench decided that no depreciation on land is to be allowed. But the Bench also expressed its opinion that where there is no distinction in the consideration paid for land and building , then entire amount would qualify for depreciation. This opinion was in the nature of Obiter Dicta and in the view of decision quoted above, the same is not acceptable. It was duty of the appellant to allocate the consideration paid for the purchase of office building towards the land and the super structure. But the appellant had not done so, and thus has claimed depreciation on the value of the land also which is not as per law.
5.5 Under such circumstances, the method adopted by AO toallocate the sale consideration as well as the purchase consideration betweenland and building on the basis of jantri rates cannot be faulted with. Also asalready held 'provisions of section 50C are applicable in the present case.
Thus, the long term capital gain computed by the AO on sale of land is upheld. Also the AO should take action for the years in which the appellants has claimed depreciation on land as per law.
5.6 Hence the ground of appeal is dismissed.
15. Aggrieved assessee is now in appeal before the Tribunal.
16. Learned Authorised Representative submitted that the Assessee had purchased office building in the year 1994 for a total sum of Rs. 6,00,000. The payment of Rs.6,00,000 was a consolidated payment for land and building for the property as a ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10 -9- whole. No bifurcation was made towards consideration for land and consideration for building at the time of purchase. Similarly, the Appellant received a consolidated sum of Rs.20,11,000 toward sale of office building (page 31 to 35). Since the property as a whole was transferred, the Appellant reduced the WDV of block of building by the sale consideration of Rs.20,11,000 (refer page 25 of the paper book). The Assessing Officer during the course of assessment artificially bifurcated the transfer of office building into transfer of land and transfer of building.The AO during the course of assessment was of the view that the consideration for transfer of land should be taxed as long term capital gains and applied the provisions of section 50C. The AO accordingly computed the sale consideration applying section 50C at Rs.39,03,346. Similarly, the AO also applied the provisions of section 50C to sale of building and reduced an amount of Rs. 7,89,950 from the WDV of building. The AO also artificially bifurcated the purchase consideration of Rs. 6,00,000 to land and building for computing capital gains on sale of land. It is respectfully submitted that since the beginning the Appellant has been treating the office building as a block of asset, No bifurcation was made between the land and building since inception. The department has allowed depreciation in all the years on the office building and therefore the bifurcation of the same into land and building at the time of sale cannot be done. The Appellant during the course of assessment and appeal had contended that since depreciable asset was transferred the capital gains has to be computed as per section 50 and section 50C cannot be applied. However, the issue contended is covered against the Appellant by the decision of Mumbai Special Bench in case of ITO v. United Marine Academy 130 ITD 113 wherein it has been held that section 50C applies to depreciable asset .The Appellant reserves it right of further appeal.It may be noted that as per section 50C stamp duty value has to be consideredas sale consideration for computing capital gains.The same cannot apply to section 43(6)(c) wherein it has been stated that the block of asset should be reduced by the moneys payable in respect of any asset falling within that block which is sold or discarded etc. "Moneys Payable" is defined by Explanation to section 41(3) which states that moneys payable in respect of building, machinery plant or furniture includes the price ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10
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for which it is sold. In case of the Appellant the AO has reduced the block of building by an amount of Rs. 7,89,950 which represents stamp duty value of building which is not correct. The decision of the Special Bench would not apply to this extent.
17. Learned Authorised Representative made alternate plea by submitting that without prejudice, in case the provisions of section 50C are made applicable in that case the AO may be directed not to bifurcate the transfer of office building into transfer of land and transfer of building and accordingly the stamp duty value as per section 50C may be reduced from the block of asset of building.
18. On the other hand Ld. Departmental Representative strongly contended that the issues raised in this appeal are cover in the favour of revenue by the special bench decision of ITAT Mumbai Bench in the cae of ITO vs. United Marine Academy. Dated 25.04.2011. He also relied on the judgment of Hon'ble High Court of Andhra Prades in the case of J. Anjaneya Sharma vs. Commissioner of Income Tax(2014) (42 taxmann.com 182) (Andhra Pradesh).
19. We have heard the rival contentions and perused the record before us and gone through the judgment referred by the Ld. Departmental Representative. Short issue raised in theseground no.2-5 relates to sale of business premises which as per assessee being a business assets which is subject to depreciation and sold for consideration of Rs.20,11,000/- do not come within the purview of provisions of section 50C of the Act and needs to be directly deducted from the written down value of the building. Further Learned Assessing Officer took a view that business premises of the assesse consists of two components namely land and building. Calculation of fair market value (FMV) as per provision of section 50C of the Act has to be done in order to calculate the long term/short term capital gain.
ITA No. 2275/Ahd/2012Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10
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20. Learned Assessing Officer accordingly calculated FMV of land on the basis of information from Sub Registrar and after allowing the benefit of indexed cost of acquisition of land at Rs. 11,21,330/- (cost taken at Rs. 4,99,011/-) computed long term capital gain at Rs. 27,82,016/-. Ld. A.O. further calculated the fair market value of the building at Rs. 7,89,950/- and reduced it from the written down value of Block of assets. In short Ld. Assessing Officer has calculated the fair market value of the land and building at Rs. 46,93,296/- as against 20,11,000/- shown by the assessee.
21. We will first take up the issue whether provisions of section 50Care applicable on the business assets for analyzing which is issue after going through the relevant provisions of section 50, 50C of the Act and sectionand section 2(14)(a) of the Act.
22. We find that section 50 of the Act specifically deals with the provisions for computation of capital gains in the case of depreciable assets. And provisions of section 50C applies where the sale consideration received or accruing as a result of the transferby aassessee of a capital assets, being land or building or both, is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer,than the value so adopted or assessed ,shall for the purpose of section 48 be deemed to be the full value of the consideration received or accruing,as a result of such transfer.
23. We further observe that section 50C applies when there is transferred by aassessee of a capital assets. Now when we refer to the definition of capital assets provided in section 2(14)(a) of the Act, we find that it includes a property of any kind held by an assessee whether or not connected with the business or profession. The definition of capital assets clearly shows that it inter alia includes assets connected with the business or profession. When we read section 50C with respect to section 2(14)(a) of the Act, we come to the conclusion that section 50C equally applies on the capital assets held for business purposes and therefore Ld. Assessing ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10
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Officer has rightly applied the provisions of section 50C of the Act on the transaction of sale of land and building by the assessee during the year.
24. In order to support our view we find it pertinent to observethe decision of special bench in the case of ITO vs. United Marine Academy(supra) wherein similar facts were there before the special bench for adjudication in which assessee sold office building and depreciation was being claimed regularly since last many years. Further during the course of assessment Assessing Officer after noticing that the value of property as per stamp duty valuation is Rs. 76,49,000/-, applied provisions of section 50C and calculated short term capital gain accordingly. Special bench held as under:-
The main issue for consideration in the instant case was as to whether in a case where capital gain arising from the transfer of depreciable asset is computed as per the special provisions contained in section 50, the provisions of section 50C can be applied so as to adopt the value assessed for the purpose of payment of stamp duty to be the full value of the consideration received or accruing as a result of such transfer. (Para 11) There are two deeming fictions created in section 50 and section 50C. The first deeming fiction modifies the term 'cost of acquisition ' used in section 48 for the purpose of computing the capital gains arising fromtransfer of depreciable assets where as the deeming fiction created in section 50C modifies the term 'full value of the consideration received or accruing as a result of transfer of the capital asset' used in section 48 for the purpose of computing the capital gains arising from the transfer of capital asset being land or building or both. The deeming fiction created in section 50C thus operates in a specific field which is different from the field in which section 50 is applicable. It was thus not a case where any supposition had been sought to be imposed on other supposition of law. There are two different fictions created into two different provisions and going by the legislative intentions to create the said fictions, the same operate in different fields. The harmonious interpretation of the relevant provisions makes it clear that there is no exclusion of applicability of one fiction in a case where other fiction is applicable. As a matter of fact, there is no conflict between these two legal fictions which operate in different fields and their application in a given case simultaneously does not result in imposition of supposition on other supposition of law. The Assessing Officer thus was right in applying the provision of section 50C to the transfer of depreciable capital assets covered by section 50 and in computing the capital gain arising from the said transfer adopting the stamp duty valuation. [Para 20] ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10
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25. Further similar type of issue was also adjudicated by the Hon'ble court of Andhra Pradesh in the case of J. Anjaneya Sharmam (supra) and it was held as under:-
If sub-section (1) of section 50C is analyzed it would appear that there must be a transfer of a capital asset, which means, the land or building or both. The consideration received or accrued on the transfer is less than the value adopted or assessed or assessable by an authority of the State Government on which the stamp duty is paid. If the valuation adopted by the Stamp Valuation Authority is more than the consideration received, then such value has to be treated as the full value of the consideration received or accrued for the purpose of section 48. [Para 5] Thus, it appears that there is scope for accepting the valuation of the land in case of the vacant land alone and the valuation of the building in case of the building only or in case of land and building both. Thus, the valuation has to be adopted in case of transfer of land and building together jointly and not separately. Sub-section (2) of section 50C has to be read without affecting the applicability of sub-section (1). Similarly, sub-section (3) has to be read subject to sub-section (2). Where the applicability of sub-section (2) will militate against sub-section (1), sub-section (1) has to be applied ignoring sub-section (2). Where sub-section (1) is applicable wholly and it is applied, there is no scope for applying subsection (2). [Para 6] Therefore, the appeal was to be dismissed.
26. From going through the above judgment relied on by the Ld. Departmental Representative we infer that provisions of section 50C of the Act clearly applies on the assets held for business purpose. Therefore Ld. Assessing Officer has rightly applied the provisions of section 50C on the impugned transactions.
27. Now, the next question before us is "whether the impugned transaction of sale of office premises has to be bifurcated between the land and building so ITA No. 2275/Ahd/2012 Shankar KapdaNiryatPvt Ltd vs. ITO AY : 2009-10
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that long term/short term capital gain can be calculated for the sale of land and separate calculation of short term capital gain/loss u/s.50 of the Act for sale of building structure being depreciable asset.
28. We are of the considered opinion that land being a non depreciable asset, the gain on sale of this capital assets i.e. land ,held for more than three years is to be taxed under the head long term capital gain only and cannot be added to building as part of depreciable asset. Therefore Ld. Assessing Officer has rightly calculated the long term capital gain of Rs. 27, 82,016/- after giving benefit of indexation of the cost of land. Learned CIT(A) has also confirmed the action of assessing long term capital gain of Rs.27,82,016/- on sale of land.
29. As far as short term capital gain/loss on the building structure is concerned, we observe that assessee has merely placed the copy of possession letter and agreement to at page 31 to 35 of the paper book regarding sale of the impugned property which is a Duplex Bunglow at A-1, Mars Co-operative Housing Society Ltd. measuring 2100 square feet with the construction of 1700 square feet. There is no bifurcation of the land and building and the agreed consideration is for total structure including the land. Therefore it is undisputed that there is no sufficient information given on the part of the appellant about the separate cost incurred and sale consideration received for land and building as well as sale consideration received for land and building.Therefore we find no mistake in the order of learned assessing officer taking the fair market value of the building at Rs.7,89,950/- and giving its set off against the WDV of the block of asset. We therefore find no reason to interfere with the order of learned CIT(A) relating to this issue. We also uphold the finding of Learned CIT(A) directing the Assessing officer to take action for the years in which the appellants has claimed depreciation on land as per law. In the result ground 2,3,4& 5 of the assessee are dismissed.
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30. As regards alternate plea taken by the assessee, we find no basis in this plea as we have already held that capital gain is to be separately calculated for a land and building. Capital gain on land will be taxable as long term capital gain and only the gain/loss on building will be calculated u/s. 50C of the Act and therefore we dismiss the alternate plea of the assessee.
31. In the result appeal of the assessee is partly allowed.
Order pronounced in the Court on 12th , May 2017 at Ahmedabad.
S
SsSS
(SHRI S.S. GODARA) (SHRI MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 12/05/2017
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
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ु त / Concerned CIT
4. आयकर आय&
ु त (अपील)/ The CIT(A)-
5. वभागीय त न$ध,आयकर अपील य अ$धकरण ,राजोकट/DR,ITAT, Ahmedabad,
6. गाड0 फाईल /Guard file.
आदे शानस
ु ार/ BY ORDER,
TRUE COPY
सहायक पंजीकार (Asstt.Registrar)
आयकर अपील य अ$धकरण
ITAT, Ahmedabad