2011 (12) TMI 92 - HC - Income Tax

Capital gains cinema hall being sold - reduction of valuation of scrap - inclusion of amount paid to the tenant/licensee for vacation for computation capital gains - direction of remit on the question of payment made to employees on closure of the cinema hall Held that - In view of the fact that the A.O. did not himself make any factual analysis or study or state the basis for computing the scrap/salvage value order passed by the tribunal for the reduction in such valuation is not interfered. Regarding payment to tenant/licensee for vacation of property payment made by the assessee for vacancy of the property had a link with the sale of property and therefore was entitled for set off against sale consideration.In respect of payment to the employees the order of remitting the file back to A.O. passed by the tribunal is justified.- Decided against the Revenue.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Valuation of scrap in the sale of a cinema hall.
3. Inclusion of payment to tenant for vacation in computation of capital gains.
4. Remit of the issue of payment made to employees on closure of cinema hall.

Condonation of Delay:
The application for condonation of delay in filing the appeal was allowed as the respondent-assessee had no objection. The delay of one day was condoned, and the application was disposed of.

Valuation of Scrap:
The appeal under Section 260A of the Income Tax Act, 1961 challenged the order reducing the valuation of scrap from Rs.32,70,000 to Rs.16,35,000. The Assessing Officer valued the building/superstructure as scrap at Rs.32,70,000, while the tribunal estimated it at Rs.16,35,000. The tribunal's decision was based on the lack of justification for the Assessing Officer's valuation, leading to the acceptance of the tribunal's order.

Inclusion of Payment to Tenant:
The issue involved payment of Rs.1.48 crores to a tenant/licensee for vacation in the sale of a cinema hall. The tribunal found a clear link between the payment and the subsequent sale transaction, rejecting the Revenue's contention. Citing relevant case laws, the tribunal held that the payment was directly related to the sale, allowing it to be set off against the sale consideration.

Payment to Employees:
Regarding the payment of Rs.66,88,679 to employees, the tribunal ordered a remit to the Assessing Officer for re-examination due to contradictory findings and lack of detailed examination initially. The tribunal noted the respondent's ongoing business operations in Delhi and Mumbai, justifying the remit for a thorough re-examination of the issue.

Conclusion:
The appeal was dismissed with no costs, upholding the tribunal's decisions on the valuation of scrap and the inclusion of payment to the tenant in the computation of capital gains. The remit for re-examination of the issue of payment to employees was deemed necessary due to factual disputes and the Assessing Officer's initial failure to conduct a detailed examination.