2012 (4) TMI 745 - AT - Indian Laws

Summary

Issues involved: The judgment involves the assessment of income u/s other sources and computation of Long Term Capital Gain on the sale of land and building.

Assessment of Income u/s Other Sources:
The Assessing Officer treated a receipt of Rs. 40 lakhs as income from other sources based on the Transfer of Property Act, 1882. The assessee contended that the Rs. 40 lakhs was part of the consideration received for the property and should not be separately assessed. The CIT(A) combined both issues and concluded that the entire consideration received was Rs. 65 lakhs, directing the Assessing Officer to consider the value determined by the DVO. The addition of Rs. 40 lakhs was deleted, and set off of brought forward long term loss was allowed against Long Term Capital Gain.

Computation of Long Term Capital Gain:
The Assessing Officer computed Long Term Capital Gain on the sale of land at Rs. 5,56,376/- based on valuation by the assessee from a Government Approved Valuer. The CIT(A) directed the Assessing Officer to consider the value determined by the DVO and allowed set off of brought forward long term loss against Long Term Capital Gain. The Revenue challenged these findings, arguing that the addition should not have been deleted.

Additional Aspect of Depreciation:
During the appeal hearing, it was revealed that the assessee had claimed depreciation on the building. The AR argued that the gain from the sale of the building should be assessed as Short Term Capital Gain u/s 50 of the IT Act. Both valuers accepted the value of land at Rs. 15 lakhs, and the building at Rs. 40 lakhs. The matter was restored to the Assessing Officer to correctly compute the gains from the sale of assets comprising land and building, considering the provisions of section 50 for Short Term Capital Gain on the building.

Conclusion:
The appeal filed by the Revenue was allowed for statistical purposes, and the entire issue was restored back to the Assessing Officer to accurately compute the gains arising from the sale of assets including land and building, considering the provisions of section 50 for Short Term Capital Gain on the building.