2019 (5) TMI 1544 - AT - Income Tax

Short Term Capital Gain u/s 50 - sale of premises in Amarnath Tower being part of block of assets - other properties Namah building and Lakhani Centrium never entered the block of depreciable asset - HELD THAT - In the present case we find that the flats which never entered into the block of depreciable assets as income from the same were being offered under the head income from house property can by no stretch of imagination be said to be entitled for automatic entry into the block of depreciable asset. The reference to section 2(11), 43(6) 50 by CIT(A) is germane and support the case of the Revenue. Section 2(11) defines block of asset as a group of asset falling within the class of asset .. in respect of which the same percentage of depreciation is permissible. The income from Namah building and the premises in Lakhani Centrium was falling under the head income from house property and hence these premises cannot be said to be falling under any asset group on which any rate of depreciation is prescribed as on such asset no depreciation is permissible. The case laws referred by assessee as mentioned by us here in above are not applicable on the facts of the case. We have already noted that the Namah building and property in Lakhani Centrium never entered the block of depreciable asset as income from them was falling under the head income from house property. In this view of the matter in our considered opinion learned CIT(A) has passed well reasoned order which does not need any interference on our part. Depreciation on car - appellant has capitalized the Audi car in the F.Y.2009-10 - car had been registered in the assessee s name on 04-02-2009 and the invoice was also dated 12-01- 2009 - HELD THAT - Genuineness of the delivery document of Shreyons Automobiles which mentions that the vehicle was delivered on 19/6/2009. The genuineness is doubted solely on surmise and conjecture. The plea is that invoice is dated 12/1/2009 and registration date is 4/2/2009, hence it is claimed that it is hard to believe that it was delivered on 19/6/2009. Why it is so hard to believe that the assessee took delivery after four-month is not specified, the learned CIT-A has even suggested that it may not be the first time that the vehicle was delivered, signifying that the vehicle was delivered earlier used by the assessee, it went back, and it was again delivered on 19/6/09. We find that this is too much for a preposterous presumption dihors any cogent material. The assessee has got the delivery from recognised seller in the city of Mumbai. There is no doubt on the existence or the address of the seller. Nothing prevented the authorities below from making enquiry from the said seller before summarily rejecting the veracity of delivery document on mere surmise. - Decided in favour of assessee

Summary

Issues Involved:
1. Short Term Capital Gain on Sale of Premises
2. Applicability of Provisions of Section 50
3. Disallowance of Depreciation on Car

Issue-wise Detailed Analysis:

1. Short Term Capital Gain on Sale of Premises:
The assessee sold flats in Amarnath Towers for ?161,75,480, with a 50% share of ?80,87,740. The AO noted that the WDV of these assets was only ?3,81,661, resulting in short-term capital gains of ?67,06,074 as per Section 50 of the Act. The assessee contended that the block of assets was not extinguished due to the purchase of property worth ?1,24,68,460 in Lakhani Centrium and the use of part of the Namah building for office purposes, which was part of the depreciable block. However, the AO rejected this, noting that the properties were not part of the depreciable block, as income from Lakhani Centrium was offered under 'income from house property' and no depreciation was claimed on the Namah building.

2. Applicability of Provisions of Section 50:
The CIT(A) confirmed the AO's action, referring to Sections 2(11), 43, and 50. Section 50 stipulates that where the consideration received on transfer of an asset exceeds the WDV of the block, the excess is deemed to be capital gains from short-term capital assets. The CIT(A) noted that the Namah bungalow and Lakhani Centrium properties never depreciated by the appellant and thus did not form part of the depreciable block. Consequently, the block of depreciable assets was extinguished after the sale of the Amarnath properties, and the excess sale consideration was hit by the provisions of Section 50.

3. Disallowance of Depreciation on Car:
The AO noted that the assessee claimed depreciation of ?10,67,065 on an Audi motor car, costing ?71,13,769. The car was registered in the assessee’s name on 04-02-2009, and the invoice was dated 12-01-2009. The assessee claimed the car was gifted on 19-06-2009, with delivery on the same date. The AO held that the car should have been depreciated in A.Y. 2009-10, reducing the WDV to ?60,46,704 and allowing depreciation of ?9,07,005. The CIT(A) confirmed this, doubting the genuineness of the delivery document and noting that the car was registered and invoiced in the previous financial year.

Judgment:
The Tribunal considered the submissions and records. It found that the flats sold did not cease to exist in the depreciable block, as claimed by the assessee, since the Namah building and Lakhani Centrium were treated as self-occupied property and income from house property, respectively. The Tribunal upheld the CIT(A)'s decision that these properties never entered the block of depreciable assets.

Regarding the car, the Tribunal found that the authorities below doubted the genuineness of the delivery document without substantial evidence. The Tribunal set aside the orders of the authorities below, deciding the issue in favor of the assessee, allowing the claimed depreciation on the car.

Conclusion:
The assessee's appeal was partly allowed. The Tribunal upheld the CIT(A)'s decision on the short-term capital gains and applicability of Section 50 but ruled in favor of the assessee regarding the depreciation on the car.