2023 (11) TMI 633 - AT - Income Tax

Sale of land - long term capital loss / gain (LTCG) or Short term capital loss / gain (STCG) - Depreciable assets or not - Computation of Capital Gain u/s 50 - Assessee never claimed the depreciation on land - HELD THAT - We fail to understand on the conclusion drawn by Ld. CIT(A) of treating land as depreciable assets and subjecting it to capital gain u/s. 50 of the Acton the premise that land was traded by the assessee as a business asset as reflected in the Balance Sheet of the assessee. The issue contested by the assessee was that Ld. AO was not correct in computing the long term capital gain on sale of land as against the long term capital loss reported by the assessee by taking indexation benefit on the cost of acquisition. Ld. CIT(A) has altogether digressed from the issue and taken a stand unwarranted on the facts of the case. Assessee has never claimed any depreciation nor it has been allowed in the books of account for which reference was made to the audited financial statement forming part of the paper book. Ld. Counsel referred to Schedule G of fixed assets forming part of the audited financial statement wherein land is one of the items reported in the Schedule. It was pointed out that in the gross block and net block, the amount which appeared against land are gross amounts at which the lands were acquired by the assessee. In the same schedule, in the column for depreciation, the amounts are NIL thus, no depreciation whatsoever has been charged by the assessee on land owned by it. Ld. CIT(A) has placed reliance on certain judicial precedents which are in reference to sec. 50 dealt with the depreciable assets and treatment of capital gain thereon. Thus, considering the submissions made by the Ld. Counsel, the factual matrix and the material on record, we set aside the order of Ld. CIT(A) since he has altogether digressed from the issue raised by the assessee before him and had taken a stand unwarranted on the facts of the case. Considering the above stated facts duly corroborated by documentary evidence, we find the computation of long term capital loss on sale of land to be proper and allow the claim of the assessee. Accordingly, grounds taken by the assessee are allowed.

Summary

Issues:
The appeal challenges the order of Ld. CIT(A) regarding the treatment of land as depreciable assets and the computation of long-term capital gain on the sale of land.

Issue 1: Treatment of Land as Depreciable Assets

The assessee contested the Ld. CIT(A)'s decision to treat the land as depreciable assets and to classify the gain/loss from the sale of the land as short-term capital gain/loss. The appellant argued that no depreciation was claimed or allowed on the land, as evidenced by the audited accounts and income tax records. The appellant further contended that the order relied on irrelevant judgments not applicable to the case. The Ld. CIT(A) directed the Assessing Officer to treat the capital gain as short-term capital gain under Section 50 of the Income Tax Act.

Issue 2: Computation of Long-Term Capital Gain

The primary issue in this appeal pertains to the computation of long-term capital gain on the sale of land. The assessee reported a long-term capital loss, which was recalculated by the Ld. AO as long-term capital gain. The appellant provided detailed facts regarding the sale of land, including agreements and financial statements. The Ld. AO's method of computation was challenged, particularly concerning the index cost of acquisition and deductions from sales proceeds. The Ld. CIT(A) upheld the assessment, directing the capital gain to be treated as short-term capital gain under Section 50 of the Act.

Conclusion:

Upon review, the Appellate Tribunal set aside the Ld. CIT(A)'s order, emphasizing that the land was not a depreciable asset and had never been treated as such by the assessee. The Tribunal found that the Ld. CIT(A) had deviated from the core issue raised by the assessee and made an unwarranted decision. The Tribunal accepted the computation of long-term capital loss provided by the appellant, supported by documentary evidence. Consequently, the Tribunal allowed the appellant's grounds, and the appeal was granted in favor of the assessee.

This summary provides a detailed overview of the issues raised in the legal judgment, including the treatment of land as depreciable assets and the computation of long-term capital gain on the sale of land.