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TMI Blog2012 (10) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... - IT APPEAL NOS. 444 & 445 (MDS.) OF 2011 - - - Dated:- 16-3-2012 - N.S. SAINI, AND GEORGE MATHAN, JJ. M.N. Naik for the Appellant. R. Sundara Rajan for the Respondent. ORDER George Mathan, Judicial Member - ITA No. 444/Mds./11 is appeal filed by the Revenue against the order of Commissioner of Income Tax(A)-V, Chennai in appeal No. 119/08-09 dated 30.11.10. ITA No. 445/Mds./11 is appeal filed by the Revenue against the order of Commissioner of Income Tax(A)-V, in appeal No. 406/09-10 dated 30.11.10. Shri M.N. Naik, Ld. C.I.T. DR represented on behalf of the Revenue and Shri R. Sundara Rajan, C.A., represented on behalf of the assessee. 2. It was submitted by Ld. DR that for assessment year 2006-07, there were two issues. The first was against the action of the Commissioner of Income Tax(A) in allowing capital expenses of Rs. 12,68,286/- on conversion of land held as capital assets and later converted into 'stock in trade'. The second issue was against the action of the Ld. Commissioner of Income Tax(A) in allowing the terminal depreciation on the WDV of the cost of the factory building and land as a revenue expenditure. It was the submission that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Authorised representative of the assessee has filed written submissions as follows:- "For A.Y. 2007-08 1. Loss on conversion of Land Rs. 12,68,286/-During 1995 the factory land of 69,478 sq. ft. of and was acquired at the cost of Rs. 23,50,823/- and the assessee have incurred the development cost of Rs. 21,54,602/- for the Land portion in which the Factory Building is constructed during 1995. The factory building was constructed on 14,300 sq.ft. and the development cost of land is incurred only for that portion. The total cost of land including the land development cost is included in the Fixed Assets Schedule during 1995 as cost of land. After 2003, because of the recession imprinting industry for which the Company is originally formed, the management of the Company thought of utilizing the vacant land available for promoting independent residential dwelling units and diversified their line of activity and got necessary approvals from the Government authorities. In the first two years 2003-04 and 2004-05 only vacant factory land is utilized and only the cost of the land and the conversion value is taken into account in the books. However, during 2005-06 accounting yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of 69,478 sq. ft. of and was acquired at the cost of Rs. 23,50,823/- and the assessee have incurred the development cost of Rs. 21,54,602/- for the Land portion in which the Factory Building is constructed during 1995. The factory building was constructed on 14,300 sq.ft. and the development cost of land is incurred only for that portion. The total cost of land including the land development cost is included in the Fixed Assets Schedule during 1995 as cost of land. After 2003, because of the recession imprinting industry for which the Company is originally formed, the management of the Company thought of utilizing the vacant land available for promoting independent residential dwelling units and diversified their line of activity and got necessary approvals from the Government authorities. In the first two years 2003-04 and 2004-05 only vacant factory land is utilized and only the cost of the land and the conversion value is taken into account in the books. However, during 2005-06 accounting year, the land wherein the factory building has been constructed is demolished and the portion used for Second Phase and Third Phase of the project. The development cost has to be absor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the Individual Bungalow Unit buyers the cost of building demolished and the land development cost is recovered during the year amounting to Rs. 89,66,138/- shown as sale of bungalow units and offered as income in the profit and loss account. Hence the cost is recovered and shown as income in the books of account, the written down value of the building demolished can be treated as allowable expenditure and relying on Section 32(1)(iii), the written down value of the building demolished can be allowed as expenditure. The salvage materials on demolition is again used for Construction of Individual Dwelling Units and hence the same is absorbed in the cost of construction. 3. Depreciation on building Rs. 1,19,481/- Depreciation has been claimed for the portion of the building not demolished during the year and the same has been utilized for business purposes as godown and the assessee has stored the building materials and other tools used for construction of dwelling bungalow units. The portion of building not demolished is used only for the business purposes and hence the depreciation is claimed in our return of income." 5. We have considered the written submissions filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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