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TMI Blog2013 (2) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... n sale of industrial galas. 2. The Commissioner (Appeals) failed to appreciate that MIDC deposit of Rs. 57,557/-, BSES deposit of Rs. 81,191/-, BMC Security deposit of Rs. 65,800/-, deposit with Gas Authority of Rs. 13,100/-, license fees of Rs. 1,13,320/-, prepaid expenses of Rs. 31,250/- and the property tax paid in advance of Rs. 69,07,946/- were inextricably connected with the industrial galas and thereafter these deposits and expenses have gone along with the said galas and hence these deposits and expenses need to be considered while determining the short-term capital gains on sale of the industrial galas. 3. The Commissioner (Appeals) failed to appreciate that if the deposits and expenses are not treated as a part of the cost of the industrial galas, in such circumstances these deposits and expenses will have to be allowed as business loss as these deposits and expenses paid in advance are required to be allowed as revenue expenses on closure of the unit in Seepz. 4. The Commissioner (Appeals) erred in not allowing write off of the written down value of the safes of Rs. 23,790/-, of computer CPU for jewellery manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,93,32,286. In the return of income, the assessee decalred net capital gains at Rs. 2,06,67,083. This was the residue of sale consideration at Rs. 8,93,32,286 minus WDV at Rs. 6,14,05,018 on all assets and deposits with various government departments at Rs. 72,60,184. 4. In the course of assessment proceedings, the AO called for the detailed break up of the claim of capital gains at Rs. 2,06,67,083. In the reply to this query from the AO, the assessee vide letter dated 27.11.2009, submitted (extracted) : "The assessee is a partnership firm which was carrying on the busines of manufacturing and exporting jewellery from its factory at Seepz. The assessee firm had taken on lease from SEEPZ Authorities, four industrial gàlas bearing gala nos. 601 602 603 and 604 in Seepz at Andheri (East), Mumbai. The assessee firm furnished the said premises and various equipments and fittings and fixtures including the office equipments were installed. The assessee firm also got installed the gas pipeline for the purpose of manufacturing jewellery. The written down value of the said industrial gals, furniture and fixtures therein and machinery and office equipments as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital gains earned by the assessee on sale of the industrial galas. Thirdly, various deposits given in respect of the business being carried on from the said premises are also added to the written down value of the premises with these assets white ascertaining the short term capital gains. It is submitted that the assessee firm had transferred its MIDC deposits, BMC security deposits, Gas deposit, prepaid expenses, license fee and advance payment of property tax along with the premises because they cannot be separated or received back by the assessee firm. in this respect your kind attention is invited to the confirmations of both the purchasers of galas wherein they have confirmed that they purchase the gals from the assessee firm along with furniture, fixtures, electric fittings, office equipments, gas pipeline, etc. and also with the deposits given to various authorities as listed hereinabove Exhibit "B-1 and B-2 Fourthly, property tax advances amounting to Rs. 69,07,946/- had not been claimed as revenue expenditure by the assessee firm. Therefore, if the aforesaid properly tax advances are not treated as part of the cost of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregating to Rs. 11,20,81,000. He, reduced from the amount so arrived at by the assessee, the WDV on Galas (factory shed) at Rs. 4,83,42,826 and computed the capital gains at Rs. 6,37,38,174 and treated the same as STCG. The AO, finally taxed not only the STCG already declared by the assessee at Rs. 2,06,67,083 but also brought to tax Rs. 4,30,71,091 additionally. In the process, he also did not allow the deposits at Rs. 72,60,184 and WDV on other blocks to be included to the cost, for the purposes of arriving at the short term capital gains of Rs. 6,37,38,174. 9. Aggrieved, the assessee approached the CIT(A), before whom the assessee made various submissions. The assessee contested the decisions of the AO in not granting relief to the assessee with respect to (i) WDV on other assets and (ii) deposits of Rs. 72,60,184. On considering the assessee's submissions, the CIT(A) granted full relief with respect to the WDV on electric fittings and gas fittings and part relief at 50% on the WDV on furniture and fixtures. Regarding WDV on the rest of the other blocks and deposits, the CIT(A) confirmed the decision of the AO. Contents of paras 3.3.6, 3.3.7, 3.3.8 and 3.3.9 of the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the deduction to the extent of the WDV pertaining to these block of assets amounting to Rs. 25,55,697/- i.e. Rs. 25,06,696/- on account of electric fittings and further Rs. 49,001/-on account of gas pipelines. Therefore, in view of the same the AO is directed to allow deduction of Rs 25,55,697/- on this account out of the market value on sale of industrial units determined by the DVO for the purpose of computation of deemed short-term capital gain u/s 50 of the Act. Therefore, the addition made on account of the short term capital gain to this extent is directed to be deleted. 3.3.8. However, at the same time I also find that a part of furniture and fixture consist of movable furnitures in the nature of tables, chairs etc, computers, safes and office equipments are not intrinsically attached to these industrial sheds sold by the appellant, therefore, the AO is fully justified disallowing the claim of the appellant. No specific terms and conditions on this account are found recorded in the sublease deeds executed by the appellant. Therefore, to my considered opinion the appellant cannot be given the benefit of deduction out of the market value determined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moved in within a period of less then one month, i.e. in June 2007, though, the galas were transferred to the new entrants vide three way agreement, which were executed in October, 2007. During the course of hearing, the AR produced photographs of the furniture and fixtures as done up in the galas, which included glass partitions, conference tables, etc., which could not have been removed within the shortest duration of time, i.e. between May 20, 2007 when the business was shut down and June 20, 2007, when the buyers actually moved into occupy the galas. 12. Therefore, according to the AR, the assessee did not make any itematized sale of either the fixtures or of any other fixed asset when it sold the galas to Dania and Yash. 13. The AR, therefore, pleaded that the valuation given by the assessee has to be taken to be correct from another point of view, i.e. the owner of the galas was the Govt. of India, and under no circumstance, the assessee could have negotiated two rates, i.e. between themselves on the one hand and another agreement, interse between themselves and the Government of India, in a three way agreement, which had to be entered into by the entrant, into SEEPZ. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to other blocks and deposits. However, assesse/AR did not file any evidence to substantiate the same. Therefore, in these circumstances, the arguments advanced by the assessee, primarily based on the valuation of the galas are non maintainable, hence we are not going into the valuation aspect. Nevertheless, there is not one clue, which points towards lump sum sale, as has been reiterated by the AR at every stage, including, before us. In our considered opinion lump sum sale would, under all circumstance give one single comprehensive figure, not exact figure, going down to rupees and paise, like for example, the value of machinery taken, is shown at Rs. 1,61,43,858. Under no circumstance, even a presumption can be made that it was a lump sum sale. Adverting our attention towards grounds no. 1, 2 & 3, we find that the assessee had pleaded that advances to the tune of Rs. 72,60,184 should be included in the cost of the industrial galas or alternatively to be allowed as business as loss. It is an admitted fact that the deposits in question are not referred to valuation. Assessee has also not filed any evidence to suggest that the deposits are part of the cost of the assets in vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) had to be handed over as vacant premises. 22. After perusing the grounds, the orders of the revenue authorities and the relevant clause in the tripartite agreement, we find that the CIT(A) had been reasonable. As seen from the photographs, produced before us, which we are only presuming to be taken of the demised galas, we find that the fittings and glass facade/partitions were intricately fixed and a fair presumption can be made that, if the assessee vacated the premises and new entrants took over the possessions of the galas immediately, these fittings would have gone with the possession as well. In these circumstances, we fairly think that the values adopted by the CIT(A) are very reasonable. We, therefore, do not find any reason to disturb the findings of the CIT(A), which we sustain. These grounds are therefore, rejected. 23. In the result, grounds no. 5, 6, 7 and 8 are rejected. 24. Ground no. 9 is on jurisdiction. The ground is rejected, since this issue was not agitated by the AR at the time of hearing. We, therefore, refrain from giving any findings in the ground of appeal. 25. Ground no. 10 is general. 26. In the result, the appeal filed by the assessee is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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