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TMI Blog2013 (9) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of non-user, as stated by him. Where, one may ask, is the question of user, when the asset itself is no longer a business asset? To clarify this aspect further, take the example of three, instead of two, assets comprising the block as at the beginning of the year. While one stands sold, the second is let out and the third continues to be retained in and used for business. Could depreciation be claimed with reference to the block comprising the two remaining assets? Clearly not, and an adjustment for the asset let, as it no longer forms part of or qualifies as an asset of the business, has necessarily to be made, in computing the WDV or the capital gain, on the asset sold or the depreciation on the sole remaining business asset, as the case may be, as under the scheme of the Act it would be an either or situation, and both cannot obtain. The asset let would be akin to any other independent capital asset owned by the assessee, though the fact of it having been used for business purposes and depreciated in the past would impact its date and cost of acquisition. The assessee’s case clearly falls u/s. 50(2); the only asset, namely, the property at Arun Chambers, Mumbai, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant issues are deliberated upon. There could possibly be no vested right in the assessee not appealing earlier; the non-receipt of the appeal memo (in the Department s appeal) due to change of address being a matter of record, and which has not been disputed by the Revenue. The assessee s C.O. was, accordingly, admitted and the hearing in the matter proceeded with. 4. The brief facts are that the assessee-company owns two house properties, namely Flat No.602, Arun Commercial Premises Co-operative Society Ltd., Tardeo Main Road, Mumbai-400 034, by the name Arun Chambers , and another at 44A, Nariman Point, Mumbai-400 021, by the name Nariman Bhavan . Both the properties being used by the assessee for its business for the immediately preceding year, constitute its relevant block of assets, i.e., Buildings , as at the beginning of the current year. The Nariman Bhavan property was in fact let out continuously up to AY 2004-05, and classified by the assessee in its accounts as an investment . The same was, as stated, introduced in business as its office premises during the previous year relevant to AY 2005-06 and, accordingly, inducted in the relevant block of assets, and depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bench as to how could it be so, i.e., as claimed by the assessee, inasmuch as the only other property constituting the relevant block, i.e., Nariman Bhavan, stands since let (i.e., in July, 2005), so that it no longer formed part of the relevant block of assets, the ld. AR would submit that the law provides no exception, and the WDV as at the beginning year would have to be deducted nevertheless, though, of course, no deprecation would be exigible in its respect inasmuch as the only asset comprising the block being let out, it is no longer put to use for business. The law, it was explained by him, prevents a claim of deprecation in view of the asset being no longer used for the purpose of business, but does not provide for reduction in the WDV of the relevant block of assets on an asset no longer remaining an asset of the business, as in the instant case, having been given on rent. In any case, the reduction in WDV, even assuming so, could take effect only on the date on which the asset is actually let, i.e., July, 2005, and not 01.04.2005, which is the material date. No specific arguments were raised by the ld. DR qua the assessee s CO, relying on the assessment order. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets. The same, it would be noted, adopts the same basis as of section 43(6), which defines the WDV of a block of assets, i.e., assets of a particular class for which a uniform rate of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it becomes ineligible for being considered as part of the relevant block of assets. The question of computing either depreciation or capital gains with reference to its value, therefore, just does not arise. It is to highlight this aspect of the matter that the ld. AR was posed a query during the hearing qua the claim of depreciation in a case where, instead of a higher sale consideration, the same were to be at an amount lower than the carrying value (opening WDV) of Rs.72.36 lacs. As rightly stated by him, no depreciation for the relevant year would be eligible on the said block in that case despite a positive WDV. This is for the reason that the block ceases to exist, with one asset being sold out and the other removed from the block by being let, and not for the reason of non-user, as stated by him. Where, one may ask, is the question of user, when the asset itself is no longer a business asset? To clarify this aspect further, take the example of three, instead of two, assets comprising the block as at the beginning of the year. While one stands sold, the second is let out and the third continues to be retained in and used for business. Could depreciation be claimed with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, namely, the property at Arun Chambers, Mumbai, constituting the block at the relevant time, being sold in September, 2005, with no subsequent additions to the block. It would, we may though clarify, again, not matter if the other property rented out was so done subsequently, and not prior thereto in July, 2005. This is as the question of applicability of sec. 50(1) or s. 50(2) is to be seen as at the year-end, whereat only the depreciation u/s.32 as well as capital gain u/s.50 is to be computed, taking the entire transactions during the year into account. 7. Accordingly, the WDV of the block, adjusted for the removal of the property let out during the year in July, 2005, is to be taken into account for computing the STCG u/s.50. On the aspect of the quantum of adjustment, we find no dispute; the relevant figure/s having been rather supplied by the assessee itself. Further, we observe that the ld. CIT(A) states of the transfer value of the asset sold as being at Rs.38.53 lacs, i.e., as against Rs.39 lacs by the A.O. However, neither was this issue raised before us nor is the same relevant in view of the applicability of section 50C, so that the same would stand substituted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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