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TMI Blog1996 (9) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... s arisen as a consequence of the sale of office premises at Mumbai for a valuable consideration of Rs. 64,39,311. The assessee, had acquired another premises at Pune for a valuable consideration of Rs. 72,16,526. The assessee had claimed that because, the sold office premises and the newly acquired premises fell into the same class of asset, namely, office building, in view of the provisions contained in section 50 of the Act, it was entitled for adjustment of the cost of the newly acquired asset against the sale consideration of the asset that was sold for working out the capital gain on the depreciable asset `office building'. Accordingly, the assessee had arrived at a loss of Rs. 62,99,833 and this loss was claimed for adjustment from the income computed. 3. The Assessing Officer (hereinafter referred to as Assessing Officer), had refused the claim of the appellant company on the ground that the premises was not acquired and that it was not used for the purpose of business. The Assessing Officer had stated in his order of assessment that, the term `Block of Assets' as defined in section 2(11) of the Act, is for the purpose of allowing of depreciation which was subject to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. These have been very carefully considered by us. 6. The plea of the counsel Mr. Sonde was that the Revenue is not justified in insisting that the newly acquired office premises should have been used in the previous year and only on satisfaction of that condition that the assessee would be entitled for adjustment of its cost against the sale consideration for arriving at the capital gains and that too when the said section has not provided for any such condition. He pleaded that it is only in section 32 of the Act that the word `used for the purposes of the business' is contained as a condition, on satisfaction of which the assessee could be justified in claiming deduction of depreciation from the business income. He pleaded that section 32 of the Act states that depreciation is allowed as a deduction in the case of any block of assets, such percentage on the written down value (WDV). 7. He pleaded that the meaning and the manner of arriving at the WDV has been provided in section 43(6) of the Act and consequent to the addition of the term `block of assets' to section 2 of the Act, the manner of calculating the WDV of the block of assets has been added to section 43( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y but, is directed towards the ultimate objective of allowing depreciation and the provisions contained in section 43(6) of the Act is also directed towards allowing of depreciation. He strongly contended that the provisions contained in section 50 of the Act, is an extension of the other provisions as above and non-mention of the words `used for the purpose of the business' would not in anyway pare down the real intention of the provisions of the said section. He accordingly strongly supported the orders of the authorities below in not permitting adjustment of the cost of the new premises acquired in the year against the sale consideration of the office premises. 10. The issue revolves around the requirement and the conditions contained in the section 50 of the Act. This section has been given the title that read `special provision for computation of capital gains in case of depreciable assets'. As the title reads, it is unmistakable that the provisions contained therein are applicable only in respect of those assets that are depreciable and not for non-depreciable assets like the land. It would be necessary to reproduce the section for testing its significance. Section 50(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year. This implies that the asset that is sold during the previous year, the assessee would be entitled for the application of the said section 50 of the Act, on the satisfaction of the condition that, it was used for business in any of the earlier assessment year, on satisfaction of which condition, it was allowed depreciation in that asset year and use or non-use for the purpose of business in the year of sale would have no effect on its qualification of applicability of the said section. 13. The other adjustment with which we are presently seized with is of actual cost of the asset that is acquired in the year and such adjustment is possible only if the purchased asset falls in the same class of block of assets of which the sold asset was a part. This adjustment clause does not contain the words `used for the purposes of business' after the words `the actual cost of any asset falling within the block of assets acquired during the previous year'. It is evident from the title given to the section and the provisions of the section, it is concerned with arriving at the capital gains on the sale of a depreciable asset with reference to the date of sale, which date of sale ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, section 43(6) of the Act that is depended upon section 2(11) of the Act but, is not depended upon section 32 of the Act for the determination of WDV. In our view, therefore, the authorities below were unjustified in refusing to adjust the cost of newly acquired assets namely, office building against the sale consideration of the office premises by insisting upon the satisfaction of a non-existent condition that the said premises must be used for the purpose of the business. We accordingly uphold the claim of the assessee that it is entitled for adjustment of the actual cost of the newly acquired office building of Rs. 72,16,526 in computing the capital gain on the sale of depreciable asset namely, `office building' and delete the addition of Rs. 62,99,833. 17. The second issue of disallowance of interest of Rs. 15,300, because the assessee had advanced Rs. 1,02,000 free of interest to certain parties, was claimed as unjustified. The plea of the counsel for the appellant company was that the lower authorities had refused to consider the fact that the assessee had capital and free reserves aggregating to Rs. 71.49 lakhs and that because the authorities having not found any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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