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TMI Blog2013 (11) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said acquired assets has to be deducted from the sale proceeds received by assessee on transfer of the assets while computing the capital gains u/s 50 of the Act. Reliance has been placed on the Special bench judgment in the case of Chhabria Trust V/s ACIT [2003 (5) TMI 479 - ITAT MUMBAI], wherein it was held that for the purpose of section 50, it is not necessary that the newly acquired assets must be used for the purpose of business during the year under consideration – Again, reliance has been placed on the judgment in the case of Oceanic Investment Ltd. v. Asstt. CIT [1996 (9) TMI 581 - ITAT MUMBAI], wherein held that use of an asset which has been acquired out of transfer proceedings of the depreciable assets forming part of block of assets is not condition precedent for making adjustment in Block of assets – Following the above decisions, assessee is entitled to take actual cost of new premises aggregating to Rs.54,82,500/- which falls within the block of asset during the previous year to be deducted from the value of consideration received of Rs.67,68,750/- on transfer of earlier business premises whose WDV was NIL, while computing the capital gains u/s 50 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Rs.2,20,950/- and other expenses. Thus, the assessee claimed that actual cost of new office premises purchased during the assessment year under consideration was Rs.54,82,500/- (Rs.14,00,000 + Rs.37,15,000/- + Rs.2,20,950/- ) and formed part of the same block assets. Thus, the said cost of new office premises acquired during the year at Rs.54,82,250/- is adjustable against the sale of office premises at Prasad Chambers (ibid). The assessee computed capital gain of Rs. 12,86,500/- u/s 50(1) of the Act. (Rs. 67,68,750/- - Rs.54,82,500/- ). 5. However, the AO rejected the claim of assessee of deducting actual cost of new office premises acquired during the previous year relevant to the assessment year under consideration from the full value of consideration received on sale of office premises at Prasad Chamber (ibid) while computing the capital gain on the ground that the new office premises cannot form part of block of assets (i) that the assessee failed to take possession of the new office premises (ii) that the said premises were residential property and required to be utilized for that purpose only and thereby not forming part of block of assets. 6. Assessee also investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO while submitting the remand report has also examined one Mr. Jayesh A Ichhaporia who claimed to have transported the assessee's furniture into the impugned premises before 31.3.2007, on which the assessee relied upon to show that the property was not only taken possession but was also occupied before 31.3.2007 and stated that he did not remember exact date of transportation of furniture into the impugned new premises. Thus vital link is missing as to actual date of transport. The ld. CIT(A) has further stated that the assessee itself informed the Registrar of Firms to carry-on business from the new premises with effect from 1.06.2008. Thus, the assessee had not put to use the said new premises before 31.3.2007 for the purpose of business. Hence, purchase value of the said assets cannot go to reduce the capital gains arising on sale of other assets in the block, in the year of acquisition of new asset itself. In view of above, ld. CIT(A) has confirmed the action of AO for the purpose of computing capital gains u/s 50 of the Act in not reducing the cost of acquisition of two new impugned premises of Rs.54,82,500/- from the sale consideration of Rs.67,68,750/-. 8. In view of ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 8.3.2007 (supra). He submitted that assessee put to use the said newly acquired premises before 31.3.2007 for its business purposes. He submitted that even if the premises were not put to use, as per Clause (iii) of section 50(1) of the Act, the only requirement is to acquire the assets during the previous year and the actual cost of acquiring of such assets which fall within the block of assets is entitled to be set off against the sale proceeds while computing the capital gain. He submitted that as per section 50(1) of the Act, there is no requirement to use the said premises for business purpose to claim the benefit of section 50(1) of the Act. To substantiate his above submissions, ld. AR submitted that same very issue had been considered by Mumbai Special Bench of the Tribunal in the case of Chhabria Trust V/s ACIT [2003] 87 ITD 181 (MUM.) (SB), wherein it was held that for the purpose of adjustment under section 50 it is not necessary that newly acquired asset must have been used for purposes of business during the relevant assessment year. He submitted that the said decision of the Special Bench of the Tribunal was followed by ITAT, Mumbai Bench in the case of Fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agri University, Manipada Road, Santacruz (W), Mumbai-400098 vide agreement dated 8.3.2007 during the previous year relevant to the assessment year under consideration at a total cost of Rs.54,84,500/- and it forms part of block of assets. Thus, there is no dispute that the assessee had purchased two new premises during the previous year. We observe that the assessee claimed set off of the cost of newly acquired premises out of the sale consideration while computing capital gains u/s 50 of the Act. The AO denied adjustment of the cost of newly acquired premises on the ground that assessee failed to take possession of the newly purchased premises and put to use for its business purposes. However, we observe that the ld. CIT(A) after seeking remand report from the AO and considering the documents filed before him has admitted that the assessee has purchased/acquired two new premises at a total cost of Rs.54,82,500/- but confirmed the action of AO in not adjusting the purchase amount against the sale proceeds while computing the capital gains u/s 50 of the Act, on the ground that the assessee could not establish that it put to use the said premises for its business purposes in the AY- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or long term capital gain; 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in relying on the decision of the Hon'ble Bombay High Court in the case of CIT V/s ACE Builders Pvt Ltd, wherein it was held that even if the assets were depreciable, but held for more than 36 months, the sale proceeds could be invested under the provision of the sec 54EC of the IT Act, 1961, ignoring the fact that the decision of the Hon'ble Bombay High Court was not accepted by the department, in principle, as the decision of the High Court was not in consonance with the scheme envisaged in section 50 of the IT Act, 1961" 18. At the time of hearing, ld. DR merely relied on the order of AO and whereas ld. AR submitted that ld. CIT(A) has granted exemption u/s 54EC of the Act in respect of REC Bonds by relying on the decision of the Hon'ble Bombay High Court in the case of ACE Builders Pvt. Ltd. (supra). 19. Considering, the facts that the issue is covered in favour of the assessee by the decision of Hon'ble Bombay High Court (supra), we do not find any reason to interfere with the order of ld. CIT(A). Hence, we uphold the order of ld. CIT(A) by rejecting the grounds of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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