9911796707
Advanced Search 
TMI Blog2007 (1) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... f commercial complex along with undivided interest in the land in the relevant previous year. However, in the schedule of fixed assets, the whole of the cost was shown under the head "Building". Therefore, the assessee was required to furnish a valuation report with a view to find out the component of land cost and state why depreciation on the value of land claimed in the return may not be disallowed. The case of the assessee was that he acquired interest only in the building and not in the land. On this plea, valuation of land and building in separate terms was not furnished. It was claimed that the assessee was entitled to deduct depreciation on the whole of the cost in view of the decision of the hon'ble Supreme Court in the case of CIT v. Hindustan Times Ltd. [1998] 231 ITR 741. However, the Assessing Officer did not accept the arguments of the assessee. He was of the view that the case was squarely covered within the ratio of the decision of the hon'ble Supreme Court in the case of CIT v. Alps Theatre [1967] 65 ITR 377, and the assessee was not entitled to deduction of depreciation on the component of the value of land contained in the purchase consideration. Since the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him on page 6 of the order. It was mentioned therein that it was a common knowledge that construction cost is normally between 100 per cent. to 200 per cent, of the cost of land. Therefore, it would not be wrong to estimate one-third of the purchase consideration to be the cost of the land. 4 Coming to the legal issue, the learned Departmental representative read out extensively from the decision in the case of Alps Theatre [1967] 65 ITR 377. In that case, the Tribunal while accepting the case of the assessee had lion observed that you cannot conceive of a building without land beneath it. It was not possible to conceive a building without a bottom. What section He 10(2) (vi) of the 1922 Act says is that depreciation will be allowed on building. The word "building" itself connotes land on which something has the been constructed. It was, therefore, wrong on the part of the authorities below to exclude the value of land upon which some construction was that made. The true meaning of the word building" itself connotes the land upon which something has been constructed. It was, therefore, wrong on me the part of the authorities below to exclude the value of land upon which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A formal agreement was entered into between it and the Land Development Officer (LDO), under which a sum of Rs. 3,65,875 was paid to the LDO. Higher rent was also fixed for the land. The assessee demolished the existing structure on the land and constructed a multi-storeyed building thereon, which was several times the original area of the said land. After completion of the construction, the assessee applied to LDO for using the building for commercial purposes and paid a further sum of Rs. 36,96,516 for such user. The Assessing Officer disallowed, the deduction of depreciation on this payment by holding that the impugned amount was paid for conversion of the land user and, therefore, it should be added to the cost of the land. The matter was decided in favour of the Revenue by the Commissioner of Income-tax (Appeals) and the Tribunal. The High Court gave a finding that the conversion of the user had already taken place when the assessee paid a sum of Rs. 3,65,875 to the LDO in an earlier year and, therefore, there was no question of any further commercialisation of the land. The amount paid after construction of the building, which had been constructed by the assessee, formed pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d nothing onaccount of carriage of the goods and, therefore, the provisions of section172(2) were not applicable. The hon'ble court pointed out that it was true that excessive reliance could not be placed on the form which the partiesgave to their agreement, or on the label which they attached to the payment due from others. One must have regard to the substance of thematter and, if necessary, the veil may be lifted in order to see the truecharacter of the payment. In this very connection, he also relied on thedecision of the hon'ble Supreme Court in the case of Controller of Estate Duty v. Aloke Mitra [1980] 126 ITR 599. The decision of the hon'ble courtwas that section 5(1) of that Act alone was capable of imposing a charge ofduty. By no rule of construction, the operation of this section can be curtailed by operation of section 6, as the latter section is in addition to theprovisions of this section. The object of section 6 is to catch properties inthe net of section 5, which do not really passed on the death of a person,such as recoverable gifts, etc. Thus, where the deceased was the real ownerof certain shares held by him as benami in the names of the wife and sons,the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble court was occupied with the interpretation of the term "owner", occurring in section 22 for the purpose of bringing to tax income from house property. The hon'ble court pointed out that construction of the statute should be so made as to take into account the changes occurring after enactment of the statute. On that basis, it was held that the owner must be that person who can exercise the rights of ownership in his own right and not on behalf of the owner. Thus, it was held that registration of sale deed was not sine qua non for coming to the conclusion whether a, person was owner of a house property or not. 9 Thereafter, learned counsel took us through paragraph 2.2 of the agreement, which fixes the consideration at Rs. 6,73,29,473 at Rs. 750 per sq. ft., consisting of price of the land and the superstructure. His case was that the consideration was fixed with reference to the constructed portion. It was also mentioned that physical possession of the ground floor and vacant physical possession of one quarter of basement of the property will be effected by a possession letter to that effect. He also referred to paragraph 4.1.3(d) regarding representations and warranty and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer for this purpose. 12 In the rejoinder, the learned Departmental representative referred to a number of clauses in the main agreement which speak about proportionate ownership of the land passing to the assessee under the agreement. It was pointed out that in spite of requisition of the valuation report by the Assessing Officer, it was not filed by the assessee and, therefore, his estimate may be upheld. It was also pointed out that the assessee had not taken any ground about excessive disallowance of depreciation on land. It was clarified that the stipulation of the sale of units in the agreement with GDA was made to ensure that the assessee constructed commercial building and did not sell land to the prospective buyers. It was agitated that the issue has to be decided on the basis of facts as they existed in the relevant previous year and in this connection the argument of increase in FAR. etc., was totally extraneous to the consideration of the matter. 13 We have considered the facts of the case and rival submissions. The first issue in this case is regarding the interpretation of documents. The case of learned counsel was that the documents should be read as a whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas, service areas and facilities. The fixation of rate was merely a methodology to work out the total consideration for the aforesaid land, building, common areas, service areas and facilities. It could have been fixed with reference to proportionate area of land or constructed space as the two are linked with each other by a multiplication factor of FAR The article nowhere curtailed of the right of the assessee to ownership of undivided proportionate share in land. It was also argued by learned counsel that the land was of no use to the assessee. There is nothing on record to suggest the same. In fact, common areas, service areas are necessary to get ingress into the building for its effective utilisation. The building cannot stand without the land ole beneath it. Therefore, for the effective use of the building, the ownership of the land and interest in common areas and service areas was of equal importance. In any case, if an assessee purchases an useless asset for a consideration, its cost will not become nil. Thus, we are of the view that the subject-matter of the agreement was land and building for which the consideration was paid. 15 Coming to the second issue, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had also taken a plea that the land and building were used in the business for less than 180 days and, therefore, disallowance of depreciation relatable to land at 10 per cent. was excessive, which should be reduced to 5 per cent. His case was that as a respondent, he could support the findings of the learned Commissioner of Income-tax (Appeals) by any other argument or on any other ground. We find that this view is supported by the decision of the hon'ble Bombay High Court in the case of B. R. Bamasi v. CIT [1972] 83 ITR 223. The hon'ble court pointed out that the position of an appeal under section 33 of the Indian Income-tax Act (1922 Act) and an appeal under the Code of Civil Procedure is identical. In the case of Venkatarao v. Satyanarayanmurthy [1994] ILR Mad 147, it was held that it was open to a respondent in an appeal, who had not filed cross-objection with regard to the portion of the decree which had gone against him, to urge in opposition to the appeal of the appellant a contention which if accepted by the trial court would have necessitated the total dismissal of suit, but the decree in so far as it was against him would stand. In view of this judgment, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals). In view of these facts, it will not lie in the mouth of learned counsel now to say that the rate fixed by the Assessing Officer was excessive for reasons that (i) there is no evidence on record to support the case of the assessee, and (ii) the Assessing Officer had adopted a very reasonable method of allocating cost in absence of any evidence filed before him. 18 In a nutshell, it is held that on a complete reading of the documents, it is found that the subject-matter of agreement was land and building and fixation of rate on the basis of built-up area and the clause in the agreement between seller and the GDA do not detract us from the aforesaid conclusion in any manner. The land was very much useful for enjoyment of the built-up area and in any case that issue is irrelevant in determining that the proportionate land had any cost or not. The issue is regarding the subject-matter of the agreement and the consideration paid, which is against the assessee. The determination of the value of land and depreciation claimed thereon involve finding of new facts, which is beyond the ambit of this appeal even after taking into consideration the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 315 (SC) that it is so confined and did not apply where the receipts were directly connected with or were incidental to work of construction of the assessee's plant. The decision in the case of Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) had been followed in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. [2001] 243 ITR 2 (SC) and CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC). It was also pointed out that in the latter case, it was not disputed by the Revenue that the question related to hire charges paid by contractors had to be answered in the light of judgment in the case of Bokaro Steel Ltd. [1999] 236 ITR 315 (SC). Therefore, it was not now possible to take any different view than the view taken in Bokaro Steel Ltd.'s case [1999] 236 ITR 315 (Sc). 23 As against the aforesaid; learned counsel relied on the decision of the learned commissioner of Income-tax (Appeals). He also mentioned that the Tribunal has subsequently distinguished the decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172 (SC) in a case. 24 We have considered the facts of the case and rival submissions. In the as case of Tuticorin Alkali Chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure for finding out the cost of installation of plant and machinery. Learned counsel had also spoken about some case of the Tribunal, which distinguished the case of the aforesaid Tuticorin [1997] 227 ITR 172 (Sc). That case was, however, not cited before us. We are of the view that the Tribunal can legitimately distinguish facts of the case at hand from the facts of the case decided by any court and thereafter may come to an appropriate conclusion in the matter. However, the expression used by learned counsel "distinguished the case of Tuticorin" is vague and he has not distinguished the facts of the instant case from the case of the aforesaid Tuticorin [1997] 227 ITR 172 (SC). Having considered the decisions in the cases of Tuticorin [1997] 227 ITR 172 (SC) and Bongaigaon [2001] 251 ITR 329 (SC), it is clear that the facts of the instant case are identical to the facts of the case of Tuticorin [1997] 227 ITR 172 (SC). It is not a case where certain recoveries were made from the contractors by the assessee, who were executing the capital projects, which reduced the outgoings to be paid to the contractors. It is a case of utilization of surplus funds for earning interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
