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TMI Blog2017 (10) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... n the block of factory building on the WDV as reduced by the sale consideration. Notably, the cost of acquisition and cost of improvement thereof amounting to ₹ 15,00,000/- (net of ₹ 3,00,000/- in respect of land) and ₹ 1,09,96,039/- respectively were added to the value of the block of factory building. In considered opinion, the assessee has clearly brought out that the factory building was not put to use and was sold out prior to it being used for business. Therefore, in such a situation, the provisions of Sec. 50 of the Act do not come into operation, as canvassed by the assessee before me. Sec. 50 prescribes for computation of Capital Gains in cases where the capital asset forms part of block of assets in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short the Act ). 2. In this appeal, assessee has raised the following Grounds of appeal :- 1. The Ld. Commissioner of Income Tax (Appeals) - 44, Mumbai [hereinafter referred to as Ld. CIT(A) ] erred in confirming the action of the Ld. A.O. in making addition of ₹ 12,50,767/- on account of profit on sale of factory building treating the same as Income from Other Sources without appreciating the facts and circumstances of the case. Hence, the addition of ₹ 12,50,767/- under the head Income from Other Sources is unjustified and the same may be deleted. 2. The Ld. CIT(A) failed to appreciate the fact that the factory building purchased and improved upon during the year was acquired exclusively for the purpose of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 1,22,00,000/- on account of factory building sold (net of the land value of ₹ 3,00,000/-) and accordingly, claimed depreciation on the balance of the Written Down Value (WDV) lying in the block of factory building . The Assessing Officer required the assessee to explain as to why the surplus on the sale of the property was not offered to tax. The stand of the assessee was that the treatment accorded by it was in accordance with the provisions of the Act whereby the sale value was reduced from the value of the respective block of asset, and only on the resultant WDV, depreciation was claimed, and it was emphasised that the property in question was a fixed asset. The Assessing Officer, however, disagreed with the treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring activities, but after it was sold without putting it to use for any manufacturing activity. It was emphasised that after acquisition, assessee had spent a considerable sum of money on its improvement and extension as assessee was planning to expand its manufacturing capacity. So however, in the absence of good business prospects, without putting the factory building to use for manufacturing, it was sold. It was, therefore, contended that it has been wrongly treated as a transaction involving investment in a business asset. 6. On the other hand, the ld. DR appearing for the Revenue has relied upon the reasoning advanced by the lower authorities, which I have already noted in the earlier paras and is not being repeated for the sake of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and thus, it cannot be construed to be a capital asset in respect of which depreciation has been allowed under the Act. Therefore, the treatment accorded by the assessee is incorrect. At the same time, even the treatment by the Assessing Officer of assessing the surplus on the sale of factory building as income from other sources is also untenable. Pertinently, the factory building is a capital asset and merely because assessee has acquired it and sold during the year itself would not change its character. Therefore, it is a case where the capital asset on which depreciation has not been allowed has been sold within a period of less than 12 months of its acquisition and, therefore, the resultant surplus is a Short Term Capital Gain. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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