9911796707
TMI Blog2019 (6) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... equential relief is to be allowed. Allowance of cost of improvement claimed - assessee is unable to file any evidence before the lower authorities as the transaction of the year 2003-04 and it is 16-year-old matter - HELD THAT:- As noted assessee had incurred various expenses on improvement of the 4 galas in the nature of certain architectural changes, during the A.Y. 2004-05 amounting to ₹ 46,45,700/- which was duly explained from the Schedule of Fixed Assets in the Audited Balance Sheet of the company for FY 2003-04. During the course of assessment proceedings, the AO had asked the AR of the assessee firm to produce various documentary evidences in order to substantiate the cost of acquisition as claimed. We direct the assessee to produce all the relevant evidences before AO and AO will consider the relevant accounts of the assessee including schedule of fixed assets from the balance sheet and will decide the issue afresh. Hence, this issue is set aside to the file of the AO. - Appeal of assessee is partly allowed. - ITA No. 1849/Mum/2018 - - - Dated:- 19-6-2019 - Sri Mahavir Singh, JM And Sri Rajesh Kumar, AM For the Appellant : Dr. K Shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 4.50 crores as recorded in the sale deed. The assessee company claimed that it had treated such office as investment and hence, it computed long term capital loss of such sale and disclosed the same in the return income. The AO in the assessment proceedings treated the long term capital loss computed on such sales as short term capital gain since the said office was disclosed under the head fixed assets in the balance sheet. According to the AO, the assessee has claimed depreciation on the said office premises and hence, computed the capital gain as per the provisions of section 50 and 50A of the Act. The AO reworked the capital gain and also disallow the expenses on cost of improvement amounting to ₹ 46,65,700/- and also different in cost of acquisition being amount of ₹ 2,87,800/-. The AO also invoked the provisions of section 50C of the Act and taken the full sale consideration for the purpose of computation of short term capital gain as computed by the registering authority for the purpose of stamp valuation at ₹ 4,55,51,800/-. Aggrieved, assessee preferred the appeal before CIT(A). 4. The CIT(A) simply confirmed the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 50 and 50A of the Act are for the purpose of computing income under the head capital gains . We noted that as per section 50 and 50A of the Act, it is mandatory that the assessee should have claimed depreciation u/s 32 of the Act in any of the preceding assessment years. In the instant case, the assessee, right from the date of purchase had made a provision for depreciation as per Companies Act, 1956 amounting to ₹ 1.41 crore till 31.03.2011 but did not claim depreciation as per Income Tax Act, 1961. The said fact can be corroborated from the returns filed by the assessee company for all of the preceding assessment years. Now, before us, the assessee has field copies of acknowledgement and computation of income from A.Y. 1999-2000 to A. Y. 2014-15 in its paper book to prove this fact. Also, during the course of assessment proceedings the AO treated the long term, capital gain on sale of immovable property as short term capital gain as per para 5.3 of assessment order by stating that the office premise being depreciable capital asset forms part of block of assets within the meaning of section 2(11) of the Act and cannot be excluded from being a part of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the decision of another co-ordinate bench of Kochi Tribunal in Sakthi Metal Depot vs. ITO (2005) 3 SOT 368 (Cochin) (Trib.). The Tribunal held in para 6 to 10 as under: - 6. The assessee is in further appeal before the Tribunal. We have carefully considered the facts and the rival contentions. In the case of Ace Builders P. Ltd. (supra), the Hon ble Bombay High Court held that the fiction contained in section 50 is limited to computation of capital gains only and not to the exemption provisions such as section 54E, for which purpose no distinction can be drawn between a depreciable asset and non-depreciable asset. It was accordingly held that the exemption under section 54E was allowable to a long term capital asset notwithstanding that it was held as a business asset on which depreciation had been allowed. In other words, it was held that section 50 created a legal fiction only for a limited purpose, namely, for the purpose of sections 48 and 49 and that it cannot be extended to section 54E of the Act. In our humble understanding, the judgment is not of assistance to the assessee in the present case. As pointed out on behalf of the departmental authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1997-98. On further appeal to the Tribunal, it was held that the flat ceased to be a business asset or depreciable asset on and with effect from 01.04.1995 and its character during the accounting year ended on 31.03.1998 was that of a long term capital asset and, therefore, the capital gains should be computed as long term capital gains. In this order the provisions of section 50A were referred to. This section makes special provision for cost of acquisition in the case of depreciable asset. It says that where the capital asset is one in respect of which depreciation was allowed in any previous year; the provisions of sections 48 and 49 shall apply subject to the modification that the written down value of the asset, as adjusted, shall be taken as the cost of acquisition. Relying on this provision the Tribunal held that but for the difference in the cost of acquisition, a past claim of depreciation does not change the character of the asset as such. This order of the Tribunal supports the assessee s case before us. In the present case also the assessee had stopped claiming depreciation in the income tax return for the assessment years 1992-93 and 1993-94. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness asset and is held as an investment. The character of the asset has been changed from that of a business asset to an investment shown as fixed asset in the Balance Sheet. Even otherwise, the manner in which the asset is shown in the accounts of the assessee may not be conclusive if there are facts to show that for a long period of time the asset had ceased to be a business asset and no depreciation was claimed or allowed thereon. In the present case not only was the claim of depreciation in respect of the flat discontinued by the assessee after the assessment year 1993-94, but the flat had been let out for rent from the assessment year 1994-95. For a few years, i.e. from the assessment years 1994-95 to 1999-2000, the rental income was offered as business income. However, from the assessment year 2000-01, the rental income was offered for assessment under the head Property . There is nothing to show that it was one of the businesses of the assessee, as per its object clause in the Memorandum of Association, to let out flats on rent. Even if that were to be so, when there is a specific head under which the rent has to be assessed, namely, Income from house property , the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m capital gain and consequential relief is to be allowed. 10. As regards to the aspect of allowance of cost of improvement claimed by assessee, we noted that the assessee is unable to file any evidence before the lower authorities regarding incurring of cost of improvement. Now, before us, the assessee contended that this is almost the transaction of the year 2003-04 and it is 16-year-old matter, there are chances that evidences are not available with the assessee. He stated that in case the matter is restored back to the file of the AO, he can file the evidences in the shape of balance sheets wherein, addition made to the office premises can be proved, which are records of the Department. 11. We noted that assessee had incurred various expenses on improvement of the 4 galas in the nature of certain architectural changes, during the A.Y. 2004-05 amounting to ₹ 46,45,700/- which was duly explained from the Schedule of Fixed Assets in the Audited Balance Sheet of the company for FY 2003-04. During the course of assessment proceedings, the AO had asked the AR of the assessee firm to produce various documentary evidences in order to substantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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