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TMI Blog2019 (3) TMI 1804X X X X Extracts X X X X X X X X Extracts X X X X ..... - A.R. suggested that the more objective and scientific method should be applied to determine the value of the land and building - HELD THAT:- In our opinion it would be fair and proper if the value assigned to the building is taken at ₹ 1,15,58,000/- the book value of the building and the balance of ₹ 4,09,42,000/- is attributed to the land which is even lower to valuation as per MIDC rate. Accordingly, we direct the AO to take the sale consideration for land at ₹ 4,09,42,000/- for the land and ₹ 1,15,58,000/- for the building as there is no objective and fair basis for allocation of the sale consideration other than this. Accordingly, the ground of the assessee is allowed. Disallowance of written off project expenses - According to Ld. CIT(A) the said expenditure was capitalized in 2009-10 and in connection with the project for 180 KVA which has been kept on hold by the customer and thus there is no reason to claim the said expenditure and thus dismissed the appeal of the assessee - HELD THAT:- We are fully convinced with the contentions of the Ld. A.R. that the expenses on the above said orders for preparation of projects and feasibility etc which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to, add to, alter, modify, delete and/or change all or any above grounds or before the hearing of the appeal. 3. The issue raised in ground No.1 is against the order of Ld. CIT(A) upholding the order of AO wherein the provisions of section 50C of the Act has been held to be applicable to the assessee s case ignoring the fact that the assessee was having only leasehold rights in the property. The assessee has also challenged by way of ground no 3 the confirmation of applicability of provisions of section 50C of the Act despite the fact that difference between fair market value of ₹ 5,79,47,500/- and actual sale consideration of ₹ 5,25,00,000/- is less than 10%. In the ground No.4, the assessee has challenged the order of Ld. CIT(A) in not applying the rate at ₹ 1,596/- as per sqr. mtr. as per MIDC to the land and calculated the market value of the land by arbitrary method at ₹ 2,42,87,930/- and that of the building at ₹ 3,36,59,570/-. 4. The facts in brief are that the assessee filed the return of income at ₹ 27,912/- declaring a loss of ₹ 85,06,067/- which was processed under section 143(1) of the Act. Thereafter, the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y comprising of land and building and not merely the lease of land. As per the appellant's books the value was WDV of ₹ 115,57,936 for the building and ₹ 83,38,927 for the land. I find that on similar facts the hon'ble ITAT Mumbai bench in the decision reported in [2013] 33 taxmann.com 491 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH 'E' in the case of Shavo Norgren (P.) Ltd. v. Deputv Commissioner of Income-tax, Circle 3(3) DECEMBER 14, 2012 held that section 50C is applicable. The head notes reads as follows. Not only the above, as seen from deeds of assignment, assessee transferred the rights in the plots as well as rights in the building, since there is building involved in this assignment, the transfer of property in question do attract provisions of section 50C and, therefore, assessee s contention on this cannot be accepted. As seen from the marking given in the 'scheduled property' in the deed of transfer substantial portion was covered by the building thereon and as seen from the MoU, assessee seems to be developing the property by utilizing the development rights. In view of this, since both land and building were assigned by these deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Long TermCapital Gain of ₹ 80,58,000/ on the ground that provisions ofsection 50C of the IT Act, 1961 were not applicable to transferof land and building, being a leasehold property? 3.The impugned order of the Tribunal has dismissed the Revenue's appeal from the order dated 15 June 2012 passed by the Commissioner of Income Tax (Appeals). The issue before the Tribunal was whether Section 50C of the Act would be applicable to transfer of leasehold rights in land and buildings. The impugned order of the Tribunal followed its decision in Atul G. Puranik vs. ITO (ITANo.3051/Mum/2010) decided on 13 May 2011 which held that Section50C is not applicable while computing capital gains on transfer of leasehold rights in land and buildings.4.Mr. Kotangale, learned Counsel for the Revenue, states that the Revenue has not preferred any appeal against the decision of the Tribunal in the case of Atul Puranik (supra). Thus, it could be inferred that it has been accepted. Our Court in DIT vs. Credit Agricole Indosuez377 ITR 102 (dealing with Tribunal order) and the Apex Court in UOI vs. Satish P. Shah 249 ITR 221 (dealing with High Court order) has laid down the salutary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land at ₹ 1,33,02,663/- and the opening WDV of building at ₹ 1,15,57,936/- aggregating to ₹ 2,49,40,599/- thereby computing the taxable capital gain at ₹ 3,30,06,901/-. 13. In the appellate proceedings, the Ld. CIT(A) bifurcated the sale proceeds in the ratio of book value of land and building thereby dividing the sale consideration between land and building at ₹ 2,42,87,930/- and ₹ 3,36,59,570/- respectively by observing and holding as under: 4.10. This rate translates to ₹ 574,56,000/- for 3600 sq. mts . of plot whose book value was ₹ 83,38,927/-and adopting the same would mean that the building sale value was only ₹ 4,91,500/- for built up area of 1325 sq.mts. whose WDV was ₹ 115,57,936/- which is highly improbable It is further noted that the valuation as per MIDC also corroborates the market value of the property sold which is much higher than the stated consideration. However, there is certainly merit in the contention that since land value is shown separately in the balance sheet, as an asset on which no depreciation is claimed, the transfer should give rise to long term capital gains. In the present case whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim in respect of written off project expenses amounting to ₹ 3,03,02,372/-. 16. The facts in brief are that the AO during the course of assessment proceedings observed that assessee has debited a sum of ₹ 3,02,372/- on account of project expenses written off in the profit loss account and accordingly asked the assessee to produce the details and justification thereof. It was submitted by the assessee that it is engaged in the business of manufacturing of electronic UPS for railways and other services. Sometimes the assessee incur expenses on the products which have to be abandoned in view of the non acceptance thereby the customer. So the expenses are written off as being relating business of the assessee wholly and exclusively . The AO rejected the reply of the assessee dated 27.02.2015 and added the same to the income of the assessee by observing that the said expenditure is covered by the provision of section 35D of the Act whereunder the assessee is allowed the amortization of expenses equal to 1/10th of the project expenditure incurred prior to the commencement of the business. However, the assessee has claimed ₹ 3,02,372/- which is more than 1/10th of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. 19. Before us the Ld. A.R. submitted that the assessee is engaged in the business of manufacturing of electronic UPS for railways and other services and therefore has to make sample in the form of educational order for soliciting further orders if the project suits the requirements of the customers. The Ld. A.R. submitted before us that this is a routine course of action of business of the assessee. The Ld. A.R. took us through the pages 157, 158, 159 160 which are the copies of supply order by the Indian Railways for educational order specifying make and quality. The Ld. A.R. submitted that it is not necessary that the project expenses which are incurred for making the UPS would necessarily result into the earning of income and soliciting of further order. Therefore whatever expenses are incurred are written off over a period of time. Accordingly, the Ld. A.R. submitted that in the current year the assessee received some order from Railways on which it has been ₹ 30,33,720/- towards preparation of project which did not take off. The Ld. A.R. submitted that the Railway changed the specifications in respect of the 180 KVA transformer which was later on changed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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