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TMI Blog2024 (11) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... sset, i.e., stock-in- trade, but no specific fiction has been created while computing deprecation on the block of the assets for substantiating the sale consideration by the Stamp Duty Valuation Authority. The present definition of the moneys payable therefore, cannot be construed as including as the Stamp Duty Valuation of the property and, therefore, the legal fiction for substantiating the sale consideration by the Stamp Duty Value created under either section 50 or section 43CA of the Act cannot be extended to section 32 of the Act for claiming depreciation on the block of the asset. In the instant case, the AO could have examined the applicability of section 41(2) for taxing the quantum of depreciation claimed on building in earlier years, which we don t know whether he had examined or not. The fiction of section 50C can t be extended to the facts of the case, accordingly, we set aside the finding of the ld. CIT(A) on the issue in dispute and we delete the disallowance made by the lower authorities. Ground no. 1 raised by the assessee in appeal is accordingly allowed. Disallowance of expenses - assessee submitted that it had already disallowed certain expenses appearing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JB of the Act. The return of income filed by the assessee was selected for scrutiny and statutory notices issued under the Act were issued and complied by the assessee. The assessment u/s. 143(3) of the Act was completed on 19.12.2019 wherein disallowance of the excess depreciation claimed on building amounting to Rs. 71,94,901/- and disallowance out of other expenses amounting to Rs. 89,003,154/- was made by the ld. learned Assessing Officer ('ld. A.O.' for short). 3. On further appeal, the ld. CIT(A) sustained both the disallowance/additions made by the ld. A.O. 4. Aggrieved, the assessee is in appeal before us, by way of raising the grounds as reproduced above. The ld. Counsel for the assessee has filed a paper book containing pg. nos. 1 to 77. 5. Ground no.1 of the appeal of the assessee relates to disallowance of depreciation of Rs. 71,99,901/- sustained by the ld. CIT(A). The facts in brief qua in dispute are that during the year under consideration, the assessee had sold a factory building for a sale consideration of Rs. 2,45,00,000/-. The said property was appearing as part of block of assets in books of account and depreciation on said block of building was clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. United Marine Academy [2011] 130 ITD 113 (Mum), wherein for computing the capital gain on transfer of depreciable asset, the sale consideration is directed to be substituted by the Stamp Duty Valuation of the said depreciable asset. The relevant finding of the ld. CIT(A) is reproduced as under: 6.5 In view of the above, the moot point of adjudication here is that the amount to be reduced on account of sale of building shall be actual amount received or notional amount as per section 50C while computing allowable depreciation. In this regard, the provision 1 of section 50C are re-produced hereunder: Section 50C(1): Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer... 6.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee relied on the decision of the Hon'ble Supreme Court in the case of Mancheri Puthusseri Ahmed vs. Kuthiravattam Estate Receiver [1996] 6 Supreme Court Cases 185, wherein the Hon'ble Supreme Court held that legal fiction cannot be extended beyond the purpose for which it is created. Accordingly, he submitted that the legal fiction of section 50C of the Act cannot be extended while working out the written down value for claiming depreciation on the block of asset. The ld. Counsel for the assessee relied on the decision of the co-ordinate bench of the Tribunal in the case of Futurz Next Services (Private) Limited (supra). 9. On the contrary, the learned Departmental Representative ('ld. DR' for short) submitted that while computing the written down value of block of asset, the moneys payable in respect of the property transferred has to be considered. He referred to Explanation below to section 41(4) of the Act, wherein the term money payable has been defined. He submitted that the definition of the money payable is inclusive definition and, therefore, the word payable should include the fair market value of the property determined by the Stamp Duty Valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force: [Provided that in determining the written down value in respect of buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, depreciation actually allowed shall not include depreciation allowed under sub-clauses (a), (b) and (c) of clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the purposes of the said clause (vi);] [ Inserted by Act 15 of 1965, Section 6 (w.r.e.f. 1.4.1962).] (c) [ in the case of any block of assets,- [ Inserted by Act 46 of 1986, Section 8 (w.e.f. 1.4.1988).] (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the excess shall be deemed to be profits and gains of business or profession, and accordingly, chargeable to income-tax as the income of the previous year in which it is recovered, whether the business or profession in respect of which the deduction has been allowed is in existence in that year or not. [Explanation. - For the purposes of sub-section (3),- (1) moneys payable in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Mancheri Puthusseri Ahmed vs. Kuthiravattam Estate Receiver (supra) has held that while interpreting the provision involving a legal fiction, the court is to ascertain as for what purpose the fiction is created, and after ascertaining this, the court is to assume all those facts and consequences which are incidental or inevitable corollaries for giving effect to the fiction. We find that legislature has created the legal fiction u/s. 50C of the Act for the purpose of computing the capital gain on sale of capital assets. Similarly, while computing the profits and gains of the business, the legislature has introduced a legal fiction under section 43CA of the Act for substantiating the sale consideration by the Stamp Duty Value while transfer of an assets other than the capital asset, i.e., stockin- trade, but no specific fiction has been created while computing deprecation on the block of the assets for substantiating the sale consideration by the Stamp Duty Valuation Authority. The present definition of the moneys payable therefore, cannot be construed as including as the Stamp Duty Valuation of the property and, therefore, the legal fiction for substantiating the sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details were required. The assessee submitted that it had already disallowed certain expenses appearing in the profit and loss account in computation of total income. But in absence of any details or supporting documents, the ld. A.O. disallowed an amount of Rs. 89,03,154/-, i.e., 5% of Rs. 17,80,63,088/- on ad-hoc basis. 14. On further appeal, the ld. CIT(A) upheld the disallowance by observing as under: 6.12 During the appellate proceedings, the appellant filed break up of other expenses and filed copy of ledger extracts of said expenses. The appellant once again filed fo file supporting documents such as copy of invoices, bank statements reflecting payment made, etc. In absence of aforesaid documents, the genuineness of the expenses and correctness of expenses can not be verified. Thus, the disallowance carried out by the Ld.. AO is found to be correct and being upheld. 15. We have heard the rival submissions of the parties and perused the materials available on record. Before us, the ld. Counsel for the assessee fairly agreed and submitted that details were not filed before the lower authorities, therefore, the matter should be restored back to the file of the ld. AO. We find t ..... 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