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2013 (9) TMI 409 - ITAT MUMBAIComputation of the capital gains - Block of assets exists or not after Sale of the premises - Computation u/s 50 - Balance of WDV after sale of asset - Held that:- underlying presumption in the foregoing computation of the WDV, as well as in the manner of computing the capital gain u/s.50, is that all the assets comprising the block for the time being continue to be business assets and, thus, eligible for being considered as a part of the relevant block of assets. However, when a capital asset, as the Nariman Bhavan property in the instant case, is let by the assessee, the same no longer qualifies as a business asset. That is, it becomes ineligible for being considered as part of the relevant block of assets. The question of computing either depreciation or capital gains with reference to its value, therefore, just does not arise - no depreciation for the relevant year would be eligible on the said block in that case despite a positive WDV. This is for the reason that the block ceases to exist, with one asset being sold out and the other removed from the block by being let, and not for the reason of non-user, as stated by him. Where, one may ask, is the question of user, when the asset itself is no longer a business asset? To clarify this aspect further, take the example of three, instead of two, assets comprising the block as at the beginning of the year. While one stands sold, the second is let out and the third continues to be retained in and used for business. Could depreciation be claimed with reference to the block comprising the two remaining assets? Clearly not, and an adjustment for the asset let, as it no longer forms part of or qualifies as an asset of the business, has necessarily to be made, in computing the WDV or the capital gain, on the asset sold or the depreciation on the sole remaining business asset, as the case may be, as under the scheme of the Act it would be an either or situation, and both cannot obtain. The asset let would be akin to any other independent capital asset owned by the assessee, though the fact of it having been used for business purposes and depreciated in the past would impact its date and cost of acquisition. The assessee’s case clearly falls u/s. 50(2); the only asset, namely, the property at Arun Chambers, Mumbai, constituting the block at the relevant time, being sold in September, 2005, with no subsequent additions to the block. It would, we may though clarify, again, not matter if the other property rented out was so done subsequently, and not prior thereto in July, 2005. This is as the question of applicability of sec. 50(1) or s. 50(2) is to be seen as at the year-end, whereat only the depreciation u/s.32 as well as capital gain u/s.50 is to be computed, taking the entire transactions during the year into account. The WDV of the block, adjusted for the removal of the property let out during the year in July, 2005, is to be taken into account for computing the STCG u/s.50. - Decided in favour of Revenue.
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