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2020 (3) TMI 420 - ITAT MUMBAIComputation of capital gain - LTCG OR STCG - Block of assets - HELD THAT:- As per section 50(1), if the value of consideration exceeds the aggregate of cost of acquisition and expenses on transfer, there will be Short Term Capital Gain. On the other hand, if the value of consideration of the part transferred is less than the cost of acquisition, then the balance left is the WDV of the block at the end of the year on which depreciation will be charged as per section 32 of the Act. The above provision deals with a case where part of the block of depreciable asset is transferred i.e. the block does not cease to exist. As per section 50(2), if the value of the consideration exceeds the aggregate of cost of acquisition and the expenses of transfer, there will be STCG. On the other hand, if the value of consideration of entire block transferred is less than the aggregate of cost of acquisition and expenses of transfer, there will be short term capital loss. The above provision deals with the case where entire block of depreciable assets is transferred i.e. the block ceases to exist. In the instant case, the assessee sold all the 9 units during the impugned assessment year and out of the sale proceeds of the said flats sold, it purchased a property located in Goa. Disallowing the set off of sale of the units at Ashok Towers/Ashok Garden against the new purchase of property at Goa - appellant submits that in the block of assets concept u/s 50, the sale of asset is ought to be set off against the purchase of new assets in the same block - HELD THAT:- In the instant case the assessee has set up the business, which was ready to commence its operation. Thus the assessee would be entitled to claim expenditure which were incurred for the purpose of business. The contentions raised by the assessee before the Ld. CIT(A) vide ground no. 4 was that the AO erred in concluding that since there was no business income in the relevant assessment year, depreciation loss will not be allowed. CIT(A) has allowed this ground of appeal. Set off of sale of the units at Ashok Tower / Ashok Garden against the new purchase of property at Goa - In the block of assets concept u/s 50, the sale of assets ought to be set off against the purchase of new assets in the same block - HELD THAT:- We direct the AO to examine it and pass necessary order as per the provisions of the Act. We direct the assessee to file the relevant documents / evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes. In the instant case, we find that the assessee has rightly valued the shares as per Rule 11UA of the Income Tax Rules, 1962 (the Rules) and filed a copy of it before the AO. Further the assessee had even obtained the valuation report from the registered valuer under Rule 11UA. In any case, the value of consideration for transfer of shares is far exceeding the valuation as per Rule 11UA. In the instant case, the AO has failed to point out any mistake in the working of the value of shares as per Rule 11UA. The disallowance made by the AO is based on conjectures. In such a situation, we agree with the findings of the Ld. CIT(A) and confirm it. Short term capital loss - AO disallowed the short term capital loss claimed on the reason that it is not borne out of genuine purchase and sale - HELD THAT:- We find that the assessee has rightly valued the shares as per Rule 11UA of the Income Tax Rules, 1962 (the Rules) and filed a copy of it before the AO. Further the assessee had even obtained the valuation report from the registered valuer under Rule 11UA. In any case, the value of consideration for transfer of shares is far exceeding the valuation as per Rule 11UA. In the instant case, the AO has failed to point out any mistake in the working of the value of shares as per Rule 11UA. The disallowance made by the AO is based on conjectures. In such a situation, we agree with the findings of the Ld. CIT(A) and confirm it. Thus the 4th ground of appeal is dismissed. Claim of depreciation and administrative expenses - HELD THAT:- It is well settled that where a business unit has been set up by the assessee, which was ready to commence operation, the assessee would be entitled to claim the expenditure which were incurred for the purpose of business. Further, for the purpose of claiming depreciation u/s 32 of the Act, the assets should satisfy the dual conditions of forming part of the block of assets and being used for the purpose of conducting assessee’s business. In the instant case, we find that these conditions are satisfied. Therefore, we confirm the order of the Ld. CIT(A) on the above matter
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