TMI Blog2009 (8) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the assessment proceedings, the Assessing Officer noted that the assessee has sold office premises bearing No. 47, 4th Floor, White Hall, August Kranti Marg, Mumbai - 400007 for a consideration of Rs. 32,30,000 as per sale deed dated 19-7-2003. The Assessing Officer obtained valuation adopted by the Stamp Duty authorities in respect of the said property. The stamp duty authorities have valued the said property at Rs. 39,14,001 for the purpose of stamp duty. The Assessing Officer invoked section 50C and taxed Rs. 6,84,000 (39,14,001 - 32,30,000) as short-term capital gain. The CIT(A) directed the Assessing Officer to delete the addition of Rs. 6,84,000 from the short-term capital gain included in the total income observing that section 50 does not have any mention of the stamp valuation as is mentioned in section 50C of the Act. 4. The learned DR relied upon the order of the Assessing Officer and submitted that section 50C is applicable to all the provisions related to the computation of capital gain including sections 48M, 49 and 50 of the Act. 5. On the other hand, the learned AR relied upon the order of the CIT(A) and submitted that the assets of the office premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee heavily relied upon Explanation to clause ( iii ) of sub-section (1) of section 32 which provides that "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, this explanation is required to read with the section 32 of the Act which provides deduction and in case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause and which is sold, discarded, demolished or destroyed the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof, to that extend deduction of depreciation will be allowed. Section 32(1)( iii ) is in respect of terminal depreciation. Terminal depreciation mean the deficit arising on the transfer of the asset by way of sale, demolition, destroyment and discardation- such allowance is granted to make up the deficiency arising on sale etc. of the asset. For example ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ( i ) buildings, machinery, plant or furniture, being tangible assets; ( ii ) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after 1-4-1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession. "( i )in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; ( ii )in the case of any block of assets, such percentage on the written down value thereof as may be prescribed : Provisos to this clause Provided that no deduction shall be allowed under this clause in respect of certain assets. Certain explanations were given in respect application of the section. The clause ( iii ) of sub-section (1) of section 32 reads as under : ( iii )in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause ( i ) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to introduce a system of allowing depreciation in respect of block of assets instead of the present system of depreciation on individual assets. Simultaneously, I propose to rationalize the rate structure by reducing the number of rates as also for providing the depreciation at higher rates so as to ensure more than 80 per cent of the cost of plant and machinery is written off in a period of 4 years or less. This will render replacement easier and help modernization. Apart from those items which are eligible for 100 per cent depreciation in initial year itself, there are at present different rates for plant and machinery. I propose to have only two rates of depreciation at 33 1/3 per cent and 50 per cent. Plant and machinery used in anti-pollution devices and those using indigenous know-how are proposed to be replaced in a block carrying the higher rate of depreciation of 50 per cent. Building meant for low-paid employees of industrial undertakings will be entitled depreciation at 20 per cent as against the general rate of 5 per cent for residential buildings and 10 per cent for non-residential buildings." 6.6 Pursuant to the above announcement, amendments have been made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aggregate of the following amounts, namely : ( i )Expenditure incurred wholly or exclusively in connection with such transfer or transfers; ( ii )The written down value of the block of assets at the beginning of the previous year; and ( iii )The actual cost of any asset falling within the block of assets acquired during the previous year. Such excess shall be deemed to be short-term capital gains. (B)The newly substituted section 50(2) of the Income-tax Act deals with the cases where any block of assets ceases to exist for the reason that all the assets in that block are transferred during the previous year. In such a case, the cost of acquisition of the block of assets shall be the written down value of the block at the beginning of the previous year as increased by the actual cost of any asset falling within that block acquired by the assessee during the previous year. The income from such transfer or transfers shall be deemed to be short-term capital gains." 6.8 The section creates a deeming fiction. It cannot be extended beyond the purpose for which it has been enacted. The section is a special provision, which provides for bringing to tax by way of short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the previous year exceeds the aggregate of the following amounts, namely : ( i )expenditure incurred wholly and exclusively in connection with such transfer or transfers; ( ii ) the written down value of the block of assets at the beginning of the previous year; and ( iii ) the actual cost of any asset falling within the block of assets acquired during the previous year, then, such excess shall be deemed to be capital gains arising from the transfer of short-term capital assets. ( b ) Applicability of clause (2) - Clause (2) of section 50 deals with a situation wherein the block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year. In that case, the cost of acquisition of block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within the block of assets acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from transfer of short-term capital assets. ( c ) Illustrations - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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