TMI Blog2009 (11) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... was evident that registering authority has valued the property at Rs. 45,66,600 for the purpose of stamp duty. The assessee was asked as to why full value of consideration should not be taken at Rs. 45,66,600 for the purpose of computation of STCG (short-term capital gain) as per provisions of s. 50C of the Act and accordingly the difference shall not be added back to the income. The assessee objected to the valuation adopted by the registering authority as exaggerated and requested for referring to the Valuation Officer. As the valuation has not been disputed, reference under s. 50C(2) has been made to the Valuation Officer of the Department on 12th Dec, 2007. But the report of Valuation Officer was not received by the AO. The AO accordingly took full value of consideration at Rs. 45,66,600 as adopted by the registering authority for the purpose of stamp duty in place of Rs. 24,46,402 shown in the sale deed. The difference being Rs. 23,39,233 was accordingly added back to the income of the assessee as STCG on sale of office premises. 4. The addition was challenged before the learned CIT(A) on the ground that the AO has passed the order without waiting for report of the DVO. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following modifications : (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during 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 WDV 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 the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the WDV of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has claimed depreciation on the same in the earlier year, which has been granted. The balance sheet of the assessee ending assessment year i.e. 31st March, 2005 is filed at paper book p. 13, which shows the details of fixed asset in Sch. B. It would, therefore, prove that the assessee has been granted depreciation in the earlier assessment years as well as in the assessment year in question on the same capital asset. 7.2 Sec. 50 starts with non obstante clause like 'not withstanding anything contained in cl. (42A) of s. 2. It has also provided that ss. 48 and 49 shall be subjected to the modification as provided in sub-s. (1) and (2). It would, therefore, show that s. 50 would be applicable, if the following conditions are satisfied : (a)The capital asset is an asset forming part of the block of assets. (b)In respect of such asset, depreciation has been allowed under the 1961 Act. 7.3 When the above conditions are satisfied, the capital gain on the sale of such asset would be calculated as per the provision of s. 50 and not as per provisions of ss. 48 and 49. It is an exception to the other provision because of asset is depreciable in nature. As noted above in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of s. 50. Under sub-s. (2) a special provision has been made for capital assets which are governed by s. 49 as well as s. 55(2), namely, assets indirectly acquired and which were owned by the previous owner from before 1st Jan., 1954. For depreciable assets, which are owned by the assessee as the original owner sub-s. (1) of s. 50 applies, even though the asset may have been owned by the assessee from before 1st Jan., 1954. In such a case s. 50(1) does not contemplate that the assessee can treat the fair market value of the asset as on 1st Jan., 1954, as the cost of acquisition. The WDV of the asset has to be taken as the cost of acquisition." The above view is followed by the Hon'ble Allahabad High Court in the case of Prime Products ( P) Ltd. v. CIT (supra). 8.3 The Hon'ble Supreme Court in the case of Commonwealth Trust Ltd. (supra) held : "In commercial parlance computation of capital gain would mean, the actual gain measured by the difference between the sale price and the cost of acquisition. It is the 'cost of acquisition' that is required to be determined under the provisions of ss. 48, 49, 50 and 55 of the IT Act, 1961. Both under ss. 48 and 49, cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (2) of s. 41, as the case may be, and in cases to which cl. (2) of s. 50 applies, the computation for this purpose has to be made with reference to the period commencing from 1st Jan., 1954. Significantly, the words 'as adjusted' have been used in order to avoid the possibility of there being a double tax, where the question of any terminal (balancing) allowance under s. 32 or balancing charge under s. 41 is involved. Therefore, in its application of the expression 'as adjusted', the WDV as ascertained according to cl. (6) of s. 43 shall be adjusted with either subtraction of the terminal balancing allowance or with addition of the amount of balancing charge, if any, allowed out of or taken into the business income. Where the capital asset is sold for less than the WDV the difference or deficiency between the sale price and the WDV is allowed as a deduction in the computation of the business profits [s. 32)(1)(iii)] which is termed as 'balancing (or terminal) allowance' and where the asset is sold for more than the WDV, the sale price being less than the cost, the excess realised over the WDV is charged as business profits [s. 41(2)] and is termed as 'balancing charge', Part D o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s appeal is allowed. 9. On ground No. 2 the assessee has challenged the addition of Rs. 1.42,980 being municipal tax paid. 9.1 The AO disallowed the claim of assessee on the reasons that property was acquired vide agreement dt. 26th Nov., 1986. But the sale deed was executed on 25th April, 1997. The AO, therefore, noted the claim of the assessee was that demand raised/crystallised during the year is incorrect. The learned CIT(A) confirmed the addition because municipal- tax was relatable to the period prior to the sale deed. 9.2 On consideration or rival submissions, we are of the view that the addition is clearly unjustified because the property in question was used by the assessee for office purposes and that the bill was raised on dt. 22nd Nov., 2004, which falls in the assessment year in question. Since assessee was using the said property for office purpose and following the mercantile system of accounting, municipal tax crystallised during the assessment year in question, therefore, it was ascertained liability of the assessee in the assessment year in question. The IT Act recognizes holding of the property through agreement could be treated as transfer of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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