TMI Blog2011 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... f the consideration received or accruing as a result of transfer of the capital asset” used in section 48 for the purpose of computing the capital gains arising from the transfer of capital asset being land or building or both. The deeming fiction created in section 50-C thus operates in a specific field which is different from the field in which section 50 is applicable. It is thus not a case where any supposition has been sought to be imposed on other supposition of law. On the other hand, there are two different fictions created into two different provisions and going by the legislative intentions to create the said fictions, the same operate in different fields. The harmonious interpretation of the relevant provisions makes it clear that there is no exclusion of applicability of one fiction in a case where other fiction is applicable. As a matter of fact, there is no conflict between these two legal fictions which operate in different fields and their application in a given case simultaneously does not result in imposition of supposition on other supposition of law. Assessing Officer was right in applying the provision of section 50C to the transfer of depreciable capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was not applicable in the case of assets transferred prior to 1.4.2003 was not found acceptable by the Assessing Officer in view of Circular No 8 of 2002 issued by the Central Board of Direct Taxes clarifying that the provisions of section 50C are applicable in relation to the assessment year 2003-04 and subsequent years. The Assessing Officer was also of the view that one of the office buildings i.e office no. 101 having a written down value of Rs. 13,14,425/- was not sold by the assesse in the year under consideration. Accordingly, relying on the provisions of section 50 read with section 50C, the difference between sale consideration adopted as per the valuation of Stamp Authority of the building (excluding office no. 101) at Rs. 56,74,000/- and the written down value of the said asset amounting to Rs. 36,29,100/- adopted as cost of acquisition was treated by the Assessing Officer as shortterm capital gains and such difference amounting to Rs. 20,44,900/- was added by him to the total income of the assessee in the assessment completed u/s.143(3) vide order dated 24.02.2006. 3. Against the order passed by the Assessing Officer u/s.143(3), an appeal was preferred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets. Simply because the block of assets having depreciable assets include the land also, section 50 would not be attracted as such, so long as the land forms part of the depreciable assets covered within the special provisions of section 50. The basic purpose of creating a fiction for the sale consideration of the land at the higher rate based on stamp duty rates prescribed is because of the nature of the land that always appreciates in its value and people tend to disclose not the full amount of its value. But if it forms the part of depreciable asset as in the instant case, it cannot be covered within section 50C in view of the special provisions of section 50 that are meant to cover all the assets in the block of depreciable assets without any exception, as there are no explicit provisions to exclude the land out of the block of depreciable assets within the meaning of section 50 and take it to section 50C. Thus, I have no doubt that in the facts and circumstances of the instant case the provisions of section 50 are applicable and not the provisions of section 50C as perceived by the Ld. Assessing Officer. Hence the Ld. Assessing Officer is directed to apply the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e written down value as cost of acqusition in case of depreciable assets whereas the fiction created in section 50C operates in a different field, as explained by the Hon ble Madras High Court in the case of K.R.Palanisamy vs. Union of India (2008) 306 ITR 61 as well as by the Hon ble Bombay High Court in the case of Bhatia Nagar Premises Cooperative Society Ltd. (2010) 234 CTR 175. Relying on the Hyden s rule and the Principles of Statutory Interpretation given in the book of G.P. Singh, he contended that true intention of legislature has to be taken into account while interpreting the statutory provisions and harmonious interpretation has to be given to the relevant provisions in order to achieve such legislative intention. He contended that going by the legislative intention, the term cost of acquisition used in section 48 has been modified by section 50, whereas section 50C has modified the term full valuation of consideration . He contended that the provisions of section 50C are very clear in this regard and specify the situation where the same are applicable. 6. The learned Departmental Representative further contended that the fiction created in section 50 has limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust Ltd. (supra). As regards the other decision of the Tribunal in the case of Singer India Pvt. Ltd. (ITA No. 1785/Mum/2007), he submitted that the Deed in that case was an unregistered Deed and it was, therefore, held that section 50C has no application. As regards the other decision of the Tribunal in the case of Inderlok Hotels Pvt. Ltd. 318 ITR (AT) 234 (Mumbai), he submitted that it was a case of transfer of stock in trade which was not a capital asset and it was therefore held that section 50C has no application. 7. The learned counsel for the assessee, on the other hand, explained the concept of block of assets and its implication on various related issues with the help of Press Note dated 11.10.1985 issued by the CBDT. He submitted that section 50 and section 50C operate in different fields and both being deeming provisions, provisions of section 50C cannot be extended and applied in the cases which are covered u/s.50 as a result of deeming fiction created therein. As regards the decision of the Tribunal in the case of Mrs. Munira S. Butawala ITA No. 3468/Mum/2007, he submitted that no decision on merit was finally rendered by the Tribunal therein and the issue was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 20,44,900/- being the difference between the stamp duty valuation of building excluding office no. 101 and its written down value. He contended that the block of assets i.e. building, according to the Assessing Officer, thus had not ceased to exist in the year under consideration and the same was very much in existence on which the assessee was entitled to claim the depreciation. Relying on the decision of the Division Bench of this Tribunal in the case of ACIT vs. Roger Pereira Communications (P) Ltd. reported in 34 SOT 64, he contended that in so far as the assessee is entitled to depreciation in respect of any block of asset subject to the conditions stipulated in section 32 read with section 43(6),section 50 cannot be applied. He then invited our attention to the definition of the terms money payable and sold given in Explanation 4 to section43(6)(c). He also referred to Explanation below section 41(4) to point out that money payable is defined to mean the price at which the asset is sold. He contended that even if the stamp duty value is adopted for computing the capital gains, written down value as per section 43(6)(c) would still be positive for the purpose of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered by section 50, where there is a transfer of land and building. He contended that the fiction created in section 50 is a specific one and the same does not alter the expression full value of consideration . He submitted that similarly the fiction created in section 50C has limited application and since both these fictions operate in different fields, there is nothing to prevent the application of both the legal fictions in a given case. In this regard, he relied on pages 303 to 305 of G.P.Singh s commentary and also on the Hon ble Supreme Court decision reported in AIR (1959) SC 352. 10. As regards the alternative plea taken by the learned counsel for the assessee, the learned Departmental Representative contended that the assessee as a Respondent has no right to raise an altogether new plea at this stage before the Tribunal. He submitted that the learned CIT(A) has held that section 50 is applicable in the case of the assessee and the assessee has not challenged this finding by filing a cross appeal or cross objection. Relying on the decision of the Hon ble Delhi High Court in the case of CIT vs. Tony Electronics Ltd. reported in 185 Taxman 121 and that of Patna High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by allowing deduction on account of indexed cost of acquisition and indexed cost of any improvement instead of cost of acquisition and cost of any improvement . Section 49 of Chapter IV-E stipulates the mode of computation of cost of acquisition with reference to certain modes of acquisition. The provision contained in section 50 as substituted with effect from 1.4.1988 is a special provision for computation of capital gain in the case of depreciable asset and the same being relevant in the present context is reproduced below: 50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the cost of acquisition and the other important and relevant term used in both these provisions i.e. the full value of consideration received or accruing as a result of transfer of the asset has remained the same. The deeming fiction created in section 50 thus modifies the provision of section 48 giving mode of computation of capital gains only to the extent of modifying the term cost of acquisition and the said fiction thus operates in the limited field. 13 . The provision of section 50-C which again is a special provision in respect of full value of consideration in certain cases has been inserted in the statute with effect from 1.4.2003 and sub-section (1) thereof being relevant in the present context is extracted below : 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, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gap as it was found that the assesees were not correctly declaring the full value of consideration or in other words resorting to the practice of under valuation. As rightly contended by the learned Departmental Representative, if this is the legislative intention behind insertion of the provisions of section 50-C, it does not stand to any logic as to how the same should not be applied in the case of land and building where depreciation has been claimed by the assessee. Moreover, if there was any legislative intention to exclude the applicability of the provision of section 50C to the cases involving transfer of land and building being depreciable assets as covered by section 50, the same could have been provided for in the provisions of section 50C itself as the same was inserted in the statute on 01.04.2003 when the provisions of section 50 were already there in the statute. 14. At the time of hearing before us, the learned counsel for the assessee has mainly contended that section 50C creating a deeming fiction cannot be applied in a case where deeming fiction created in section 50 is applicable since imposition of fiction upon fiction is not permissible. In support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Tribunal, that the portion of section 23A dividend attributable to capital gain in the hands of the company should be taxed in the hands of the shareholders at the rate appropriate to " Capital gains " as provided by section 17(6) of the Income-tax Act. For its reasons given in the main order passed in I. T. A. No. 6094 of 1956-57, the Tribunal held that section 23A dividend that is included in the total income of an assessee shareholder cannot be dissected for the purpose of determining income-tax and super-tax payable thereon by the said assessee-shareholder. It, therefore, rejected the assessee's contention, the result being that the entire section 23A dividend was held to be liable to be taxed in the hands of the shareholder at the rates applicable to his total income. On these facts, the question which arose for the consideration of the Hon ble Bombay High Court was " Whether the section 23A dividend of Rs.. 6,31,527 can be dissected into two parts in the ratio of Rs. 7,86,900 : Rs.20,63,016 for the purpose of determining the amount of income-tax and super-tax payable by the assessee shareholder on his total income and if so, whether that smaller portion of Rs. 6,31, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are entirely different. Thus, it is not a case where any supposition has been sought to be imposed on other supposition of law. On the other hand, there are two different fictions created into two different provisions and going by the legislative intentions to create the said fictions, the same operate in different fields and there is nothing in the relevant provisions which prohibit the applicability of these provisions simultaneously. It is well settled position that legal fictions are created only for definite purpose and they are limited to the purpose for which they are created and should not be extended beyond their legitimate filed. As already noted by us, the legal fictions in section 50 and section 50-C are created for definite purposes which are entirely different from each other and by applying the provisions of section 50C in a case where section 50 is applicable, there is no extension of the legal fiction created in the said provision beyond its legitimate field. Moreover, it is not a case where supposition is sought to be imposed on a supposition of law which is not warranted or supported by the language of the relevant provisions and in any case, the harmoniou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f building with its written down value of Rs.49,49,525 was sold during the year under consideration. It was also submitted by the Assessee that the value of said block for the purpose of stamp duty was to the tune of Rs.74,49,000/-. Thus the finding of the AO that Office No.101 had not been sold during the year under consideration was challenged by the Assessee and by allowing the appeal of the Assessee, the said finding of the AO has been reversed by the learned CIT(A). This issue as to whether the entire block of assets was sold by the Assessee in the year under consideration thus has been finally decided by the learned CIT(A) in favour of the Assessee and the Assessee cannot be said to be aggrieved by the said decision so as to challenge the same before the Tribunal. Moreover, the said issue having been decided by the learned CIT(A) in favour of the assessee, it is not permissible for it to raise the same, as a respondent, under Rule 27 of the ITAT rules. The applicability of section 50 in its case thus was never disputed by the assessee before the learned CIT(A) and the relevant finding of the learned CIT(A) that entire block of assets had ceased to exist during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hon ble Supreme court held that it was certainly open to the department as a respondent, in the appeal filed by the assessee before the Tribunal, to support the finding of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. In the present case, the issue raised by the department is relating to the applicability of section 50C in a case where section 50 is applicable which by itself presupposes that applicability of section 50 is not in dispute. As a matter of fact, the applicability of section 50 was never disputed by the assessee before the learned CIT(A) and the finding in this regard to the effect that the entire block of assets was ceased to exist in the year under consideration having been recorded by the learned CIT(A) accepting the stand taken by the assessee before him, this issue can not be said to be decided against the assessee by the learned CIT(A). 19. In the case of Mahalaxmi Textile Mills Ltd. (supra) cited by the learned counsel for the assessee, the assessee, carrying on the business of manufacture and sale of cotton yarn, had spent Rs. 93,215 in A.Y. 1956-57 for introduction of " Casablanca c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court held that the subject-matter of the appeal filed before the Tribunal was the right of the assessee to claim allowance for Rs. 93,215 and whether the allowance was admissible under one head or the other of subsection (2) of section 10, the subject-matter for the appeal remained the same. It was held that the Tribunal having held that the expenditure incurred fell within the terms of section 10(2)(v), though not under section 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee. Hon ble Apex Court observed that the Tribunal had evidence before it from which it could be concluded that by introducing the Casablanca conversion system the assessee made current repairs to the machinery and plant and these findings had not been challenged by the department. It was also observed that under subsection (4) of section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal was competent to pass such orders on the appeal as it thinks fit and there was nothing in the Income-tax Act to restrict the Tribunal to the determination of questions raised before the departmental authorities. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 50 is applicable. It is thus not a case where any supposition has been sought to be imposed on other supposition of law. On the other hand, there are two different fictions created into two different provisions and going by the legislative intentions to create the said fictions, the same operate in different fields. The harmonious interpretation of the relevant provisions makes it clear that there is no exclusion of applicability of one fiction in a case where other fiction is applicable. As a matter of fact, there is no conflict between these two legal fictions which operate in different fields and their application in a given case simultaneously does not result in imposition of supposition on other supposition of law. In our opinion, the Assessing Officer thus was right in applying the provision of section 50C to the transfer of depreciable capital assets covered by section 50 and in computing the capital gain arising from the said transfer by adopting the stamp duty valuation. We, therefore, answer the question referred to this special bench in the affirmative i.e. in favour of the Revenue and against the assesse. 21. Before parting, we may clarify that all the judicial p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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