TMI Blog2010 (3) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... total consideration received for both land and building has to be bifurcated between value of land and value of building and the gains arising out of land need to be treated as long term capital gain whereas the gain arising out of buildings has to be considered as short term capital gain, for the simple reason that the assessee was claiming depreciation on such building - Just because in the impugned Assessment Year assessee had not claimed depreciation for building would not make any impact on the method to be followed for working out the capital gain. - ITA No. 1768/Mds/2008 - - - Dated:- 5-3-2010 - ORDER Per Abraham P. George, AM This is an appeal filed by the Revenue and cross objection by the assessee, both against the order of the Id. CIT(A)-IV, Chennai and relates to Assessment Year 2000-01. 2. Since the assessee in its cross objections has assailed the jurisdiction of the Assessing Officer, for making an assessment beyond the reason for which the reopening was made, the cross objections are taken up first for disposal. 3. Two grievances are brought out in the cross objections. First as aforesaid is that the Assessing Officer had travelled beyond the reason s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1990-91. Assessing Officer, therefore, worked out the short term capital gain as under: value for which the building was taken [Both for land and building] -Salevalue over Rs. 38,50,000 Less : Indexed cost of the land [vide working given separately] Rs. Rs. 14,83,464 23,66,536 Less " WDV of the building as on 31.3.1999 [Vide working given ] Rs. 13,36.885 Short term capital gains Rs. 10.29.651 Along with difference in rental receipts vis-a-vis TDS certificate which was cited as the reason for reopening assessment, the total income was computed after considering such short term capital gains also. 5. In its appeal before Id. CIT(A), assessee assailed the invocation of section 45(4) of the Income-tax Act, 1961 [in short, the Act], for, according to it, there was no actual distribution of assets. Argument was that capital assets of the firm both prior and after 11.11.1999 continued to be assets of the firm itself and there was no distribution of capital assets resulting in transfer of gains. Ld. CIT(A) was of the opinion that there was no business for assessee as on the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to terms with widowhood and also her non acquaintance of the business. 9. As against this, the Id. D.R. strongly objected to the condonation petition, for according to him, assessee was a widow since 10 years and she should have become used to it. Further, according to him, assessee had filed an appeal before the Id. CIT(A) which was signed by one Shri Martin and therefore, could not claim that it was on account of her inability to come to terms with the loss of her husband and non acquaintance with business that she could not file cross objection in time. 10. Before coming to the arguments of the Id. A.R. on his cross objection, we have to deal with the condonation petition. There is no dispute that assessee is widow and became so on the death of her husband, which as pointed out by the Id. D.R., was more than 10 years before. Irrespective of the issue whether assessee had become used to it or not, the fact remains that the business was conducted as submitted by the Id. A.R. mainly by assessee's husband as partner of assessee firm. That she could come to grip with the case proceedings and could get advice only late needs to be appreciated, especially so since even the appeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. Further according to him, Explanation 3 to section 147 introduced by the Finance Act 2009 w.r.e.f 1.4.1989 very much clarified the position that the Assessing Officer can make an assessment of any item of income, in respect of any issue which had escaped assessment, which came to his notice subsequently in the course of reassessment proceedings. 13. In reply to the above, the Id. A.R. submitted that the terminology used in section 147 and the terminology used in Explanation 3 thereto were similar and therefore, decisions rendered by various courts vis-a-vis section 147, prior to the addition of Explanation 3 by the Finance Act, 2009 would continue to apply irrespective of introduction of such Explanation. 14. Vis-a-vis second contention regarding sale of land ought have been taken as long term capital gain, the Id. A.R. relied on Annexure to assessment order which computed the indexed cost of land for the purposes of working out short term capital gain. According to him, the Assessing Officer had himself considered the cost of land purchased in 1989-90 and allowed indexation thereon. Therefore, gains from land should have been treated separately as long term in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of reassessment proceedings also. Here it is necessary to reproduce the body of section 147: If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any Assessment Year, he may, subject to the provisions of sections 148 to 153 assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the Assessment Year concerned." 18. Whereas body of section 147 speaks that any income chargeable to tax which had escaped assessment and which came to notice of the Assessing Officer could be considered in the reassessment along with such income for escapement of which assessment was reopened, explanation 3 gives the Assessing Officer power to assess income in respect of any issue. The difference between the Explanation 3 and of the wordings in the body of section 147 as reproduced above, is that the Assessing Officer through the explanation is given a free hand to assess or reassess income in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985. Prior to that amendment transfer was defined in relation to a capital asset as to include the sale, exchange or relinquishment of an asset or the extinguishment of any right therein or the compulsory acquisition thereof under any law. But with substitution of section 2(47) through the above mentioned Taxation Laws [Amendment] Act, there has been a sea of change. Hence a decision rendered by the Hon'ble Apex Court, relevant for a period prior to such amendment could not have come to the aid of the assessee and ought not have been relied on the by the Id. CIT(A). Similarly, the Assessment Years relevant in the case of Madan Lai Bhargava [supra] of Hon'ble Allahabad High Court as well as Siddharth Media Holding Private Limited [supra] of the Hon'ble Jurisdictional High Court were also prior to 1.4.1985, i.e. in the pre amendment era, and ought not have been relied on by the Id. CIT{A). Along with this, we have to also bear in mind substitution of subsection 3 and 4 of section 45 of the Act by the Finance Act, 1987 w.e.f 1.4.1988, which was clearly to bring into the tax net, transactions whereby assets were brought into the firm or was taken out of the firm. Subsection (4) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndexed cost of the land and thereafter WDV of the building, and come to a conclusion that net result was short term capital gain. We are of the opinion that the total consideration received for both land and building has to be bifurcated between value of land and value of building and the gains arising out of land need to be treated as long term capital gain whereas the gain arising out of buildings has to be considered as short term capital gain, for the simple reason that the assessee was claiming depreciation on such building. Just because in the impugned Assessment Year assessee had not claimed depreciation for building would not make any impact on the method to be followed for working out the capital gain. For this purpose the matter has to be revisited by the Assessing Officer and he has to correctly calculate the short term and long term capital gains. 23. In the result, the appeal of the Revenue and cross objections of the assessee are disposed of with the following directions: A. Assessee's cross objection that the Assessing Officer had traveled beyond the reason for reopening was made is dismissed. B. Other grounds of the assessee assailing reopening are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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