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2015 (9) TMI 432 - ITAT MUMBAI

2015 (9) TMI 432 - ITAT MUMBAI - TMI - Allocation of cost of land - whether CIT(A) has erred in holding that there is no basis and justification to allocate ₹ 5,28,12,000/- towards the building? - adoption of cost of building - work out long term capital gain on transfer of leasehold rights on land - Held that:- AO has arbitrarily allocated the cost of land by taking into consideration the cost of the building overlooking the claim of the assessee that even if new construction has to be ma .....

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structing a new building for new I.T. based industries with adjoining infrastructural facilities and hence it is improper to segregate a large chunk of consideration towards cost of building since the dominant object was to acquire the leasehold rights on the land. Under these circumstances we are of the view that the order passed by the learned CIT(A) on this aspect does not call for any interference - Decided against revenue.

Depreciation on the property held for more than 40 years .....

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,87,12,170/-. The AO merely brushed out the said calculation of the assessee arbitrarily assuming that the purchase cost would be more than ₹ 5 crores. In our considered opinion the matter deserves to be set aside to the file of the AO who is directed to verify the computation given by the assessee and if the cost of building as computed by the assessee is reasonable then the reasonable value can be estimated as on 01.04.1981 accordingly. Decided in favour of assessee allowed for statistic .....

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ding that there is no basis and justification to allocate ₹ 5,28,12,000/- towards the building. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the cost of building is to be taken at ₹ 87,12,170/- instead of ₹ 5,28,12,000/- as workout by Assessing Officer in a scientific way. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to work out short term .....

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market value reported by the MIDC Authorities." In the cross objections filed by the assessee it was contended that the CIT(A) erred in not allowing depreciation on the property which was held for more than 40 years and also submitted that the long term capital gains of 99 years lease should be calculated after taking into consideration the indexation value as on 01.04.1981 as prescribed in Section 55(2)(b) of the Act. 3. Facts necessary for disposal of the appeal are stated in brief. Asse .....

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ignment dated 18.06.2007 between the assessee and M/s. Meyer Organics P. Ltd. the assessee has assigned its leasehold rights in Plot No. B-22 together with the building constructed on it in the year 1966, situated in Thane Industrial area. This lease of land had been obtained from the Maharashtra Industrial Development Corporation (MIDC). Since it was an assignment of tenancy rights, the AO was of the view that there is no sale of land involved and as per the provisions of section 55(2)(a) of th .....

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at the cost of construction of the building in the year 1965 was approximately ₹ 67,000/-. In this regard the AO observed that the details of depreciation claimed on the building were not submitted and the assessee had also not submitted the separate consideration received for land and building. In fact in the deed of assignment the total consideration has been received on the leasehold rights and the building situated on it and the purchaser has paid an amount of ₹ 19,14,440/- to MI .....

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rked out to ₹ 44,772/- in the hands of the assessee and the cost at the time of transfer by the assessee works out to ₹ 1,91,88,000/-. The AO observed that as per the provisions of section 55(2)(a) of the Act, in the case of tenancy rights, the purchase price is to be taken as the cost of acquisition and the market value as on 01.04.1981 is not allowed to be substituted. Despite the objection of the assessee he proceeded to compute the long term capital gains at ₹ 1,84,41,306/- .....

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on has not considered the market value in the above calculation of differential premium. It was also brought to the notice of the learned CIT(A) that according to the Ready Reckoner issued by Government of India the market value of the land in that area was ₹ 1,557/- per sq.ft. Even if the prevailing rate was 30% to 40% higher, as under the new government policy IT industries are to be promoted in that zone, with double FSI and also other availability of infrastructure. The value of the la .....

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against ₹ 5.27 lakhs worked out by the AO. The AO had taken the cost of construction at ₹ 8,000/- per sq.mt. For a building constructed in 1966 no person will purchase the same at that price. It was therefore submitted that the amount paid by the purchaser was on account of the land cost. 8. The learned CIT(A) examined the issue and observed that the Hon'ble Bombay High Court, in the case of D.K. Sandhu Bros. Chembur P. Ltd. 249 ITR 265 had considered identical issue wherein it w .....

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07, got the lease on the above land and building by paying ₹ 7.2 crores in addition to payment of a sum of ₹ 19,14,400/- towards differential premium to MIDC. In fact the AO called for information in respect of differential premium from MIDC wherein it was clarified that the Corporation has not considered the market value in above calculation of differential premium which highlights that the premium rates charged by MIDC is different from the actual market value. He also observed tha .....

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out the short term capital gains on the building as per section 50 of the I.T. Act. 10. It could thus be seen that the learned CIT(A) allocated ₹ 5,28,12,000/- towards value of land and the balance towards cost of building. The Revenue challenged the order passed by the learned CIT(A) whereas in the cross objections the assessee contends that the market value as computed under section 55(2)(b) has to be taken into consideration in the case of the building, which is more than 40 years old. .....

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rbitrarily allocated the cost of land by taking into consideration the cost of the building overlooking the claim of the assessee that even if new construction has to be made in the same plinth area it cannot be more than ₹ 87,00,000/-. The learned CIT(A) has correctly taken into consideration the fact that the MIDC has not taken into consideration the market value while calculating the differential premium. Since the leasehold rights were transferred to the purchaser at ₹ 7.20 crore .....

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