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2016 (4) TMI 738 - ITAT KOLKATA

2016 (4) TMI 738 - ITAT KOLKATA - TMI - Capital gain arising out of the sale of leasehold land - STCG OR LTCG - whether section 50 is applicable in the facts and circumstances of the case? - Held that:- The said provision is applicable where the capital is an asset forming part block of asset in respect of which depreciation is allowed under the Act. We are unable to accept the contentions of ld. Counsel for the assessee, as already noted section 50 is applicable where capital is an asset formin .....

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ance on account of foreign travel - Held that:- The claim of the assessee on account of expenditure incurred for foreign travel of his wife is sustained and it is an allowable expenditure as held by the HON’BLE HIGH COURT OF KERALA in the case of CIT vs. APPOLLO TYRES LTD [1998 (8) TMI 68 - KERALA High Court] and disallowance thereon confirmed by the CIT-A is not justified - ITA No. 1769/Kol/2011 - Dated:- 15-4-2016 - Shri P. M. Jagtap, A.M. And Shri S. S. Viswanethra Ravi, J.M. For the Petition .....

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hereon is STCG in place of LTCG in terms of Section 50 of the Income Tax Act, 1961. The said asset has never been a business asset. A wrong claim of depreciation over the same in the last year can not change the nature of asset. The profit out of the sale of said asset need to be treated as LTCG with benefit of cost indexation. 2. That in view of the facts & circumstances of the case, the Ld. CIT(A) erred in confirming disallowance of the foreign tour expenses to the extent of 60% of the tot .....

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ing a total income of ₹ 71,565/-. The notices under section 143(2) and 142(1) of the Act were issued under scrutiny. 4. During the assessment proceedings, the assessee has shown long term capital gain of ₹ 7,46,717/-. The AO found that the assessee has relinquished lease right on land and construction thereon and sold for a consideration of ₹ 1,20,00,000/- and also found assessee deposited only ₹ 5,00,000/-in Union Bank of India. The AO treated ₹ 1,25,00,000/- as va .....

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7; 1,25,00,000/- instead of ₹ 1,20,00,000/- as per the provisions of Sec.50C of the Act. It was contended by the Ld. A.R. that it is apparent from the record that by a registered Deed of Surrender of Lease being an Indenture of Surrender dt. 29th Feb. 2008, the lease-hold interest in land together with twostoried brick-built structure thereon for a total consideration of Rs.l,20,00,000/-. The consideration of Rs.l,20,00,000/- was received by the assessee by way of two cheques dt. 2/2/2008 .....

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lakh on 28/4/2007 on account of Receivable Against Termination of Lease and has erroneously considered this amount to be a part of consideration money received by the appellant against the Deed of Surrender of Lease dt. 29/2/2008. It was submitted by the assessee that addition of ₹ 51akh to the total consideration of ₹ 1,20,00,000/- as per the Deed is completely arbitrary and erroneous because the aforesaid sum of ₹ 5 lakh which was received and deposited in bank on 28/4/2007 w .....

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ed by him while computing the income from Capital Gains and also in computing the capital gain by applying the provisions of Sec. 50 of the Act. It was contended that from the records it is apparent that in the assessee's books of account under the head "Land & Building a/c.", there were two types of assets, i.e. (i) Leasehold interest in the land and (ii) Building constructed on such leasehold land. According to provisions of Section 32 of the Act, no depreciation is allowable .....

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sessment of the assessee in respect of A.Y. 2007-08 and hence the charging of depreciation in books of account of the assessee in respect of the preceding financial year cannot be automatically treated to have been allowed to the assessee in terms of provisions of Sec. 50 of the Act. Since, no assessment has been made in respect of immediately preceding F.Y., no depreciation on land & building has been allowed to the assessee and hence the provisions of Sec. 50 are not applicable in the inst .....

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erved by the AO that on 28/4/2007, the appellant had deposited a sum of ₹ 5 lakh on account of Receivable Against Termination of Lease. Hence, he has considered the full value of consideration for the purpose of computation of capital gain at ₹ 1,25,00,000/- instead of ₹ 1,20,00,000/- declared by the appellant. On the other hand, during the course of appellate proceedings it is contended by the Ld. A.R. that the AO was not justified in taking full value of consideration for sur .....

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self has admitted that sum of ₹ 5 lakh deposited in Union Bank of India was on account of amount receivable against termination of lease. However, he has failed to explain that if the said amount of ₹ 5 lakh was not related to the surrender of lease of land and building, then, on account of which termination of lease that sum of ₹ 5 lakh was received by him. He has further failed to explain as to whether the said sum of ₹ 5 lakh was offered for taxation in the preceding f .....

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I do not find any merit in the submission of the appellant. From the assessment records it is apparent that the; appellant has treated the land & building as his business assets of the proprietary concern M/s. Oriental Leather Industries and that he has also claimed the depreciation On that asset. Under the circumstances, the AO was justified in denying the Indexation and assessing the capital gain income as short-term capital gain by invoking provisions of section 50 of the I.T. Act. The a .....

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material available on record. The question that arises for deciding this issue that whether section 50 is applicable in the facts and circumstances of the case. The said provision is applicable where the capital is an asset forming part block of asset in respect of which depreciation is allowed under the Act. In this regard, the ld. Counsel for the assessee has contained that the building was incomplete and are not in the position to use. He also contended that the land was taken on lease and le .....

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the provisions of section 50 of the Act, then, are clearly applicable in the case of assessee and the profit arises from the sale of land and building is chargeable to tax as STCG as rightly held by the authorities below. We therefore, find no merit in the ground no.1 and dismiss the same. 9. Ground no.2 raised by the assessee is regarding the disallowance of ₹ 83,550/- on account of foreign travel. The AO disallowed at 60% of ₹ 1,39,249/-. The ld. CIT(A) was of the view that the for .....

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both the sides and perused the material available on record. As relied by the HON BLE HIGH COURT OF KERALA in the case of CIT vs. APPOLLO TYRES LTD reported in 237 ITR 0706 held as follows: 47. But the Tribunal has relied on the decision of the Special Bench of the Tribunal in the case of Glaxo Laboratories (India) Ltd. vs. ITO (supra) which distinguished the two decisions referred to above. It is the case of the assessee-company that the wife of the chairman-cum-managing director of the company .....

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ot a case that the foreign tour made by the chairman-cum-managing director is not for any business purposes or that the accompaniment of the wife is not for the purpose of fulfilling the social aspects aforementioned. The authorities below also do not have a case that the accompaniment of the wife of the chairmancum- managing director did not result in any advantage to the assessee. It is also relevant to note that the board of directors of the company, by resolution, have permitted the same. 48 .....

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of the Madras and Gujarat High Courts discussed above and distinguished the said decisions. Relying on the factual finding entered by the Tribunal, we held that the dictum laid down by the Madras and Gujarat High Courts did not apply. In these circumstances, we do not find any illegality in the findings entered by the Tribunal which relate to the Question No. 1 in IT Ref. No. 43/97. 12. In the aforesaid decision, the question that arose for consideration before the Hon ble High Court of Kerala t .....

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ase on hand and applied the finding given by the Bombay Special Bench in GLAXO LABORATORIES (INDIA) LTD. vs. INCOME TAX OFFICER. 13. Let us examine the finding of the Bombay Special Bench in GLAXO LABORATORIES (INDIA) LTD. vs. ITO reported in 18 ITD 0226 (SB), the facts are that Chairman and the Chief Executive of "Glaxo Holding" had extended invitation to Mr. & Mrs. Bhoothalingam and that the wife was accompanying her husband as a number of social engagements were included in the .....

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e wife accompanied the husband because of business considerations. In the modern age, and more so in the western countries, the senior executives are, as matter of social custom, accompanied by their wives when the visit, though for business purposes, has necessarily some social aspects also. Under these circumstances, we hold that the expenditure of ₹ 19,783 which includes air-fare of ₹ 15,656 and foreign exchange of ₹ 4,022 equivalent to £ 210 is an allowable expenditur .....

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