TMI Blog2017 (5) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... salvage received shall have to be treated as short term capital gain or short term capital loss, as the case may be. In view of the above discussion, the action of the Assessing Officer in adding back the short term capital loss of (-) ₹ 9,87,702/- to the Income of the assessee is erroneous and is not in accordance with the Law. Therefore, direct the AO to delete the addition made on this count. Accordingly, the grounds raised by the assessee are allowed. - I.T.A. No. 1421/HYD/2016 - - - Dated:- 12-5-2017 - Smt. Asha Vijayaraghavan, Judicial Member For Assessee : Shri C. Suresh For Revenue : Smt. N. Suresh ORDER This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-9, Hyderabad, dated 20-06-2016 for the A.Y. 2003-04. 2. Briefly the facts of the case are that the assessee is a HUF filed its return of income for the AY 2003-04 on 19/11/2003 admitting loss of ₹ 3,47,090/-. Apart from house property income of ₹ 5,73,694/-, the assessee declared loss of ₹ 19,28,443/- from the business of running a printing press, long term capital gains of ₹ 9,92,793/- and income of ₹ 14,878/- from oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable in respect of any asset falling within that block which is sold or discarded or demolished or destroyed during that previous year ..... Further Explanation to section 41 defines money payable as including any insurance, salvage or compensation money payable in respect thereof . Thus a harmonious reading of section 43(6)(c) and section 50 of the Act would bring out the fact Where an asset is demolished, and the lock of asset ceases to exist the difference between the written down value and e salvage received shall have to be treated as short term capital gain or short term capital loss, as the case may be. In my Income tax case for the assessment year 2003-04 the land had been taken on lease and I had constructed the building several year back. On the expiry of the lease. I was under an obligation to return the land to the landlord. Thus, as per the conditions of the lease I was under a legal obligation to demolish the building. Thus the block of asset building ceased to exist on its demolition during the previous year relevant to assessment year 2003-04. The difference between the salvage value and the WDV had been treated as short term capital loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order it was nowhere stated that the assessment was reopened u/s 148 on the basis of audit objection. He, therefore, issued a letter to AO on 04/01/2016 to verify the concerned records and furnish comments as to whether the notice u/s 148 was issued on the basis of audit objection. In response, the AO vide letter dated 01/02/2016 stated as under: It is hereby submitted that as per the order sheet noting dated 07/03/2010, the AO has recorded the reasons for reopening of the concerned case and subsequently issued notice u/s 148 on 09/03/2010. The assessment record in one volume is enclosed for ready reference. Accordingly, the appeal may be decided on the merits of the matter. 5.1 In view of the above, the CIT(A) held that the report of the AO does not mention that the assessment has been reopened on the basis of an audit objection and as such, the contention of the assessee is not acceptable and this ground is therefore dismissed. 6. With regard to the disallowing the set off of short term capital loss of ₹ 9,87,702/- on demolition of building, the AO observed as under: The assessee's contentions have been given careful consideration but are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The learned Commissioner of lncome Tax (Appeals)-9, Hyderabad has erred on facts and in law in not allowing the set off of short term capital loss (-) ₹ 987702 against other long term capital gain of the Assessee, failing to note that on the demolition of Building being depreciable Asset, the Block of Asset bad ceased to exist and the rights of the assessee in the said Asset stood extinguished. 2. The learned Commissioner of Income Tax (Appeals)-9, Hyderabad, erred in Law in taking the stand that extinguishment of rights in an Asset consequent to its demolition does not fall within the definition of Transfer' as provided for in section 2(47) of the Act. The learned Commissioner of Income Tax (Appeals)-9, Hyderabad, failed to appreciate the fact that, as held by the Honourable Supreme Court, one cannot approve the view that the expression 'extinguishment of any rights therein cannot be extended to mean extinguishment of rights independent of (or) otherwise than on account of transfer. In the result the learned Commissioner of Income Tax (Appeals)-9, Hy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted. By the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such 'reduction does not exceed the written down value as so increased. 11.2 From the above it would be clear that in case of any block of assets the aggregate of the written down value at the beginning of previous year shall have to be considered and duly adjusted by the reduction of the moneys payable in respect of a.ny asset falling within that block which is sold or discarded or demolished or destroyed during that previous year 11.3 Further Explanation to section 41 defines money payable as including any insurance, salvage or compensation money payable in respect thereof. 11.4 Thus a harmonious reading of sections 43(6)(c) and section 50 of the Act would bring out the fact where an asset is demolished, and the block of asset ceases to exist, the d ..... 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