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2018 (2) TMI 303

ately sold to a third party - section 50(1) applicability - Special provision for computation of capital gains in case of depreciable assets - Held that:- Admittedly there was no power of attorney whatsoever given by the assessee in favour of Shri Sanjay Todi. We are therefore are of the view that there is no merit in the contentions put forth by the assessee. We hold that the Revenue authorities were correct in coming to the conclusion that there was a transfer of capital asset by the assessee during the previous year relevant to A.Y.2007-08. - In the present case the block of assets ceases to exist and therefore the provisions of Sec.50(2) of the Act would apply. Under Sec.50(2) of the Act, it is only the income received or accruing as a result of transfer that should be reduced from the WDV of the block of building as on 1.4.2006 to arrive at the Short Term capital gain. Admitted factual position is that the Assessee was to receive only a sum of ₹ 32 lacs from S.K.Todi as sale consideration in respect of the property. The admitted position is that the difference between ₹ 32 lacs and ₹ 56 lacs has already been taxed in the hands of S.K.Todi. In this factual .....

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aforesaid income was to be assessed under the head income under the head capital gain (Short term capital gain). 4. In the assessment of the assessee for A.Y.2007-08 the AO noticed that the property at M.G.Road, Bangaluru which was the subject matter of the discussion in the earlier paragraphs was part of the block of asset Building on which the assessee had claimed depreciation. The AO was of the view that there was a transfer of the aforesaid property during the previous year relevant to A.Y.2007-08. The AO was of the view that in view of the provision of section 50(1) of the Income Tax Act, 1961 (Act) the short term capital gain on transfer of the asset should be brought to tax. It is not disputed that the block of assets of building ceased to exist, as a result of the transfer of the property at M.G.Rod, Bangaluru. The AO accordingly computed the short term capital gain invoking the provision of section 50(1) of the Act. The assessee took a stand before the AO that as far as the assessee is concerned the sale consideration receivable by the assessee was only ₹ 32,00,000/- and therefore capital gain should be taxed in the hands of the assessee by regarding ₹ 32,00,00 .....

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it is to point out that though the 'appellant claims that agreement of sale was entered on 22-10-2005 amongst the Firm and Sanjay Kumar Todi at a price of ₹ 32,00,000/- and Capital Gain of ₹ 30,71,522/- got accrued in F.Y 2005-06 however, this remains a fact that no capital gain was even shown In A.Y 2006-07 and the Asset continued to appear in the Balance Sheet upto subsequent Assessment Years. Therefore, the argument lacks factual basis. The assessee has further claimed that the C.I.T (A) has allowed capital gain in the hands of Shri Sanjay Kumar Todi for the year 2007-08.whereas A.O had treated the transaction as income from other sources in the hands of Shrl Todi considering the fact that the property was not be the capital asset of the assesee since full payment was not made and possession was not taken. In this regard it is pertinent to mention here that before C.I.T(A) the facts of the case of M.M Export were not placed. Had it been placed before C.I.T(A) that the assessee M/s M.M Export. from where Mr. Sanjay Todi stated to have purchase in F.Y 2005-06. has not shown any transfer in its books of account, no capital Gain/income is shown. the asset has not bee .....

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or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, any immovable property. The Ld. Counsel for the assesee drew our attention to CBDT Circular No.495 dt. 22.09.1987 explaining the aforesaid provision which reads as follows :- Definition of transfer widened to include certain transactions 11.1 The existing definition of the word transfer in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member of or acquiring shares in a co-operative society, company, or association or persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistoreyed constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a .....

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a; ] 11. We are of the view that none of the clause of Explanation-2 are attracted in the present case. We also are of the view that Explanation-2 will not be applicable to the facts of the present case and the same is restricted to cases of transfer of assets of a company pursuant to transfer of shares. 12. The ld. Counsel for the assessee has filed certain decisions in the paper book filed before us but has made reference to only few decisions. The first decision is of the Hon ble Madhya Pradesh High Court in the case of CIT vs Laxmidevi Rathani and Ors (2008) 296 ITR 363 (MP).We have perused the aforesaid decision and it is on the same line as that of the decisions of the Hon ble Bombay High Court in the case of Tata Services Ltd. (supra). It was a case in which the question for consideration before the Hon ble Court was as to whether giving up right to claim performance extinguishes the right to property so as to attract the rigour of section 2(14) of the act r.w. s.2(47). This decision is of no relevance to the facts of the present case. The ld. Counsel also drew our attention to the decision of the Hon ble Supreme Court in the case of Suraj Lamps & Industries (P)Ltd vs St .....

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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 assets during the previous year, exceeds the aggregate of the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such tr .....

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