TMI Blog2003 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... section 256(1) of the Income-tax Act, 1961, for our opinion on the question quoted hereinbelow : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the surplus realised on the sale of land shall be treated as long-term capital gains and the surplus on the sale of building shall be treated as short-term capital gain ?" Facts: Some time during the accounting year ending December, 1975, the assessee purchased a plot of land admeasuring 3,930 sq. yards at Friends Colony, New Delhi. In the next year, the assessee started construction of a bungalow as a residence for the assessee's manager in New Delhi. On August 7, 1978, the assessee sold the entire property for Rs. 30,00,000. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessment order. Being aggrieved, the matter was carried in appeal to the Tribunal by the assessee, which took the view that in the present case the land was a distinct and separate capital asset vis-a-vis the building ; that the land was a long-term capital asset ; that in India, the principle "dual ownership" was applicable ; that for the purposes of computation of capital gains, land and building were two separate and distinct assets and, therefore, profits arising from the sale of land was required to be considered as long-term capital gain whereas, profits arising from the sale of building was required to be considered as short-term capital gain. Being aggrieved by the decision of the Tribunal, the matter has come by way of ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r profession, the assessee is entitled to deduction. In this case, we are concerned with the assessment year 1979-80. Under section 32(1)(ii), the assessee was entitled to deduction for depreciation in case of buildings, machinery, plant or furniture, etc. That deduction was to consist of a certain percentage on the written down value. Therefore, under section 32, the assessee was entitled to depreciation only in respect of the buildings and not the land. In the case of CIT v. Alps Theatre [1967] 65 ITR 377 (SC), it has been held that depreciation under the Income-tax Act was not allowable on the cost of the land on which the building is erected but only on the cost of the superstructure. In that matter, the assessee carried on the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l provision for computing cost of acquisition in the case of depreciable assets. Since land is not a depreciable asset, section 50 will not apply to the site on which the building is erected. Section 50, therefore, provides for determination of the cost of acquisition of a depreciable asset which in the present case is a superstructure on the site. Section 50 refers to the provisions of section 48 which in term deals with mode of computation and deductions in respect of the income chargeable under the head "Capital gains". Section 48 states that such income shall be computed by deducting from the full value of the consideration received, the expenditure incurred wholly in connection with such transfer and the cost of acquisition of the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee received Rs. 14,00,000 for land under the above conveyance as against the cost of Rs. 9,20,530 resulting in the capital gain of Rs. 4,79,470. According to the Department, this working is correct. However, according to the Department, since the land was a part of the superstructure, the said amount of Rs. 4,79,470 was not a long-term capital gain but it was to be treated as short-term capital gain. This is the only issue which arises in this case. As stated above, this view of the Department is erroneous for two reasons. Firstly, under section 32(1), no depreciation is admissible for land (see judgment of the Supreme Court in the case of Alps Theatre [1967] 65 ITR 377). Secondly, the department can assess the company to short-term c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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