TMI Blog2018 (5) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and gains of business or profession - that brought forward business losses could not be allowed to be set off against STCG - issue of carry forward of loss needs further verification by the AO - appeal stands partly allowed - I.T.A./6076/Mum/2014 - - - Dated:- 23-5-2018 - Sh. Rajendra, Accountant Member And Amarjit Singh, Judicial Member For The Revenue : Shri Suman Kumar-DR For The Assessee : Shri Manjunath Prabhu Order u/s. 254(1)of the Income- tax Act, 1961(Act) PER RAJENDRA, AM Challenging the order dated 03/06/2014 of the CIT(A)-17, Mumbai, the Assessee has filed present appeal. Assessee-company, engaged in the business of manufacturing of textiles, filed its return of income on 30/09/2011 declaring total income at NIL. The Assessing Officer (AO) completed assessment u/s. 143(3) of the Act, on 03/01/2014, determining total income at ₹ 71. 52 lakhs. 2. First ground of appeal is about confirming the addition of ₹ 62. 02 lakhs under the head Short-Term Capital Gains(STCG). During the assessment proceedings, the AO found that the assessee had sold factory building along with land for ₹ 80 lakhs, that after reducing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories, that if depreciation had not been allowed, the cost of acquisition of the asset was required to be computed u/s. 48 and 49 of the Act and not as per the provisions of section 50. He referred to the provisions of section 32, 50 and 55 of the Act and held that for claiming depreciation the assessee should own the asset, that it should be used for purpose of the business/profession, that the definition of block of assets was inserted with effect from 01/04/1988. He further observed that the assessee had sold the industrial gala which was the only asset in the block of assets, that the year after it entered into an agreement with a developer/builder for purchase of a new gala, that the new gala was not taken over by the assessee, that the developer had not constructed the gala, that the assessee was issued only allotment letter, that it had paid a part consideration for the property in question, that the balance amount was yet to be paid, that as against ₹ 76, 95, 000/- the assessee had paid ₹ 44. 01 lakhs only for the year under consideration, that the claim made by the assessee about acquiring a new asset was factually incorrect, that the claim made by it for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for computing capital gains as per section 50 of the Act there was no condition of asset to use. He referred to the cases of Artic (68 ITD 462), Fluorescent Fixtures Ltd. (34 SOT 48), Oceanic Investments Ltd. (507 TTJ 549) and Ansal Properties and Infrastructure Ltd. (44 SOT236). The Departmental Representative(DR)contended that the assessee had not acquired the asset or nor has put the asset to use, that in the balance sheet it had shown the gala as work in progress, that gala could not be treated as part of the block. 5. We have heard the rival submissions and perused the material before us. We find that the assessee had sold its industrial gala at Vapi, that it had purchased a gala in Mumbai, that it had paid ₹ 44. 01 lakhs to a developer, that the total amount to be paid by the assessee for the gala was ₹ 76. 95 lakhs, that the assessee had claimed that it had acquired asset that would form part of the block of assets, that while calculating the STCG a sum of ₹ 44. 01 lakhs should be considered, that the departmental authorities held that the assessee had not acquired the property, that it had not put the asset to use, that they also held that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allotment letter of asset would make the allottee entitled to claim STCG. Therefore, we hold that claim made by the assesee-that an allotment letter from developer is equal to acquisition of an asset-is not tenable, especially when it had not submitted the basic documents like approval of Municipal/ Panchayat authorities approving the plan of the proposed gala or the commencement certificate. Even for the sake of argument, it is presumed that the developer had the requisite permissions, it would not entitle the assessee to claim benefit of section 50. It has claimed deduction for non-existent asset. So, we hold that order of the FAA does not suffer from any legal infirmity. Now, we would like to deliberate upon the cases relied upon by the assessee. In the matter of Artic(supra)the Tribunal had held as under: The basic question to be examined in the light of the persuasive arguments advanced by both the parties before us, is whether it is a requirement of the section that in order to obtain deduction thereunder in respect of the cost of a new asset acquired during the previous year, the assessee should be found to be carrying on some business or the other. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness/profession, that brought forward business losses could not be allowed to be set off against STCG. However the assessees was allowed set off of unabsorbed depreciation of ₹ 7. 48 lakhs. 7. During the appellate proceedings, before the FAA, the assessee made detailed submissions to justify the claim of carry forward of losses of earlier years. After considering the assessment order and submissions made by the assessee, he held that section 50 contained a special provision for computation of capital gain in case of depreciable assets, that it was a deeming provision, that only by a legal fiction income from the transfer of otherwise long-term capital asset was treated as capital gains arising from the transfer of short-term capital assets, that a deeming provision could not be extended beyond the purpose for which it was enacted, that the prescription of section 50 was to be extended only up to the computation of capital gains. He referred to the case of Manali Investments (139 TTJ 411) and held that capital gain in the case under consideration had arisen from the transfer of an asset which was held for a period of more than three years, that the disputed amount would r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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