TMI Blog2018 (7) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... .04 crores to the employees he got the staff quarters vacated. Thus, the said amount was adjusted from the agreed sale consideration to be paid to the assessee. The aforesaid facts make it clear that the amount of ₹ 1.04 crores was never received by the assessee from the buyer as the buyer adjusted it from the sale consideration. In any case of the matter, even if it is treated as part of sale consideration the amount of ₹ 1.04 crores have to be treated as expenditure incurred by the assessee for transferring the property, hence allowable under Section 48 of the Act. Thus, looked at from any angle the amount of ₹ 1.04 crores has to be allowed as deduction. Sale of property - bifurcation in to land and building - Long term / Short term capital gain - Held that:- As could be seen from the facts on record, assessee itself has bifurcated the sale of property to land and building portions and offered long term capital gain and short term capital gain on the sale consideration received. However, when the Bench put a query to the learned counsel for the assessee regarding the exact extent of land and building sold and how the valuation of the land portion and building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able property of the closed textile mill. On verifying the Profit Loss Account and computation of income the AO found that in the relevant previous year assessee has executed a sale deed with a builder, M/s. Sanghvi Premises P. Ltd. for sale of the property. The AO noticed that the assessee has offered long term capital gain from sale of property by treating it as sale of land. However, the AO was of the view that the properties sold comprise of mill workers quarters against which the assessee has claimed depreciation earlier. The proceeds from sale of property has to be taxed as short term capital gain. Therefore, he called upon the assessee to explain as to why the income should not be assessed as short term capital gain. In response it was submitted by the assessee that the property in question sold by the assessee since was a land, the sale proceeds has to be assessed as long term capital gain. In this context the assessee relied upon the sale deed as well as the confirmation of the buyer, i.e. M/s. Sanghvi Premises P. Ltd. in response to the notice issued under Section 133(6) of the Income Tax Act (hereinafter the Act ). The AO, however, did not find merit in the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the land to the developer. He observed, since, the assessee could not get the staff quarters vacated, finally the developer has to step in to get the staff quarters vacated by paying an amount of ₹ 1,04,00,000/- to various employees of the assessee by issuing cheques to them over a period from 26.11.2007 to 25.02.2009 and reduced the said amount from the agreed sale consideration. He further observed that in response to notice issued under Section 133(6) of the Act the developer has clearly stated that he has acquired the land for the purpose of developing and converting it into real estate. Thus, the learned CIT(A) was of the opinion that the intention of the parties was to transfer the land only as the developer was not interested in buying staff quarters, which were occupied by the employees of the assessee and, in fact, the staff quarters were creating a hindrance in the transfer of the land. Thus, the CIT(A) held that the staff quarters did not yield any gain to the assessee, rather, it took away ₹ 1.04 crores from the consideration of land for getting those staff quarters vacated. The learned CIT(A) concluded that since the asset transferred was a land on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased the land from the assessee. The sale deed further enjoins upon the assessee to get the staff quarters vacated at its own cost and since the assessee failed to get it vacated even after considerable lapse of time, the buyer took it upon itself to vacate the property by paying an amount of ₹ 1.04 crores to the employees of the assessee, which was adjusted against the sale consideration. The learned A.R. submitted that as per provisions of Section 50(1) of the Act, the capital asset must form part of block of asset. He submitted that in the case of the assessee it is not so as the land in question never formed part of the block of asset. He submitted that as per section 2(11) of the Act block of asset does not include land. Therefore, provisions of Section 50(1) is not applicable as the land is not subjected to depreciation. The learned A.R. submitted, the allegation of the AO that the claim of sale of vacant land as per the sale deed and confirmation of the buyer is an afterthought is misplaced considering the fact that the assessee has entered into development agreement in the year 2005 which cannot be considered to be an afterthought in the year 2011. Without prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance Sheet assessee has shown the value of staff quarters at ₹ 12,26,193/- and it is also a fact that these staff quarters were standing over the land sold by the assessee,however, after going through the recitals of the registered agreement dated 29.10.2005 it is very much clear that the intention of the parties was to sell the land as the value offered under the sale transaction was the value of land and not the staff quarters. It is further evident that the buyer purchased the property for the purpose of developing the land as a real estate. Thus, reading the development agreement makes it clear that the immovable property subjected to transfer was the land and not the staff quarters. It is further clear from the fact that the terms of the deed required the assessee to vacate the employees from the staff quarters and handover the vacant possession of the property to the buyer. Since, the assessee failed to vacate the staff quarters, the buyer took it upon itself to vacate the employees from the staff quarters by paying compensation to them to the tune of ₹ 1.04 crores. Thus, from the aforesaid facts it is clear that the buyer intended to buy the land for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 2(47)(v) of the Act has taken place in that assessment year. In view of the aforesaid, we hold that the gain derived from transfer of capital asset was to be assessed in A.Y. 2006-07 and not in the impugned assessment year. Further, considering the fact that this without prejudice argument was made by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, under which the assessee is entitled to support the order of the CIT(A) on any ground decided against him,the relief is to be restricted to the extent given by the learned CIT(A). Accordingly, we uphold the order of the CIT(A) on this issue. 9. As regards deduction of claim of ₹ 1.04 crores towards payment made by the builder to the employees for vacating the staff quarters, the material on record clearly demonstrate that as per the terms of the agreement the assessee was obliged to handover the vacant possession of the land to the builder after vacating the employees from the staff quarters. However, it is evident that the assessee has failed in its attempt to vacate the employees. Therefore, the buyer stepped in and after paying compensation of ₹ 1.04 crores to the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Simplex House has been shown as depreciable asset. Further, in the return of income for the impugned assessment year, the assessee has claimed depreciation on the opening written down value of the asset. Thus, the learned CIT(A) held that the assets sold being a depreciable asset the gain derived from sale of asset has to be treated as short term capital gain under Section 50(1) of the Act. 14. The learned A.R. submitted before us that the assessee has sold both land and building and has accordingly offered long term capital gain for sale of land and short term capital gain for sale of building in the return of income filed for the year. He submitted that the land in question not being a depreciable asset, the gain derived from sale of land cannot be treated as short term capital gain under Section 50(1) of the Act. 15. The learned D.R. relied upon the observations of the AO and the learned CIT(A). 16. We have considered rival contentions and perused the material on record. As could be seen from the facts on record the assessee, vide agreement dated 15.04.2009, has sold its 2/3 share in land and structureon Plot No. 44 at Juhu for a consideration of ₹ 3.26 crores ..... 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