TMI Blog2019 (9) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is accordingly decided in favour of assessee. Capital gain on sale of land building and leasehold rights - bifurcation of capital gain - short term capital gain - as per assessee same needs to be treated as short term capital gains for sale of building and long term capital gains for leasehold rights in land - HELD THAT:- On a plain reading of section 50 of the Act, it is clear that it is applicable for transfer of buildings and not for transfer of right in lease hold land. Therefore, the Capital Gains on the transfer of the right in lease hold land has to be computed under the normal provisions as Long Term Capital Gains and the Capital Gains on the transfer of the buildings has to be computed under the provisions of section 50 as Short Term Capital Gains. Observations of the CIT(Appeals) contrary to the aforesaid provisions are unsustainable and are hereby vacated. The ld. counsel for the assessee has in this regard rightly placed reliance on the decision of CIT v. Vimal Chand Golecha [ 1992 (12) TMI 33 - RAJASTHAN HIGH COURT] wherein it was held that when price of two capital assets is charged at one consolidated price, where a gain from one of capital assets was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land as Long-Term Capital Gains. 5. The learned CIT(A) erred in upholding the assessment order which is against the CBDT Circular No. 14(XL-35) dated April 11, that has been judicially noted and approved. 6. The learned CIT(A) erred in law and on facts in holding that transfer of leasehold land along with the buildings on it leads to short-term capital gains u/s 50 of the Income Tax Act, 1961 without appreciating that Sec 50 of the I.T.Act,1961 is applicable in the case of depreciable assets, and land/lease hold land is not a depreciable asset. 7. The learned CIT(A) erred in law and on facts in holding that it is not possible to bifurcate the consideration between land and buildings. 3. The additional grounds of appeal sought to be raised by the assessee reads as follows:- 1. The learned CIT(A) erred in law and on facts in not allowing the set off of unabsorbed depreciation u/s32(2) rws 71 of the I.T. Act. 2. The learned CIT(A) erred in law and on facts in not allowing the set off of brought forward business loss against the short term capital gains on sale of business assets. 4. The above additional grounds sought to be raised by the Assessee were grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty tax dues, the assessee had to incur expenses towards Office Rent, Legal Professional Fees, Property Maintenance Charges, fees towards meeting compliance under Companies Act, Income Tax Act and other Statutory applicable laws. 9. In the return of income filed for A.Y. 2015-16 on 30/11/2005, the assessee returned Capital Gains on transfer of leasehold rights in land and buildings put up on it by the assessee as Short Term Capital Gains at ₹ 3,67,67,836 and after adjusting current years business expenses of ₹ 1,08,54,687 (including depreciation as per the I.T. Act) under the applicable provisions of the Income Tax Act, 1961 (Set off provision under section 71 of the Act), returned a total taxable Income of ₹ 2,59,15,640. 10. In the assessment proceedings, the assessee claimed that the sale of the leasehold rights over the land that was sold gave rise to long term capital gain (LTCG). That the sale of building was taxable as short term capital gain (STCG) u/s. 50 of the Act as the building was a depreciable asset and was part of the block of assets of building on which the assessee had claimed depreciation. The plea of assessee was that whenever an asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year relevant to A.Y. 1996-97. In the return of income, the assessee claimed deductions for expenditure including for renovation of the buildings after the business was stopped, post operative rent and post operative interest. The Hon'ble Court rejected the contention that no deduction is to be allowed as the business was completely stopped and also that the expenditure claimed was also not substantiated. It held that the liabilities like paying rent etc., are not personal liabilities of the assessee and that all the expenditure including the expenditure for renovation of buildings etc., incurred after the business was stopped has to be allowed, though the business was stopped in the year 1994. 15. The ld. counsel for the assessee submitted that the assessee has to maintain its legal status as a company till the assets are disposed and liabilities are paid. He brought to our notice the break-up of the various expenses claimed which are as follows:- PARTICULARS AMOUNT IN RS. REMARKS Rent 394,208 Registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court of Karnataka in the case of Lawrence D'Souza (supra) took the view that expenditure in question had to be allowed in AY 1996-97, though business came to a halt in the year 1994. Following the aforesaid decision of Hon ble High Court of Karnataka, we are of the view that the expenses in question have to be allowed as a deduction. This issue is accordingly decided in favour of assessee. 19. As far as the other issue of capital gain on sale of land building is concerned, the ld. counsel for the assessee submitted that the assessee had wrongly treated the entire capital gains as short term capital gain in its return of income and the same needs to be treated as short term capital gains for sale of building and long term capital gains for leasehold rights in land. He brought to our notice that the CIT(A) rejected the claim of assessee only for the reason that assessee has shown short term capital gains from sale of its capital assets in its return of income. The CIT(A) dismissed the claim of assessee holding as follows:- . No revised return of income was filed by the assessee. So the claim of the assessee could not have been considered by the AO in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e record, found that the relevant material qua the claim made by the assessee company under Section 80 IB (10) of the Act was placed on record by the assessee company during the assessment proceedings and therefore, it deemed it fit to direct its reexamination by the Assessing Officer. 18.1 In our opinion, the view taken by the Tribunal is unexceptionable and therefore, does not merit any interference. 21. He submitted that similar decisions have been rendered by the Hon'ble Bombay High Court in the cases: CIT v. Prabhu Steel Industries (P.) Ltd [1988] 171 ITR 530 (Bombay) and CIT v. Pruthvi Brokers Shareholders [2012] 23 taxmann.com 23 (Born.). He pointed out that during the assessment proceedings and the proceedings before the CIT(A), the assessee submitted the details of the transfer of lease hold right in the land and building on the land along with the supporting documents and neither the AO nor the CIT(A) have commented adversely on them. It was submitted that the claim of the assessee for correct computation of the Capital gains should be considered by this Tribunal as the relevant record was available on record with the AO and the CIT(A). 22. We have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(Appeals) contrary to the aforesaid provisions are unsustainable and are hereby vacated. The ld. counsel for the assessee has in this regard rightly placed reliance on the decision of Hon'ble Rajasthan High Court in the case of CIT v. Vimal Chand Golecha [1993] 201 ITR 442 (RAJ.) wherein it was held that when price of two capital assets is charged at one consolidated price, where a gain from one of capital assets was a short-term capital gain while from other it was a long term capital gain, then the assessee is entitled to bifurcate the same and benefit to assessee could not be denied in respect of gain arising from sale of an asset which could be considered as long-term capital gain. 26. As far as the issue of set off of business loss and unabsorbed depreciation is concerned, a specific ground was raised by the assessee before the CIT(Appeals), but the CIT(A) has not rendered any decision specifically on this issue. It is a fact that during the assessment proceedings it was submitted to the AO that profit on transfer of a business depreciable asset (which is determined under section 50) and taxable as short-term capital gain under the head Capital gains is an incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
