TMI Blog2020 (3) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... ases to exist. In the instant case, the assessee sold all the 9 units during the impugned assessment year and out of the sale proceeds of the said flats sold, it purchased a property located in Goa. Disallowing the set off of sale of the units at Ashok Towers/Ashok Garden against the new purchase of property at Goa - appellant submits that in the block of assets concept u/s 50, the sale of asset is ought to be set off against the purchase of new assets in the same block - HELD THAT:- In the instant case the assessee has set up the business, which was ready to commence its operation. Thus the assessee would be entitled to claim expenditure which were incurred for the purpose of business. The contentions raised by the assessee before the Ld. CIT(A) vide ground no. 4 was that the AO erred in concluding that since there was no business income in the relevant assessment year, depreciation loss will not be allowed. CIT(A) has allowed this ground of appeal. Set off of sale of the units at Ashok Tower / Ashok Garden against the new purchase of property at Goa - In the block of assets concept u/s 50, the sale of assets ought to be set off against the purchase of new assets in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter - ITA No. 2881/MUM/2016, ITA No. 3335/MUM/2016 - - - Dated:- 10-2-2020 - Shri Ravish Sood (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Yogesh Thar, AR For the Revenue : Mr. D.G. Pansari, DR ORDER PER N.K. PRADHAN, A.M. The captioned cross appeals one filed by the assessee and the other by the Revenue- are directed against the order of the Commissioner of Income Tax (Appeals)-5 (in short CIT(A) ), Mumbai are arise out of the assessment order passed u/s 143(3) of the Income Tax Act 1961, (the Act ). ITA No. 2881/MUM/2016(AY 2010-11) (Assessee s Appeal) 2. The 1st ground of appeal The CIT(A)-5, Mumbai erred in not considering 3 units at Ashok Garden and 2 units at Ashok Towers, purchased for a total consideration of ₹ 3,12,86,535/- in the block of assets. The appellant submits that the said unit were purchased and used for a purpose of office/guest house for its business and are eligible to enter in the block of assets. 3. Briefly stated, the facts of the case are that during the year under consideration, the assessee sold five fully constructed units for a consideration of ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1804 23.12.2009 22,98,335/- Total cost of purchases 312,86,535/- S. No. Name of Property and flat No. Agreement (sale) value (Rs.) Value as per stamp valuation Authority (Rs.) Value adopted in terms of securities. 50C of I.T. Act (Rs.) 1. Ashok Garden F 1901 1,19,42,791/- 2,12,13,250/- 2,12,13,250/- 2. Ashok Garden E 2001 1,15,28,605/- 2,04,84,500/- 2,04,84,500/- 3. Ashok Garden F 2001 1,15,28,605/- 2,04,84,500/- 2,04,84,500/- 4. Ashok Tower C 1803 89,50,000/- 89,23,075/- 89,50,000/- 5. Ashok Tower C 1804 31,70,000/- 31,70,000/- 31,70,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty may be assessed as long term capital gains allowing the assessee indexation benefit. Thus he modified the computation of the AO of STCG as LTCG. 5. Before us, the Ld. counsel for the assessee submits that the assessee-company was incorporated on 19.09.2007 and was engaged in the business of developing real estates and investing in immovable properties for its commercial exploitation. It had purchased 9 units viz. F 1901, E 2001, F 2001 located in the building Ashok Garden and C 1803, C 1804, B 1803, B 1804, B 1805, B 1806 located in the building Ashok Tower by way of allotment letters dated 01.04.2008. Out of the said 9 units, the possession of 4 Units, viz. Units bearing No. B-1803, B-1804, B-1805 and B-1806 located in the building Ashok Tower, were received on 30.03.2009 relevant to the AY 2009-10 and the same were forming part of the block of assets of the assessee-company in the AY 2009-10. The aforesaid four units were used by the assessee for office purposes. Further, the possession of the remaining five units, viz. Units bearing Nos. F-1901, E-2001, F-2001 located in the building Ashok Garden and Unit Nos. C-1803, C-1804 located in the building Ashok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to use during the year under consideration and that they were used wholly and exclusively for the purpose of conducting the assessee s business. Also it is stated by him that assuming without admitting that the AO was correct and admitting higher value as per stamp duty authority u/s 50C of the Act, even then the said value was less than the WDV of the block of assets of the assessee-company and as such there would be no STCG. With the above submissions, the Ld. counsel submits that the addition of ₹ 4,30,15,715/- being STCG computed by the AO be deleted. 6. On the other hand, the learned Departmental Representative (DR) submits that as per the audited balance sheet of the year under consideration, in the Fixed Assets Schedule, those 5 units were classified as CWIP and therefore, these units cannot form part of the block of assets; as the purchase of these units were completed only during the year under consideration, there was no evidence for these units having been put to use and hence the claim of depreciation does not arise. Thus the ld. DR supports the order passed by the AO. 7. We have heard the rival submissions and perused the relevant materials available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the beginning of the year; and (b) actual cost of any asset falling within that block, acquired during the year. As per section 50(1), if the value of consideration exceeds the aggregate of cost of acquisition and expenses on transfer, there will be Short Term Capital Gain. On the other hand, if the value of consideration of the part transferred is less than the cost of acquisition, then the balance left is the WDV of the block at the end of the year on which depreciation will be charged as per section 32 of the Act. The above provision deals with a case where part of the block of depreciable asset is transferred i.e. the block does not cease to exist. As per section 50(2), if the value of the consideration exceeds the aggregate of cost of acquisition and the expenses of transfer, there will be STCG. On the other hand, if the value of consideration of entire block transferred is less than the aggregate of cost of acquisition and expenses of transfer, there will be short term capital loss. The above provision deals with the case where entire block of depreciable assets is transferred i.e. the block ceases to exist. In the instant case, the assessee sold all the 9 units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o claim the expenditure which were incurred for the purpose of business. It is stated that the well furnished property at Goa and office equipments were purchased and held for the purpose of business and as such the said property and office equipments would form part of the block of assets of the assessee-company. On the other hand, the ld DR supports the order passed by the Ld. CIT(A). 11. We have heard the rival submissions and perused the relevant materials on record. In the instant case the assessee has set up the business, which was ready to commence its operation. Thus the assessee would be entitled to claim expenditure which were incurred for the purpose of business. The contentions raised by the assessee before the Ld. CIT(A) vide ground no. 4 was that the AO erred in concluding that since there was no business income in the relevant assessment year, depreciation loss will not be allowed. The Ld. CIT(A) has allowed this ground of appeal. In the 2nd ground of appeal before the Tribunal the assessee has raised the issue of (i) set off of sale of the units at Ashok Tower / Ashok Garden against the new purchase of property at Goa (ii) In the block of assets concept u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal means to manipulate the value of shares as the companies being private limited companies which are controlled by the assessee s group of persons and (iv) shares are purchased and sold at a rate which does not conform to Rule 11UA of the Rules. Thus the AO disallowed the short term capital loss claimed by the assessee on the reason that it is not borne out of genuine purchase and sale. 16. In appeal, the Ld. CIT(A) held : 5.6 I have considered the appellant's submission. In this issue appellant had purchased shares of the 4 unquoted Private Ltd. companies from its group company Delta in the previous year. Later the shares were sold on credit to Whitecity Mercantile Pvt. Ltd. by a purchase agreement entered between them. Now AO had disallowed the loss incurred by the appellant on the ground that purchase and sale are not genuine. AO's main argument is appellant s purchase and sales is between related properties hence the purchase and sales are not genuine. Here when we examine the details though purchase is from related party, sale is to unrelated party i.e. Whitecity Mercantile P. Ltd. whose directors are Alpana Chinai and Mahesh Gupta who are not related to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A) and confirm it. Thus the 4th ground of appeal is dismissed. 19. The 5th ground of appeal On the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing the claim of depreciation and administrative expenses without appreciating that the Goa premises had not been utilized, no business activities were earned out, no income had been offered during the year. 20. It is well settled that where a business unit has been set up by the assessee, which was ready to commence operation, the assessee would be entitled to claim the expenditure which were incurred for the purpose of business. Further, for the purpose of claiming depreciation u/s 32 of the Act, the assets should satisfy the dual conditions of forming part of the block of assets and being used for the purpose of conducting assessee s business. In the instant case, we find that these conditions are satisfied. Therefore, we confirm the order of the Ld. CIT(A) on the above matter and dismiss the 5th ground of appeal. In the result, the appeal filed by the Revenue is dismissed. 21. To sum up, the appeal filed by the assessee is partly allowed, whereas the appeal filed by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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