Revenue's Appeal Dismissed: Costs Allocation Upheld. Capital Gains Calculation Revised. Depreciation Allowed.

The Revenue's appeal challenging the allocation of costs towards the building and the calculation of long-term capital gains on leasehold rights was dismissed. The CIT(A)'s decision to allocate the building's value at Rs. 87,12,170 instead of Rs. 5,28,12,000 was upheld, emphasizing that the buyer paid based on the land cost due to the leasehold rights' transfer. Additionally, the CIT(A) directed a revision of the building's value and allowed depreciation on the property held for over 40 years. The cross objections by the assessee were treated as allowed for statistical purposes.

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Issues:
1. Allocation of cost towards building
2. Calculation of long term capital gains on leasehold rights
3. Depreciation on property held for more than 40 years

Allocation of Cost towards Building:
The Revenue challenged the CIT(A)'s decision regarding the allocation of Rs. 5,28,12,000 towards the building, contending that the cost should be considered at Rs. 87,12,170 instead. The AO had initially computed long term capital gains at Rs. 1,84,41,306 and short term capital gains at Rs. 5,37,54,656. The CIT(A) directed the AO to consider the value of the building at Rs. 87,12,170, emphasizing that the buyer paid based on the land cost due to the leasehold rights' transfer. The Revenue's appeal was dismissed as the CIT(A)'s decision was deemed appropriate.

Calculation of Long Term Capital Gains on Leasehold Rights:
The AO observed that the leasehold rights were assigned to a purchaser for Rs. 7.20 crores, with an additional payment of Rs. 19,14,400 towards differential premium to MIDC. The CIT(A) noted discrepancies in the AO's valuation, directing the value of the building to be revised to Rs. 87,12,170 instead of Rs. 5,28,12,000. The CIT(A) upheld that the buyer paid primarily for the land due to potential new construction for IT industries, leading to dismissal of the Revenue's appeal.

Depreciation on Property Held for More Than 40 Years:
The assessee contended that depreciation should be allowed on the property held for over 40 years and that long term capital gains on the 99-year lease should consider indexation value as of 01.04.1981. The CIT(A) set aside the matter to the AO for verification of the computation provided by the assessee, suggesting a reasonable estimate of the building's cost as of 01.04.1981. The cross objections filed by the assessee were treated as allowed for statistical purposes.

Overall, the Revenue's appeal was dismissed, and the cross objections by the assessee were allowed for statistical purposes, emphasizing the correct allocation of costs and valuation considerations in determining capital gains and depreciation on the property.

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