Tribunal directs inclusion of deposits in cost of assets and permits deduction of written down value in capital gains

The appellate tribunal allowed the appeal, directing the Assessing Officer to include deposits paid to MIDC in the cost of assets transferred and permit the deduction of written down value of fixed assets and other assets written-off in the computation of capital gains for the relevant assessment year.

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Issues:
Computation of capital gains involving the cost of assets transferred, deposits for water and electricity supply, deduction of written down value (WDV) of fixed assets, and deduction of other assets written-off.

Analysis:

1. Cost of Assets Transferred:
The appeal involved the computation of capital gains for the Assessment Year (AY) 2015-16. The assessee sold a plot and shed for a total consideration of Rs. 225 Lacs. The agreement encompassed the transfer of land and built-up shed along with various attached facilities. The dispute arose regarding the inclusion of deposits paid to MIDC for water and electricity supply in the cost of assets transferred. The assessee contended that these deposits were integral to the assigned property and should be considered as part of the cost. The tribunal agreed with the assessee's argument, directing the Assessing Officer (AO) to allow the deduction of these deposits in the computation of capital gains.

2. Deduction of WDV of Fixed Assets:
The assessee claimed a deduction for the written down value (WDV) of fixed assets, including assets written-off and deposits made to MIDC. The AO denied the deduction of these components. During the appellate proceedings, the assessee argued that the discarded assets were outdated or immovable, justifying their write-off. The tribunal concurred that the deduction under section 32(1)(iii) should be allowed for these assets, as they were no longer part of the fixed asset block. The tribunal directed the AO to permit the deduction of the WDV of assets attached to the land and shed, as presented in the balance sheet.

3. Other Assets Written-Off:
The case also involved the deduction of other assets written-off, such as air conditioners, computers, and vehicles. The tribunal analyzed each asset's remaining useful life and scrap value to determine the eligibility for deduction. The tribunal found that these assets were either outdated, embedded, or had a remaining useful life that justified their write-off. Consequently, the tribunal directed the AO to allow the deduction of the WDV of these assets, as the fixed asset block had ceased to exist.

In conclusion, the appellate tribunal allowed the appeal, emphasizing the inclusion of deposits paid to MIDC in the cost of assets transferred and permitting the deduction of written down value of fixed assets and other assets written-off in the computation of capital gains for the relevant assessment year.

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