Capital loss on demolished factory building upheld where block of assets value was properly substantiated and reduction lacked evidence.

Capital loss on demolition of a factory building was allowed at the claimed figure because the assessee substantiated acquisition of the tenant-constructed building and its inclusion in the block of assets through the cancellation agreement, bank records, ledger accounts, TDS certificate and photographs. The written down value of the relevant block was shown to have increased from the opening balance after the acquisition, and there was no contrary material supporting substitution of that block value on the basis of an alleged mismatch from earlier assessment years. The attempt to reduce the loss by disturbing the opening written down value was therefore unsustainable, and the assessee was entitled to the capital loss as claimed.

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Issues: Whether the assessee was entitled to compute capital loss on the demolished factory building at Rs.99,762,929, and whether the Assessing Officer was justified in restricting the loss to Rs.56,268 by disturbing the opening written down value of the block of assets.

Analysis: The assessee produced the cancellation agreement, bank statements, ledger accounts, TDS certificate and photographs to show that it had acquired the tenant-constructed building for Rs.59,459,326 and added that amount to the existing block of assets. The records showed that the written down value of the relevant block stood at Rs.40,303,603 at the beginning of the year and rose to Rs.99,762,929 after the acquisition. The attempt to substitute the block value by relying on an alleged mismatch relating to earlier assessment years was unsupported by any contrary material and could not justify reducing the loss on an or assumption based on assessment year 2010-11.

Conclusion: The restriction of the capital loss to Rs.56,268 was unsustainable, and the assessee was entitled to the capital loss of Rs.99,762,929 as claimed.

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