TaxTMI 
TaxTMI 
2017 (5) TMI 780
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.... same against the long term capital gains. The loss was computed as under: Sale consideration of salvage value on demolition 1,00,000 Less: WDV as on 31/03/02 10,87,702 Loss 9,87,702 2.2 The AO opined that as demolition of asset does not constitute transfer of capital asset, prima facie the loss was not allowable and income chargeable to tax had escaped assessment within the meaning of section 147 of the IT Act. Accordingly, notice u/s 148 of the Act was issued to the assessee on 09/03/2010. In response, the assessee filed a letter dated 15/04/2010 requesting that the return filed on 10/11/2003 may be treated as filed in response to the notice issue. The AO issues notices u/s 143(2) and 142(1) and informed that the claim was not allowable as there was no transfer of capital asset and that it was proposed to disallow the claim and to file objections if any in respect of the proposed action. The assessee submitted its written objections on 03/09/2010 and 22/11/2010, stating as under: "With regard to the above we invite your kind attention to the depreciation Statement shown under Annexure 1 to the 3CD Tax Audit Report for the said assessment yea....
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....eassessment proceedings, the AO took the stand that there had been demolition of an asset and realization of salvage value resulting in the particular block of asset ceased to exist, resulting in extinguishment of rights there. He submitted that the said extinguishment had not come about consequent to transfer as contemplated u/s 2(47) and hence set off of the resulting short term capital loss of (-) Rs. 9,87,702 against other long term capital gain is incorrect. He submitted that the AO has reiterated this stand in the assessment order passed u/s 143(3) of the Act. 2.4 Assessee relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. Grace Collis [2001] 248 ITR 323. 2.5 The assessee submitted that during the assessment proceedings, assessee was informed that the notice u/s 148 had been issued on account of an audit objection raised with regard to the issue relating to set off of short term capital loss. Thus, the opinion of the audit party on the issue involved has determined the issue of notice u/s 148 in case of assessee. He submitted that once this is true, the issue of notice u/s 148 is itself is not valid as held by the Hon'ble Supreme court in the case of....
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....of computing depreciation. Section 50, on the other hand, is applicable to a case where the WDV of a block of assets is reduced to NIL and subsection (2) is specif ically applicable to a situation where the block of assets ceases to exist. However, for arriving at short term capital gain or loss as the case may be under sub section (2), it is essential that there should be a 'transfer" of all the capital assets falling within the block. Here 'transfer' has to be understood in def inition of transfer in section 2(47) includes sale, exchange and relinquishment of the asset or extinguishment of any rights therein. Demolition of an asset which is equivalent to destruction or extinguishment of an asset is not covered by the def inition. Since there is no transfer of asset as contemplated under section 2(47) of the Act, the provisions of section 50 would not come into pay here. A harmonious reading of the sections is not possible as section 50 can be invoked only af ter section 43(6)(c) has been applied. The decision cited by the assessee is also not applicable to the facts of the case in as much as the decisions is not about extinguishment of the asset itself but of extingui....
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....preciable asset represented by the difference between the WDV of the block and the salvage value received clearly represents short term capital loss that qualif ies for set off against other long term capital gain." 8.1 Before us, the assessee did not contest reopening of assessment u/s 147 of the Act. 9. Ld. AR submitted that CIT(A) erred in Law in taking the stand that extinguishment of rights in an Asset consequent to its demolition does not fall within the definition of Transfer' as provided for in section 2(47) of the Act. He further submitted that CIT(A) failed to note that loss arising on the demolition of a depreciable asset represented by the difference between the WDV of the block and the salvage value received clearly represents short term capital loss that qualifies for set off against other long term capital gain. 10. Ld. DR, on the other hand, relied on the orders of revenue authorities and relied on the decision of ITA Mumbai Bench in case of Shri Dilip Manhar Parekh Vs. DCIT, in ITA No. 6169/Mum/2013, dated 15/04/2016, a copy of which is available on record. 11. We have considered the rival submissions and perused the material facts on record. From t....