TaxTMI 
TaxTMI 
2017 (12) TMI 599
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Income Tax Act, 1961 (hereinafter referred to as "the Act") passed by the Assessing Officer (AO) dated 20/12/2012 for the Assessment Year (AY) 2010-11. The assessee has challenged the chargeability of Long Term Capital Gains (LTCGs) on sale of land determined by the CIT(A). 2. Briefly stated, the assessee an individual is engaged proprietary business of manufacturing pharmaceutical machinery. The assessee filed return of income for AY 2010-11 declaring total income of Rs. 2,36,790/-. The return of income was subjected to scrutiny assessment. In the course of the scrutiny assessment, the AO noticed that the assessee has sold factory shed for Rs. 42 lakhs and purchased another factory shed for Rs. 43.10 lakhs It was found by the AO that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he appellant has submitted that it has sold the factory shed as composite and single unit and no separate sale consideration was received towards land and structure. Since it was a composite consideration on transfer of capital assets the AO had no powers to bifurcate such consideration. It has also objected to the manner of bifurcation and working of capital gains. She has submitted that AO was wrong to assume that factory shed would depreciate and would not appreciate. It has been submitted that since the cost has been divided in the ratio of 50:50 the sale price should also be bifurcated in the same ratio. After considering the factual matrix, it is noted that the, assets which have been sold by the appellant during the year was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entioned. (v) Letter dt 21-4-2010 from GIDC sanctioning the transfer of lease rights and similar approvals given by GIDC for transfer of sheds. In view of the above it is submitted that the appellant had not handed over the possession of the entire old shed at the time of execution of the sale deed and continued the operations from part of. the said shed. Similarly the possession of the new shed was taken earlier to establish the operations. It assets on which depreciation was claimed. The appellant did not claim any depreciation on the factory shed. Therefore, the cost for the purpose of calculating the capital gain shall be the cost of acquisition for which the appellant has purchased the asset in the year 2006. Since it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee is entitled set off as claimed in view of the fact that both the assets are similar in nature and falls in the same 'block' as contemplated under s.2(11) r.w.s.32 of the Act. The Ld.AR submitted that regardless of the fact that no depreciation was claimed on the factory shed which is inseparable from land, the assessee has bought and substituted another factory shed of similar nature falling in same block. The Ld.AR submitted that no tax liability therefore can be fastened on the assessee towards capital gain in view of the block of the said scheme provided in the statute. 6. The Ld.DR, on the other hand, relied upon the order of the CIT(A). The Ld.DR referred to section 50 of the I.T.Act and submitted that the order of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of asset in respect of which depreciation has been allowed under the Income Tax Act, the sale consideration received or accruing as a result of transfer of asset falling in the block which exceeds actual cost of the assets acquired during the previous year falling in the same block shall be deemed to be Short Term Capital Gains (STCGs) arising on such transfer. 8. We notice here that it is an admitted position that the assessee has never claimed any depreciation on the asset under transfer. Therefore, the very premise for claiming the same to be part of block of asset for the purpose of s.50 is a damp squib. Secondly, the benefit of section 50 is available only when the depreciation has been allowed on the asset under transfer. It is an....