SABAH INVESTMENT P.LTD, MUMBAI v. ITO 3(3)2, MUMBAI

CO 124/MUM/2013 | 2006-2007
Pronouncement Date: 24-07-2013 | Result: Dismissed

Appeal Details

RSA Number 12419923 RSA 2013
Assessee PAN AAACS7791P
Bench Mumbai
Appeal Number CO 124/MUM/2013
Duration Of Justice 1 month(s) 2 day(s)
Appellant SABAH INVESTMENT P.LTD, MUMBAI
Respondent ITO 3(3)2, MUMBAI
Appeal Type Cross Objection
Pronouncement Date 24-07-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 24-07-2013
Date Of Final Hearing 16-07-2013
Next Hearing Date 16-07-2013
Assessment Year 2006-2007
Appeal Filed On 21-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUM BAI .. ! '# ' $ BEFORE SHRI I. P. BANSAL JM AND SHRI SANJAY ARORA AM ./ I.T.A. NO.8456/MUM/2010 ( & ' (' & ' (' & ' (' & ' (' / / / / ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER -3(3)(2) ROOM NO. 602 AAYAKAR BHAVAN M. K. ROAD MUMBAI-400 020 & & & & / VS. SABAH INVESTMENT PVT. LTD. 44A NARIMAN BHAVAN MUMBAI 400 021 ) '# ./ * ./ PAN/GIR NO. AAACS 7791 P ( )+ / APPELLANT ) : ( -)+ / RESPONDENT ) & -$' ./ C.O. NO.124/MUM/2013 ( & ' (' & ' (' & ' (' & ' (' / / / / ASSESSMENT YEAR: 2006-07) SABAH INVESTMENT PVT. LTD. 601 COSMOS COURT S. V. ROAD VILE PARLE(W) MUMBAI-400 056 & & & & / VS. INCOME TAX OFFICER -3(3)(2) ROOM NO. 607 AAYAKAR BHAVAN M. K. ROAD MUMBAI-400 020 ) '# ./ * ./ PAN/GIR NO. AAACS 7791 P ( -$' / CROSS OBJECTOR ) : ( -)+ / RESPONDENT ) . / ' / REVENUE BY : SHRI AARSI PRASAD & '01 . / ' / ASSESSEE BY : SHRI BIREN GABHAWALA & . 12# / // / DATE OF HEARING : 16.07.2013 3 ( . 12# / DATE OF PRONOUNCEMENT : 24.07.2013 '4 / O R D E R PER SANJAY ARORA A. M.: THIS IS AN APPEAL BY THE REVENUE AND CROSS OBJECTIO N BY THE ASSESSEE ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME TAX (APP EALS)-7 MUMBAI (CIT(A) FOR 2 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. SHORT) DATED 17.09.2010 PARTLY ALLOWING THE ASSESS EES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT H EREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER DATED 30.12.2008. 2. THE ISSUE ARISING IN THE INSTANT APPEAL IS THE C OMPUTATION OF THE CAPITAL GAINS ARISING ON THE SALE DURING THE RELEVANT PREVIOUS YE AR OF ONE OF THE TWO BUILDING PREMISES OWNED BY THE ASSESSEE. 3.1 AT THE VERY OUTSET IT WAS OBSERVED THAT THE AS SESSEES CROSS OBJECTION (C.O.) IS DELAYED BY A PERIOD OF 120 DAYS. THE CONDONATION AP PLICATION FILED ALONG WITH EXPLAINS THE REASONS FOR THE DELAY AS THE NON-RECEIPT OF THE APPEAL MEMO IN RESPECT OF THE DEPARTMENTS APPEAL FOR THE RELEVANT YEAR DUE TO CH ANGE IN THE REGISTERED OFFICE OF THE COMPANY. THE LD. CIT(A) HAVING ALLOWED PART RELIEF I.E. QUA APPLICABILITY OF SECTION 50C OF THE ACT THE ASSESSEE WAS NOT INCLINED TO PREFER AN APPEAL IN THE FIRST INSTANCE AND THAT ONLY UPON IT COMING TO ITS NOTICE THAT THE REVENUE HAD FILED AN APPEAL THAT IT WAS DECIDED TO CONTEST THE MATTER IN FULL I.E. QUA THE APPLICABILITY OF SECTION 50 OF THE ACT AS WELL . 3.2 AFTER HEARING THE PARTIES IN THE MATTER WE ARE INCLINED TO ADMIT THE ASSESSEES C.O. INASMUCH AS IT GIVES THE ASSESSEE THE SCOPE TO CONT EST THE IMPUGNED ORDER AND THAT ALL THE RELEVANT ISSUES ARE DELIBERATED UPON. THERE COULD P OSSIBLY BE NO VESTED RIGHT IN THE ASSESSEE NOT APPEALING EARLIER; THE NON-RECEIPT OF THE APPEAL MEMO (IN THE DEPARTMENTS APPEAL) DUE TO CHANGE OF ADDRESS BEING A MATTER OF RECORD AND WHICH HAS NOT BEEN DISPUTED BY THE REVENUE. THE ASSESSEES C.O. WAS A CCORDINGLY ADMITTED AND THE HEARING IN THE MATTER PROCEEDED WITH. 4. THE BRIEF FACTS ARE THAT THE ASSESSEE-COMPANY OW NS TWO HOUSE PROPERTIES NAMELY FLAT NO.602 ARUN COMMERCIAL PREMISES CO-OPERATIVE SOCIETY LTD. TARDEO MAIN ROAD MUMBAI-400 034 BY THE NAME ARUN CHAMBERS AND AN OTHER AT 44A NARIMAN POINT MUMBAI-400 021 BY THE NAME NARIMAN BHAVAN. BOTH THE PROPERTIES BEING USED BY THE ASSESSEE FOR ITS BUSINESS FOR THE IMMEDIATELY PRECE DING YEAR CONSTITUTE ITS RELEVANT BLOCK OF ASSETS I.E. BUILDINGS AS AT THE BEGINNING O F THE CURRENT YEAR. THE NARIMAN BHAVAN 3 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. PROPERTY WAS IN FACT LET OUT CONTINUOUSLY UP TO AY 2004-05 AND CLASSIFIED BY THE ASSESSEE IN ITS ACCOUNTS AS AN INVESTMENT. THE SAME WAS A S STATED INTRODUCED IN BUSINESS AS ITS OFFICE PREMISES DURING THE PREVIOUS YEAR RELEVANT T O AY 2005-06 AND ACCORDINGLY INDUCTED IN THE RELEVANT BLOCK OF ASSETS AND DEPRE CIATION FOR THE RELEVANT ASSESSMENT YEAR (A.Y. 2005-06) CLAIMED AT THE WRITTEN DOWN VALUE (W DV) INCLUSIVE OF ITS VALUE. IT WAS AGAIN ADMITTEDLY LET IN JULY 2005. THE ASSESSEE SO LD ARUN CHAMBERS IN SEPTEMBER 2005 (12.09.2005) FOR A CONSIDERATION OF RS.39 LACS . THE ASSESSEE BEFORE THE AUTHORITIES BELOW CONTESTED THE APPLICABILITY OF SECTION 50C C ONTENDING THAT IN VIEW OF THE RELEVANT CAPITAL ASSET BEING A DEPRECIABLE ASSET ONLY SECTI ON 50 WOULD APPLY I.E. IN PREFERENCE TO SECTION 50C SO THAT THE TRANSFER CONSIDERATION FOR COMPUTING CAPITAL GAINS WOULD BE THE ACTUAL SALE VALUE. IT WAS SUCCESSFUL IN APPEAL SO THAT THE REVENUE IS IN FURTHER APPEAL CLAIMING THE SUBSTITUTION OF THE SAID SALE CONSIDER ATION WITH THE STAMP DUTY VALUE OF RS.72.63 LACS. 5. BEFORE US ON BEING CONFRONTED WITH THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. UNITED MARINE ACADEMY [2011] 130 ITD 113 (MUM.)(SB) ADDUCED BY THE LD. DR HOLDING THAT BOTH THE SECTIO NS I.E. S. 50 AND S. 50C WOULD APPLY VIS-A-VIS THE SAME TRANSACTION THE LD. AR THE ASS ESSEES COUNSEL FAIRLY CONCEDED TO THE SAME RAISING NO OBJECTION. HOWEVER EVEN SO THE C APITAL GAINS IT WAS URGED BY HIM WOULD HAVE TO BE COMPUTED STRICTLY IN TERMS OF SECT ION 50; THE ONLY IMPORT OF THE APPLICABILITY OF SECTION 50C BEING THE SUBSTITUTION OF THE SALE CONSIDERATION DEEMING IT AT THE STAMP VALUATION RATE AND NO FURTHER; IT BEING TRITE THAT A DEEMING PROVISION IS TO BE RESTRICTED TO ITS LEGITIMATE FIELD. COMPUTING THE C APITAL GAINS IN TERMS OF SECTION 50 NECESSARILY INVOLVES REDUCTION OF THE OPENING WDV O F THE RELEVANT BLOCK OF ASSETS WHICH IS AT RS.72.36 LACS. FOR THIS HE WOULD REFER TO TH E STATEMENT OF DEPRECIATION FOR THE YEAR PLACING A COPY OF THE SAME ON RECORD. IN THIS VIEW OF THE MATTER CAPITAL GAINS COMPUTED U/S.50 R/W S. 50C WORKS TO RS.0.27 LACS (RS.72.63 LACS RS.72.36 LACS). THE REVENUE HOWEVER HAS ALLOWED REDUCTION ONLY OF THE WDV OF T HE ARUN CHAMBERS AS ON 31.03.2005 I.E. RS.50 000/- ASSESSING THE BALANC E RS.72.13 LACS AS SHORT TERM CAPITAL 4 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. GAIN (STCG) WHICH IS CONTRARY TO THE CLEAR PROVISI ON OF LAW ADVERTING TO SECTION 50 WHICH PER SUB-SECTION (1) CLEARLY PROVIDES FOR THE REDUCTION OF THE WDV OF THE RELEVANT BLOCK OF THE ASSETS AS AT THE BEGINNING OF THE RELE VANT PREVIOUS YEAR. THIS CONSTITUTES THE ASSESSEES GRIEVANCE PER ITS CROSS OBJECTION. ON A QUERY BY THE BENCH AS TO HOW COULD IT BE SO I .E. AS CLAIMED BY THE ASSESSEE INASMUCH AS THE ONLY OTHER PROPERTY CONSTITUTING TH E RELEVANT BLOCK I.E. NARIMAN BHAVAN STANDS SINCE LET (I.E. IN JULY 2005) SO THAT IT NO LONGER FORMED PART OF THE RELEVANT BLOCK OF ASSETS THE LD. AR WOULD SUBMIT THAT THE LAW PR OVIDES NO EXCEPTION AND THE WDV AS AT THE BEGINNING YEAR WOULD HAVE TO BE D EDUCTED NEVERTHELESS THOUGH OF COURSE NO DEPRECATION WOULD BE EXIGIBLE IN ITS RES PECT INASMUCH AS THE ONLY ASSET COMPRISING THE BLOCK BEING LET OUT IT IS NO LONG ER PUT TO USE FOR BUSINESS. THE LAW IT WAS EXPLAINED BY HIM PREVENTS A CLAIM OF DEPRECATI ON IN VIEW OF THE ASSET BEING NO LONGER USED FOR THE PURPOSE OF BUSINESS BUT DOES N OT PROVIDE FOR REDUCTION IN THE WDV OF THE RELEVANT BLOCK OF ASSETS ON AN ASSET NO LONG ER REMAINING AN ASSET OF THE BUSINESS AS IN THE INSTANT CASE HAVING BEEN GIVEN ON RENT. IN ANY CASE THE REDUCTION IN WDV EVEN ASSUMING SO COULD TAKE EFFECT ONLY ON THE DATE ON WHICH THE ASSET IS ACTUALLY LET I.E. JULY 2005 AND NOT 01.04.2005 WHICH IS THE MATERI AL DATE. NO SPECIFIC ARGUMENTS WERE RAISED BY THE LD. DR QUA THE ASSESSEES CO RELYING ON THE ASSESSMENT ORDER . 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. 6.1 THE PRIMARY FACTS AS NARRATED ABOVE ARE NOT I N DISPUTE. THE ISSUE OF SIMULTANEOUS APPLICATION OF SECTIONS 50 & 50C I.E. WHERE BOTH APPLY INDIVIDUALLY TO A TRANSACTION STANDS SINCE CLARIFIED BY THE TRIBUNAL PER ITS DECI SION IN THE CASE OF UNITED MARINE ACADEMY (SUPRA). BOTH THE SECTIONS IT STANDS EXPLAINED A RE LEGAL FICTIONS THOUGH THERE IS NO CONFLICT BETWEEN THE TWO AND OPERATE IN DIFFERE NT FIELDS. AS SUCH THE APPLICATION OF ONE SECTION WOULD NOT EXCLUDE THAT OF THE OTHER. IN FACT THIS WAS ALSO THE AGREED POSITION BEFORE US SO THAT WE NEED NOT DWELL FURTHER IN THE MATTER. THE FIRST APPELLATE AUTHORITY HAD ALLOWED RELIEF TO THE ASSESSEE ON THIS SCORE FOLLOW ING THE DECISION BY THE TRIBUNAL WHICH NO LONGER OBTAINS IN VIEW OF THE DECISION BY ITS LA RGER BENCH IN U.M. ACADEMY (SUPRA). 5 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. 6.2 THE ONLY ISSUE THEREFORE THAT REQUIRES OUR AD JUDICATION IS THE MANNER OF COMPUTATION OF THE CAPITAL GAINS ARISING ON THE SAL E OF THE PREMISES ARUN CHAMBERS. THE SAME BEING A DEPRECIABLE ASSET FORMING PART OF THE RELEVANT BLOCK OF ASSETS THE GAIN ON ITS TRANSFER WOULD HAVE TO BE COMPUTED U/S.50. T HE ASSESSEES CLAIM IS THAT THE SAME IS TO BE COMPUTED WITH REFERENCE TO SECTION 50(1) SO THAT THE WDV OF THE RELEVANT BLOCK ASSETS AS AT THE BEGINNING OF THE YEAR I.E. RS.72 .36 LACS IS TO BE DEDUCTED FROM THE DEEMED SALE CONSIDERATION (OF RS.72.63 LACS) IN COM PUTING THE STCG. 6.3 WE ARE FOR THE REASONS STATED HEREINAFTER UNABL E TO AGREE WITH THE ASSESSEES STAND. SECTION 50 OF THE ACT READS AS UNDER: SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS. 50. NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2 WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLO CK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT 1922 (11 OF 1922) THE PROVISIONS O F SECTIONS 48 AND 49 SHALL BE SUBJECT TO THE FOLLOWING MODIFIC ATIONS : (1) WHERE THE FULL VALUE OF THE CONSIDERATION RECE IVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ASSET TOGETHER WITH T HE FULL VALUE OF SUCH CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF THE ASSET S DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE FOLLOWING AMOUNTS NAM ELY : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OR TRANSFERS; (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSET S AT THE BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE BLOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS; (2) WHERE ANY BLOCK OF ASSETS CEASES TO EXIST AS SU CH FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PREVIOUS YEAR THE COST OF ACQUISITION OF THE BLOCK OF ASSETS SHALL BE THE WRI TTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YE AR AS INCREASED BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK OF ASSETS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE INCOME RE CEIVED OR ACCRUING AS A 6 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. RESULT OF SUCH TRANSFER OR TRANSFERS SHALL BE DEEME D TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASS ETS. THE SAME IT WOULD BE NOTED ADOPTS THE SAME BASIS AS OF SECTION 43(6) WHICH DEFINES THE WDV OF A BLOCK OF ASSETS I.E. ASSETS OF A PARTICULAR CLASS FOR WHICH A UNIFORM RATE OF DEPRECIATION AS A PERCENTAGE OF WDV HAS B EEN PRESCRIBED. AS WOULD BE APPARENT FROM THE CONJOINT READING FROM SS. 32 43(6) AND 50 THE MONEYS PAYABLE ON THE TRANSFER DISCARD DEMOLITION OR DESTRUCTION OF ANY ASSET FO RMING PART OF THE BLOCK IS TO BE REDUCED FROM WHILE THE ACTUAL COST OF ANY ASSET ACQUIRED D URING THE YEAR IS TO BE ADDED TO THE OPENING VALUE OF THE RELEVANT BLOCK I.E. AS AT TH E BEGINNING OF THE YEAR AND UPON WHICH (VALUE) THE RATE OF DEPRECIATION AS PRESCRIBED IS T O BE APPLIED TO ARRIVE AT THE CLOSING WDV I.E. THE WDV AS AT THE YEAR-END. THIS IS AS THE DEPRECIATION IS NO LONGER PROVIDED QUA THE INDIVIDUAL VALUES OF THE ASSETS COMPRISING A B LOCK BUT ON THEIR AGGREGATE VALUE REPRESENTED BY THE WDV OF THE BLOCK . AS SUCH WHENEVER AN ASSET IS TRANSFERRED ITS TRANSFER VALUE IS REDUCED FROM THE CARRYING VALUE O F THE BLOCK. IT IS THIS CONCEPT AS ENSHRINED IN SECTION 32 R.W.S. 43(6) WHICH HAS BEE N INCORPORATED IN SEC. 50. AS LONG AS THERE IS A POSITIVE WDV IT WOULD CONTINUE TO BE EX IGIBLE FOR DEPRECIATION WHILE CLEARLY A NEGATIVE WDV WOULD IMPLY REALIZATION OF A SURPL US I.E. STCG BY DEFINITION. THERE IS THUS COMPLETE HARMONY BETWEEN THE DIFFERENT PROV ISIONS WHICH ARE EVEN OTHERWISE TO BE READ HARMONIOUSLY MAKING CLEAR THE SCHEME OF TH E ACT. WHERE FOLLOWING THE AFORESAID METHOD OF COMPUTING THE WDV THE AGGREGAT E VALUE FALLS BELOW THE SALE CONSIDERATION OR MONEYS PAYABLE SO THAT THERE IS N O CARRYING VALUE THE ENTIRE SURPLUS IS TREATED AS STCG. SIMILAR WOULD BE THE CASE WHERE I RRESPECTIVE OF THE VALUE POSITIVE OR NEGATIVE THERE IS NO ASSET IN THE RELEVANT BLOCK SO THAT IT CEASES TO EXIST. NO DEPRECIATION UNDER SUCH CIRCUMSTANCE WOULD BE EXIGIBLE AND THE VALUE OF THE BLOCK WOULD REPRESENT THE SHORT TERM CAPITAL LOSS OR GAIN AS THE CASE MA Y BE (SECTION 50C(2)); SUB-SECTION (2) BEING ONLY AN EXTENSION OR SPECIE OF SUB-SECTION (1 ). 6.4 CONTINUING FURTHER THE UNDERLYING PRESUMPTION IN THE FOREGOING COMPUTATION OF THE WDV AS WELL AS IN THE MANNER OF COMPUTING THE CAPITAL GAIN U/S.50 IS THAT ALL THE 7 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. ASSETS COMPRISING THE BLOCK FOR THE TIME BEING CONT INUE TO BE BUSINESS ASSETS AND THUS ELIGIBLE FOR BEING CONSIDERED AS A PART OF THE RELE VANT BLOCK OF ASSETS. HOWEVER WHEN A CAPITAL ASSET AS THE NARIMAN BHAVAN PROPERTY IN TH E INSTANT CASE IS LET BY THE ASSESSEE THE SAME NO LONGER QUALIFIES AS A BUSINESS ASSET. T HAT IS IT BECOMES INELIGIBLE FOR BEING CONSIDERED AS PART OF THE RELEVANT BLOCK OF ASSETS. THE QUESTION OF COMPUTING EITHER DEPRECIATION OR CAPITAL GAINS WITH REFERENCE TO ITS VALUE THEREFORE JUST DOES NOT ARISE. IT IS TO HIGHLIGHT THIS ASPECT OF THE MATTER THAT THE LD. AR WAS POSED A QUERY DURING THE HEARING QUA THE CLAIM OF DEPRECIATION IN A CASE WHERE INSTEAD OF A HIGHER SALE CONSIDERATION THE SAME WERE TO BE AT AN AMOUNT LOWER THAN THE CARRYIN G VALUE (OPENING WDV) OF RS.72.36 LACS. AS RIGHTLY STATED BY HIM NO DEPRECIATION FOR THE RELEVANT YEAR WOULD BE ELIGIBLE ON THE SAID BLOCK IN THAT CASE DESPITE A POSITIVE WDV. THIS IS FOR THE REASON THAT THE BLOCK CEASES TO EXIST WITH ONE ASSET BEING SOLD OUT AND THE OTHER REMOVED FROM THE BLOCK BY BEING LET AND NOT FOR THE REASON OF NON-USER AS S TATED BY HIM. WHERE ONE MAY ASK IS THE QUESTION OF USER WHEN THE ASSET ITSELF IS NO LONGE R A BUSINESS ASSET ? TO CLARIFY THIS ASPECT FURTHER TAKE THE EXAMPLE OF THREE INSTEAD OF TWO ASSETS COMPRISING THE BLOCK AS AT THE BEGINNING OF THE YEAR. WHILE ONE STANDS SOLD THE S ECOND IS LET OUT AND THE THIRD CONTINUES TO BE RETAINED IN AND USED FOR BUSINESS. COULD DEPR ECIATION BE CLAIMED WITH REFERENCE TO THE BLOCK COMPRISING THE TWO REMAINING ASSETS? CLEA RLY NOT AND AN ADJUSTMENT FOR THE ASSET LET AS IT NO LONGER FORMS PART OF OR QUALIFI ES AS AN ASSET OF THE BUSINESS HAS NECESSARILY TO BE MADE IN COMPUTING THE WDV OR THE CAPITAL GAIN ON THE ASSET SOLD OR THE DEPRECIATION ON THE SOLE REMAINING BUSINESS ASS ET AS THE CASE MAY BE AS UNDER THE SCHEME OF THE ACT IT WOULD BE AN EITHER OR SITUATIO N AND BOTH CANNOT OBTAIN. THE ASSET LET WOULD BE AKIN TO ANY OTHER INDEPENDENT CAPITAL ASSE T OWNED BY THE ASSESSEE THOUGH THE FACT OF IT HAVING BEEN USED FOR BUSINESS PURPOSES A ND DEPRECIATED IN THE PAST WOULD IMPACT ITS DATE AND COST OF ACQUISITION. THE PURPOSE OF COMPUTING THE WDV IT MAY BE NOTED IS TO ARRIVE AT THE AMOUNT OF DEPRECIATION AND CONSEQUENTLY THE DEPRECIATED VAL UE OF THE RELEVANT BLOCK OF ASSETS WHICH CARRIES AN IN-BUILT PRESUMPTION OF ALL THE AS SETS COMPRISING THE SAME IRRESPECTIVE OF THEIR VALUE AS BEING BUSINESS ASSETS. A NON-BUS INESS ASSET IS INCAPABLE OF BEING USED 8 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. FOR THE PURPOSES OF BUSINESS AN ESSENTIAL INGREDIE NT FOR THE CLAIM OF DEPRECIATION. AS DEPRECIATION IS TO BE WORKED OUT ONLY AS AT THE YEA R-END THE DEPRECIATED VALUE OF THE BLOCK AS AT THE END OF THE IMMEDIATELY PRECEDING YE AR ONLY IS TO BE TAKEN INTO ACCOUNT. THIS EXPLAINS THE REDUCTION OF THE WDV AS AT THE BE GINNING OF THE RELEVANT YEAR. THE ADDITIONS TO OR DELETIONS FROM A BLOCK - A PHYSICAL CONCEPT HOWEVER COULD AND DO TAKE PLACE DURING THE YEAR CONTINUOUSLY CHANGING ITS CO MPOSITION. THE SAME IMPACTS THE CARRYING VALUE OF THE BLOCK THROUGH THE FINANCIAL V ALUE DEBIT OR CREDIT OF THE TRANSACTIONS INCREASING OR DECREASING AS THE CASE MAY BE THE V ALUE OF THE BLOCK WHICH ALGORITHM AS AFORE-NOTED STANDS IMPORTED IN SECTION 50; MAKING THE SAME HARMONIOUS WITH SECTIONS 32 AND 43(6). FURTHER IT IS DUE TO THIS CHANGING COMP OSITION THAT THE LAW CONTEMPLATES A STATE WHERE THE BLOCK CEASES TO EXIST. AS SUCH AS ALSO NOTED EARLIER WHERE AN ASSET ITSELF IS REMOVED BY THE ASSESSEE FROM THE RELEVANT BLOCK AS WHERE THE SAME IS CONVERTED INTO STOCK-IN-TRADE OR AS IN THE INSTANT CASE LET THE SAME HAS TO BE EXCLUDED FROM THE RELEVANT BLOCK WITH CONCOMITANT FINANCIAL IMPLICATIONS. THE INCIDENTS OF TRANSFER DISCARD ETC. ON THE OTHER HAND ARE TOWARD MONEYS PAYABLE. 6.5 IN OUR CLEAR VIEW THEREFORE THE ASSESSEES CA SE CLEARLY FALLS U/S. 50(2); THE ONLY ASSET NAMELY THE PROPERTY AT ARUN CHAMBERS MUMBA I CONSTITUTING THE BLOCK AT THE RELEVANT TIME BEING SOLD IN SEPTEMBER 2005 WITH NO SUBSEQUENT ADDITIONS TO THE BLOCK. IT WOULD WE MAY THOUGH CLARIFY AGAIN NOT MATTER IF THE OTHER PROPERTY RENTED OUT WAS SO DONE SUBSEQUENTLY AND NOT PRIOR THERETO IN JULY 2 005. THIS IS AS THE QUESTION OF APPLICABILITY OF SEC. 50(1) OR S. 50(2) IS TO BE SE EN AS AT THE YEAR-END WHEREAT ONLY THE DEPRECIATION U/S.32 AS WELL AS CAPITAL GAIN U/S.50 IS TO BE COMPUTED TAKING THE ENTIRE TRANSACTIONS DURING THE YEAR INTO ACCOUNT. 7. ACCORDINGLY THE WDV OF THE BLOCK ADJUSTED FOR THE REMOVAL OF THE PROPERTY LET OUT DURING THE YEAR IN JULY 2005 IS TO BE TAKEN I NTO ACCOUNT FOR COMPUTING THE STCG U/S.50. ON THE ASPECT OF THE QUANTUM OF ADJUSTMENT WE FIND NO DISPUTE; THE RELEVANT FIGURE/S HAVING BEEN RATHER SUPPLIED BY THE ASSESSE E ITSELF. FURTHER WE OBSERVE THAT THE LD. CIT(A) STATES OF THE TRANSFER VALUE OF THE ASSET SO LD AS BEING AT RS.38.53 LACS I.E. AS 9 ITA NO.8456/M/10 & CO NO.124/M/13 (A.Y. 2006-07) SABAH INVESTMENT PVT. LTD. AGAINST RS.39 LACS BY THE A.O. HOWEVER NEITHER WAS THIS ISSUE RAISED BEFORE US NOR IS THE SAME RELEVANT IN VIEW OF THE APPLICABILITY OF SECTI ON 50C SO THAT THE SAME WOULD STAND SUBSTITUTED BY THE STAMP VALUATION RATE. WE DECIDE ACCORDINGLY. 8. IN THE RESULT THE REVENUES APPEAL IS ALLOWED A ND THE ASSESSEES CROSS OBJECTION DISMISSED. 0 15 . 61 . 1 78 9 & '0 1 . -$' #0 . 1 78 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 24 2013 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER '# / ACCOUNTANT MEMBER MUMBAI; :& DATED : 24.07.2013 .&../ ROSHANI SR. PS '4 . 1; <';(1 '4 . 1; <';(1 '4 . 1; <';(1 '4 . 1; <';(1/ COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. -)+ / THE RESPONDENT 3. = ( ) / THE CIT(A) 4. = / CIT CONCERNED 5. ;@A 1& / DR ITAT MUMBAI 6. AB' C / GUARD FILE '4& '4& '4& '4& / BY ORDER D DD D/ // /7 7 7 7 (DY./ASSTT. REGISTRAR) / ITAT MUMBAI FIT FOR PUBLICATION IN ITD SD/- SD/- (JM) (AM)