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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Per Chandra Poojari, Accountant Member
This appeal is directed against the order dated 19.2.2020 of the CIT(Appeals), Bengaluru-6, Bengaluru for the assessment year 2016-17 on the following grounds:-
“1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The Ld. CIT (A) erred in law and facts of the case by allowing capital gains on depreciated asset shown in the books of account to be treated as long term capital gains 3. The Ld. CIT (A) erred in concluding that when land and building are together a block of asset (as building is on the land), the capital gains received on selling the asset cannot be treated as received for only land.
4. The Ld. CIT (A) erred in stating that there is no basis for disallowance of 50% of expenditure without evidence/ proof of the expenditure not being submitted by the assessee and when the assessee has discontinued the operations, claiming the loss on discontinuing operations separately.
5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored.
6. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal.”
The appellant is a private limited company engaged in manufacturing printing and cutting machines, had two units- one at industrial town, Rajajinagar Bengaluru and the second at Chikkaballapur. In earlier years the building at Rajajinagar, was given on lease to Advaith Hyundai and the lease rent was offered to tax under the head "Income from House Property". The appellant continued its manufacturing activities at Chikkaballapur, but at a lower scale, due to liberalization of imports and mushrooming of competitors.
During the previous year ended 31/03/2016 the land with building at Chikkaballapur was also sold for sum of Rs. 5,84,00,000/- after terminating the services of the employees for which expenditure of Rs. 11,12,723/- on employees compensation was made. As required by Accounting Standard- 24 "Discontinuing Operations", the loss of Rs. 1,39,76,986 was disclosed separately in the profit and loss A/c with full details in Note 20 to the financial statements.
The appellant filed the return for A.Y. 2016-17 u/s 139(4) on 29/04/2017 on a total income was Rs. 2, 89,12,220 comprising Rs. 24,07,102 under the head income from House Property, loss of Rs. 1,48,67,027 under the head "Profits and Gains from Business or Profession" and Rs. 4,16,23,148 under the head " Capital Gains-Long Term". The Appellant also claimed deduction of Rs. 2,51,000 u/s. 80G in respect of certain donation
The AO passed an order u/s 143(3) dated 28/12/2018 determining the income at Rs. 3,85,77,277/-, denying the claim of LTCG. The CIT(Appeals) observed that gain on sale of immovable property situated at Chikkaballapur to be considered as long term capital gain. Against this, the revenue is in appeal before us.
We have heard both the parties and perused the material on record. In this case, the assessee sold a factory building situated at Chikkaballapur for a sum of Rs.8.45 crores in the AY 2016-17. According to the AO, the gain arising out of sale of this property to be assessed as short term capital gain. The assessee has owned this building from 30.8.2002 and plant & machinery included the land & building which is very minimal and towards this cost, the assessee has already deducted Rs.3 lakhs from the block of assets on sale of the land & building. The contention of the ld. AR is that the entire asset except land included in the block of assets, the said amount of Rs.3 lakhs has been reduced from the block of assets and the whole amount of Rs.5.85 crores should be considered as consideration towards land and out of this, long term capital gain has been computed. In our opinion, though land is included in the block of assets on which assessee has not claimed any depreciation, being so, capital gain arising on sale of land cannot be treated as short term capital gain and it has to be assessed as long term capital gain only and the ld. CIT(Appeals) has correctly charged to tax on account of sale of land as long term capital gin as declared by the assessee. We do not find any infirmity in the order of the CIT(Appeals) and all the grounds of the revenue are rejected.
In the result, the appeal by the revenue is dismissed.
Pronounced in the open court on this 7th day of April, 2022.