JASANI TEXTILE PROCESSORS PVT LTD,MUMBAI vs. THE DCIT -6(3) (1) , MUMBAI

Aforesaid appeal by assessee for Assessment Year (AY) 2015-16 arises out of the order of learned Commissioner of Income-Tax (Appeals)-12, Mumbai [CIT(A)], dated 04/06/2019 in the matter of assessment framed by Ld. Assessing Officer (AO) u/s 143(3) of the Act on 26/12/2017. The grounds of appeal read as under: -

On facts and in the circumstances of the case and in law learned CIT (Appeals) failed to appreciate that the capital assets were transferred along with all advantages, benefits, claims, appurtenances, use and rights etc and hence the cost of assets transferred also includes the cost of acquiring such advantages, benefits, claims, appurtenances, use and rights such as water supply and electric supply for which deposits of Rs.1,49,256/-were given to MIDC, MSEB etc.

Alternatively on facts and in the circumstances of the case and in law learned CIT (Appeals), having found that assessee had given deposits of Rs.1,49,256/- to MIDC, MSEB etc for supply of water and electricity etc in or upon the capital asset transferred, ought to have allowed the deduction thereof as cost of improvement of such capital asset.

Learned CIT (Appeals) having held that written down value (WDV) of Rs.4,78,083/- of fixed assets discarded and written off in books is not deductible while computing capital gains as it does not form part of cost of acquisition or cost of improvement of assets sold and having further observed that deduction of WDV of these assets is allowable u/s 32(i)(iii) of the I.T.Act, learned CIT (Appeals) ought to have allowed the same u/s 32(i)(iii) because the appellant is entitled to the same and it was also claimed before CIT (Appeals).

The appellant craves leave for permission to add, amend or alter any ground of appeal at the time of hearing.

The material facts are that the assessee being resident corporate assessee sold plot and shed for aggregate consideration of Rs.225 Lacs during the year. In the deed of agreement, the value assigned to land was Rs.51.47 Lacs whereas the value assigned to shed was Rs.173.53 Lacs. The agreement is composite agreement by which the assessee has transferred its interest in land as well as built up shed admeasuring

81 Square Meters together with outhouses, office, building, courtyard, areas compound, swear ditches fences, trees, drains, ways, paths, passages, privileges, easements etc. attached with the leasehold land as well as with shed.

The shed formed part of depreciable fixed assets. While computing short-term capital gains from shed, the assessee deducted not only the 3 M/s Jasani Textile Processors Pvt. Ltd. Assessment Year: 2015-16 WDV of shed but also deducted WDV of other assets and deposits as per MIDC (authority) for Rs.13.21 Lacs. These include assets written-off for Rs.4.78 Lacs and deposits written-off for Rs.1.49 Lacs. The deduction of these two components was denied by Ld. AO.

During appellate proceedings, the assessee submitted that it had given various deposits to MIDC towards water, additional water etc. These deposits were part and parcel of allotted land which also got assigned in favor of assignee. The MIDC would not refund the deposits as long as the said premises were occupied by assignee. The assessee received composite consideration for assignment of land along with deposits & claims. However, Ld. CIT(A) rejected the same since the write-off do not constitute cost of acquisition or cost of improvement of the property.

Regarding other assets written-off, the position was summarized as under: - No. Particulars WDV as on Remarks 31/03/2014

So far as the write-off of deposits is concerned, we find that the rights in land and shed have been assigned along with all the rights, privileges etc. through composite agreement. The deposits have been paid to MIDC for various purposes in connection with lease of land and therefore, these form part & parcel of the land & shed. Since, the rights have been transferred, these would also stand transferred to the assignee. This being so, there is no reason as to why the deduction of the same is not available to the assessee while computing the capital gains. Therefore, we direct Ld. AO to allow the deduction of the same. So far as the write-off of other assets is concerned, we find that fixed assets have been reduced to nil at year-end which is evident from assessee’s Balance Sheet as placed on record. Hence, the fixed asset block has ceased to exist. Therefore, the deduction of WDV of assets as attached to above land & shed would be available to the assessee. We order so. The Ld. AO is directed to allow the same.

The appeal stands allowed. Order pronounced on 2nd August, 2021. (Amarjit Singh) (Manoj Kumar Aggarwal) न्यासयक दस्य / Judicial Member लेखा दस्य / Accountant Member मुिंबई Mumbai; सदनािंक Dated : 02/08/2021 Sr.PS, Dhananjay