ITO 3(1)(2), MUMBAI vs. DEVIDAYAL PLASTIC INDUSTRIES P.LTD, MUMBAI

BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. (Assessment Year:2010-11) Income Tax Officer - 3(1)(2), Aayakar Bhavan, Room No.666, 6th Floor, M. K. Road, Mumbai - 400020 Appellant Vs. M/s. Devidayal Plastic Industries Pvt. Ltd. S-1, Pemino, Altamount Road, Mumbai – 400 026 Respondent PAN: AAACD3767G अपीलाथ� क� ओर से /By Appellant : Shri Vivek Anand Ojha, D.R. ��यथ� क� ओर से/By Respondent :Shri Deepak Tikekar, A.R. सुनवाई क� तार�ख/Date of Hearing : 06.10.2015 घोषणा क� तार�ख/Date of Pronouncement : 28.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-6, Mumbai, dated 17.10.2013 for A.Y. 2010-11 on following grounds:

A.Y. 10-11 [ITO vs. M/s. Devidayal Plastic Inds. Pvt. Ltd.] Page 2

“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in restricting the Short Term Capital Gain to Rs.40,69,030/- as against the STCG worked out by the AO at Rs.53,66,599/- giving a relief of Rs.12,97,569/- by assigning the proportionate sale value in the ratio of WDV of the land and the building without appreciating the fact that the STCG was worked out appropriately as per the provisions of Act.”

2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.”

2. Assessee is a private Limited Company. The only issue before us is regarding short term capital gain. During year under consideration, assessee sold its factory premises at Halol, Gujarat, for Rs.67lacs. Assessee had not disclosed any capital gain from sale of factory in return of income. Since Assessing Officer received information in respect of sale of factory from AIR Data, he questioned the assessee in this regard. In fact Assessing Officer obtained information from the Sub-Registrar, Halol u/s.133(6) vide letter dated 13.12.2012. The concerned Sub-Registrar, Halol confirmed the transfer/registration of the property sold by assessee. Therefore, he computed short term capital gain in respect of factory sold as per provisions of Section 50 of the Act by reducing written down value (WDV) of assets sold from the sale consideration of Rs.67lacs and computed short term capital gain at Rs.53,66,599/-. A.Y. 10-11 [ITO vs. M/s. Devidayal Plastic Inds. Pvt. Ltd.] Page 3 2.1 Matter was carried before the First Appellate Authority, wherein having considered the submission on behalf of assessee, CIT(A) restricted the short term capital gain to Rs.40,69,030/- as against short term capital gain worked out by Assessing Officer at Rs.53,66,599/- giving a relief of Rs.12,97,569/-.

2.2 Same has been opposed before us on behalf of Revenue inter alia stating that under the facts and circumstances, CIT(A) was not justified in restricting the short term capital gain to Rs.40,69,030/- against short term capital gain worked out by Assessing Officer at Rs.53,66,599/-. Accordingly, order of CIT(A) be set aside and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A).

2.3 After going through rival submissions and material on record, we find that assessee has sold factory at Halol, which consists of land, building and compound wall, for a consideration of Rs.67 lacs. The land is not a depreciable asset; hence capital gain in respect thereof cannot be computed as per the provisions of Section 50 of the Act. Capital gain in respect of land, which was acquired by assessee in 1981 would be computed as per normal provisions as provided in Section 48 of the Act. Assessee has apportioned the sale consideration between land and building and is claiming that sale consideration in respect of industrial A.Y. 10-11 [ITO vs. M/s. Devidayal Plastic Inds. Pvt. Ltd.] Page 4 building and compound wall is of the same value as is written down value of these assets. Balance sale consideration has been assigned to the land. This methodology claimed by assessee was not found correct. The building, land and compound wall would have to be assigned proportionate sale value in ratio of their WDV out of total sale consideration of Rs.67lacs which is logical as well. From this methodology, sale considerations of land and building and consequently capital gains in respect thereof shall be computed in following manner: 1. Sale consideration for Land Rs.16,19,968/- (proportionate to WDV of land) 2. Sale consideration for building 3. (factory and compound wall) Rs.50,80,032/- (proportionate to WDV of building) Total Rs.67,00,070/- 1. Long-term capital gain in Rs.16,19,968/- (Sale value) Respect of Land (-) Rs.10,11,003/- (Sale value) Long – term capital loss Rs.4,17,588/-

Pronounced in the open Court on this the 28th day of October, 2015.