NON APPLICABILITY OF SECTION 50C TO SALE OF ASSETS FORMING PART OF BLOCK OF ASSETS

SECTION 50C DOESN’T APPLY TO SALE OF ASSETS FORMING PART OF BLOCK OF ASSETS

Deeming provision under section 50C, adopting stamp duty value as sale consideration applies to compute capital gains and not to determine written down value of assets

[2015] 59 taxmann.com 373 – ITAT MUMBAI – Bhaidas Cursondas & Company v/s ACIT, Mumbai

FACTS

During the relevant year, the Assessing Officer observed that the assessee had sold a part of the assets forming part of the block of assets ‘Building’ at Rs. 1.50 lakhs.

The Assessing Officer during the course of assessment proceedings observed that this transaction attracts section 50C and the value adopted by the stamp value authority was Rs. 2.30 lakhs. Accordingly, he recomputed the opening Written Down Value (WDV) of the relevant block of assets and allowed the depreciation for the current year accordingly, working the same at an amount less than that claimed by the assessee.

On appeal, the Commissioner (Appeals) ruled in favour of the assessee and held that section 50C only applies for computing ‘capital gains’ arising to the assessee on the transfer of capital assets specified therein and the same would have no implication towards computing the WDV of the relevant block of assets.

HELD

On further appeal to Tribunal, The revenue based its claim on the decision by the Special Bench of the Tribunal in the case of ITO v. United Marine Academy [2011] 130 ITD 113 (Mum). However, as rightly noted by the Commissioner (Appeals), the said decision, in ratio, only holds that section 50C shall apply equally in respect of depreciable assets; on being the assessee’s claim in that case that immovable property, the asset class specified in section 50C, would yet not apply in as much as the same is a depreciable asset being used for the purposes of its business by the assessee. The deeming provision of section 50C is for the limited purpose for computing the capital gains under section 45 read with section 48 on the assets specified under the said section. The only purpose of section 50C is the extent of the matter specified therein, providing (to that extent) an alternate basis to that specified section 48, for computing the capital gains chargeable under section 45. The WDV would have to be necessarily computed in terms of section 43(6), and for which section 50C has no application. The decision in the case of United Marine Academy (supra) shall, therefore, have no application in the facts of the case, even as clarified by the Commissioner (Appeals), whose decision is accordingly upheld. In fact, the opening WDV could not be altered without first changing the depreciation for the immediately preceding year and, concomitantly, the WDV at the close of that year. The revenue’s case is wholly untenable in law. In the result, the revenue’s appeal is dismissed.

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