Shyamala Pictures and Hotel Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1185/CHNY/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6075 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI JT
• Assessee Lawyers: S SRIDHAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Depreciation; Earning of tax free income; Proportionate interest; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 14A; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , . ! #$, & #' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ITA NO.1185/MDS/2015 & ! (! / ASSESSMENT YEAR : 2009-10 SHYAMALA PICTURES AND HOTEL PVT. LTD. SHYAMALA TOWERS, 136, ARCOT ROAD, SALIGRAMAM, CHENNAI - 600 093. [PAN: AABCS 0267K] VS. DY. COMMISSIONER OF INCOME TAX, MEDIA RANGE, CHENNAI 600 034. ( /APPELLANT ) ( / RESPONDENT ) $) * + / APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE ,-$) * + / RESPONDENT BY : SHRI ASHISH TRIPATHI, JT. CIT . * / / DATE OF HEARING : 04.07.2017 0( * / / DATE OF PRONOUNCEMENT : 27.09.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, CHENNAI ( CIT(A) FOR SHORT) DATED 20.03.2015, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 23.12.2011 FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS THE DISALLOWANCE U/S.14A, EFFECTED, APPLYING R. 8D, IN THE SUM OF . 14,53,751/-. THE ASSESSEE OBJECTS THERETO ON SEVERAL GROUNDS. FIRSTLY, NO SATISFACTIO N, MANDATORY U/S. 14A(2), 2 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT STANDS RECORDED BY THE ASSESSING OFFICER (AO). THE AO HAD WRONGLY INCLUDED THE INVESTMENT IN PARTNERSHIP FIRMS AT THE INVESTME NT THEREIN AS AT THE YEAR-END, I.E., . 2862.96 LACS, WITHOUT REALIZING THAT THE OPENING VALUE THEREOF IS NIL, SO THAT THE AVERAGE VALUE OF THE INVESTMENT IN PARTNER SHIP FIRMS HELD DURING THE YEAR WOULD STAND REDUCED BY HALF. AGAIN, INASMUCH A S INTEREST IN PARTNERSHIP FIRMS IS TAXABLE, THE SAME SHOULD IN FACT BE EXCLUD ED IN RECKONING THE VALUE OF THE INVESTMENTS YIELDING TAX-FREE INCOME. FURTHER, AS EXPLAINED BY THE HON'BLE COURT IN JOINT INVESTMENTS LTD. V. CIT [2015] 372 ITR 694 (DEL), THE DISALLOWANCE (OF EXPENDITURE) U/S. 14A CANNOT EXCEE D THE AMOUNT OF TAX-EXEMPT INCOME EARNED DURING THE YEAR. 3. WE SHALL CONSIDER EACH OF THE OBJECTIONS. TRUE, THE AO, WHERE THE ASSESSEE CLAIMS A PARTICULAR AMOUNT (WHICH COULD BE NIL AS WELL), WITH REFERENCE TO ITS ACCOUNTS, AS HAVING BEEN INCURRED IN RELATIO N TO THE TAX-EXEMPT INCOME EARNED DURING THE YEAR WHICH IN THE PRESENT CASE IS AT . 1,24,031/- (REFER PARA 2 OF THE NOTES BY THE ASSESSEE), THE AO CANNOT PROC EED TO INVOKE R. 8D UNLESS HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESS EES CLAIM (S. 14A(2) R/W S. 14A(3)). THAT IS, IT IS INCUMBENT ON HIM TO EXAMINE THE ASSESSEES CLAIM, ALSO INDICATING AS TO WHY HE IS NOT SATISFIED THEREWITH. THIS IS THE CLEAR LAW IN THE MATTER, EXPLAINED EXTENSIVELY BY THE HON'BLE COURTS , AS IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM), SINCE APPROVED BY THE HON' BLE SUPREME COURT IN CA NO.7020 OF 2014 DATED 08.05.201 7. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE DECISION IN THE CASE OF AFL (P.) LTD. V. ASST. CIT [2013] 28 ITR (TRIBUNAL) 263 (MUM). THE ASSESSEE IN THE PRESENT CASE HAS MADE A CLAIM WITH REFERENCE TO R. 8D, I.E., DE HORS ITS ACCOUNTS. HOW, PRAY, THE AO EXPRESS HIS DISSATISFACTION WITH THE ASSESSEES CLA IM, WHICH HE IS TO BEFORE INVOKING R. 8D? THE LD. AR WOULD, ON BEING SO QUEST IONED BY THE BENCH DURING HEARING, CONTEND THAT THE SAME (WORKING U/R. 8D) WA S SUBMITTED BY THE ASSESSEE WITHOUT PREJUDICE, AND THAT HE WOULD PRODUCE THE AS SESSESS LETTER PER WHICH THE 3 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT SAID WORKING WAS FURNISHED. HOWEVER, THE SAME WAS N OT PRODUCED DESPITE THE MATTER BEING ADJOURNED ON THREE OCCASIONS AFTER THE DATE OF THE FIRST HEARING ON 27.06.17, I.E., BY THE PRESENT CONSTITUTION, BEFORE BEING FINALLY HEARD ON 04.07.2017. FURTHER, IF THE SAME REPRESENTED AN ALT ERNATE CLAIM, WHAT IS THE ASSESSEES ORIGINAL CLAIM? NO MATERIAL EXHIBITING T HE SAME, MUCH LESS ANY CONTENTION TO THAT EFFECT, HAS BEEN LED OR STANDS M ADE BEFORE ANY AUTHORITY. THE PLEA AS TO THE NON-SATISFACTION OF THE AO IS CLEARL Y A BOGEY. THE ASSESSEES SECOND ARGUMENT IS FACT BASED. THE ASSESSEES BALAN CE-SHEET AS ON 31.03.2009 IS NOT BEFORE US. IF THE SAME REFLECTS THE INVESTMENT IN THE PARTNERSHIP FIRMS, AS ADOPTED, WITH THAT AT ITS BEGINNING, I.E., 31.03.20 08, BEING NIL, I.E., AS CLAIMED, THE AVERAGE INVESTMENT (IN THE PARTNERSHIP FIRMS) W OULD WORK TO 50% OF THAT BY THE AO. WHY, THE ASSESSEE, WHERE IT IS FAVOURABLE T O IT, CAN ALSO ADOPT A MONTHLY AVERAGE, BEGINNING APRIL, 2008. COMING, NEXT, TO TH E ASSESSEES CLAIM OF THE INVESTMENT IN PARTNERSHIP FIRMS BEING EXCLUDED AS T HE INTEREST ARISING THEREON IS TAXABLE. THE SAME IS VALID, I.E., IN PRINCIPLE. HOW EVER, THE INSTRUMENT OF PARTNERSHIP/S IS NOT ON RECORD TO EXHIBIT IF THERE IS A PROVISION FOR INTEREST ON CAPITAL, WHICH IS ASSESSABLE U/S. 28. IN ANY CASE, NO INTEREST HAS BEEN EARNED ON THE SAID INVESTMENT/S, WHICH WOULD, WHERE SO, PRECL UDE DISALLOWANCE OF ANY DIRECT OR INDIRECT INTEREST COST U/S. 14A. IN THE P RESENT CASE, THE DISALLOWANCE IS RESTRICTED ONLY TO INDIRECT, ADMINISTRATIVE EXPENDI TURE, ESTIMATED U/R. 8D(2)(III). INASMUCH AS THE (SHARE OF) PROFIT FROM THE PARTNERS HIP FIRMS IS TAX-EXEMPT UNDER CHAPTER III, I.E., DOES NOT FORM PART OF THE TOTAL INCOME OF A PARTNER, WE FIND NO REASON TO EXCLUDE THE INVESTMENT/S THEREIN FOR WORK ING THE DISALLOWANCE U/S.14A(1), I.E., IN RESPECT OF SUCH EXPENDITURE. FINALLY, COMING TO THE ASPECT OF THE DECISION IN JOINT INVESTMENTS PVT. LTD. (SUPRA), ITS HEAD NOTE, WHICH REPRESENTS TRULY THE JUDGMENT, WHICH STANDS ALSO PE RUSED BY US, READS AS UNDER: INCOME COMPUTATION DISALLOWANCE OF EXPENDITURE ON EARNING NON-TAXABLE INCOME DISALLOWANCE ONLY TO EXTENT OF EXPENDITURE INCURRED BY ASSESSEE IN RELATION TO TAX EXEMPT INCO ME NO REASON FOR 4 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT DISALLOWANCE OF SUM VOLUNTEERED NO SCRUTINY OF AC COUNTS ENTIRE TAX EXEMPT INCOME LOWER THAN DISALLOWANCE MATTER REMANDED INCOME-TAX RULES, 1962, R. 8D INCOME-TAX ACT, 1961, S. 14A . HOW COULD, THEN, WE WONDER, IT BE SAID THAT THE SAI D DECISION LAYS DOWN THE PROPOSITION THAT THE DISALLOWANCE U/S. 14A COULD NO T EXCEED THE TAX-EXEMPT INCOME? THE EXPENDITURE INCURRED IN RELATION TO THE TAX EXEMPT INCOME, WHICH IS TO BE THEREFORE DISALLOWED U/S. 14A, IS ES SENTIALLY A MATTER OF FACT, AS INDEED IS THE NATURE AND THE EXTENT EXPENDITURE INCURRED IN RELATION TO ANY INCOME, TAXABLE OR NON-TAXABLE. INCOME, IT NEEDS TO BE APPRECIATED, IS, BY DEFINITION, NET OF EXPENDITURE INCURRED IN ITS RESP ECT. INASMUCH AS, THEREFORE, THE TAX EXEMPT INCOME, I.E., THE INCOME NOT FORMING PART OF THE TOTAL INCOME, WOULD ONLY BE AT NET OF EXPENDITURE INCURRE D IN RELATION THERETO, THE SAME IS TO BE QUANTIFIED AND EXCLUDED. ELSE, THE SA ME WOULD STAND ABSORBED OR SET OFF AGAINST INCOME FORMING PART OF THE TOTAL INCOME, ALSO ARISING TO THE ASSESSEE DURING THE RELEVANT PERIOD. THIS, THEN , IS THE SUBSTANCE, OBJECTIVE AND PURPORT OF SEC. 14A, I.E., TO ARRIVE AT THE CORRECT INCOME CHARGEABLE TO TAX UNDER THE ACT, AS EXPLAINED IN MA NY A DECISION BY THE HON'BLE COURTS ( CIT V. WALFORT SHARE & STOCK BROKERS (P.) LTD. [2010] 326 ITR 1 (SC)). REFERENCE IN THIS CONTEXT MAY ALSO BE DRAWN TO THE DECISIONS INTER ALIA IN DY. CIT V. DAMANI ESTATES & FINANCE PVT. LTD . [2013] 25 ITR (TRIB) 683 (MUM); VOLTECH ENGINEERS V. DY. CIT [2017] 163 ITD 469 (CHENNAI); AND SUNDARAM FASTENERS LTD. V. ASST. CIT (IN ITA NO. 874/MDS/2015 DATED 17/4/2017). THE EXPENDITURE, AS INCURRED, AND AS IN ANY OTHER CASE, IS TO BE DETERMINED ON THE BASIS OF EVIDENCE. WHERE, HOWEVER , THE ASSESSEES BOOKS OF ACCOUNT DO NOT ENABLE A REASONABLE AND PROPER DE TERMINATION OF SUCH EXPENDITURE, BEING INCURRED ALONG WITH AND IN THE C OURSE OF CARRYING ON OTHER ACTIVITIES YIELDING TAXABLE INCOME, THE LAW, PER S. 14A R/W R. 8D, PROVIDES A BASIS FOR ITS ESTIMATION. THIS EXPENDITU RE INCURRED IN RELATION TO THE TAX EXEMPT INCOME, AS INDEED QUA ANY OTHER INCOME, COULD THUS BE LESS 5 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT THAN, EQUAL TO, OR EVEN EXCEED THE INCOME (GROSS). WHY, SEC. 14A(3) ITSELF PROVIDES FOR THERE BEING, IN THE FACTS OF A PARTICU LAR CASE, NO EXPENDITURE. THERE IS CONCEPTUALLY NO DIFFERENCE BETWEEN POSITIV E, NIL OR NEGATIVE INCOME, I.E., LOSS; THE LAST BEING WHERE THE EXPEND ITURE EXCEEDS THE INCOME (REFER CIT V. HARPRASAD AND CO. PVT. LTD. [1975] 99 ITR 118 (SC)). THERE IS THEREFORE NO BASIS IN LAW TO SAY THAT THE EXPEND ITURE INCURRED AND, THEREFORE, ITS DISALLOWANCE, CANNOT EXCEED THE TAX- EXEMPT INCOME, AND NEITHER HAS THE HON'BLE COURT IN JOINT INVESTMENTS PVT. LTD. (SUPRA) SAID SO. IT HAS, ON THE CONTRARY, CLARIFIED THAT THE DISALLO WANCE U/S. 14A COULD NOT EXCEED THE EXPENDITURE INCURRED IN RELATION TO THE TAX-EXEMPT INCOME. THIS IS PRECISELY WHAT S. 14A PRESCRIBES AND PURPORTS TO , AND IS RATHER AXIOMATIC. WE SAY SO AS THE DISALLOWANCE OF EXPENDITURE COULD NOT EXCEED THE EXPENDITURE ITSELF! THE OBSERVATION BY THE HON'BLE C OURT, AS A READING OF THE DECISION SUGGESTS, WARRANTED BY THE FACTS OF TH E CASE, STATED BY WAY OF ABUNDANT CAUTION. IN FACT, R. 8D, AS AMENDED W.E.F. 02.06.2016, ALSO CARRIES THE SAME CAVEAT. THE ARGUMENT IS ACCORDINGLY INADMISSIBLE. THE MATTE R, FOR THE PURPOSE OF VERIFYING THE ASSESSEES CLAIM WITH REGA RD TO THE CORRECTNESS OF THE WORKING UNDER R. 8D(2)(III), SHALL TRAVEL BACK TO T HE FILE OF AO, TO BE DECIDED AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE IN THE MATTER PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 4. THE SECOND AND THE PRINCIPAL ISSUE ARISING IN TH E INSTANT APPEAL IS THE CORRECT INCOME CHARGEABLE TO TAX ARISING TO THE ASS ESSEE ON THE SALE OF APARTMENTS ALLOTTED TO IT UNDER A JOINT DEVELOPMENT AGREEMENT (JDA) DATED 15.12.2006, DURING THE RELEVANT YEAR. THE CONTROVER SY, IN THE MAIN, IS WITH REGARD TO THE COST OF THE CAPITAL ASSET/S TRANSFERR ED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE, AN OWNER OF 113.33 GROUNDS (271992 SQ.FT. ) OF LAND AT 136, ARCOT ROAD, SALIGRAMAM, CHENNAI (ALSO REFERRED TO AS THE OWNER), ENTERED INTO A DEVELOPMENT AGREEMENT WITH CEEBROS PROPERTY DEVELOP MENT PRIVATE LIMITED ON 6 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT 04.05.2005 FOR DEVELOPMENT OF 102 GROUNDS (244800 SQ.FT.) OF THE SAID LAND, I.E., AFTER GIFTING 11.33 GROUNDS THEREOF TO CMDA TOWARD OSR. THE LAND HAD BUILT- UP AREA OF 55,004.81 SQ.FT. (OF WHICH 45,598.22 SQ. FT. WAS COVERED BY ASBESTOS SHEET ROOFING) AND 8942.59 SQ.FT. BY CONCRETE ROOFI NG. THE ASSESSEE, RUNNING A FILM STUDIO AND RECORDING THEATRE (UPTO SOMETIME IN THE YEAR 2005) THEREAT WAS, ACCORDINGLY, CLAIMING DEPRECIATION IN RESPECT OF TH E SAID BUILDING, A PART (50%) OF WHICH IS STATED AS HAVING BEEN LET, SO THAT DEPR ECIATION WAS BEING CLAIMED ONLY ON 50% OF THE BUILDING. CONTINUING FURTHER, AS THE SUPERSTRUCTURE HAD TO BE DEMOLISHED (FOR THE DEVELOPMENT OF THE PROPERTY), T HE ASSESSEE APPLIED FOR DEMOLITION IMMEDIATELY AFTER EXECUTING THE JDA DATE D 04/5/2005 . APPROVAL FOR CONSTRUCTION OF COMMERCIAL/OFFICE/IT BUILDING COMPR ISING STILT PLUS 9 FLOORS (IN A PORTION OF SCHEDULE A LAND ABUTTING ARCOT ROAD), AN D FOR CONSTRUCTION OF FOUR RESIDENTIAL BLOCKS OF DWELLING UNITS (EACH BLOCK CO MPRISING STILT PLUS 9 FLOORS) IN THE REAR PORTION OF SCHEDULE A LAND, WAS OBTAINED V IDE G.O. MS NO. 86 DATED 20/3/2006. SUBSEQUENTLY, CANCELLING THE AGREEMENT D ATED 04.05.2005, A FRESH JDA WAS ENTERED INTO BY THE ASSESSEE WITH CEEBROS P ROPERTY DEVELOPMENT (CEEBROS OR DEVELOPER HEREINAFTER), A PROPRIETA RY CONCERN, ON 15/12/2006. THIS WAS FOLLOWED BY A POWER OF ATTORNEY (POA) IN F AVOUR OF THE DEVELOPER ON 18/12/2006. THE PRINCIPAL TERM OF THE AGREEMENT IS THAT THE ASSESSEE IS TO RETAIN 51% OF THE LAND, WHILE THE BALANCE 49% WOULD FALL T O THE SHARE OF THE DEVELOPER, IN CONSIDERATION FOR A DEFINED SHARE IN THE BUILT-UP AREA, I.E., 51% OF THE TOTAL SUPER BUILT AREA (I.E., INCLUDING COMMON AREA), AND AFTER REDUCING 17,500 SQ.FT. TO THE DEVELOPER IN THE RESIDENTIAL B LOCKS FROM OUT OF THE TOTAL BUILT-UP AREA. THE DISTRIBUTION OF AREA STANDS ARE PRESENTED AS UNDER IN THE AGREEMENT: (PB PG. 76, PARA 2.5 OF THE IMPUGNED ORD ER) OWNERS 2,61,385 SQ.FT 1,01,120 SQ.FT 3,62,505 SQ.FT ENTIRE COMMERCIAL/ OFFICE/I.T. BUILDING 75 APARTMENTS IN ALL 4 BLOCKS OF RESIDENTIAL UNITS 7 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT DEVELOPER 3,62,800 SQ.FT 269 APARTMENTS IN ALL 4 BLOCKS OF RESIDENTIAL UNITS TOTAL 7,25,305 SQ.FT WHILE THE ASSESSEE RETURNED CAPITAL GAIN ON THE TRA NSFER OF 49% OF LAND IN THE YEAR RELEVANT TO ASSESSMENT YEAR 2007-08, FOR T HE CURRENT YEAR, THE CAPITAL GAINS ARISING TO THE ASSESSEE IS ON THE SALE OF THE BUILT-UP AREA I.E., AS CONSTRUCTED AND ALLOTTED TO IT UNDER THE JDA. THERE IS NO DISPU TE QUA THE SALE CONSIDERATION, WHICH HAS BEEN ADOPTED WITH REFERENCE TO S. 50C OF THE ACT. THE BONE OF CONTENTION BETWEEN THE PARTIES IS WITH REGARD TO TH E COST OF THE CAPITAL ASSET TRANSFERRED. WHILE THE ASSESSEE CLAIMS THE COST OF THE SINCE DEMOLISHED BUILDING (AT . 33.97 PER SQ. FT.), AS A PART OF THE COST OF THE CAPITAL ASSET TRANSFERRED ( AT A TOTAL OF . 61.74 PER SQ. FT.), AS FOR AY 2007-08, THE REVENU E INSISTS THAT IT IS ONLY THE COST OF THE LAND (I.E., . 27.77 PER SQ. FT., BEING ITS FAIR MARKET VALUE AS ON 1/4/1981) THAT IS TO BE TAKEN INTO ACCOUNT, AS I T IS LAND ALONE ON WHICH THE SUPERSTRUCTURE IS TO BE CONSTRUCTED, AND IS THEREFO RE TRANSFERRED. BOTH THE COSTS, I.E., . 27.77 PER SQ. FT. AND . 33.97 PER SQ. FT., IT MAY BE NOTED, ARE PRIOR TO INDEXATION. TWO, THE BUILT-UP AREA IN THE FORM OF A PARTMENTS (6) SOLD (DURING THE YEAR) IS A SHORT-TERM CAPITAL GAIN, WHICH, THOUGH H AS NOT BEEN DISTURBED, AND ASSESSED AT THE RETURNED SUM OF . 377.78 LACS. IT STANDS FURTHER ADDED THAT THE COST OF THE BUILDING AS TAKEN BY THE ASSESSEE, THE WHOLE OF WHICH IS INDEXED WITH REFERENCE TO 01.04.1981, INCLUDES BUILDING (TO THE EXTENT OF . 51.33 LACS, OUT OF THE TOTAL COST OF BUILDING AT . 83.14 LACS) CONSTRUCTED IN THE YEAR 2002, SO THAT EVEN WHERE THE COST OF THE SAME IS TO BE INCLUDED, I.E., BY REGARDING IT AS A PART OF THE CAPITAL ASSET/S SOLD/TRANSFERRED, THE SAME W OULD STAND TO BE INDEXED WITH REFERENCE TO THAT YEAR (2002), I.E., AT 582/426 (AN D 519/426 FOR AY 2007-08), AS AGAINST 582/100 (AND 519/100 FOR AY 2007-08). NO IM PACT OF THE SAME THOUGH IS REQUIRED AS THE COST OF THE EXISTING BUILDING HA S NOT BEEN TAKEN INTO ACCOUNT, REGARDING IT AS NOT TRANSFERRED, SO THAT THE QUESTI ON OF ITS INDEXATION DOES NOT 8 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT ARISE (PG. 12 OF THE ASSESSMENT ORDER). WE MAY IN T HIS REGARD, FOR THE SAKE OF MORE CLARITY, ALSO REPRODUCE THE OPERATING PART OF THE IMPUGNED ORDER, WHICH ENDORSES THE ASSESSMENT, AS UNDER: 6. THE DECISION: 6.1 A PERUSAL OF THE AGREEMENT FOR SALE OF FLATS TO INDIVIDUAL BUYERS REVEALS THAT IN ALL THESE CASES WHAT WAS TRA NSFERRED WAS THE CONSTRUCTED AREA AND UNDIVIDED SHARE OF LAND AS COU LD BE SEEN FROM THE RELEVANT SCHEDULES TO THE AGREEMENTS. THUS THE ASSESSEE'S ACTION IN CLAIMING THE INDEXED COST OF THE BUILDING BY WAY OF DEDUCTION FROM THE SALE CONSIDERATION TO ARRIVE AT THE CAPITA L GAINS IS NOT CORRECT. 6.2 THE LAND IS ONE CAPITAL ASSET TRANSFERRED BY TH E APPELLANT AND THE FLATS ALLOTTED TO IT IN CONSIDERATION FOR THE T RANSFER OF LAND CONSTITUTE A DIFFERENT CAPITAL ASSET FOR THE APPELL ANT. IT IS NOT A CONVERSION OR AN ASSET FROM ONE FORM TO THE OTHER. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE LAND HELD BY THE APPE LLANT WAS ITS CAPITAL ASSET. IT CANNOT ALSO BE DISPUTED THAT FLATS ACQUIR ED IT WERE ALSO ITS CAPITAL ASSETS. THE ACQUISITION OF THE NEW ASSET CA ME TO IT BY WAY OF CONSIDERATION FOR TRANSFER OF EARLIER ASSET, AS PER S. 2(47) OF THE ACT CONSTITUTING ALTOGETHER A NEW TRANSACTION. AS PER T HE DEVELOPMENT AGREEMENT APPELLANT HAS NO CLAIM OVER THE LAND WHIC H HAS BEEN GIVEN TO THE DEVELOPER. ACCORDINGLY, IT IS HELD THAT TRAN SFER OF LAND IN CONSIDERATION OF THE FLATS CONSTITUTE ONE TRANSACTI ON GIVING RISE TO CAPITAL GAINS AND THE SALE OF FLATS BY THE ASSESSEE CONSTITUTE ANOTHER TRANSACTION GIVING RISE TO CAPITAL GAINS. [DR. MAYA SHENOY VS. ACIT (2009) 124 TTJ (HYD) 692:(2009) 23 DTR 140 FOL LOWED]. 6.3 THE AUTHORIZED REPRESENTATIVE VEHEMENTLY ARGUED RELIED ON THE ASSESSMENT FOR AY 2007-08 MADE U/S 143(3)/263. IN T HIS, ASSESSING OFFICER ADMITTED THE COST OF ACQUISITION @ 6L.74 PER SQ.FT. BY ADOPTING SUCH VALUE HE HELD THAT COST OF ACQUISITIO N IS TO INCLUDE BOTH THE LAND AND SUPERSTRUCTURE THEREON. HE CITED EXTRACTS OF THE JOINT DEVELOPMENT AGREEMENT IN ORDER TO PROVE THIS FACT. AT THE COST OF REPETITION I AM REPRODUCING THE SAME AGAIN HERE. 'JOINT DEVELOPMENT AGREEMENT WAS ENTERED BETWEEN M/ S SHYAMALA PICTURES LIMITED AND M/S CEEBROS PROPERTY DEVELOPMENT. IN PAGE NO.2 OF JDA IT WAS MENTIONED THAT THE 'OWNE RS HEREIN ARE THE ABSOLUTE OWNERS OF THE LAND OF AN EXTENT OF 6.55 ACRES OR THEREABOUTS (OR 118.88 GROUNDS) AND THE SUPERSTR UCTURES 9 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT STANDING THEREON BEARING DOOR NO.136, ARCOT ROAD, SALIGRAMAM, CHENNAI 93. IN PAGE NO.4 OF THE JDA MENTIONED THAT THE TOTAL LA ND OWNED BY THE OWNERS HEREIN NAMELY 6.55 ACRES OR THEREABOU TS (OR 118.88 GROUNDS) AND THE SUPERSTRUCTURES STANDING TH EREON BEARING DOOR NO.136, ARCOT ROAD, SALIGRAAM, CHENNAI 93. IN PAGE NO.19 OF JDA IN SCHEDULE OF PROPERTY 'A' IT WAS MENTIONED THAT ALL THAT PIECE OF PARCEL OF LAND OF AN EXTENT OF 6.55 ACRES (118.88 GROUNDS) OR THEREABOUTS AND T HE SUPERSTRUCTURES STANDING THEREON BEARING DOOR NO.13 6, ARCOT ROAD, SALIGRAMAM, CHENNAI 93.' 6.4 THUS WHEN THERE IS TRANSFER BETWEEN THE LAND OW NER I.E. THE APPELLANT AND THE DEVELOPER IT IS CATEGORICALLY MEN TIONED THAT THE TRANSFERRED PROPERTY CONSTITUTED LAND AND THE SUPER STRUCTURE THEREON. HENCE THE AO COME TO CONCLUSION THAT COST OF ACQUIS ITION TO BE TAKEN @ 6L.74 SQ.FT. BUT IN THE PRESENT SITUATION, WE ARE N OT CONCERNED WITH THE TRANSFER OF LAND TO DEVELOPER FO R DEVELOPMENT. AT PRESENT, THERE IS TRANSFER OF CONSTRUCTED SPACE ALO NG WITH UNDIVIDED SHARE OF LAND. THE PERSPECTIVE BUYERS OF FLATS HAVE NO CONNECTION WITH SUPER CODE SUPERSTRUCTURE. IN THE ABOVE MENTIO NED PARAGRAPH I HAVE ALREADY MENTIONED THERE IS TWO TRANSACTIONS, O NE WITH THE JOINT DEVELOPMENT AGREEMENT ANOTHER WITH OUTRIGHT SALE. I N THE SECOND SCENARIO, THE COST OF ACQUISITION WILL BE LIMITED TO LAND ONLY. THUS THE AO IS JUSTIFIED IN TAKING THE VALUE OF COST OF ACQUISITION AT RS.27.77. 6.5 DURING THE APPELLATE PROCEEDINGS, THE AUTHORIZE D REPRESENTATIVE RELIED ON THE DECISION MADE IN THE C ASE OF SMT. SOWCAR JANAKI VS. ITO (ITA NO.615/MDS/2012). BUT THE SAID CASE DEAL WITH TRANSFER OF LAND FOR DEVELOPMENT WHERE TH E INDEXATION BENEFIT FOR BUILDING WAS GIVEN. BUT THE PRESENT CAS E IS DIFFERENT AND IS DEALING WITH SECOND LEG OF TRANSFER. 6.6 THE EXISTING SUPERSTRUCTURE WAS DEMOLISHED BY T HE JOINT DEVELOPMENT A GREEMENT AND THE POSSESSION WAS TRANSFERRED TO THE DEVELOPER. SEVERAL FLATS WERE CONSTRUCTED AND SOME OF THEM WERE TRANSFERRED TO APPELLANT AS CONSIDERATION. SUBSEQUENTLY, SOME OF THE FLATS WERE SOLD ALONG WITH UNDIVIDED SHARE OF LAND. THUS, WHAT WAS NOT TRANSFERRED CANNOT HAVE THE BENEFIT OF INDEXATION. HENCE THE FAIR MARKET VALUE OF LAND AS ON 01.04.1981 ALONE IS ELIG IBLE FOR DEDUCTION BY WAY OF COST AFTER DUE INDEXATION. THE FAIR MARKET VALUE OF THE LAND AS PER VALUER'S CERTIFICATE IS RS .67,99,800/-. IF THE SAME IS DIVIDED BY 24,480 SQ.FT., THE COST PER SQ.F T WORKS OUT TO 10 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT RS.27.77. THE COST ALONE IS THE ELIGIBLE FOR INDEXA TION. THUS, THE GROUNDS NO.2 TO 13 AS SET OUT IN GROUNDS OF APPEAL ARE DISMISSED. 6.7 THERE IS ANOTHER POINT WHICH IS RELEVANT AND TH E AO ALSO HAS MENTIONED IN THE ASSESSMENT ORDER. A PERUSAL OF THE COMPUTATION OF CAPITAL GAINS GIVEN BY THE ASSESSEE REVEALS THAT WHILE TAKING INTO ACCOUNT THE VALUE OF THE BUILDING THE ASSESSEE HAS INDEXED THE COST OF THE BUILDING AS ON 1/4/1981 BUT OUT OF THE BUILD ING VALUE OF RS.83,14,332/- A SUM OF RS.51,33,401/- REPRESENTS D EPRECIATED VALUE OF THE COST OF CONSTRUCTION ADDED TO THE EXIS TING STRUCTURE CONSTRUCTED DURING THE YEAR 2002. THE ASSESSEE HAS ALSO INCLUDED THE BUILDING CONSTRUCTED DURING THE YEAR 2002 IN TH E COST INDEXATION AS ON 1/4/1981 FOR THE ENTIRE BUILDING. THE BASE YE AR FOR THE ADDITION MADE IN THE YEAR 2002, SHOULD BE 2002 (I.E . THE YEAR OF CONSTRUCTION) AND NOT 1/4/1981 FOR THE ABOVE SAID A DDITIONAL CONSTRUCTION. THIS PORTION OF THE COST AMOUNTING TO RS. 51,33,401 HAS BEEN INDEXED AT 519/100 INSTEAD OF 519/426 FOR ASSESSMEN T YEAR 2007-08 AND AT 582/100 INSTAED OF 582/426 FOR ASSESSMENT Y EAR 2009-10 THE YEAR UNDER CONSIDERATION. TO THIS EXTENT THE ASSESS EE HAS CLAIMED EXCESS COST. SINCE THE COST OF THE BUILDING HAS BEE N EXCLUDED IN ITS ENTIRETY IN THE COST OF THE PROPERTY BEING TRANSFER RED, THIS ISSUE IS NOT BEING RAISED AT THIS POINT OF TIME. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE MAY, TO BEGIN WITH, SIMPLISTICALLY THOUGH FOR THE LAND FALLING TO THE SHARE OF THE ASSESSEE-OWNER AND THE DEVELOPER MAY N OT BE CONTIGUOUS, AS DRAWN, FOR THE SAKE OF BETTER COMPREHENSION, SEEK TO GRAPH ICALLY REPRESENT/EXHIBIT THE TRANSACTION, AS UNDER: A/O 51% D 49% A/O => THE ASSESSEE/OWNER D => DEVELOPER FOR AY 2007-08, THE ASSESSEE TRANSFERRED 49% INTERE ST IN THE LAND IN CONSIDERATION FOR THE BUILT-UP AREA ON THE BALANCE (51%) OF THE LAND. FOR THE 11 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT CURRENT YEAR, IT IS THE BUILT-UP AREA ON HIS (PART OF THE) LAND THAT IS BEING TRANSFERRED. CLEARLY, THE SAME CONSISTS OF THE BUIL T-UP AREA, RECEIVED IN CONSIDERATION FOR THE TRANSFER OF 49% OF LAND, AND THE LAND AREA PROPORTIONATE TO THE AREA SOLD (SPREAD OVER SCHEDULES B, E, F & H OF THE JDA). THIS IS AS WHEN ANY BUILT-UP AREA IS SOLD ON FREEHOLD BASIS, THE TI TLE IN THE PROPORTIONATE LAND AREA ALSO GETS TRANSFERRED ALONG-WITH. THERE IS IN FACT NO DISPUTE OR DOUBT WITH REGARD TO THIS. AGAIN, THIS WILL HAVE TO BE WORKED OUT ON THE BASIS OF SUPER BUILT AREA, I.E., INCLUDING COMMON AREA AND, FURTHER, ALSO TAKE INTO ACCOUNT CAR PARK AREA, IF ANY, ALSO SOLD ALONG WITH. THE LAND AND THE BUILT-U P AREA, SOLD TOGETHER, IN THE FORM OF AN APARTMENT (AS IN THE CASE AT HAND), ARE TWO DIFFERENT CAPITAL ASSETS INASMUCH AS LAND AND BUILDING THEREON ARE TWO SEPAR ATE ASSETS. THIS PRINCIPLE STANDS LAID DOWN BY THE APEX COURT IN CIT V. ALPS THEATRE [1967] 65 ITR 379 (SC). A PERUSAL OF THE SAID JUDGMENT REVEALS BOTH T HE DECISION AS WELL AS ITS BASIS, I.E., THE REASON/S INFORMING THE SAME. WHAT IS SUBJECT TO DEPRECIATION, AN ACCOUNTING CONCEPT, RECOGNIZED BY LAW, IS AN ALLOWA NCE FOR WEAR AND TEAR, SO THAT THE REAL INCOME CAN BE BROUGHT TO TAX. THE LAN D, OR THE SITUS OF THE BUILDING, IS NOT SUBJECT TO DEPRECIATION, WHICH IS CONFINED O NLY TO THE SUPERSTRUCTURE, SO THAT BUILDING UNDER THE ACT REFERS THERETO. THE H ONBLE COURT EXAMINED THE MATTER FROM THE STAND POINT OF BOTH, THE CONCEPT OF DEPRECIATION AS WELL AS THE CONTEXT IN WHICH THE WORD BUILDING IS USED IN THE ACT. THE MATTER IS IN FACT WELL SETTLED, HAVING BEEN FOLLOWED BY DIFFERENT HIG H COURTS IN DIFFERENT FACT SETTINGS (AS, INTER ALIA , IN CIT VS. CITIBANK N. A. [2003] 261 ITR 570 (BOM); CIT VS. PARTHAS TRUST [2001] 249 ITR 120 (KER); CIT V. DR. D.L. RAMACHANDRA RAO [1999] 236 ITR 51 (MAD); CIT VS. VIMAL CHAND GOLECHA [1993] 201 ITR 442 (RAJ)), AND ALSO APPLIED BY THE TRIBUNAL IN MAN Y A CASE (VIZ. ASST. CIT V. EAGLE BURGMANN INDS. (P.) LTD. (IN ITA NO.4249/MUM/2012 DATED 08/4/2015). FURTHER, THE LAND, BEING OWNED BY THE ASSESSEE SINC E PRIOR TO 01.04.1981, SHALL BE A LONG-TERM CAPITAL ASSET (LTCA) ON THE DEEMED C OST OF WHICH (I.E., THE FAIR MARKET VALUE AS ON 01.04.1981) INDEXATION WOULD APP LY. THE BUILT-UP AREA, 12 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT INASMUCH AS ITS HOLDING PERIOD IS CLEARLY LESS THAN 36 MONTHS, WOULD BE A SHORT- TERM CAPITAL ASSET (STCA) AND, THEREFORE, NO INDEXA TION ON ITS COST, THUS, AVAILABLE. THIS, THEN, SHALL GIVE RISE TO THE QUEST ION OF DETERMINATION OF THE EXTENT OF LONG-TERM CAPITAL GAIN (LTCG) ARISING ON THE SALE OF LAND AND SHORT- TERM CAPITAL GAIN (STCG) ON THE TRANSFER OF THE BUI LT-UP AREA. THOUGH, NORMALLY, ONE WOULD, IN THE ABSENCE OF ANY OTHER INDICATOR, S EEK TO APPORTION THE SALE VALUE IN THE RATIO OF THE COST OR, AS THE CASE MAY BE, INDEXED COST OF ACQUISITION, OF THE TWO CAPITAL ASSET/S SOLD/TRANSFERRED COMPOSI TELY FOR A SINGLE CONSIDERATION, IN THE PRESENT CASE, INASMUCH AS THE SAME HAS NOT B EEN DELIBERATED AT ANY STAGE, INCLUDING BEFORE US, WE CONSIDER IT PROPER THAT THI S BE ADJUDICATED BY THE AO UPON CONSIDERING ALL THE RELEVANT ASPECTS AND, OF C OURSE, AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE ON APPORT IONMENT OF THE SALE VALUE AS BETWEEN LAND AND THE BUILT-UP AREA. WE MAY THOUGH A DD THAT INASMUCH AS S. 50C IS APPLICABLE, REGARD FOR WHICH HAS TO BE NECESSARI LY MADE, THE GUIDELINE VALUE UNDER THE STAMP ACT (I.E., OF THE (VACANT) LAND AND THE BUILT-UP STRUCTURE (FROM WHICH, THEREFORE, THAT SANS THE LAND COMPONENT COULD BE DERIVED), WHERE AND TO THE EXTENT APPLICABLE, SHOULD SERVE AS A VALID, LEG AL BASIS FOR APPORTIONMENT OF THE SALE CONSIDERATION. THE ISSUE IN PRINCIPLE IS S QUARELY COVERED BY THE DECISION IN DR. D.L.RAMACHANDRA RAO (SUPRA) BY THE HON'BLE JURISDICTIONAL HIGH COURT, AS WELL AS THE DECISIONS BY THE BOMBAY AND RAJASTHA N HIGH COURTS CITED SUPRA. WE, NEXT, COME TO THE ASPECT OF THE COST OF ACQUISI TION. AS AFORE-STATED, WHAT STANDS TRANSFERRED BY THE ASSESSEE (TO THE BUY ERS OF THE APARTMENTS) IS LAND AND THE SUPERSTRUCTURE THEREON. IT IS THE COST OF T HESE TWO CAPITAL ASSETS ALONE THAT IS, THEREFORE, RELEVANT, AND IS TO BE TAKEN INTO AC COUNT FOR THE PURPOSE OF DETERMINING THE NATURE AND QUANTUM OF THE CAPITAL G AINS ARISING TO THE ASSESSEE. WE HAVE ALREADY EXPLAINED THAT LAND AND BUILDING TH EREON, WHICH FORM AN INTEGRATED UNIT IN-AS-MUCH AS NO BUILDING CAN EXIST WITHOUT LAND, AND WHICH WAS IN FACT THE ARGUMENT THAT FOUND FAVOUR WITH BOTH TH E TRIBUNAL AND HON'BLE HIGH COURT IN ALPS THEATRES CASE (SUPRA), ARE YET SEPARATE ASSETS. LAND, IT NEE DS TO BE 13 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT APPRECIATED, DESPITE FORMING PART OF THE COMPOSITE UNIT, DOES NOT MERGE WITH THE BUILDING, AND RETAINS ITS INDEPENDENT IDENTITY. IT IS FOR THIS REASON THAT, AS HAS BEEN WITNESSED FOR CENTURIES NOW, BUILDINGS OR OTHE R STRUCTURES KEEP COMING UP ON THE SAME LAND. THESE ASPECTS STAND ALSO CONSIDER ED AND HIGHLIGHTED BY THE LD. CIT(A) VIDE PARA 6 (I.E., SUB PARAS 6.1 THROUGH 6.6 ) OF HIS ORDER, STATING IT TO BE NOT A CASE OF CONVERSION OF AN ASSET INTO ANOTHER, AND OF IT BEING THE SECOND LEG OF THE TRANSFER. THE DECISIONS IN THE CASE OF MISS DHUN DADABHOY KAPADIA V. CIT [1967] 63 ITR 651 (SC) AND SMT. SOWCAR JANAKI V. ITO [2014] 160 TTJ 747 (CHENNAI), RELIED UPON BY THE ASSESSEE, DO NOT ADVANCE ITS CASE IN ANY MANNER. THE VERY FACT THAT THE TWO THE LAND AND T HE SUPERSTRUCTURE THEREON, ARE SEPARATE ASSETS, SOLD AS A COMPOSITE UNIT, AND THE SUPERSTRUCTURE A PART OF THE UNIT TRANSFERRED, COULD NOT COME INTO EXISTENCE WIT HOUT REMOVING THE ENCUMBRANCE OF THE EXISTING STRUCTURE (SINCE DEMOLI SHED, AND NECESSARILY SO), MAKES EVEN THE SUGGESTION OF TAKING THE COST OF THE EXISTING STRUCTURE INTO ACCOUNT, BIZARRE, BESIDES BEING INCONSISTENT WITH A ND REMOVED FROM THE FACTS. THAT IS, THE SAME IS ONLY TO BE STATED TO BE REJECT ED. NOW, THE COST OF THE LAND COMPONENT WOULD BE THE SA ME, I.E., AT . 27.77 PER SQ.FT., BEING THE FAIR MARKET VALUE AS ON 01.04 .1981, WHICH SHALL BE SUBJECT TO INDEXATION. THE COST OF THE BUILT-UP STRUCTURE WOUL D, AGAIN, BE THE SAME, I.E., ITS VALUE AS ADOPTED FOR RECKONING THE SALE CONSIDERATI ON OF THE LAND (AND BUILT-UP AREA) TRANSFERRED TO THE DEVELOPER (49%) IN COMPUTI NG THE CAPITAL GAIN ON THE SAID TRANSFER (FOR AY 2007-08). THIS IS AS THE SAME (BUILT-UP STRUCTURE) STANDS ACQUIRED IN LIEU, OR BY WAY OF EXCHANGE, OF ALL THE ASSETS TRANSFERRED DURING THE PREVIOUS YEAR RELEVANT TO AY 2007-08. AS WE SEE IT, THE TRANSFER BEING ONE TO WHICH S. 50C IS APPLICABLE, IT IS THE GUIDELINE VAL UE UNDER STAMP ACT (AS ON THE DATE OF TRANSFER) OF THE ASSETS TRANSFERRED DURING THE RELEVANT PREVIOUS YEAR (TO AY 2007-08), THAT SHALL DEFINE THE SALE CONSIDERATI ON THEREOF. IN ANY CASE, ITS VALUE GETS CRYSTALLIZED. BEING A MATTER PERTAINING TO, AND WHICH STANDS CONCLUDED IN, THAT YEAR, WE ARE DISINCLINED TO EMBA RK ON THE MERITS OF THE SAID 14 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT VALUE. AGAIN, NO DOUBT, FOR AY 2007-08, THE COST OF THE ASSETS TRANSFERRED INCLUDED BOTH LAND AND THE EXISTING STRUCTURE THERE ON. HOWEVER, THE COST WOULD ONLY FOLLOW WHAT HAS BEEN REGARDED AS TRANSFERRED. FOR THE CURRENT YEAR, WE HAVE, ON AN EXAMINATION OF THE TRANSACTION, FOUND N O BASIS TO HOLD THAT THE EXISTING STRUCTURE, WHICH IS AGREED TO BE DEMOLISHE D BY THE CONTRACTING PARTIES; RATHER, IS ESSENTIALLY TO BE SO FOR THE AGREEMENT T O TAKE EFFECT, COULD BE REGARDED AS AN ASSET TRANSFERRED, FOR ITS COST TO BE INCLUDE D AS PART OF THE ASSETS TRANSFERRED, I.E., IN ADDITION TO THE COST OF THE L AND TRANSFERRED. THE MATTER IS ESSENTIALLY FACTUAL . IN FACT, THE TWO SITUATIONS ARE DIFFERENT, AND TH E TWO SCENARIOS CANNOT BE REGARDED AS AT PAR, EVEN AS EMPHASIZED BY THE LD. CIT(A) (REFER PARA 6.4 OF HIS ORDER). IN AS MUCH AS THE DEVELOPER STAN DS TO REALIZE SOME VALUE FROM THE STRUCTURE TO BE DEMOLISHED, EVEN THOUGH THE SAM E MAY PERHAPS BE LESS THAN THE COST OF DEMOLITION, IT IS POSSIBLE TO CONTEND T HAT WHAT THE ASSESSEE HAS TRANSFERRED IS LAND AND SUPERSTRUCTURE THEREON TO T HE DEVELOPER, WHO HAS, FOR HIS OWN INTEREST, RISK AND OPTION, DECIDED TO DEMOLISH THE STRUCTURE THEREON. THIS CLEARLY OVERLOOKS THE FACT OF ONE, COMPOSITE AGREEM ENT, AND OF THE DEVELOPER UNDERTAKING DEVELOPMENT THERE-UNDER. THE MOOT POINT , HOWEVER, IS THAT THE SAME CANNOT BE SAID FOR THE PART FALLING TO THE SHA RE OF THE ASSESSEE (51% OF LAND) AND STRUCTURE THEREON. THE DEMOLITION OF THIS STRUCTURE, EVEN IF UNDERTAKEN BY THE DEVELOPER, IS FOR AND ON BEHALF OF THE ASSES SEE. THAT IS, IN CONTRADISTINCTION TO THE TRANSFER FOR AY 2007-08, A LLOWING POSSESSION AND DOMINION OF THE LAND (49%) AND THE STRUCTURE THEREO N TO THE DEVELOPER, THE TRANSFER FOR THE CURRENT YEAR IS IN RELATION TO THA T RETAINED BY THE ASSESSEE. THERE IS NO TRANSFER OF THE LAND RETAINED OR THE STRUCTUR E THEREON TO THE DEVELOPER, AND THE ONLY TRANSFER IS OF THE BUILT-UP AREA, IN THE F ORM OF THE APARTMENTS, COMPRISING BUILDING AND THE PROPORTIONATE INTEREST IN LAND. THERE IS, ACCORDINGLY, NO BASIS AND, THEREFORE, NO REASON FOR THE COST OF THE EXISTING STRUCTURE ON LAND, TO BE AND SINCE DEMOLISHED FOR T HE DEVELOPMENT OF LAND, AS FORMING PART OF THE ASSETS, I.E., APARTMENTS, TRANS FERRED TO THE BUYERS THEREOF, FOR 15 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT ITS COST TO BE TAKEN INTO ACCOUNT IN RECKONING THE CAPITAL GAINS ON THE SAID TRANSFER. FINALLY, OUR ORDER BEING APPEALABLE, WE MAY ALSO CONSIDER THE ASPECT OF A PART OF THE EXISTING SUPERSTRUCTURE (BUILDING) BEIN G A DEPRECIABLE ASSET, SO THAT THE PROVISION OF S.50 SHALL BECOME APPLICABLE. THIS MAY ASSUME RELEVANCE IN CASE OUR DECISION DOES NOT FIND ACCEPTANCE (IN WHOL E OR IN PART) BY THE HON'BLE HIGH COURT IN FURTHER APPEAL, SO THAT THE COST OF T HE EXISTING STRUCTURE SHALL HAVE TO BE TAKEN INTO ACCOUNT IN RECKONING THE LTCG ON S ALE OF (PROPORTIONATE) LAND, I.E., ON THE SALE OF APARTMENTS (NEW STRUCTURE BUIL T ON THE LAND). THE ASSESSEE HAS IN THIS REGARD REFERRED TO THE STATEMENT OF TAXABLE INCOME FOR AY 2003-04 (PB PG. 142); AY 2004-05 (PB PG. 145); AND AY 2005-06 ( PB PG. 146), CLAIMING DEPRECIATION ON BUILDING AT 50% OF THE AMOUNT OTHER WISE EXIGIBLE. IF, AS CLAIMED, THIS IS ON ACCOUNT OF ONLY 50% OF THE BUIL DING BEING PUT-TO-USE FOR THE PURPOSE OF THE BUSINESS, ONLY THAT PART OF THE BUIL DING WOULD QUALIFY AS A BUSINESS ASSET, AND SHALL CONSTITUTE, IRRESPECTIVE OF THE TREATMENT IN THE ACCOUNTS, A SEPARATE BLOCK OF ASSETS FOR THE PURPOSE OF S. 43 (6), AND TO WHICH THE PROVISION OF S. 50 SHALL APPLY. HOWEVER, IT NEEDS ALSO TO BE ENSURED THAT DEPRECIATION AT FULL RATE HAS NOT BEEN CLAIMED AT ANY STAGE EARLIER (OR EVEN LATER, I.E., FOR AY 2006-07), AS THAT WOULD ALTER THE AMOUNT TO BE REGA RDED AS A SEPARATE BLOCK OF ASSETS WHICH IS SUBJECT TO S. 50. THE SECOND ASPECT OF THE MATTER IS IN RESPECT OF THE ADDITION TO THE BUILDING DURING THE YEAR 2002, SO THAT, TO THE EXTENT IT DOES NOT FORM PART OF THE BLOCK OF ASSETS AND, THUS, IS NOT SUBJECT TO S. 50, INDEXATION WOULD APPLY WITH REFERENCE TO THE YEAR 2002 AS TH E BASE YEAR. BEFORE PARTING, WE MAY, LEST WE BE CONSTRUED AS HA VING, IN ANY MANNER, TRAVELLED OUTSIDE THE SCOPE OF THIS APPEAL, REFER T O THE DECISION IN CIT V. WALCHAND AND CO. (P.) LTD. [1967] 65 ITR 381 (SC), CLARIFYING THAT THE TRIBUN AL IS TO DEAL WITH AND DETERMINE ALL THE QUESTIONS WHI CH ARISE OUT OF THE SUBJECT MATTER OF APPEAL, IN LIGHT OF THE EVIDENCE AND CONS ISTENTLY WITH THE JUSTICE OF THE CASE. RELIANCE IS ALSO PLACED, INTER ALIA , ON THE FOLLOWING DECISIONS WITH REGARD 16 ITA NO.1185/MDS/2015 (AY 2009-10) SHYAMA LA PICTURES AND HOTEL PVT. LTD. V. DY. CIT TO THE NATURE AND SCOPE OF THE DUTY AND POWER OF TH E TRIBUNAL/APPELLATE AUTHORITY: KAPURCHAND SHRIMAL V. CIT [1981] 131 ITR 451 (SC); HUKUMCHAND MILLS LTD V. CIT [1967] 63 ITR 232 (SC); CIT V. C.C.C. HOLDINGS [2003] 260 ITR 433 (MAD); CIT V. INDIAN EXPRESS (MADURAI) PVT. LTD. [1983] 140 ITR 705 (MAD); THANTHI TRUST V. ASST. CIT [1999] 238 ITR 117 (MAD); AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351(BOM-FB); CONTROLLER OF ESTATE DUTY V. R.BRAHADEESWARAN [1987] 163 ITR 680 (MAD); CIT V. CELLULOSE PRODUCTS OF INDIA LTD . [1985] 151 ITR 499 (GUJ-FB) . 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON SEPTEMBER 27, 2017 AT CHENNAI . SD/- SD/- ( ! #$ ) (GEORGE MATHAN) & / JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED, SEPTEMBER 27, 2017. EDN 2 * ,&/34 54(/ /COPY TO: 1. $) /APPELLANT 2. ,-$) /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT 5. 478 ,&/& /DR 6. 89! : /GF