Marvel Indenting Pvt.Ltd., Baroda V. The Income tax Officer,Ward-4(1), Baroda

ITA 213/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89785 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SONIA KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Depreciation; Cost of acquisition
• Section: 54; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND S.S. GODARA JUDICIAL MEMBER I.T.A. NO. 213/AHD/2012 (ASS TT. YEAR 2008-09) MARVEL INDENTING PVT. LTD UNIVERSAL HOUSE 50 KUNJ SOCIETY, ALKAPURI, VADODARA-390007. PAN AABCM 2824 N VS INCOME TAX OFFICER, WARD 4(1), AAYAKAR BAHVAN, NR. RACE COURSE CIRCLE, BARODA. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. N. SOPARKAR. REVENUE BY MRS. SONIA KUMAR, SR.D.R. / DATE OF HEARING : 30-06-2015 / DATE OF PRONOUNCEMENT: 24-7-2015 / O R D E R PER S.S. GODARA JUDICIAL MEMBER: THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 , ARISES FROM ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I II, BARODA, IN CASE NO.CAB/III-134/10-11 DATED 18-11-2011, TREATING ITS LONG TERM CAPITAL GAINS OF RS.57,91,168/- AS SHORT TERM CAPITAL GAINS OF RS.1,06,82,196/- ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 2 BY APPLYING SECTION 50, IN PROCEEDINGS UNDER SECTOI N143(3) OF THE INCOME TAX ACT,1961 FOR SHORT THE ACT. 2. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE A SSESSEE- COMPANY IS A COMMISSION AGENT. IT ACQUIRED THE IMPU GNED CAPITAL ASSET NAMELY UNIVERSAL HOUSE, BEHIND AKOTA STADIUM, BAR ODA IN ASSESSMENT YEAR 1999-2000 FOR RS.66,78,080/-. IT US ED THE SAME AS A BUSINESS ASSET AND CLAIMED DEPRECIATION THEREON TIL L ASSESSMENT YEAR 2005-06. THEREAFTER, THE ASSESSEE GAVE IT ON RENT. IT SOLD THE SAID ASSET ON 17-12-2007 FOR GROSS CONSIDERATION OF RS.1,53,00 ,000/-. THE ASSESSEE DECLARED LONG TERM CAPITAL GAINS FROM THE SAID SALE TRANSACTION OF RS.57,91,168/-. 3. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE SOUGH T TO INVOKE SECTION 50 ON THE GROUND THAT THE ABOVESTATED ASSET FORMED PART OF BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HA D BEEN ALLOWED IN THE PAST. HE WAS OF THE VIEW THAT THE IMPUGNED PROFITS DERIVED FROM ITS SALE HAD TO BE RE-COMPUTED AS SHORT TERM CAPITAL GAINS. 4. THE ASSESSEE CONTENDED IN RESPONSE NEITHER ANY D EPRECIATION ON THE ASSET IN QUESTION HAD BEEN CLAIMED AS ON THE DA TE OF SALE NOR IT WAS USED IN ANY BUSINESS. THE LIMITED PURPOSE OF SECTI ON 50 WAS CLARIFIED TO BE ONLY REGARDING SECTIONS 48 AND 49 WITHOUT ANY EF FECT ON THE CONSEQUENTIAL EXEMPTION OR RATE OF TAX CLAIMS. IT S UBMITTED THAT THE BUILDING SOLD IN QUESTION WAS 16 YEARS OLD STRUCTUR E AND THE IMPUGNED CAPITAL GAINS HAD MAINLY ARISEN ON SALE OF THE LAND THEREUNDER. A SEPARATE CALCULATION SHEET SEGREGATING LAND AND BUI LDING PORTION VALUATIONS WAS ALSO FILED. THE ASSESSING OFFICER V ISITED THE BUILDING SPOT. HE FOUND IT TO BE IN PERFECT USABLE CONDITION . THE VENDEE CONCERNED ALSO DEPOSED TO THE SAID EFFECT. THE ASSE SSING OFFICER ADVERTED TO ASSESSEES DEPRECIATION CHART AND OBSER VED THAT THE SAME ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 3 NEVER COMPRISED OF ANY LAND BUILDING COMPONENT IN T HE PRECEDING ASSESSMENT YEARS. AND ALSO THAT SECTION 50 DID NOT REQUIRE BUSINESS USE OR DEPRECIATION OF THE ASSET SOLD AS ON THE DAT E OF SALE. ALL THIS RESULTED IN TREATMENT OF ASSESSEES LONG TERM CAPIT AL GAINS OF RS. 57,91,168/- TO THAT AS SHORT TERM CAPITAL GAINS AMO UNTING TO RS.1,06,82,196/- IN ASSESSMENT ORDER DT. 2-12-2010. 5. THE ASSESSEE PREFERRED APPEAL. THE CIT (A) HAS A FFIRMED THE ASSESSING OFFICERS FINDINGS AS UNDER:- 4.3 TO DECIDE THE ISSUE, FOLLOWING FACTS ARE PERTIN ENT AND ARE TO BE DISCUSSED. (I) WHETHER IT IS A SALE OF BUILDING ONLY OR BOTH LAND AND BUILDING. (II) WHETHER THE COMPUTATION OF CAPITAL GA IN IS TO BE DONE AS PER SECTION 50 OR NOT IN VIEW OF THE FACT THAT ON T HE DATE OF SALE NO DEPRECIATION WAS BEING CLAIMED BY THE APPELLANT. (III) EVEN IF THE CAPITAL GAIN IS COMPUTED AS S HORT CAPITAL GAIN IN SECTION 50 OF THE ACT, WHETHER THE RATE OF TAX ON S UCH INCOME WILL BE 20% AS PER PROVISIONS OF SECTION 112 AS APPLICAB LE TO LONG TERM CAPITAL GAIN OR NOT. 4.3.1 IN ORDER TO DECIDE THE FIRST ISSUE, REFERENCE HAS TO BE MADE TO THE DEPRECIATION CHART IN THE AUDITED ACCOUNTS O F THE APPELLANT. AS PER THE SCHEDULE 5 FORMING PART OF AUDITED ACCOU NTS AND GIVING THE DETAILS OF FIXED ASSETS, IT IS SEEN THAT THE W. D.V., AS ON 01.04.2007, OF BLOCK OF BUILDING IS RS.68,64,489/-. AN ADDITION OF RS.5,21,OOO/- HAS BEEN MADE DURING THE YEAR. OUT OF THIS, DEDUCTION OF RS.73,85,489/- HAS BEEN MADE AND THUS, THE BALANCE AS ON 31.03.2008 HAS BECOME NIL. IN THIS SCHEDULE T HERE IS NO MENTION OF ANY LAND. HENCE, THE APPELLANT'S AR WAS ASKED TO SUBMIT THE COPY OF DEEDS OF PURCHASE AND SALE OF TH E BUILDING AND ALSO TO CLARIFY THE NATURE OF OWNERSHIP OF LAND ON WHICH THE BUILDING WAS LOCATED. THE APPELLANT'S AR HAS FILED FOLLOWING DOCUMENTS IN THIS REGARD: (A) COPY OF PURCHASE DEED OF THE BUILDING FOR PURCHASE BY THE APPELLANT. (B) COPY OF SALE DEED FOR SALE OF THE BUILDING BY THE A PPELLANT. ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 4 (C) COPY OF LEASE AGREEMENT FOR THE SITE ON WHIC H THE BUILDING WAS LOCATED. 4.3.2 FROM THE COPY OF THE LEASE DEED, IT IS SEEN T HAT THE LAND WAS NOT AN OWNERSHIP LAND, BUT IT WAS A LEASEHOLD LAND, TAKEN ON LEASE FROM THE VADODARA MUNICIPAL CORPORATION. THE SITE W AS GIVEN ON LEASE BY VMC ON 30.12.1988 TO A PARTNERSHIP FIRM NA MED SHIV- SHAKTI CHEMICALS FOR 99 YEARS, ON RECEIPT OF ONETIM E PAYMENT OF RS.2,27,808/- AND A GROUND RATE AT THE RATE OF RS. 1.05 PER SQ. METER PER YEAR PAYABLE IN ADVANCE EVERY YEAR. THE L ESSEE WAS ALLOWED TO DEVELOP THE PLOT OF LAND IN ACCORDANCE W ITH THE BUILDING BYE-LAWS AND T.P. REGULATIONS AND DEVELOPMENT CONTR OL RULES, WHICH WAS TO BE COMPLETED WITHIN, TWO YEARS FROM TH E HANDING OVER POSSESSION OF THE SAID PLOT. THE LESSEE WAS AL SO TO OBTAIN THE COMPLETION CERTIFICATE FOR THE SUPER STRUCTURE BUIL T UPON BY THEM AND ALSO OCCUPATION CERTIFICATE AS PER MUNICIPAL LA WS AND BYE- LAWS, ON SUCH CERTIFICATE BEING GRANTED BY THE CORP ORATION, THE LESSEE WAS ENTITLED TO TRANSFER THE SAID SUPER-STRU CTURE FOR THE AFORESAID PURPOSE ONLY TO A PERSON AS DEFINED IN GU JARAT OWNERSHIP FLATS ACT, 1973. IT WAS ALSO PROVIDED THA T THE AGREEMENT / CONTRACT BETWEEN THE LESSEE AND THEIR B UYERS IN RESPECT OF SUPERSTRUCTURE/ FLAT/ PREMISE OR ANY PAR T THEREOF, WAS IN NO WAY A CONTRACT BETWEEN THE LESSOR AND THE BUY ER, BUT ONLY THE OBLIGATIONS UNDER THIS AGREEMENT OF THE LESSEE HAS TO BE OBSERVED AND FULFILLED BY THOSE WHO OCCUPY THE PREM ISES. CLAUSE 8 OF THE DEED PROVIDES THAT THE LESSEE WAS ENTITLED T O RECEIVE PAYMENTS OF THE CONSTRUCTIONS THAT MAY BE CARRIED O UT FROM THE OCCUPIERS OR OWNERS, BUT THE SAID OCCUPIERS OR OWNE RS WERE NOT TO HAVE ANY RIGHT WHATSOEVER IN RESPECT OF THE PLOT OF LAND WHICH WAS GIVEN TO THE LESSEE UNDER THIS LEASE DEED. FURTHER, AS PER CLAUSE 9, THE LESSEE WAS ENTITLED TO DETERMINE THE NAME / NAME OF THE OWNER/OCCUPIER, A PERSON OR ASSOCIATION OF PERSONS UNDER THE GUJARAT OWNERSHIP FLATS ACT, OF THE SUPER-STRUCTURE TO WHOM THE LEASEHOLD RIGHTS OF THE LAND SO FULLY DEVELOPED WOU LD BE TRANSFERRED BY THE LESSOR AND IN THAT EVENT THE SUB -LEASE WAS BOUND TO OBSERVE ALL THE TERMS AND CONDITIONS OF TH E LEASE DEED. 4.3.3 FROM THESE CONDITIONS OF THE LEASE DEED, IT I S EVIDENT THAT THE OCCUPIER OR OWNERS HAVE NOT BEEN GIVEN ANY RIGH T IN RESPECT OF THE PLOT OF LAND. BUT SUCH RIGHT WAS TRANSFERABL E TO THEM BY THE LESSEE AS PER CLAUSE 9. HENCE, IT BECOMES IMPORTANT TO SEE WHETHER AS PER DEED OF PURCHASE OF PROPERTY BY THE APPELLANT, THE LEASEHOLD RIGHTS WERE ALSO TRANSFERRED TO IT OR NOT . THE APPELLANT HAD PURCHASED THE PROPERTY FROM PROTECH INVESTMENTS AND ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 5 FINANCE LTD. AND PROTECH SWITCH GEARS LTD. THESE TW O COMPANIES HAD PURCHASED THE PROPERTY FROM THE ORIGINAL LESSEE OF THE LAND I.E., M/S. SHIV SHAKTI CHEMICALS ON 16.12.1992. THE APPELLANT PURCHASED THIS PROPERTY FROM THESE TWO COMPANIES VI DE 8 REGISTERED DEEDS. COPY OF ONLY ONE REGISTERED DEED HAS BEEN SUBMITTED IN WHICH THE DESCRIPTION OF THE PROPERTY BEING PURCHASED BY THE APPELLANT HAS BEEN SHOWN AS FOLLOW S: 'DESCRIPTION OF THE PROPERTY SOLD: T 'A HALL AND THREE BATHROOMS OF EAST SIDE ON FIRST F LOOR AND PROPERTY ADMEASURING 89.27 SQ. MTS. ON WEST SIDE FR OM PLOT NO. 10 ADMEASURING 504 SQ.MTRS. OF FINAL PLOT NO. 24 OF T.P. NO. 1 OF VILLAGE AKOTA DISTRICT SUB REGISTRATION REGISTRATIO N VADODARA WITH STAIRCASE FROM SOUTH AND ITS FOUR DIRECTIONS ARE AS UNDER: EAST : 18 MTR WIDE T. P. ROAD WEST : SUB PLOT 11 OF FINAL PLOT 24 NORTH : T.P. ROAD IN F.P. NO. 30 SOUTH : SUB PLOT 9 OF F.P. NO. 9' 4.3.4 THIS SCHEDULE CLEARLY SHOWS THAT ONLY THE SUP ER-STRUCTURE HAS BEEN SOLD TO THE APPELLANT AND NOT ANY RIGHT IN THE PLOT OF LAND ON WHICH THE BUILDING STOOD. THIS BECOMES MORE CLEA R WHEN THE DEED FOR SALE OF THE PROPERTY BY THE APPELLANT IS. EXAMINED. AS PER CLAUSE 4 OF THIS DEED, IT HAS BEEN STATED THAT THE NAMES OF M/S. SHIV SHAKTI CHEMICALS, PROTECH INVESTMENT AND FINANCE LTD. AND PROTECH SWITCH GEARS LTD. ARE ENTERED INTO THE PROPERTY CARDS OF CITY SURVEY AND IT IS RECORDED VIDE FINAL PLOT N O. 64 AND CITY SURVEY NO. 1284. THIS CLAUSE READ WITH THE CLAUSE 8 AND 9 OF THE LEASE DEED FOR THE PLOT OF LAND (SUPRA) SHOW THAT S HIV SHAKTI CHEMICALS HAD TRANSFERRED THE RIGHT IN THE LAND TO THESE TWO COMPANIES BY VIRTUE OF WHICH THE NAMES OF THESE TWO COMPANIES HAVE BEEN ENTERED IN THE PROPERTY CARD. BUT THERE H AD BEEN NO TRANSFER OF RIGHT IN THE PLOT OF LAND BY THESE TWO COMPANIES TO THE APPELLANT AND AT THE TIME OF PURCHASE OF THE BUILDI NG BY THE APPELLANT. THIS IS THE REASON THAT THE NAME OF THE APPELLANT HAS NOT BEEN DETERMINED IN THE PROPERTY CARD BY VMC. TH IS IS ALSO SUPPORTED BY THE FACT THAT THE APPELLANT HAS SHOWN THE ENTIRE CONSIDERATION PAID FOR PURCHASE OF THIS PROPERTY IN ITS SCHEDULE OF FIXED ASSETS AGAINST BUILDING ONLY AND HAS CLAIMED DEPRECIATION ON THIS ENTIRE AMOUNT AND THAT THERE IS NO MENTION OF ANY LAND IN THE SCHEDULE OF FIXED ASSETS. 4.3.5 SINCE THE APPELLANT HAS CLAIMED DEPRECIATION ON THE ENTIRE BLOCK OF ASSETS COMPRISING OF BUILDING AND, ALSO AS EXPLAINED ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 6 ABOVE, THE NAME OF THE APPELLANT WAS NOT RECORDED A S LEASE RIGHT HOLDER OF THE PLOT OF LAND IN THE PROPERTY RECORDS, HENCE, THE APPELLANT'S CLAIM THAT IT HAS SOLD BOTH LAND AND BU ILDING AND MAJOR PART OF CONSIDERATION IS ON ACCOUNT OF LAND AND HEN CE THE CONSIDERATION RECEIVED BY IT SHOULD BE DIVIDED UNDE R THESE TWO HEADS IN COMPUTATION OF CAPITAL GAIN IS NOT CORRECT . HENCE, THIS CLAIM OF THE APPELLANT IS REJECTED AND IT IS HELD T HAT THE A.O. HAS RIGHTLY COMPUTED SHORT TERM CAPITAL GAIN AS PER THE PROVISIONS OF SECTION 50 ON ACCOUNT OF SALE OF THIS BUILDING. 4.3.6 WITHOUT PREJUDICE TO THE ABOVE, EVEN IF FOR A RGUMENT SAKE, IT IS ACCEPTED THAT THE APPELLANT WAS HAVING A RIGH T IN THE PLOT OF LAND, IT IS EVIDENT FROM ABOVE DISCUSSIONS THAT THI S RIGHT IS NOT IN THE NATURE OF OWNERSHIP RIGHT BUT IS IN THE NATURE OF LEASEHOLD RIGHT OR TENANCY RIGHT. SINCE THE APPELLANT HAS NOT DISCLOSED ANY AMOUNT PAID ON ACCOUNT OF LEASEHOLD RIGHT IN ITS BO OKS OF ACCOUNT, HENCE, IT IS TO BE PRESUMED THAT THE CONSIDERATION PAID BY THE APPELLANT FOR PURCHASE OF THE BUILDING COMPRISED OF BOTH THE BUILDING AS WELL AS LEASEHOLD RIGHT. THE ENTIRE, CO NSIDERATION HAS BEEN SHOWN AS COST OF ACQUISITION OF THE BUILDING A ND DEPRECIATION HAS BEEN CLAIMED ON IT. LEASEHOLD RIGHT IS AN INTAN GIBLE ASSET AND THERE HAVE BEEN CLAIMS MADE FOR DEPRECIATION ON THI S AMOUNT. IN SUCH CASE, IT IS TO BE PRESUMED THAT THE APPELLANT HAS CLAIMED DEPRECIATION ON BUILDING AS WELL AS LEASEHOLD RIGHT AND THE SAME HAS BEEN ALLOWED IN COMPUTATION OF TOTAL INCOME UP TO A.Y. 2005- 06. IN SUCH A CASE, AGAIN WHEN THE APPELLANT HAS TR ANSFERRED THE BUILDING ALONG WITH ITS LEASEHOLD RIGHTS, THE COMPU TATION OF CAPITAL GAIN IS TO BE MADE U/S 50 ONLY AND NOT UNDER ANY OTHER SECT ION. ON THIS ACCOUNT ALSO THE COMPUTATION OF CAPITAL GAI N MADE BY THE A.O. IS TO BE UPHELD. 5. THE SECOND ISSUE IS AS TO WHETHER THE SECTION 50 WOULD APPLY IF NO DEPRECIATION IS BEING CLAIMED ON THE DA TE OF TRANSFER. THIS ISSUE HAS ALREADY BEEN SETTLED BY THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF SHAKTI METAL DEPOT (SUPRA) IN WHICH DETAILED DISCUSSION IN THIS REGARD HAS BEEN M ADE. HENCE, IT IS HELD THAT A.O. HAS RIGHTLY APPLIED PROVISIONS OF SECTION 50 IN THIS REGARD. 6 THE LAST ISSUE IS REGARDING THE RATE OF TAX. IN THIS REGARD, THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE B OMBAY HIGH COURT IN THE CASE OF DELITE TIN INDUSTRIES (SUPRA). THIS DECISION OF HON'BLE HIGH COURT HAS BEEN GIVEN IN RESPECT OF CLA IM OF DEDUCTION BY THE ASSESSEE U/S 54E IN RESPECT OF THE CAPITAL GAIN ARISING ON THE TRANSFER OF A CAPITAL ASSET ON WHICH THE DEPRECIATION HAS BEEN ALLOWED AND IT IS DEEMED AS SHORT TERM CAP ITAL GAIN U/S ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 7 50 OF THE I.T. ACT, 1961. IN THIS CASE, THE HON'BLE COURT HAS TAKEN NOTE OF THE LANGUAGE OF SECTION 54E AS PER WHICH EX EMPTION IS GRANTED FROM PAYMENT OF CAPITAL GAINS TAX WHERE THE WHOLE OR PART OF THE NET CONSIDERATION RECEIVED FROM A TRANS FER OF A LONG TERM CAPITAL ASSET IS INVESTED OR DEPOSITED IN A SP ECIFIED ASSET WITHIN A PERIOD OF 6 MONTHS AFTER THE DATE OF SUCH TRANSFER, THE COURT HELD THAT THE CONTENTION OF THE REVENUE THAT BY THE AMENDMENT OF SECTION 50, THE LONG TERM CAPITAL ASSE T HAS BEEN CONVERTED INTO A SHORT TERM CAPITAL ASSET IS WITHOU T ANY MERIT. THE COURT HELD THAT THE LEGAL FICTION CREATED BY THE ST ATUTE IS TO DEEM THE CAPITAL GAIN AS SHORT TERM CAPITAL GAIN AND NOT TO DEEM THE ASSET AS SHORT TERM CAPITAL ASSET. THEREFORE, IT CA NNOT BE SAID THAT THE SECTION CONVERTS LONG TERM CAPITAL ASSET INTO A SHORT TERM CAPITAL ASSET. THUS, THIS DECISION IS ON ACCOUNT OF USE OF THE WORD 'TRANSFER OF LONG TERM CAPITAL ASSET' IN SECTION 54 E.THIS SECTION NOWHERE MAKE ANY MENTION TO NATURE OF CAPITAL GAIN FOR ITS APPLICABILITY. ON THE CONTRARY, PROVISIONS OF SECTI ON 112 ARE AS FOLLOWS: [ TAX ON LONG TERM CAPITAL GAINS]. 112. (1) WHERE THE TOTAL INCOME OF AN ASSESSEE INCL UDES ANY INCOME, ARISING FROM THE TRANSFER OF A LONG-TERM CA PITAL ASSET, WHICH IS CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS', THE TAX PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME SHALL B E THE AGGREGATE OF, - (A) IN THE CASE OF AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY, [BEING A RESIDENT,] (I) THE AMOUNT OF INCOME-TAX PAYABLE ON THE TOTAL INCOME AS REDUCED BY THE AMOUNT OF SUCH LONG-TERM CAPITAL GAINS, HAD THE TOTAL INCOME AS SO REDUCED BEEN HIS TOTAL I NCOME ; AND (II) THE AMOUNT OF INCOME-TAX CALCULATED ON SUCH LONG TERM CAPITAL GAINS AT THE RATE OF TWENTY PER CENT: PROVIDED THAT WHERE THE TOTAL INCOME AS REDU CED BY SUCH LONG-TERM CAPITAL GAINS IS BELOW THE MAXIMUM A MOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX, THEN, SUCH L ONG-TERM CAPITAL GAINS SHALL BE REDUCED BY THE AMOUNT BY WHI CH THE TOTAL INCOME AS SO REDUCED FALLS SHORT OF THE MAXIM UM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX AND THE TAX ON THE BALANCE OF SUCH LONG-TERM CAPITAL GAINS SHAL L BE COMPUTED AT THE RATE OF TWENTY PER CENT; ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 8 (B) IN THE CASE OF A [DOMESTIC] COMPANY, (I) THE AMOUNT OF INCOME-TAX PAYABLE ON THE TOT AL INCOME AS REDUCED BY THE AMOUNT OF SUCH LONG-TERM CAPITAL GAINS, HAD THE TOTAL INCOME AS SO REDUCED BEEN ITS TOTAL INCOME; A ND (II) THE AMOUNT OF INCOME-TAX CALCULATED ON SUC H LONG- TERM CAPITAL GAINS AT THE RATE OF [TWENTY] PER CENT : R***J (EMPHASIS SUPPLIED) THESE PROVISIONS CLEARLY MENTION THAT THE TAX PAYAB LE BY THE ASSESSEE ON THE LONG TERM CAPITAL GAINS SHALL BE TH E AMOUNT OF INCOME TAX CALCULATED ON SUCH 'LONG TERM CAPITAL GA INS AT THE RATE OF 20%. THUS, THIS SECTION CLEARLY MENTIONS THE RATE OF 20% FOR LONG TERM CAPITAL GAINS' AND NOT ON 'CAPITAL G AIN ON ACCOUNT OF TRANSFER OF LONG TERM CAPITAL ASSET'. THE PROVISIONS OF SECTION 50 CLEARLY STATE THAT THE CAP ITAL GAINS COMPUTED UNDER THIS SECTION SHALL BE DEEMED TO BE T HE CAPITAL GAINS' ARISING FROM THE TRANSFER OF SHORT TERM CAPI TAL GAIN. HENCE, SUCH CAPITAL GAIN IS IN THE NATURE OF SHORT TERM CA PITAL GAIN AND IN SUCH A SITUATION THE PROVISIONS OF SECTION 112 ARE NOT APPLICABLE TO IT. MOREOVER, HON'BLE BOMBAY HIGH COURT IN THE CASE OF DELITE TIN INDUSTRIES (SUPRA) HAS ALSO HELD THAT THE LEGAL FIC TION CREATED BY THE SECTION 50 OF THE STATUTE IS TO DEEM J:HE J:API TAJJGIAJRI_ THIS CONTENTION OF THE APPELLANT IS ALSO NOT ACCEPT ABLE AND IT IS HELD THAT THE A.O. HAS RIGHTLY MADE THE COMPUTATION OF TAX BY TREATING THE CAPITAL GAINS AS SHORT TERM CAPITA! GA IN AND HAS RIGHTLY NOT APPLIED THE PROVISIONS OF SECTION 112. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THIS LEAVES THE ASSESSEE AGGRIEVED. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE ASSESSEES FIRST ARGUMENT IS AGAINST APPLICATIO N OF SECTION 50 TO THE EFFECT THAT ITS CAPITAL ASSET IN QUESTION WAS NEITH ER USED IN BUSINESS NOR ANY DEPRECIATION CLAIMED THEREUPON AS ON THE DATE O F SALE. ITS SECOND ARGUMENT IS THAT EVEN IF THE REVENUES STAND THROUG HOUT IS CONCURRED WITH, ITS VALUATION SEGREGATING THE IMPUGNED CAPITA L GAINS IS LAND AND ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 9 BUILDING COMPONENTS HAS TO BE ACCEPTED. THE THIRD A ND LAST ARGUMENT IS THAT SECTION 50 OF THE ACT ONLY RESULTS IN ONLY RE- COMPUTATION OF LONG TERM CAPITAL GAINS ARISING FROM SALE OF DEPRECIABLE ASSETS AS SHORT TERM CAPITAL GAINS WITHOUT ANY EFFECT ON THE TAX RATE AP PLICABLE. THE REVENUE SUPPORTS THE CIT (A)S ORDER ON ALL THREE PLEAS. TH E RELEVANT FACTS OF THE CASE ALREADY STAND NARRATED HEREINABOVE. WE FIND T HAT THE ASSESSEES FIRST ARGUMENT WAS EARLIER ACCEPTED BY A COORDINATE BENCH OF THE TRIBUNAL IN SHAKTI METAL DEPOT VS. CIT 3 SOT 368 L ATERON OVERRULED BY HONBLE KERALA HIGH COURT IN CIT VS. SHAKTI METAL D EPOT (2010) 189 TAXMANN 329 (KER). THEIR LORDSHIPS HAVE HELD THAT THE CONDITIONS OF THE ASSETS USE IN BUSINESS AND DEPRECIATION CLAIM ALLOWED AS ON THE DATE OF SALE ARE NOWHERE PRESCRIBED U/S. 50. THE AS SESSEE DOES NOT QUOTE ANY CASE-LAW TO THE CONTRARY. ITS FIRST ARGU MENT ACCORDINGLY FAILS. 7. NOW WE COME TO THE ASSESSEES SECOND ARGUMENT PR AYING FOR ACCEPTANCE OF SEPARATE LAND AND BUILDING COMPONENT COMPUTATION FOR THE PURPOSE OF IMPUGNED CAPITAL GAINS. IT HAS COME ON RECORD IN THE CIT (A)S FINDINGS EXTRACTED HEREINABOVE THAT THE A SSESSEE HAD NOT PURCHASED ANY LAND COMPONENT IN ACQUIRING ITS CAPIT AL ASSET. IT FAILS TO CONTROVERT THE LOWER APPELLATE FINDINGS TO THE EFFE CT THAT THE ENTIRE PURCHASE PRICE OF THE ASSET WAS INCLUDED IN DEPRECI ATION CHART. THAT MEANS IT HAD NEVER ACQUIRED ANY LAND ELEMENT ON WHI CH THE CONSTRUCTION OF THE BUILDING SOLD HAD BEEN RAISED. IN THESE CIRCUMSTANCES, WE OBSERVE THAT ONCE ASSESSEE DID NO T PURCHASE ANY LAND, IT COULD NOT HAVE SOLD THE CORRESPONDING COMP ONENT IN THE SALE DEED IN QUESTION. WE REITERATE VERY MUCH SETTLED P REPOSITION NEMO DAT QUOD NON HABET I.E. NO ONE CAN TRANSFER A BETTER T ITLE THAN HE HIMSELF POSSESSES. THE ASSESSEE HAD NOT ACQUIRED ANY LEASEH OLD RIGHTS IN THE PLOT. ITS PLEA OF HAVING TRANSFERRED LAND COMPONENT FOR INCLUDING THE SAID ELEMENT IN COMPUTATION OF RESULTING CAPITAL GA INS IS DECLINED. WE REJECT THIS SECOND ARGUMENT AS WELL. ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 10 8 THIS LEAVES US WITH THE ASSESSEES THIRD AND LAST ARGUMENT (SUPRA). THE CASE RECORDS REVEALS THAT A CO-ORDINA TE BENCH IN CASE OF MANALI INVESTMENT VS. ACIT (2011) 139 TTJ 411 HOLDS THAT SECTION 50 AND DEEMING FICTION ENVISAGED THEREIN APPLIES FOR T HE LIMITED PURPOSE OF TREATING LONG TERM CAPITAL GAINS AS LONG TERM ARISI NG FROM CORRESPONDING DEPRECIABLE ASSETS TO BE SHORT TERM CAPITAL GAINS. IT HAS BEEN CONCLUDED THAT THE SAME DOES NOT APPLY QUA ALL CONSEQUENCES O F EXEMPTIONS OR TAX RATE PURPOSES. THE HONBLE BOMBAY HIGH COURT IN CIT VS. MANALI (2013) 39 TAXMANN.COM (BOM.) HAS CONFIRMED THIS DEC ISION. IT IS EVIDENT TO US THAT A CO-ORDINATE BENCH IN M/S. SMIT A CONDUCTORS LTD. VS. DCIT 152 ITD 417 INTERPRETS THE AFORESAID DECISION TO MEAN THAT EVEN IF LONG TERM CAPITAL GAINS ARE RECOMPUTED AS SHORT TER M BY APPLYING U/S. 50, THE SAME HAVE TO BE TREATED AS LONG TERM FOR TH E PURPOSE OF APPLICABILITY OF TAX RATE IF THE ASSET IN QUESTION IS HELD FOR MORE THAN 3 YEARS. THE ASSESSEES CAPITAL ASSET HAS BEEN HELD FOR ABOUT 8 YEARS. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON F ACTS OR LAW. WE ACCEPT THE ASSESSEES THIRD ARGUMENT ACCORDINGLY BY FOLLOW ING THE ABOVE STATED PRECEDENTS AND DIRECT THE ASSESSING OFFICER TO PASS NECESSARY CONSEQUENTIAL ORDER TO THE LIMITED EXTENT OF TAX RA TE ONLY. BEFORE PARTING, WE MAKE IT CLEAR THAT THE ASSESSEE HAS QUOTED OTHER JUDICIAL DECISIONS AS WELL I.E. (2006) 281 IT R 210 (BOM.) CIT VS. ACE. BUILDERS, (2012) 20 TAXMANN.COM 197 (DEL), CIT VS. I.K. INTERNATIONAL PVT. LTD., (2013) 38 TAXMANN,.COM 244 (GUJ) CIT VS. ADITYA MEDISALES. THE FIRST CASE LAW HAS ALREADY B EEN RELIED UPON BY THE CO-ORDINATE BENCH IN DECIDING MANALI INVESTMENT S (SUPRA). THE SECOND ONE OF HONBLE DELHI HIGH COURT INVOLVES A C ASE WHEREIN THE ASSESSEE HAD DECLARED A SPECIFICLAND COMPONENT AND PRICE THEREOF FROM THE VERY BEGINNING AS CONTRARY TO FACTS OF THIS CAS E. THE HONBLE JURISDICTIONAL HIGH COURT HEREINABOVE DEALT WITH A CASE OF SECTION 54 EC ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 11 DEDUCTION IN RELATION TO CAPITAL GAINS RECOMPUTED U /.S 50 OF THE ACT. WE FIND THE SAME DO NOT REQUIRE MUCH A DETAILED DIS CUSSION IN VIEW OF THE FACTS DISTINGUISHED AS ABOVE. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY,THE 24 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD. DATE:- 24 -07-2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! () / THE CIT(A), AHMEDABAD 5. $%& '', , )*++ / DR, ITAT, AHMEDABAD 6. &,- . / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) ! '#$, &' / ITAT, AHMEDABAD ITA NO. 213/ AHD/2012 ASSESSMENT YEAR 2008-09 MARVEL IDENTING PVT.LTD. 12 1. DATE OF DICTATION- DIRECT ON COMPUTER 20-7-15 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER :20-7-15. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. -21-7-2015 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT : 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER