AMIT BAJAJ ADVOCATE

Held: (i) There are two deeming fictions created in s. 50 and s. 50C for computing capital gains on building. While s. 50 modifies the “cost of acquisition” for purposes of s. 48, s. 50C modifies the term “full value of the consideration received or accruing as a result of transfer of the capital asset”. The two deeming fictions operate in different fields and there is no conflict between them. As s. 50C was inserted to prevent assessee’s indulging in under-valuation, there is no logic why it should not be applied to a depreciable building;

(ii) The assessee’s alternate argument that as the AO had held that the block of asset had not ceased to exist in the year and was in existence, s. 50 could not apply as held in Roger Pereira Communications 34 SOT 64 is not acceptable because the assessee itself had considered the entire block of buildings as having been sold/transferred during the year and the same was upheld by the CIT (A). The assessee was not aggrieved by the finding and could not file an appeal nor was it permitted to raise it as a Respondent under Rule 27 of the Tribunal rules to raise the issue



My Comments: Another important judgment on section 50C given by Mumbai ITAT namely  ITO vs United Marine Academy. In this case it has been held by tribunal that deeming fiction of section 50C is also applicable to depericiable immovable assets being land or building or both. Section 50C is applicable on immovable capital assets being land or building or both and there is no reason why section 50C should not be applicable to depericiable immovable capital assets being land or building, more so when the block of asset ceases to exist. In the said case the tribunal has held that since the assessee has himself contended that the block of asset of land and building has ceased to exist therefore section 50 would be applicable.
  
It is here to be noted that as per section 50 if the sale consideration from an asset in a block of asset or the whole of block of asset increases the W.D.V of such block of asset then the gain arising from it is considered as STCG. Since in the said case it was contended by the assessee himself that the block of asset has ceases to exist therefore it cannot be said that section 50 is not applicable to the case.

Once its clear that section 50 is applicable the only question is whether section 50C can be applied to depericiable immovable capital asset being land or building or both, which is answered rightly in affirmative by the tribunal, holding that there is no conflict between the provisions of section 50 and 50C.



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