S/s. 43(6), 50 – The term `acquired’ used in section 50 is not synonymous with acquisition of title to the property. Use of asset is not a condition for availing the benefits of section 50. In a case where amounts are paid and registration had been complete, though possession was not received, it can be said that the assessee has acquired the property for the purpose of section 50.

The assessee had, vide agreement dated 05-04-2007, sold business premises, whose stamp duty value was Rs. 48,47,850, for a consideration of Rs. 39,00,000. Depreciation was claimed on the premises sold and they constituted part of block of asset. The assessee had purchased two new galas vide agreements dated 28-03-2008 for Rs. 27,28,462 and Rs. 12,71,538. The building in which the galas were situated were under construction and possession of these galas was not with the assessee as on 31-03-2008.

The Assessing Officer held that since the possession of new galas purchased were not with the assessee as on 31–03-2008, they could not be said to be forming part of block of assets for financial year 2007-08 and therefore when the sale consideration of the property sold is reduced from the block of assets, the block would cease to exist and the sale consideration in excess of the opening written down value would be taxed u/s. 50. Since the stamp duty value was not disputed by the assessee, the AO adopted stamp duty value to be the sale consideration. He charged Rs. 47,69,046 as short term capital gains.

Aggrieved, the assessee preferred an appeal to CIT(A) who held that a reading of Clause (c) of section 43(6) would reveal that the written down value had to be adjusted by actual cost of any asset falling within the block acquired during the year. The assessee had purchased two galas and the entire amount of Rs. 40 lakh had been paid, registration had been completed, therefore, the assessee had acquired the assets as per section 43(6)(c). The term used in section 50 was “acquired during he previous year”. Referring to the decision of the jurisdictional Tribunal in the case of Orient Cartons Ltd. (60 ITD 87), he held that the use of the asset was not a condition precedent for making an adjustment in block of asset. There was no explicit requirement in the statutory provision to the effect that the new asset should also be used in a business carried on by the assessee and that if there was no business carried on by him, the deduction could not be given. He also held that the word “acquired” in section 50 was of a very amorphous word and the acquisition of the property in that section was not synonymous with acquisition of title to the property. Accordingly, he held that the assessee had acquired the premises within the meaning of section 50 of the Act and therefore was entitled for adjustment of cost of the property with that of WDV of the block of assets for the purposes of capital gains. He allowed the appeal filed by the assessee. Aggrieved, the revenue preferred an appeal to the Tribunal.

Held:

The Tribunal noted that a similar view had been taken in the case of Lalbhai Kalidas & Co. Ltd. (ITA No. 5832/Mum/2011, AY 2007-08 dated 08-11-2013). Following the said decision, the Tribunal upheld the order of the CIT(A) on this ground. This ground of appeal of the revenue was dismissed.