Building with Land sold – Whether capital gain can be calculated seperately for land and building?
CIT v. I. K. International (P) Ltd. (2012) 206 Taxman 622 / 72 DTR 70 (Delhi)(HC)
- 50 : Capital gains – Depreciable assets – Block of assets – Land is not depreciable asset – Land and building – Land having been held for a period of more than 36 months, surplus of sale price over indexed cost of acquisition of land was to be taxed as long term capital gains [S. 2(11), 2(42A) 32, 45, 54EC]
The assessee had purchased a property in March, 2001. It sold said property in the A.Y. 2006-07. In the return of income, the assessee bifurcated the property in to land and building. According to assessee, the capital gain arising from sale of land was taxable as long term capital gain, since the entire capital gain from sale of land was invested in specified bonds under section 54EC, same was not liable to tax. The Assessing Officer held that since land and buildings were not sold separately the land was not long term capital asset and it was purchased together with building for a consolidated sum and not separately shown in the balance sheet hence provisions of section 50(2) is applicable. On appeal, Commissioner(Appeals) and Tribunal held that provisions of section 50(2) is not applicable hence directed the Assessing Officer to allow deduction under section 54EC. On appeal by the revenue the Court held that since the land is not depreciable asset and cannot form part of block of assets in the absence of a rate of depreciation having been prescribed therefore, provisions of section
50 could not be invoked. As the land being held more than 36 moths, surplus of sale price over indexed cost of acquisition of land was to be taxed as long term capital gain. (A.Y. 2006-07)
