CIT Vs. EAGLE THEATRES

JUDGEMENT

(1.) The Revenue by the present appeal under Section 260A of the Income Tax Act, 1961 (Act, for short) impugns order dated 31st January, 2011 passed by the Income Tax Appellate Tribunal (tribunal, for short) on three grounds.

(2.) The respondent-assessee sold a cinema hall in Mumbai in the period relevant to the assessment year 2007-08 for rs. 27,70,00,000/- . In the sale deed it was mentioned that rs. 15,00,000/- was attributable to furniture, fixture, equipment and AC plant. This figure was not disputed or interfered with by the Assessing Officer. The Assessing Officer, however, felt that the building or the superstructure was sold and was required to be valued and the gain treated as short-term capital gain. This was necessary as the building was part of the block of the asset on which depreciation had been claimed. The Assessing Officer accepted that the building/superstructure was to be valued as scrap or salvage as the building was to be demolished and re-constructed. The respondent-assessee had submitted that the salvage value of the building/super structure should be valued at rs. 1,00,000/- . This was rejected by the Assessing Officer, who valued the salvage of superstructure/building at rs. 100/- per square feet and accordingly computed the salvage along with all the superstructure/building at rs. 32,70,000/- . The Assessing Officer further noticed that the depreciated value of the building/superstructure as per the block of assets was rs. 70,085/- . He accordingly assessed the short-term capital gain on the building/superstructure as rs. 31,99,915/- .

(3.) The CIT (Appeals) did not interfere with the order passed by the Assessing Officer. On further appeal, the tribunal after examining the facts of the case held that the scrap or salvage cannot be valued at rs. 1,00,000/- . Looking at the facts and circumstances of the case, it was held that the salvage value should be taken at rs. 50/- per square feet and accordingly estimated the scrap value of the building/superstructure at rs. 16,35,000/- .