Destruction of capital asset (building) in
earthquake claim of capital loss thereto - Year of claim
Facts:
Assessee sold a piece of land for Rs. 5 crores during
assessment year 2010-11. The indexed cost of acquisition of the land was Rs. 80
lakhs. Assessee had constructed a hotel in the said land for Rs. 8.86 crores
and the same was destroyed by an earthquake in 2001. While computing the
capital gains on the sale of land the assessee claimed a long term capital loss
as under -
|
|
Rs.
in crores
|
|
Sale consideration
|
5
|
|
Less : Indexed cost of
acquisition
|
0.80
|
|
Less : Construction cost of
the destroyed hotel building
|
8.86
|
|
Long term capital loss
|
4.66
|
AO rejected the claim of the destroyed building citing that
vide section 45(IA) only if there was an insurance claim received the same is
claimable and since the insurance company had rejected the claim in the said
asst. year the said capital loss can be claimed only in the year of receipt of
the insurance claim. The assessee has gone in higher appeal against the insurance
company which is pending before high court. On appeal the CIT(A) held that
there was no transfer of the destroyed building in the said assessment year
rejecting the claim of the assessee.
On higher appeal to ITAT by the assessee -
Held in favour of the assessee that vide section 45(1A)
when the insurance company rejected their claim for the destroyed building the
consideration was thus zero under section 45(1A) and since the cost of the
building was Rs. 8.86 crores the same was a long term capital loss in that year
of refusal by the insurance company. In this assessment year the assessee has
sold the land for Rs 5 crores thus the assessee was entitled to carry forward
the said loss and claim it against the sale of land if the same was as per the
limitation in the statute. The claim of the assessee was thus upheld.
Applied:
CIT v. Grace Collis & Ors. (2001) 248 ITR 323 (SC) :
2001 TaxPub(DT) 1188 (SC)
Case: Flamingo
Hotels (P) Ltd. v. ITO 2023 TaxPub(DT) 7071 (Rajkot-Trib)