N. K. Gems v. ITO

Case snapshot

Sections / provisions: 32

Questions before the Court / Tribunal

• When office premises enter block of assets: The reported ruling concerns depreciation and whether payment plus a registered agreement can establish acquisition/use-related entitlement even before formal possession. Exact facts must be verified.

Material facts and background

Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 19.06.2024, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15. 2.

commercial office premises vide allotment letter dated 24.07.2010 at Bharat Diamond Bourse by Bharat Diamond Bourse and endorsed the same in block of asset and accepted by the Revenue. The Assessee sold the said property vide Sale-Deed registered on dated

13.11.2013 in the office of Sub-Registrar, Andheri, Mumbai, wherein consideration amount of Rs.2,03,68,000/- has also duly been also acknowledged. 3.

properties/two offices bearing no.168 and 668 on 1st floor and 2nd floor of the building namely Kamla Industrial Park, Mumbai on a consideration of Rs. 2,08,76,204/- and treated/introduced the said offices, as new asset and /or being part of block of assets. 4.

Assessee introducing the new offices in the block of asset, however, refused to entertain the claim of the Assessee by observing interalia: (i) (ii) (iii) (iv)

That these office premises/units were acquired vide agreement dated 25.03.2014 i.e. at the fag end of the order. Further, from the copy of the agreement submitted, it was observed that only part payment was made by the Assessee. Possession of the property was not received by the Assessee as on 31.03.2014. Further, the new assets were not put to use for business purposes during the financial year under consideration and therefore, the addition to the fixed asset was “NIL” and consequently depreciation was also “NIL”. and since office premises were included in the fixed assets, on which depreciation was claimed and allowed in the previous year, the provisions of section 50 of the act is applicable.

gain under Section 50 of the Act, as under: Sale consideration = Rs.2,03,68,000 – : WDB as on 01.04.2013 Short term capital gain on depreciable :

Appellant / assessee submissions

: Shri Rahul Sarda, Ld. AR : Shri Leyaqat Ali Aafaqui, Ld. SR. D.R. : 09.01.2026 : 12.02.2026 ORDER

Revenue / respondent submissions

462, Mumbai, the Hon’ble Co-ordinate Bench of the Tribunal has also considered the identical issue and held as under: “16. One more aspect remains to be seen. In the course of the arguments, the learned departmental representative submitted that the requirement of section 50(1)(iii) was that the assessee should have acquired the new property during the previous year, but in the present case the assessee has only entered into an agreement with Smt. Kamini Khanna for purchasing the flat, that the formal conveyance and registration took place in November 1995 after the close of the accounting year and under such circumstances it cannot be stated that the assessee "acquired" the flat in the previous year. Very many decisions were cited by the learned departmental representative in support of this contention but we are of the view that after the recent judgment of the Supreme Court in CIT v. Poddar Cements P. Ltd. [1997]

226 ITR 625/92 Taxman 541 the contention cannot be accepted. In respect of a property for which payment has been made to the extent of Rs. 6,82, 049 out of the sale price of Rs. 7,17,000 at the time of signing the agreement (18-3-1995) the principle of the Judgment should apply. At the end of the agreement we find that the vendor has acknowledged the payment, giving particulars of the cheques, etc. The learned departmental representative drew our attention to clause 4 of this agreement to contend that the vendor herself was not in possession of the flat at the time of the agreement and therefore the purchaser could not be stated to be in possession of the property. We are unable to accept the contention because this clause speaks of physical possession of the flat. But when the rights of the vendor over the property have been assigned to the assessee by the agreement and by clause 4 it was agreed that physical possession would be handed over to the assessee-firm by the builder directly after the vendor receives the full and final payment under the agreement, the legal possession of the building must be taken to be with the assessee. Even otherwise the vendor is none else than one...

Court / Tribunal analysis and reasoning

record. We observe that the previous property situated at Bharat Diamond Bourse having been purchased on 24.07.2010, is not in controversy. Subsequent sale of such property on dated 13.11.2013 is also not in controversy. The only controversy revolves around the treatment

The properties were acquired vide agreement dated 25.03.2015 i.e. at the fag end of the year. (ii) Only part payment was made by the Assessee. (iii) No possession of the property was given to the Assessee, therefore, the property was not put to use for business purposes and, (iv) The consideration amount for new office was just an advance towards purchase of office premises.

reflected from bank statement showing payments (paper book no. 138 to 141) therefore, it is entitled to introduce new office premises in the block of assets. 15.

462, Mumbai, the Hon’ble Co-ordinate Bench of the Tribunal has also considered the identical issue and held as under: “16. One more aspect remains to be seen. In the course of the arguments, the learned departmental representative submitted that the requirement of section 50(1)(iii) was that the assessee should have acquired the new property during the previous year, but in the present case the assessee has only entered into an agreement with Smt. Kamini Khanna for purchasing the flat, that the formal conveyance and registration took place in November 1995 after the close of the accounting year and under such circumstances it cannot be stated that the assessee "acquired" the flat in the previous year. Very many decisions were cited by the learned departmental representative in support of this contention but we are of the view that after the recent judgment of the Supreme Court in CIT v. Poddar Cements P. Ltd. [1997]

226 ITR 625/92 Taxman 541 the contention cannot be accepted. In respect of a property for which payment has been made to the extent of Rs. 6,82, 049 out of the sale price of Rs. 7,17,000 at the time of signing the agreement (18-3-1995) the principle of the Judgment should apply. At the end of the agreement we find that the vendor has acknowledged the payment, giving particulars of the cheques, etc. The learned departmental representative drew our attention to clause 4 of this agreement to contend that the vendor herself was not in possession of the flat at the time of the agreement and therefore the purchaser could not be stated to be in possession of the property. We are unable to accept the contention because this clause speaks of physical possession of the flat. But when the rights of the vendor over the property have been assigned to the assessee by the agreement and by clause 4 it was agreed that physical possession would be handed over to the assessee-firm by the builder directly after the vendor receives the full and final payment under the agreement, the legal possession of the building must be taken to be with the assessee. Even otherwise the vendor is none else than one...

of the acquisition, certainly amount to utilization of the Assessee of the capital gain made by him for the purpose of purchasing and/or acquiring the assets. For ready reference and completeness, the relevant observations of the Hon’ble Apex Court are reproduced herein below: “38. We are of the view that the aforesaid construction of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words "not utilized" in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be "utilized" by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and...

Operative decision and relief

In the result, Assessee’s appeal is allowed. Order pronounced in the open court on 12.02.2026.

Authorities and precedents appearing in the judgment

• Supreme Court in CIT v. Poddar Cements P. Ltd

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on When office premises enter block of assets. The operative result is classified as Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with When office premises enter block of assets. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

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