2009 (8) TMI 849 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 6,84,000 as short-term capital gain.
2. Applicability of section 50C in the computation of capital gains.

Summary:

Issue 1: Deletion of Addition of Rs. 6,84,000 as Short-Term Capital Gain

The CIT(A) directed the Assessing Officer to delete the addition of Rs. 6,84,000 from the short-term capital gain included in the total income, observing that section 50 does not mention the stamp valuation as is mentioned in section 50C of the Act. The assessee argued that the assets sold were part of a block of assets, and the block continued to exist with a positive figure after the sale. Therefore, no capital gains arose on this transaction, and neither section 50 nor section 50C would be activated. The Tribunal agreed with the CIT(A) and the assessee, concluding that the CIT(A) rightly deleted the addition of Rs. 6,84,000 on account of short-term capital gains.

Issue 2: Applicability of Section 50C in the Computation of Capital Gains

The Assessing Officer invoked section 50C and taxed Rs. 6,84,000 as short-term capital gain, arguing that section 50C is applicable to all provisions related to the computation of capital gain, including sections 48, 49, and 50 of the Act. However, the Tribunal noted that section 50 is a special provision that provides for bringing to tax by way of short-term capital gains depreciable assets which are transferred during the previous year. The Tribunal emphasized that section 50 creates a deeming fiction and cannot be extended beyond the purpose for which it has been enacted. Consequently, the Tribunal upheld the CIT(A)'s decision, stating that the CIT(A) correctly interpreted the law and deleted the addition.

Conclusion:

The Tribunal dismissed the appeal of the revenue, confirming that the CIT(A) rightly deleted the addition of Rs. 6,84,000 on account of short-term capital gains and that section 50C was not applicable in this case.