2014 (5) TMI 670 - HC - Income Tax

Admissibility of appeal - Monetary limit for filing appeal Held that - Under Instruction No. 3/2011 dated 9th February, 2011 issued by the CBDT u/s 268A(1) of the Income Tax Act it has been mentioned that the appeal cannot be filed if the tax effect of the appeal is less than Rs.10 lakh - Revenue has not disputed the fact that the tax effect is less than Rs.10 lakhs thus, the appeal cannot be entertained Decided against Revenue. Sale of assets Benefit of capital gains u/s 54EC of the Act Held that - The Tribunal was rightly of the view that the provisions of the computation of capital gains as Long term capital gain cannot be denied to the assessee in so far as it was nobodys case to foresee what was to be gained after the business assets have been used claiming deprecation alone makes the sale of assets which gain on the sale thereafter has to be as capital gains - Once the capital gains have been computed the consideration for their investment is to be in accordance with the provision of the Income Tax Act cannot be disregarded in so far as the provisions do not disallow claiming of deduction u/s 54 EC of the Act whether has to be first termed as long term capital assets and then the re-computation whether could be as short term capital gain for taxation purpose Relying upon DCIT vs Himalaya Machinery (P) Ltd 2012 (12) TMI 607 - GUJARAT HIGH COURT and CBDT Circular No.469 dated 23rd September, 1986 - the claim of deduction u/s 54EC of the Act was rightly claimed by the assessee Decided against Revenue.

Summary

Issues:
1. Whether the assessee is entitled to claim the benefit of capital gains under section 54EC of the Income Tax Act?
2. Whether the tax effect in the case is below Rs.10 lakhs, thereby preventing the Revenue from challenging the Tribunal's order?

Analysis:

1. The primary issue in this case revolves around the entitlement of the assessee to claim the benefit of capital gains under section 54EC of the Income Tax Act. The assessee, a partner in a firm, sold assets during the relevant financial year and sought the benefit of capital gains under section 54EC. The Revenue contended that the asset was not a long-term capital asset and was depreciable, making it a short-term capital asset ineligible for the provisions of section 54EC. However, the Tribunal allowed the claim based on the argument that once capital gains are computed, the provisions for investment consideration under the Income Tax Act cannot be disregarded. The Tribunal relied on the decision of the Hon'ble Gujarat High Court and CBDT Circular No.469 to support the assessee's claim. Ultimately, the Tribunal directed the Assessing Officer to accept the claim as returned by the assessee, setting aside the order of the CIT(A).

2. The second issue pertains to the tax effect in the case being below Rs.10 lakhs, which according to Instruction No. 3/2011 issued by the CBDT, prevents the Revenue from challenging the Tribunal's order. The appointed Amicus Curie pointed out that the tax effect was Rs.9,78,878, falling below the threshold. Citing a Division Bench judgment, it was highlighted that cases with a tax effect below Rs.10 lakhs are not eligible for appeal, as per the CBDT instruction. The Revenue did not dispute the tax effect being below the threshold, leading to the dismissal of the appeal solely on this ground.

In conclusion, the High Court of Calcutta upheld the Tribunal's decision allowing the assessee's claim for capital gains under section 54EC of the Income Tax Act. Additionally, the appeal was dismissed based on the tax effect being below Rs.10 lakhs, in accordance with the CBDT instruction, preventing the Revenue from challenging the Tribunal's order.