2020 (5) TMI 256 - AT - Income Tax

Applicable rate of taxation to Long Term Capital Asset - Capital Asset which is business asset, where depreciation is claimed - Short Term Capital Gain computed u/s 50 as per AO - AO taxed it at 30% as against 20% claimed by the assessee - HELD THAT - As decided in M/S. VELVET HOLDINGS PVT. LTD 2017 (7) TMI 1355 - BOMBAY HIGH COURT deeming fiction attached to section 50 of the Income-tax Act has to be restricted only for the method of computing the capital gain and cannot be read into while considering the case for non-charge-ability of capital gain - assessee is entitled to deduction u/s 54E in respect of the capital gain arising on the transfer of a capital asset on which depreciation has been allowed and which is deemed as short-term capital gain u/s 50 - See case of CIT vs. ACE Builders Pvt. Ltd. 2005 (3) TMI 36 - BOMBAY HIGH COURT as approved by the Apex Court in the case of CIT, Panji vs. V.S.Dempo Company Ltd. 2016 (10) TMI 62 - SUPREME COURT . As the issue raised in the present appeal is already covered in the favour of assessee.

Summary

Issues involved:
1. Application of higher tax rate on capital gains.
2. Passing assessment order on non-existent Permanent Account Number (PAN).
3. Levy of interest under section 234B and 234C.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax for the Assessment Year 2014-15. The primary issue was the application of a higher tax rate on capital gains earned by the assessee on the sale of intangible property. The assessee contended that the tax rate should be 20% instead of 30% as determined by the Assessing Officer. The Tribunal referred to relevant case laws and highlighted that for Long Term Capital Assets held for more than 3 years, the applicable tax rate is 20%. The Tribunal found in favor of the assessee, citing precedents and settled legal positions, and allowed ground no.1 raised by the assessee.

2. The second issue pertained to the passing of the assessment order using a non-existent Permanent Account Number (PAN) of a predecessor entity. However, during the proceedings, the counsel for the assessee mentioned that this issue was not being pressed, and therefore, it was dismissed as not pressed. Hence, no further adjudication was required on this matter.

3. The final issue raised was regarding the levy of interest under sections 234B and 234C of the Income-tax Act. The counsel for the assessee informed the Tribunal that the mistake related to the levy of interest under section 234B had been rectified by the Assessing Officer. As a result, no grievance was before the Tribunal concerning this aspect. However, regarding the levy of interest under section 234C, the counsel requested early disposal of the matter. The Tribunal directed the Assessing Officer to take action on the rectification application and dispose of the issue within three months from the date of the order.

In conclusion, the Tribunal partially allowed the appeal of the assessee, primarily focusing on the tax rate applicable to the capital gains, while dismissing the issue related to the PAN and providing directions for the expeditious resolution of the interest levy matter. The judgment was pronounced on 12th March 2020 by the Appellate Tribunal ITAT Pune.