9911796707
TMI Blog2012 (12) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 50 and the capital gains tax will be charged as if such capital gains has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - Decided in favor of assessee. - Tax Appeal No. 271 of 2012 - - - Dated:- 27-11-2012 - Anil Kureshi And Sonia Gokani, JJ. Appellant Rep. by : Mr K M Parikh, Adv JUDGEMENT Per : Akil Kureshi, J : Revenue is in appeal against the order of Income Tax Appellate Tribunal ( ITAT for short) dated 29.11.201. The following question is presented for our consideration: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of Rs.40,99,947/- u/s. 50 of the Act on account of assessee s claim for exemption u/s. 54EC on gain arising from the sale of depreciable assets being short term capital gain without appreciating that exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and any depreciable assets was if sold after 36 months would give rise to the short-term capital gains. In that view of the matter, according to the ld.Counsel, exemption of Section 54EC would not be available. To appreciate the contention we may recapitulate the facts, before adverting to the statutory provisions. The assets in question are ertain depreciable assets which formed part of the block assets of the assessee. The assessee had held such assets for a period of more than 36 months. During the year under consideration, assessee had sold such assets and made capital gains. Assessee had invested such amount in the specified bond as provided under section 54EC of the Act. In this factual background, the question that arises is whether the assessee s claim for exemption was valid ? We may peruse the relevant statutory provisions at this stage. Part E of the Chapter IV of the Act pertains to Capital gains. Section 45 is a charging Section under which any profits or gains arising from the transfer of a capital asset effected in the previous year, would be chargeable to income-tax under the head Capital gains and shall be deemed to be the income of the previous year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in the block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.] Upon perusal of Section 50 of the Act, it can be seen that in case of capital assets forming the part of block of assets in respect of which depreciation was allowed, provision of Section 48 and 49 shall apply subject to such modifications as are provided in clause (1) and (2) of Section 50 of the Act. It would thus emerge that in case not talling under section 50 of the Act for computation of capital gains in case of transfer of the asset, mode of computation and the cost of acquisition of asset would be worked out by applying the provisions as contained in Section 48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets. However, once such condition is fulfilled, by virtue of the fact that asset was such on which the depreciation was allowed and therefore, computation would be done as provided u/s. 50 of the Act by applying modifications in Section 48 and Section 49 would not change the nature of capital asset or availability of exemption specified under Section 54EC of the Act. We may notice that Gauhati High Court in case of Commissioner of Income Tax Vs. Assam Petroleum Industries (P) Ltd. reported in 262 ITR P.587 had taken a similar view . In such decision, Court was concerned with the sale of an asset covered under section 50 of the Act and exemption from payment of capital gain of Section 54E of the Act. High Court ruled in favour of Assessee, making following observations : The essential requirements or ingredients to attract the provisions of Section 54E are (I) the capital gains has arisen from the transfer of a long term capital asset and not from any short term capital asset, (ii) the assessee has, within period of six months after the date of transfer invested or deposited any part or whole of the net consideration in any specified asset, if these essential conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y restricted to Section 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in section 48 and 49. Secondly, it is well established in law that a fiction created by the Legislature has to be confined to the purpose for which it is created. In this connection, we may refer to the decision of the apex court in the case of State Bank of India v. D. Hanumantha Rao reported in [1998] 6 SCC 183. In that case, the Service Rules framed by the bank provided for granting extension of service to those appointed prior to July 19, 1969. The respondent therein who had joined the bank of July 1, 1972, claimed extension of service because he was deemed to be appointed in the bank with effect from October 26, 1965, for the purpose of seniority, pay and pension on account of his past service in the Army as Short Service Commissioned Officer. In that context, the apex court has held that the legal friction created for the limited purpose of seniority, pay and pension cannot be extended for other purposes. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
