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TMI Blog2015 (11) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... ble asset, on which depreciation had been allowed, as noted by the ld. CIT(A) (refer para 3 of the impugned order), the capital gain arising on its transfer would be, in terms of section 50 of the Act, a short-term capital gain (STCG), to be computed in the manner prescribed therein. To this extent, there is no dispute. The assessee, however, claims that the building having been held for a period in excess of three years, it would by definition qualify to be a long-term capital asset (LTCA) u/s.2(29A), and the capital gain arising on its transfer eligible for exemption u/s. 54EC. So, however, the Hon'ble jurisdictional High Court, even as noticed by the ld. CIT(A), has in Ace Builders (P.) Ltd. (2005 (3) TMI 36 - BOMBAY High Court) clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year under consideration, the assessee earned income from business as well as income from other sources. The assessee also earned long term capital gain, which was claimed exempt under section 54EC. The assessee sold one shop and earned capital gain on the sale of the said shop. The assessee made investment of ₹ 25,50,000, in capital gain bonds of National Highway Authority of India and claimed exemption under section 54EC of the Act against the aforesaid capital gain earned. The Assessing Officer denied the benefit of exemption under section 54EC on the ground that the shop was a depreciable asset and the resultant gain was a short term capital gain whereas the exemption under section 54EC was available only on long term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Bombay High Court in the case of CIT Vs ACE Builders (cited supra), but has observed that the said decision was not accepted in principle by the Department and the SLP against the decision was not filed by the Department due to the smallness of the tax effect involved. However, as per judicial principles in such a situation, the decision of the jurisdictional High Court is binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. For these reasons, I delete the disallowance of exemption u/s 54EC made by the A.O. and the ground raised by the appellant is allowed." Aggrieved by the aforesaid order passed by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of three years, it would by definition qualify to be a long-term capital asset (LTCA) u/s.2(29A), and the capital gain arising on its transfer eligible for exemption u/s. 54EC. We, next, consider the aspect of allowance of deduction u/s.54EC on the capital gains arising u/s.45 r/w s. 50. Section 50 clearly applies notwithstanding anything contained in section 2(42A) of the Act, which defines short-term capital asset (STCA) with reference to its holding period, i.e., period for which it stands held by the assessee prior to its disposal/transfer by him. Section 2(29A) defines LTCA negatively to mean an asset which is not a STCA. Section 50, thus, overrides both section 2(42A), as explicitly stated therein and, by implication, section 2(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst business profits. Though, therefore, by definition a capital expenditure, depreciation, which is amortization of the cost over a definite period is allowed as expenditure where the asset is employed for the purposes of business or profession, toward recouping its' cost, so as to make available the necessary funds with the business for the replacement of the asset at the end of its' useful life, enabling the business to in the process, maintain the capital of the firm. Income, by definition, is accretion to capital, so that only the excess, i.e., over cost, including the cost of depletion of capital, would be income, both in economic and accounting theory. The charge of depreciation, thus, has a sound basis thereto, well accepted in ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court, even as noticed by the ld. CIT(A), has in Ace Builders (P.) Ltd. (supra), clearly held deduction u/s.54EC to be available on the capital gains computed u/s.50 of the Act. The said authority, as well as we are bound by the said case law. No difference in facts, as claimed, has been brought forth by the Revenue for the non-applicability of the said decision in the instant case. We, therefore, respectfully following the same, uphold his decision in the matter. We decide accordingly. The foregoing discussion, which represents our humble opinion in the matter, is only to project the view point of the Revenue, for the consideration of the Hon'ble Court in appropriate proceedings. 7. In the result, Revenue's appeal stands dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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