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TMI Blog2016 (7) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... rm capital asset. Therefore, it cannot be said that section 50 converts long-term capital asset into a short-term capital asset Therefore, the Tribunal was justified in allowing the benefit of exemption under section 54E to the assessee in respect of the capital gains arising on the transfer of a capital asset on which depreciation had been allowed. - Decided in favour of assessee. - I.T.A. No. 65/Mum/2015 - - - Dated:- 25-7-2016 - Shri Joginder Singh (JM) And Rajesh Kumar (AM) For the Appellant : Shri H M Wanare For the Respondent : None ORDER Per Rajesh Kumar, Accountant Member This is an appeal filed by the revenue and is directed against the order of the Ld. CIT(A)-31, Mumbai dt.22.10.2014 pertaining to A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 within a period of six months from the date of sale of the said property. The said property was held by the assessee for more than three years which is not disputed but was a depreciable asset. Aggrieved by the order of the AO, the assessee referred an appeal before the ld. CIT(A), who allowed the appeal of the assessee by directing the AO to allow the deduction u/s 54EC of the Act to the tune of ₹ 49,83,928/- by observing and holding as under: 5.5. The claim of deduction u/s 54EC is allowed on transfer of a long term capital asset and it is immaterial whether the corresponding gain is a short term capital gain by virtue of deeming fiction under section 50 of the IT Act. It is material to note that as per the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord available before us and heard the ld.DR. we find from the facts before us that the assessee was denied deduction u/s 54EC and now the issue before us is whether the adjustment made during processing of income tax return disallowing the appellant s claim was within the ambit of section 143(1) or not. The scope of adjustment u/s 143(1)(a) has been incorporated in para 2 of the appeal order. We are in agreement with the conclusion drawn by the First Appellate Authority that as per the provisions of section 143(1)(a)(ii) ), the processing should take care of correcting an incorrect claim if such claim is apparent from any information in the return. It, therefore, follows that in the present scenario, if an appellant has filed a return wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing in the section to suggest that the fiction created in section 50 is not only restricted to sections 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 sections 48 and 49 and cannot be extended beyond that. 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. Thirdly, section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under section 54E cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on created by the statute is to deem the capital gain as short-term capital gain and not to deem the asset as short- term capital asset. Therefore, it cannot be said that section 50 converts long-term capital asset into a short-term capital asset. [Para 26] Therefore, the Tribunal was justified in allowing the benefit of exemption under section 54E to the assessee in respect of the capital gains arising on the transfer of a capital asset on which depreciation had been allowed. [Para 27] Accordingly, the appeal failed. The close perusal of the above reveals that the case of the assessee is squarely covered by the ratio laid down by the Jurisdictional High Court in the case of ACE Builder (supra) and therefore, respectfully fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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