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TMI Blog2018 (10) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... off of accumulated depreciation of Rs. 17,37,830/- and brought forward business loss of Rs. 8,65,154/- against the current year's Short Term Capital Gains of Rs. 1,00,85,754/- 4. The Ld. CIT (A) ought to have appreciated that short term capital gains arising on sale of business assets, even though offered to tax as short term capital gains, is in essence business income only and therefore eligible for set - off. 5. The Ld. CIT (A) has erred in relying upon certain judicial pronouncements which are inapplicable, not relevant or clearly distinguishable. 6. The Ld. CIT (A) has erred in raising fresh issue of quantification of business loss for the earlier years, which is not disputed by the Ld. AO during the course of current year's assessment u/s. 143(3). 7. The appellant craves leave to add, alter, modify, amend or substitute all or any of the above grounds of appeal. RELIEF CLAIMED 1. The appellant be allowed to set off Current Year Business Loss aggregating to Rs. 15,265/-. 2. The appellant be allowed to set off Accumulated Depreciation aggregating to Rs. 17,37,830/-. 3. The appellant be allowed to set off Carried Forward Business Loss aggregating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ratio laid down by the Pune Bench of Tribunal in DCIT Vs. M/s. Demech Heavy Equipments Pvt. Ltd. in ITA No.1377/PN/2014, along with CO No.16/PN/2016, relating to assessment year 2006-07, vide order dated 13.05.2016. 7. We find that the Tribunal in DCIT Vs. M/s. Demech Heavy Equipments Pvt. Ltd. (supra) relying on the decision of Hon'ble Bombay High Court in CIT Vs. Ace Builders Pvt. Ltd. (supra) and also referring to the decision in CIT Vs. Parrys (Eastern) Pvt. Ltd. (supra), had held as under:- "17. Even on merit we find the issue has to be decided in favour of the assessee. We find the Hon'ble Bombay High Court in the case of Ace Builders Pvt. Ltd. reported in 281 ITR 210 has held that there was nothing in section 50 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 this section makes it explicitly clear that the deeming fiction created in sub-section (1) and (2) is restricted only to the mode of computation of capital gains contained in section 48 and 49. The legal fiction is to deem the capital gain as short-term capital gain and not to deem the asset as short-term capital as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a depreciable long-term capital asset, whether the assessee can be denied exemption under section 54E merely because, section 50 provides that the computation of such capital gains should be done as if arising from the transfer of short-term capital asset? 24. Section 54E of the Income-tax Act grants exemption from payment of capital gains tax, where the whole or part of the net consideration received from the transfer of a long-term capital asset is invested or deposited in a specified asset within a period of six months after the date of such transfer. In the present case it is not in dispute that the assessee fulfils all the conditions set out in section 54E to avail of the exemption, but the exemption is sought to be denied in view of fiction created under section 50. 25. In our opinion, the assessee cannot be denied exemption under section 54E, because, firstly, there is nothing in section 50 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 under sections 48 and 49 or under section 50. The contention of the Revenue that by amendment to section 50 the longterm capital asset has been converted into a short-term capital asset is also without any merit. As stated hereinabove, the legal fiction created by the statute is to deem the capital gain as short-term capital gain and not to deem the asset as shortterm capital asset. Therefore, it cannot be said that section 50 converts a long-term capital asset into a short-term capital asset." 18. We find following the above decision, the Hon'ble Bombay High Court in the case of Parrys (Eastern) Pvt. Ltd. has held that where deemed short term capital gain arose on account of sale of depreciable assets that was held for a period to which the long term capital gain would apply, said gain would be set off against brought forward long term capital losses and unabsorbed depreciation. Since the Hon'ble High Court has already held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profession during the year under consideration, he was not entitled to claim the benefit of set off of unabsorbed depreciation during the year under consideration. In this regard, the learned Authorized Representative for the assessee placed reliance on the decision of Hon'ble Supreme Court in CIT Vs. Virmani Industries (P.) Ltd. (1995) 83 Taxman 343 (SC), wherein it was held as under:- "18. Yet another question which has to be answered before we can answer the question concerned in this appeal is whether it is necessary that in the following year the assessee must carry on business, i.e., some or other business, to avail of the benefit of the said sub-section? Two views are possible in this behalf, viz., (1) since the sub-section speaks of unabsorbed depreciation being carried forward to the next year and "added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance" the sub-section necessarily contemplates existence of a business in the following year and (2) inasmuch as the sub-section not only speaks of adding the unabsorbed depreciation to the depreciation allowance allowed in the following year but also s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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