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TMI Blog2023 (7) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ets. Section 50 cannot convert long term capital assets into short term capital assets. So the assessee is entitled for benefit of section 54EC of the Act as it has capital gain arisen out of long term capital assets invested in specified assets and as such the assessee is not liable to be charged capital gains and is entitled for exemption u/s 54EC - AO is directed to allow the same. Grounds No.1 to 3 are decided in favour of the assessee. Tax @30% on STCG computed under section 111A levied - assessee drew our attention towards consolidated account statement available - HELD THAT:- All these documents relied upon by the assessee have not been examined by the AO as well as the Ld. CIT(A). It is not clear from the record if the funds qua which STCG is to be taxed was an equity or in the mutual fund. To consider the same u/s 111A all these documents are required to be examined by the AO. In order to decide the issue once for all we set aside the findings returned by the CIT(A) and remit this issue back to the AO to decide ground No.4 afresh after providing opportunity of being heard to the assessee. - ITA No. 836/M/2023 - - - Dated:- 31-5-2023 - SHRI PRASHANT MAHARISHI, ACCO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short the Act ). The Assessing Officer (AO) sought explanation of the assessee as to why the deduction claimed under section 54EC should not be disallowed. Declining the contentions raised by the assessee the AO proceeded to disallow the deduction claimed under section 54EC of the Act on the ground that the asset transfer should be long term capital asset whereas in this case the assessee himself has offered short term capital gains (STCG) on the sale of office premises. The AO also levied tax @ 30% on STCG computed under section 111A of the Act as against 15% tax rate on the same as claimed by the assessee. The AO thereby framed the assessment under section 143(3) of the Act. 3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by partly allowing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal. 4. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45: Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees: (2) Where the long-term specified asset is transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit: Provided that where any bond has been notified before the 1st day of April, 2007, subject to the conditions specified in the notification, by the Central Government in the Official Gazette under the provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007, such bond shall be deemed to be a bond notified under this clause; (ba) long-term specified asset for making any investment under this section on or after the 1st day of April, 2007 but before the 1st day of April, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 denied by referring to the fiction created under section 50. Section 54E specifically provides that where capital gain arising on transfer of a long-term capital asset is invested or deposited (whole or any part of the net consideration) in the specified assets, the assessee shall not be charged to capital gains. Therefore, the exemption under section 54E could not be denied to the assessee on account of the fiction created in section 50. It is true that section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets. Section 50 cannot convert long term capital assets into short term capital assets. So the assessee is entitled for benefit of section 54EC of the Act as it has capital gain arisen out of long term capital assets invested in specified assets and as such the assessee is not liable to be charged capital gains and is entitled for exemption under section 54EC of the Act. We are of the considered view that the Ld. CIT(A) has erred in denying the exemption claimed by the assessee under section 54EC of the Act. The AO is directed to allow the same. Grounds No.1 to 3 are decided in favour of the assessee. Ground No. 4 15. The AO has levied the tax @30% on STCG computed under section 111A of the Act which was also confirmed by the Ld. CIT(A). The Ld. A.R. for the assessee contended that in this case STCG are to be computed @ 15% under section 111A of the Act. The Ld. A.R. for the assessee drew our attention towards consolidated account statement available at page 19 to 43 of the paper book. 16. However, all these documents relied upon by the assessee have not been examined by the AO as well as the Ld. CIT(A). It is not clear from the record if the funds qua which STCG is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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