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TMI Blog2023 (12) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- u/s. 54EC of the Income Tax Act, 1961 by treating it as short term capital gain. Ld. CIT(A) failed to appreciate that although provisions of Section 50 of the Act applies to depreciable assets but it is Long Term Capital Gain which is entitled for exemption under Section 54EC of the Act. Therefore appellant ought to have entitled the benefit of Section 54EC of the Act. The same be held now and disallowance be deleted. 3. The order passed by the Ld. CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now. 4. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal" 3. The brief facts of the case are that the assessee had submitted its return of income for A.Y. 2014-15 on 30.11.2014 declaring total income at Rs. 29,15,800/-. The assessee is engaged in the business of trading of fabrics and carpets. During the course of assessment, it was observed that the assessee had sold office premises for a consideration of Rs. 1,30,00,000/- on 16.12.2013. The assessee claimed deduction under Section 54EC of the Act at Rs. 1,00,00,000/- on account of investment in REC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in REC Bonds on 31.03.2014, for the reason that to be eligible for deduction under Section 54EC of the Act, the capital asset must be a long term capital asset. However, since the assessee sold a depreciable asset, being office premises, therefore, in view of Section 50 of the Act, profit arising on sale of depreciable asset would be a short term capital asset. The Ld. CIT(A) held that in the case of Sakthi Metal Depot vs. CIT 130 taxman.com 238, the High Court held that profit arising on sale of depreciable asset would be assessed as short term capital gains, even if the asset has been held for more than 36 months. This is because Section 50 of the Act, which deals with the computation of capital gains provides that the profit arising on sale of depreciable asset shall be deemed to be short term capital gain, irrespective of the period for which the asset has been held. In the present case, the Ld. CIT(A) observed that the capital asset which was transferred was a depreciable asset, being office premises. Therefore, in view of the Section 50 of the Act, the asset being sold would be "deemed" to be a "short term capital asset". Therefore, the profit arising on sale of the asset w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm capital asset and hence the benefit of Section 54EC of the Act was not available to the assessee on sale of such asset. Accordingly, it was submitted that the assessee is not eligible for claim of benefit of deduction under Section 54EC of the Act, looking into the instant facts. 7. We have heard the rival contentions and perused the material on record. On the issue whether exemption under Section 54EC can be denied on account of the fact that deeming fiction of short term capital gain was created under Section 50 of the Act, the Gujarat High Court in the case of Aditya Medisales Ltd. 38 taxmann.com 244 (Gujarat) has held that exemption under Section 54EC of the Act could not be denied on account of the fact that deeming fiction of short term capital gain was created under Section 50 of the Act. In this case the assessee company sold automatic electric monitoring system. The company invested gain amount in Rural Electrification Bonds and claimed exemption under Section 54EC of the Act. The Assessing Officer found that short term capital gain was offered by assessee under Section 50 of the Act and disallowed exemption under Section 54EC claimed by the assessee on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two Financial Years, the High Court of Madras in the case of CIT vs. C. Jaichander 53 taxmann.com 466 (Madras) held that where assessee invested a sum of Rs. 50 lakhs each in two different Financial Years, within a period of six months from date of transfer of capital asset, he was eligible for deduction under Section 54EC of the Act. The facts in this cases were that the assessee sold a property vide sale agreement dated 18.02.2008 and invested a sum of Rs. 1 crores out of sale proceeds in certain bonds in two Financial Years 2007-08 and 2008-09. The Assessing Officer held that assessee could take benefit of investment in said Bonds to a maximum of Rs. 50 lakhs only under Section 54EC(1) and accordingly, held that the other sum of Rs. 50 lakhs invested over and above ceiling prescribed did not qualify for exemption. However, the Madras High Court held that from a reading of Section 54EC(1) and first proviso, it was clear that time limit for investment was six months from the date of transfer and even if such investment felt under two Financial Years, benefit claimed by the assessee could not be denied and there was no cap on investment in Bonds. Accordingly, the Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted long-term capital gains. The section 54EC investment was required to he made within 6 months i.e. on or before 21.04.2008. The appellant invested Rs. 50 lakhs in REC bonds on 31.12.2007 (F.Y. 2007- 08. within the 6 M time limit) and Rs. 50 lakhs in NHA1 bonds on 26.5.2008 (F.Y. 2008-09. beyond the 6 M time limit) and claimed a deduction of Rs. 1 crore. The appellant claimed that no eligible scheme was available for subscription from 1.4.2008 to 28.5.2008 and that he applied in the NHAI bonds as soon as it opened and that he was prevented by sufficient cause from investing within the lime period of 6 months. The Assessing Officer & CIT(A) rejected the claim for exemption of Rs. 50 lakhs in respect of the NHAI bonds on the ground that (i) it exceeded the monetary limit of Rs. 50 lakhs prescribed in section 54EC ad (ii) it was made beyond the time limit of 6 months. On appeal to the Tribunal, held allowing the appeal: (i) The Proviso to section 54EC provides that the investment made in a long term specified asset by an appellant "during any financial year" should not exceed Rs. 50 lakhs. It is clear that if the appellant transfers his capital asset after 30th September of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er General Clauses Act, 1897 shall mean of month recognized according to the British Calendar. The relevant extracts of the ruling are reproduced for ready reference:- "5. We have heard both the sides at length. The legal issue involved is within a narrow compass, as also revolves around few succinct facts. A sale was executed and registered on 10th of June, 2008. As per the Revenue Department, the assessee was required u/s.54EC to invest in NHAI bond on or before 10th of December, 2008,i.e. within six months, however, the said investment was stated to be made by the assessee on 17th of December, 2008. At this juncture it may not be out of place to mention that there was a claim of the assessee that the said cheque was tendered on 8th of December, 2008, hence the said investment was otherwise made before the expiry of limitation as prescribed. Be that as it was, this controversy of exact date of investment, shall be addressed after addressing the main controversy that whether the said investment of the assessee which was allegedly made on 17th of December, 2008 was within the phraseology, "at any time within a period of six months after the date of such transfer" as prescribed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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