ITO, Jaipur V. ANKUR MINING PVT. LTD., Jaipur

ITA 271/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5097 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation
• Section: 50C; 54F

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH , - MH - TSU U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI A.D. JAIN, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA- @ ITA NO. 271/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2012-13 I.T.O., WARD 2(2), JAIPUR. CUKE VS. M/S ANKUR MINING PVT. LTD., 309, CITY PULSE, NARAYAN SINGH CIRCLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA 9684 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RE SPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/09/2016 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 15/09/2016 VKNS'K@ ORDER PER: A.D. JAIN, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 25/01/2016 FOR THE ASSESSMENT YEAR 2012-13, CONTENDING THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION AMOUNTING TO RS. 50,00,000/- U/S 54EC OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY PURCHASED A FLAT, I.E. FLAT NO. 1, L-16, KAILASH COLONY, NEW DEL HI, ON 13/5/1996. ON THIS ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 2 FLAT, THE ASSESSEE CLAIMED DEPRECIATION. THE WRITTEN DOWN VALUE (WDV) OF THE FLAT AS ON 31/3/2011 WAS RS. 52,708/-. DURING THE YEAR, THE ASSESSEE SOLD THE FLAT, ON 03/2/2012, FOR RS. 60 LA CS. IT DECLARED LONG TERM CAPITAL GAIN OF RS. 8,14,664/- AND CLAIMED DED UCTION OF RS. 50.00 LACS U/S 54EC OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD CLASSIFIED THE FLAT AS A BUILDING, ON WHICH, TH E DEPRECIATION HAD BEEN CLAIMED ON THE ENTIRE CONSIDERATION; THAT THE ASSES SEE WAS NOT HAVING ANY RIGHT IN THE LAND, EXCEPT THE RIGHT IN THE COMM ON AREA AND, THEREFORE, THE FLAT COMPRISED ONLY OF BUILDING ON WHICH DEPRECI ATION HAD BEEN CLAIMED; THAT THUS, ON THE SALE OF THE FLAT, SHORT TERM CAPITAL GAIN HAD ARISEN U/S 50 OF THE ACT, ON WHICH DEDUCTION U/S 54E C WAS ALSO NOT ALLOWABLE. AS IT WAS A CASE OF TRANSFER OF A DEPRECIA BLE ASSET. THE ASSESSING OFFICER, ACCORDINGLY, ASSESSED THE INCOME FROM THE SALE OF THE FLAT AS SHORT TERM CAPITAL GAIN, AT RS. 58,14,664/- . 3. VIDE THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE, HOLDING AS FOLLOWS:- (I) I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED FROM THE ASSESSMENT ORDER THAT THE AO DID NOT ALLOW THE BENEFIT U/S 54EC OF THE ACT IN MAKING INVESTMEN T IN ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 3 RURAL ELECTRIFICATION BONDS TO THE APPELLANT BY HOL DING THAT SINCE THE CAPITAL GAIN WAS SHORT TERM AND THE EXEMPT ION U/S 54EC OF THE ACT IS AVAILABLE ONLY FOR LONG TERM CAP ITAL ASSETS. (II) DURING APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT THE LAND PORTION COMPRISED IN THE FL AT HAS RESULTED IN LONG TERM CAPITAL GAIN AND THEREFORE DE DUCTION U/S 50EC IS ALLOWABLE TO IT IN RESPECT OF SUCH LONG TERM CAPITAL GAIN. ALTERNATIVELY, IT WAS SUBMITTED THAT D EEMING FICTION CREATED IN SECTION 50 OF INCOME TAX ACT, 19 61 IS RESTRICTED ONLY TO MODE OF COMPUTATION OF CAPITAL G AINS AS CONTAINED IN SECTION 48 & 49 OF THE ACT AND DOES NO T APPLY TO OTHER PROVISION OF THE ACT. IF THE ASSET IS HELD FOR MORE THAN 36 MONTHS, IRRESPECTIVE OF THE FACT THAT DEPRE CIATION HAS BEEN ALLOWED ON IT, BENEFIT AS SPECIFIED IN SECT ION 54EC OR 54F IS TO BE ALLOWED. EXEMPTION REFERRED TO IN SE CTION 54EC CANNOT BE DENIED SIMPLY REFERRING TO SECTION 5 0 OF THE ACT. TREATING DEPRECIABLE ASSETS AS SHORT TERM CAPIT AL ASSETS U/S 50 IS ONLY WITH REFERENCE TO MODE OF COMPUTATION SPECIFIED IN SECTION 50 BUT NOT TO OTHER PROVISION. SO FAR AS OTHER PROVISIONS ARE CONCERNED, IF ASSET IS HELD FO R MORE THAN 36 MONTH, IT IS LONG TERM CAPITAL ASSET AND AL L THE BENEFITS OR EXEMPTIONS AVAILABLE TO LONG TERM CAPIT AL ASSETS ARE AVAILABLE TO SUCH ASSETS ALSO. DEEMING FICTION IS NOT TO BE APPLIED WITH REFERENCE TO EXTENDED MEANING. THEREF ORE EVEN IF THE GAIN IS ASSESSED AS SHORT TERM CAPITAL GAIN, THE FLAT UNDER CONSIDERATION HAVING BEEN HELD FOR MORE THAN 36 ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 4 MONTHS, IS A LONG TERM CAPITAL ASSETS AND THEREFORE DEDUCTION U/S 54EC IS AVAILABLE IN RESPECT OF SUCH SHORT TERM CAPITAL GAIN DETERMINED BY THE AO. IN SUPPORT OF IT S CLAIM, THE APPELLANT RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS. (III) I HAVE GONE THROUGH THE JUDICIAL PRONOUNCEMENTS REL IED UPON BY THE APPELLANT AND I FIND MERIT IN THE CONTE NTION OF THE APPELLANT. IT IS A FACT THAT THE FLAT UNDER CON SIDERATION WAS OWNED BY THE APPELLANT FOR MORE THAN THREE YEARS AND THUS IS A LONG TERM CAPITAL ASSET. FURTHER SECTION 54EC TALKS ABOUT THE EXEMPTION ON THE TRANSFER OF A LONG TERM CAPITAL ASSET AND IT DOES NOT EXCLUDE DEPRECIABLE ASSETS, T HE GAIN ON THE TRANSFER OF WHICH IS DEEMED TO BE A SHORT TER M CAPITAL GAIN U/S 50 OF THE IT ACT. IN VIEW OF THE AB OVE DISCUSSION AND THE JUDICIAL PRONOUNCEMENTS IN THE C ASES OF: CIT VS. ADITYA MEDISALES LTD. 218 TAXMAN 477 (GUJ.) (HC) CIT VS. HIMALAYA MACHINERY (P.) LTD. (2012) 88 DTR 1 75 (GUJ) (HC) CIT V. ACE BUILDERS (P) LTD (2006) 281 ITR 210 (BOM . H.C) CIT VS. ASSAM PETROLEUM INDUSTRIES (P) LTD (2003) 2 62 ITR 587 (GAUHATI) MANALI INVESTMENTS VS. ASSTT. CIT 56 D TR 218 (MUM. TRIB) RAMAKRISHNA THEATRES LTD. VS. DCIT(2014) 41 CCH 005 0 (BANG) (TRIB.) ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 5 IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN DENYING EXEMPTION U/S 54EC OF THE ACT ON THE INVESTMENTS MADE BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. 4. THE LD. SR.DR HAS CONTENDED THAT THE LD. CIT(A) HA S ERRED IN ALLOWING DEDUCTION OF RS. 50.00 LACS TO THE ASSESSEE U/S 54EC OF THE ACT, DESPITE THE FACT THAT THE CAPITAL GAIN WAS LONG TERM CAPITAL GAIN. IT HAS BEEN SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN FAIL ING TO CONSIDER THAT ACCEPTEDLY THE PROPERTY IN QUESTION WAS HELD AS A FI XED ASSET IN THE BLOCK OF ASSETS AS A BUSINESS ASSET, DUE TO WHICH, THE PRO VISIONS OF SECTION 50 OF THE ACT ARE APPLICABLE, AS THE TRANSACTION OF SA LE WAS IN RESPECT OF A DEPRECIABLE ASSET, CALLING TO BE ASSESSED AS SHORT TERM CAPITAL GAIN; THAT MOREOVER, THE LD. CIT(A) HAS ALSO FAILED TO CONSIDER THAT THE ASSESSEE HAD HIMSELF SHOWN THE LAND AND BUILDING AS COMPOSITE AS SETS AND DEPRECIATION HAD BEEN CLAIMED; THAT THE FLAT COMPRI SED OF ONLY BUILDING ON WHICH DEPRECIATION HAD BEEN CLAIMED BY THE ASSESS EE AND SO, IT WAS SHORT TERM CAPITAL GAIN, WHICH WAS CHARGEABLE ON THE SALE OF THE FLAT; THAT THE LD. CIT(A) HAS ERRONEOUSLY FAILED TO CONSIDER TH IS ASPECT OF THE MATTER; THAT THE LD. CIT(A) HAS ALSO ERRED IN NOT CO NSIDERING THAT SINCE IT WAS A CASE OF TRANSFER OF DEPRECIABLE CAPITAL ASSET, NO DEDUCTION U/S 54EC OF THE ACT WAS ALLOWABLE; THAT THE LD. CIT(A) HAS FURTHER FALLEN IN ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 6 ERROR IN MISAPPLYING CASE LAWS WHICH ARE NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE; AND THAT, THEREFORE, THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT PASSED BY THE ASSESSING OFFICER BE REVIVED . 5. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE HA S PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTEND ED THAT, IT HAS RIGHTLY BEEN APPRECIATED BY THE LD. CIT(A), SINCE THE FLAT WAS OWNED BY THE ASSESSEE FOR MORE THAN THREE YEARS, IT WAS A LONG TE RM CAPITAL ASSET, BUT THE TRANSFER WHEREOF, THE GAIN IS LONG TERM CAPITAL GAIN, ENTITLING THE ASSESSEE FOR EXEMPTION U/S 54EC OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE FL AT IN QUESTION WAS PURCHASED ON 13/5/1996. IT WAS SOLD ON 03/2/2012; DU RING THE YEAR. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXEMPTION U/S 54EC, OBSERVING THAT THE CAPITAL GAIN EARNED WAS SHORT TERM CAPITAL GAIN AND EXEMPTION U/S 54EC OF THE ACT IS AVAILABLE ONLY FOR LONG TERM CAPITAL ASSETS. THE LD. CIT(A) HELD, DELETING THE DISALLOWANCE, THAT THE FLAT HAD BEEN OWNED BY THE ASSESSEE FOR MORE THAN THREE YEARS AND SO, IT WA S A LONG TERM CAPITAL ASSET. IT WAS OBSERVED THAT THE TRANSFER OF THE FLAT FETCHED GAIN, WHICH ENTITLED THE ASSESSEE FOR EXEMPTION U/S 54EC OF THE ACT, WHICH DOES NOT ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 7 EXCLUDE DEPRECIABLE ASSETS, THE GAIN ON TRANSFER OF WHICH IS DEEMED TO BE A SHORT TERM CAPITAL GAIN U/S 50 OF THE ACT. 7. WE DO NOT FIND ANY ERROR WHATSOEVER IN THE ORDER OF THE LD. CIT(A). SECTION 50 OF THE ACT CREATES A DEEMING FICTION. THI S DEEMING FICTION IS RESTRICTED ONLY TO MODE OF COMPUTATION OF CAPITAL G AINS, AS PRESCRIBED BY SECTIONS 48 AND 49 OF THE ACT. IT DOES NOT APPLY TO THE OTHER PROVISIONS OF THE ACT. IF THE ASSET IS HELD FOR MORE THAN 36 MONT HS, DISPITE DEPRECIATION HAVING BEEN ALLOWED ON IT, BENEFIT U/S 54EC OF THE A CT IS AVAILABLE. IF THE ASSET IS HELD FOR MORE THAN 36 MONTHS, IT IS A LONG TERM CAPITAL ASSET, ON WHICH, ALL BENEFITS OR EXEMPTIONS AVAILABLE TO LONG TERM CAPITAL ASSETS, ARE AVAILABLE. AS SUCH, EVEN IF THE GAIN IS ASSESSED AS SHORT TERM CAPITAL GAIN, ON THE TRANSFER OF SUCH ASSET, DEDUCTION U/S 54EC I S AVAILABLE. 8. IN THIS REGARD, IN CIT VS. ACE BUILDERS (P) LTD , 281 ITR 210 (BOM), IT WAS HELD THAT THERE IS NOTHING IN SECTION 50 OF THE ACT TO SUGGEST THAT THE FICTION CREATED THEREUNDER IS NOT ONLY RESTRICTED TO SECTIONS 48 AND 49 OF THE ACT, BUT IT ALSO APPLIES TO OTHER PROVISIONS; THAT ON THE CONTRARY, SECTION 50 MAKES IT CLEAR THAT THE DEEMED FICTION CREATED IN SECTIONS 50(1) AND 50(2) IS RESTRICTED ONLY TO T HE MODE OF COMPUTATION OF CAPITAL GAINS CONTAINED IN SECTIONS 48 & 49; THA T A FICTION CREATED BY ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 8 THE LEGISLATURE HAS TO BE CONFINED TO THE PURPOSE F OR WHICH IT WAS CREATED; THAT THUS, SECTION 50 IS CONFINED TO COMPU TATION OF CAPITAL GAINS ONLY AND CANNOT BE EXTENDED BEYOND WHAT IS NOT STAT ED IN THE STATUTE; AND THAT SECTION 54E DOES NOT MAKE ANY DISTINCTION BETWEEN DEPRECIABLE ASSET AND NON-DEPRECIABLE ASSET, AND, THEREFORE, TH E EXEMPTION AVAILABLE U/S 54E CANNOT BE DENIED TO DEPRECIABLE ASSETS BY R EFERRING TO THE FICTION CREATED IN SECTION 50. 9. ACE BUILDERS, (SUPRA) WAS FOLLOWED BY THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ADITYA MEDISALES L TD., 218 TAXMAN 477 (GUJ)(HC), TO HOLD THAT THE LEGAL FICTION CREATED U/S 50C IS RESTRICTED ONLY TO THE COMPUTATION OF CAPITAL GAINS AND IT DOES NOT RESTRICT THE APPLICATION OF SECTION 54EC ALLOWING EXEMPTION OF CAPITAL GAIN O N MAKING PRESCRIBED INVESTMENTS. 10. SIMILAR ARE THE OTHER DECISIONS RELIED ON BY TH E LD. CIT(A). NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NO TICE. AS SUCH, THE LD. CIT(A) CANNOT BE HELD TO HAVE MISAPPLIED THE CASE LA WS WHICH HE HAS REFERRED TO IN THE IMPUGNED ORDER. ITA 271/JP/2016_ ITO VS M/S ANKUR MINING PVT. LTD. 9 11. IN VIEW OF THE ABOVE, FINDING NO MERIT IN THE GR IEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT, THE SAME IS REJECTED. THE ORDER UNDER APPEAL IS CONFIRMED. 12. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/09/2016. SD/- SD/- FOE FLAG ;KNO , - MH TSU (VIKRAM SINGH YADAV) (A.D. JAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- SEPTEMBER, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD-2(2), JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S ANKUR MINING PVT. LTD., JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 271/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR