ITO 21 (1) (5), MUMBAI V. JAYA DEEPAK BHAVNANI, MUMBAI

ITA 6444/MUM/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4172 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Capital asset; Depreciation
• Section: 54F; 54; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 6444/MUM/2016 (ASSESSMENT YEAR: 2012-13) INCOME TAX OFFICER - 21(1)(5) ROOM NO. 120, 1ST FLOOR PIRAMAL CHAMBERS PAREL, MUMBAI 400012 VS. SMT. JAYA DEEPAK BHAV NANI 407, SUN INDUSTRIAL ESTATE SUNMIL COMPOUND, LOWER PAREL, MUMBAI 400013 PAN AAAPB7618R APPELLANT RESPONDENT APPELLANT BY: RAJEEV GUBGOTRA RESPONDENT BY: SHRI VIMAL PUNAMIYA DATE OF HEARING: 26.09.2018 DATE OF PRONOUNCEMENT: 12.10.2018 O R D E R PER RAJESH KUMAR, AM THIS APPEAL FILED BY REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-33, MUMBAI DATED 03.08.2016 AND IT RELATES T O A.Y. 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) HOLDING THAT WHETHER DEDUCTION UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT') IS ALLOWABLE ON CAPITAL GAIN ARISING ON TRANSFER OF DEPRECIABLE ASSET WITHOUT APPRECIATING THE FACT THAT SAME IS TAXABLE AS SHORT TERM CAPITAL GAIN UNDER SECTION 50 OF THE ACT AND ALSO CHALLENGED THE ORDER OF CIT(A) ON THE GROUND THAT ALLOWING DEDUCTION UNDER SECTION 54F OF THE ACT WOULD AMOUNT TO DOUBLE DEDUCTION ONCE AS DEPRECIATION AND SUBSEQUENTLY UNDER SECTION 54F OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF READYMAD E GARMENTS AND JOB WORK THROUGH HER PROPRIETARY CONCERN, M/S. HITECH F ASHIONS. DURING THE YEAR THE ASSESSEE SOLD A BUILDING ON WHICH SHE HAS CLAIMED DEPRECIATION IN THE EARLIER YEARS FOR A NET CONSIDERATION OF ` 1,33,73,400/-. THE OPENING ITA NO. 6444/MUM/2016 SMT. JAYA DEEPAK BHAVNANI 2 WDV OF THE SAID BLOCK WAS ` 6,23,456/- AND AS A RESULT OF SALE OF THE SAID BUILDING FOR A CONSIDERATION OF 1,33,74,400/- A GAI N OF ` 1,27,49,944/- HAS RESULTED. IT WAS CLAIMED BY THE ASSESSEE AS EXEMPT UNDER SECTION 54F OF THE ACT BY INVESTING THE GAIN IN NEW HOUSE PROPERTY TO THE TUNE OF ` 1,44,68,000/-. THE AO DENIED EXEMPTION UNDER SECTIO N 54 F AND ADDED THE SAME ON THE GROUND THAT CAPITAL GAIN RESULTING FROM SALE OF DEPRECIABLE ASSETS UNDER SECTION 50 OF THE ACT IS SHORT TERM CA PITAL GAIN AND THEREFORE NO EXEMPTION OF THE SAME CAN BE CLAIMED UNDER SECTI ON 54F OF THE ACT. IN THE APPELLATE PROCEEDINGS THE LEARNED CIT(A) ALLOWE D THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE CONTENTIONS AND SUBM ISSIONS BY HOLDING AND OBSERVING AS UNDER: - 7.5 FROM THE ABOVE, IT IS CLEAR THAT THE MAIN QUE STION TAKEN UP BY THE HON'BLE HIGH COURT WAS AS TO WHETHER THE DEEMIN G FICTION CREATED UNDER SECTION 50 IS RESTRICTED TO SECTION 50 ONLY O R IT CAN BE EXTENDED TO SECTION 54E OF THE INCOME-TAX ACT AS WELL. THE H ON'BLE HIGH COURT IN THE AFORESAID CASE HAS CLEARLY HELD THAT WHERE T HE LONG-TERM CAPITAL ASSET HAS AVAILED DEPRECIATION THE CAPITAL GAIN HAS TO BE COMPUTED IN THE MANNER PRESCRIBED UNDER SECTION 50 AND THE CAPI TAL GAINS TAX WILL BE CHARGED AS IF SUCH CAPITAL GAIN HAS ARISEN OUT O F A SHORT-TERM CAPITAL ASSET. THEREAFTER, HON'BLE JURISDICTIONAL H IGH COURT HAS RULED THAT EVEN IN SUCH CIRCUMSTANCES, THE BENEFIT OF SEC . 54E OF THE ACT WILL BE AVAILABLE TO THE ASSESSEE. IN THE INSTANT CASE T OO, THE APPELLANT HAS CLAIMED BENEFIT U/S 54F TO MAKE HIMSELF ELIGIBL E FOR SUCH BENEFIT. 7.6 IN THE LIGHT OF THE DISCUSSION MADE IN THE PRE CEDING PARAGRAPHS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT, THE AO IS DIRECTED TO ALLOWING EXEMPTIO N CLAIMED BY ASSESSEE UNDER SECTION 54F OF INCOME TAX ACT, 1961. THUS, GROUND OF APPEAL NO. 1 IS ALLOWED. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MAT ERIAL WE FIND THAT THE ISSUE FOR ADJUDICATION BEFORE US IS WHETHER THE CAPITAL GAIN RESULTING FROM SALE OF DEPRECIABLE ASSETS IS SHORT TERM CAPIT AL GAIN OR LONG TERM CAPITAL GAIN FOR THE PURPOSE OF EXEMPTION UNDER SE CTION 54F OF THE ACT TOWARDS INVESTMENT IN NEW HOUSE. IN OUR OPINION THE DEEMING PROVISIONS AS CONTAINED IN SECTION 50 OF THE ACT ONLY PROVIDE THAT THE ANY GAIN RESULTING FROM THE DEPRECIABLE ASSETS SHALL BE DEEM ED TO BE CAPITAL GAIN ARISING FROM SHORT TERM CAPITAL ASSETS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS (P.) LTD. 155 TAXM AN 855 HAS HELD THAT THE LEGAL FICTION CREATED IN SECTION 50 IS TO DEEM CAPITAL GAIN AS SHORT TERM ITA NO. 6444/MUM/2016 SMT. JAYA DEEPAK BHAVNANI 3 CAPITAL GAIN AND NOT TO DEEM AN ASSET AS SHORT TERM CAPITAL ASSET AND THEREFORE IT CANNOT BE SAID THAT SECTION 50 CONVERT S LONG TERM CAPITAL ASSET INTO SHORT TERM CAPITAL ASSET AND THEREFORE EXEMPTI ON UNDER SECTION 54F OF THE ACT IS AVAILABLE FOR DEPRECIABLE ASSETS AS SECT ION 54F DOES NOT MAKE ANY DISTINCTION BETWEEN DEPRECIABLE ASSETS AND NON DEPRECIABLE ASSET. THE LEARNED CIT(A) ALSO CONSIDERED AND FOLLOWED THE SAI D DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN DECIDING THE I SSUE IN FAVOUR OF THE ASSESSEE. SIMILARLY THE CASE OF THE ASSESSEE IS ALS O SQUARELY COVERED BY VARIOUS DECISIONS OF VARIOUS JUDICIAL FORUMS SUCH A S; (I) CIT VS. F.S. DEMPO COMPANY LTD. (2016) 74 TAXMANN.COM 15 (SC), (II) SM ITA CONDUCTORS LTD., ITA NO. 4004/MUM/2011 FOR A.Y. 2006-07 DATED 17.09. 2013, AND (III) CIT VS. RAJIV SHUKLA (2013_ 20 TAXMAN.COM 606 (DEL) WHE REIN IDENTICAL ISSUE WAS ALSO DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDI NG THAT CAPITAL GAIN ARISING FROM DEPRECIABLE ASSETS IS LONG TERM CAPITA L GAIN FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 54F/54E OF THE ACT . WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF VARIOUS HON BLE COURTS ARE INCLINED TO DISMISS THE APPEAL OF THE REVENUE BY UPHOLDING THE ORDER OF THE CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCTOBER, 2018. SD/ - SD / - (AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH OCTOBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -33, MUMBAI 4. THE PR.CIT - 21, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.