ITO 16(1)2), MUMBAI V. HARIBHAI B. DESAI, MUMBAI

ITA 8948/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8432 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N H GAJRIA
• Keywords: Capital asset; Depreciation; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H BENCH BEFORE SHRI I.P.BANSAL (JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.8948/MUM/2010 ASSESSMENT YEAR: 2007-08 ITO, 16(1)(2), MATRU MANDIR, MUMBAI. HARIBHAI B DESAI, 42,WALKESHWARI ROAD, MALABAR HILL, MUMBAI PA NO.AAAFH 0849 L APPELLANT VS. (RESPONDENT) APPELLANT BY : SHRI RAKESH RANJAN RESPONDENT BY: SHRI N.H.GAJRIA DATE OF HEARING: 30.10.2012 DATE OF PRONOUNCEMENT: 30.10.2012 ORDER PER I.P.BANSAL, JM: THIS IS APPEAL FILED BY DEPARTMENT. IT IS DIRECTE D AGAINST ORDER OF LD CIT(A) DATED 17.9.2010 FOR ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE SOLD THREE GODOWNS DURING THE YEAR, FOR A CONSIDERATION OF RS.70,00,000/- WHICH WERE FORMING PART OF BLOCK OF ASSETS ON WHICH DEPRECIATION WAS CLAIMED. THE ENTIRE SALE CONSIDERATION WAS INVESTE D IN RURAL ELECTRIFICATION CORPORATION BONDS. AS ACCORDING TO SECTION 50 OF I.T.ACT, 1961 , THE GAIN ARISING OUT OF SALE OF GODOWNS, WAS TO BE COMPUTED AS SHORT TERM CAPITAL G AINS. THE AO DID NOT GIVE BENEFIT TO THE ASSESSEE FOR EXEMPTION U/S.54EC ON THE BONDS PURCHASED BY THE ASSESSEE OUT OF SALE CONSIDERATION RECEIVED IN RESPECT OF THREE GOD OWNS. LD CIT(A) HAS ACCEPTED SUCH CLAIM OF THE ASSESSEE ON THE BASIS OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS PVT LTD., 281 ITR 210(BOM). THE DEPARTMENT IS AGGRIEVED WITH THE ORDER OF LD CIT(A) AND HAS RAISE D FOLLOWING GROUNDS: 1. THE LD. CIT (A) ERRED IN HOLDING THAT THE ASSE SSEE IS ENTITLED FOR DEDUCTION U/S 54EC IGNORING THE FACT THAT THE CAPIT AL GAINS ARISING FROM SALE OF DEPRECIABLE ASSETS IS CAPITAL GAIN ARISING FROM THE SHORT TERM CAPITAL ASSETS I.E., SHORT TERM CAPITAL GAIN AND TH E EXEMPTION U/S 54EC IS ONLY AVAILABLE FOR LONG TERM CAPITAL GAIN. ITA NO.8948/MUM/2010 ASSESSMENT YEAR: 2007-08 2 2. THE LD. CIT (A) ERRED IN RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ACE BUILDERS PVT. LTD. WHEREIN IT IS HELD THAT EVEN IF THE ASSETS IS DEPRECIABLE ASSETS, BUT HELD FOR MORE THAN 36 MONTHS THE SALE PROCEEDS COULD BE INVESTED UNDER TH E PROVISION OF SEC 54EC OF THE I.T. ACT. 1961 WITHOUT IGNORING THE FAC T THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT WAS NOT ACCEPTED BY T HE DEPARTMENT BUT DUE TO LOW TAX EFFECT SLP WAS NOT PROPOSED. 3. WE HAVE HEARD BOTH PARTIES AND RIVAL CONTENTIONS HAVE BEEN CAREFULLY CONSIDERED. LD D.R. RELIED UPON THE GROUNDS OF APP EAL. AS AGAINST THAT, LD A.R. RELIED ON THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF ACE BUILDERS PVT LTD.,(SUPRA). THE ISSUE RAISED IN THE APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE AFOREMENTIONED DECISION IN WHICH, I T HAS BEEN HELD THAT SECTION 50 OF THE I.T.ACT, 1961 CARVES OUT AN EXCEPTION IN RESPEC T OF DEPRECIABLE ASSETS AND PROVIDES THAT WHERE DEPRECIATION HAS BEEN CLAIMED AND ALLOWE D ON THE ASSET, THEN THE COMPUTATION OF CAPITAL GAIN ON TRANSFER OF SUCH ASS ET UNDER SECTIONS 48 & 49 SHALL BE AS MODIFIED UNDER SECTION 50. IT WAS FURTHER OBSERVED THAT THE EFFECT OF SECTION 50(2) IS THAT WHERE THE CONSIDERATION RECEIVED ON TRANSFER O F ALL THE DEPRECIABLE ASSETS IN THE BLOCK EXCEEDS THE WRITTEN DOWN VALUE OF THE BLOCK, THEN THE EXCESS IS TAXABLE AS A DEEMED SHORT TERM CAPITAL GAINS. THE FICTION CREAT ED UNDER SECTION 50 IS CONFINED TO THE COMPUTATION OF CAPITAL GAINS ONLY AND CANNOT BE EXT ENDED BEYOND THAT. HOWEVER, THE BENEFIT UNDER SECTION 54E WILL BE AVAILABLE TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT THE COMPUTATION OF CAPITAL GAINS IS DONE EITHER UND ER SECTION 48 AND 49 OR UNDER SECTION 50. THEREFORE, RESPECTFULLY FOLLOWING THE AFOREMEN TIONED DECISION OF HONBLE JURISDICTIONAL HIGH COURT(SUPRA), WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF LD CIT(A) VIDE WHICH NECESSARY RELIEF HAS BEEN GRANTED TO THE ASSESSEE. 4. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (I.P.BANSAL) JUDICIAL MEMBER MUMBAI, DATED 30 TH OCTOBER, 2012 PARIDA ITA NO.8948/MUM/2010 ASSESSMENT YEAR: 2007-08 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX(A)-27 4. CIT-CITY-XVI 5. DEPARTMENTAL REPRESENTATIVE, BENCH H MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI