Exemption of capital gain - investment in securities

[HIMANSHU JARIWALA]

Mr. X has sold immovable property after claiming depreciation and earned short term capital gain. The asset was purchased long time before and was long term by nature as it was held for more then 36 months. Now can Mr.x invest in securities mentioned U/s 54EC and Exempt capital gain? Pls inform there is any case law?

[Surender Gupta]

By virtue of section 50 which is overriding provision, makes it mandatory that any gain from sale of capital asset on which depreciation has been availed shall be treated as capital gains from sale of short term capital assets or in other words short term capital gains. Therefore, I do not agree with the proposal that you can avail the benefit of exempiton under section 54EC.

[DEV KUMAR KOTHARI]

Have asearch and U will find case law.

[DEV KUMAR KOTHARI]

This is a helpful judgment on similar provision of S. 54E [2003] 131 Taxman 699 (Gau.) High Court of Gauhati Commissioner of Income-tax v. Assam Petroleum Industries (P.) Ltd. P.P. Naolekar, Cj. and Amitava Roy, J. IT Appeal No. 30 of 2001 June 24, 2003 section 54E, read with  section 50, of the Income Tax Act, 1961.  - Capital gains - Not to be charged in certain cases - Assessment year 1991-92 - Whether  section 50 nowhere says that depreciable asset shall be treated as short-term capital asset and section 54E has an application where long-term capital asset is transferred - Held, yes - Whether capital gain may have been received by assessee on depreciable asset, and if conditions necessary under section 54E are complied with by assessee, he will be entitled to benefit under section 54E - Held, yes

AI Summary

Can Short-Term Capital Gains from Depreciated Assets Qualify for Section 54EC Tax Exemption? Gauhati High Court Insights. A forum discussion addressed whether Mr. X, who sold an immovable property after claiming depreciation and earned a short-term capital gain, can invest in securities under Section 54EC to exempt the capital gain. One participant argued that Section 50 mandates treating gains from depreciated assets as short-term, thus disqualifying them from Section 54EC benefits. Another participant suggested researching case law, citing a relevant judgment from the Gauhati High Court, which indicated that if conditions under Section 54E are met, the benefit might be applicable despite the asset's depreciable nature.