TaxTMI 
TaxTMI 
2015 (3) TMI 534
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....ng heard to the assessing officer and/or for filing of report. 2. Though various grounds are raised, but they all relate to the application of provisions of section 50 of the Income-tax Act, 1961 (hereinafter called in short "the Act") for the purpose of computation of capital gain and claim of deduction raised under section 54EC of the Act. 3. The facts in brief borne out from the record are that during the relevant assessment year, the assessee has sold shop No.UGF-2 for Rs. 40.20 lakhs and shop No.UGF-34 for Rs. 18.76 lakhs, which were shown as shop and godown respectively in the Schedule of fixed assets. The assessee has treated the capital gain as long term capital gain and after indexation, computed the long term capital gain at Rs. 48,32,031/- and the same has been claimed as exempt under section 54EC of the Act and invested in National Highway Bond. The Assessing Officer invoked the provisions of sub-section (2) of section 50 of the Act, where any block of assets ceases to exist, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, and the income received or accruing as a result of....
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....rrect. It was also contended before the ld. CIT(A) that the properties in question were purchased in assessment years 2002- 03 and 2005-06 through his own resources and not through business account. The assessee was the proprietor of M/s Nitin Scientific Corporation and has been filing a single return for its business income and other income like income from other sources and house property for many years. As no separate return was filed by the assessee for the income other than business, no separate balance sheet was ever made for the assessee as individual. A proprietorship return can be filed on proprietor PAN only. Therefore, as per law, two returns cannot be filed for same person. The assessee has shown all assets in the balance sheet filed with the department, whether these were residential house for which rental income was derived or business assets. It was further explained that sale proceeds were also deposited in the saving bank account of the assessee and National Highway Bonds were also purchased from the same saving bank account. It was further explained that in the balance sheet, the assets in question was shown as fixed assets, but no depreciation were either charged....
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....ct, which provides as under 41(2) Where any building, machinery, plant or furniture,- (a) which is owned by the assessee; (b) in respect of which depreciation is claimed under clause (i) of sub section (1) of section 32; and (c) which was or has been used for the purposes of business, is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year in which the moneys payable for the building, machinery, plant or furniture became due. In the instant case the shops shown in the schedule of fixed assets were owned by the appellant but were neither used for the purpose of business having been treated as personal assets nor were any depreciation either claimed by the appellant or allowed by the Assessing officer in any of the earlier assessment years. The shops came in the ownership of the appellant in assessment year 2002- 2003 ....
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....sets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets." Section 54EC of the Act provides as under- 54EC. Capital gain not to be charged on investment in certain bonds.- (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset ....
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....tions necessary under section 54EC of the Act are complied with by the assessee, he will be entitled to the benefit envisaged in section 54EC of the Act. 4(7)(i) In order to examine the issue it would not be out of place to refer to the decision of Hon'ble Mumbai High Court in the case of CIT Vs Ace Builders (P) Ltd. on 07.03.2005 [144 TAXMAN 855]. In this case the question required to be considered was, whether the deeming fiction created under section 50 of the Act was restricted to section 50 of the Act only or was it applicable to section 54E of the Act as well, in other words, the question was, whether the long-term capital gain arises on transfer of a depreciable long-term capital asset, whether the assessee can be denied exemption under section 54E of the Act merely because section 50 of the Act provides that the computation of such capital gains should be done as if arising from the transfer of short-term capital asset. The Hon'ble Court laid down as under- In our opinion, the assessee cannot be denied exemption under section 54E, because, firstly, there is nothing in section 50 to suggest that the fiction created in section 50 is not only restricted to sectio....
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....ed with by assessee, he will be entitled to benefit under section 54E - Held, yes 4(8) In the case of Dr. (Mrs) Sudha S Trivedi vs ITO (2009) 31 SOT 38(Mum), the Hon'ble ITAT, Mumbai has held that section 54EC of the Act is an independent provision not controlled by section 50 of the Act. If the capital asset is held for more than 36 months the benefit of section 54EC of the Act cannot be snatched away because section 50 of the Act is restricted only to the mode of computation of capital gain contained in section 48 of the Act and section 49 of the Act and this fiction cannot be extended beyond that for denying the benefit otherwise available to the assessee under section 54EC of the Act, if the other requisite conditions of the section are satisfied. Similar findings have also been recorded by the Hon'ble ITAT, Mumbai in the case of DCIT Vs Bharat Enterprises (2011) 14 Taxmann.com 110. Further, allowability of exemption under section 54F of the Act under similar circumstances has been allowed by Hon'ble ITAT, Jaipur in the case of Prakash Karnawat (2011) 16 Taxmanh.com 357. 4(9) On the basis of above examination I find that in the case of depreciable assets the d....
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....d depreciation in the corresponding assessment years as per rules. Besides, he has placed reliance upon the order of the Assessing Officer. 8. The ld. counsel for the assessee, on the other hand, has contended that for invoking the provisions of section 50(2) of the Act, there should be a capital asset in the form of block of assets, in respect of which depreciation has been allowed under this Act. Therefore, if depreciation was not allowed in any of the earlier assessment years, provisions of section 50(2) of the Act cannot be invoked for computing the short term capital gain on transfer of part of block of assets. Similar is the position with regard the applicability of provisions of section 41(2) of the Act as before invoking the provisions of section 41(2) of the Act, the asset should be depreciable assets and depreciation should have been claimed in earlier assessment years. If depreciation is not claimed in earlier years, provisions of section 41(2) of the Act cannot be invoked. It was further contended that the assessee is an individual and has submitted one return of income after preparing a single balance sheet. The shops and godowns were shown as part of fixed assets, ....
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....s incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. 1. For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. 2. For the purposes of this sub-section, "successor in business" means-- (2) Where any building, machinery, plant or furniture,-- (a) which is owned by the assessee ; (b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32 ; and (c) which was or has been used for the purposes of business,is sold, ....