TaxTMI 
TaxTMI 
2014 (10) TMI 963
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....to the capital gain computed under section 50 in respect of long term asset. 3. On the facts and in the circumstances of the case and in law, the Learned CIT (A) has failed to appreciated that: a) The asset sold by the appellant was a long term capital asset. b) Section 50 modified the provisions of section 48 and 49 only did not modify the provisions of section 45 or 112. 4. Reasons assigned for various additions and disallowances are wrong, insufficient and contrary to facts and law." 2. The facts pertaining to the issue in controversy are in narrow compass which can be culled out from the impugned order. The assessee company is engaged in trading/resale of pigments etc., The assessee filed its return of income on 24/09/2008 declaring income of Rs. 1,30,24,145/- which inter-alia consisted of income from capital gains. It was noted by the Assessing Officer that during the year, the assessee had sold its office premises situated at Block No.2, 2nd Floor, Raja Annamalai Building, Marshall Road, Egmore, Chennai, on 17th October, 2007 for a consideration of Rs. 98,37,000/-. The said office premises were being shown by the assessee in earlier years as fixed assets on whi....
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....prescribed u/s.112 of the I.T. Act. 3. The assessee carried the issue before the Ld.CIT(A) but Ld.CIT(A) confirmed the assessment order approving the view taken by the Assessing Officer. The operative part of the finding of the Ld.CIT(A) is as under : "5.1 In the present case, there was no controversy on the applicability of section 50 in as much as the assessee itself computed short term capital gain of Rs. 93,40,796/- on sale of its office premises in the computation of total income in accordance with the provisions of section 50. The issue in appeal is about the applicability of concessional tax rate of 20% as per section 112 of the I.T. Act to the short term capital gains so computed under sec. 50 of the I T Act. Relying on the decision of the Hon'ble Bombay High Court in the case of ACE Builders (P) Ltd. (144 Taxmann 855), the submission of the appellant is that the tax rate applicable to such deemed short term capital gain is 20% i.e. the rate applicable to long term capital gains tax under sec. 112 of the I.T. Act as the subject property was held by the appellant for more than three years. This argument of the appellant is not legally sustainable. Section 50 is ena....
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....gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45. (Emphasis given). The Bombay High Court observed in the above case that section 50 does not convert long-term capital asset into a short-term capital asset and therefore the benefit of section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either under sections 48 and 49 or under section 50. But at the same time, the High Court held in no uncertain terms that the capital gains tax will be charged as if such capital gain has arisen out of a short-term capital asset. As pointed out by the Assessing Officer, this observation of the High Court supports the case of the revenue that such capital gains computed under sec. 50 shall be charged to tax under the normal tax rate applicable to short term capital gains and not at the lower rate of as provided in sec. 112 in case of long term capital gains. 5.1.1 In the case of M/s. P.D. Kunte & Co. in ITA No. 4437/Mum/05 dated 10.04.2008 read with : MA 394/Mum/2008, the ITAT, Mumbai held that "on the reasoning of the Bombay High Court in the case of Ace Builder Pvt....
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....ard the Ld. Departmental Representative. 5. In the present case, it is not in dispute that the office premises which was sold by the assessee was a part of the business asset and section 50 is applicable as assessee had claimed depreciation on the same. We are unable to accept the submission of the Ld. Counsel that in the case of Ace Builders Pvt. Ltd., (Supra) the Hon'ble High Court has held that even capital gain is computed in the manner prescribed u/s.50 in that case also, the same is to be treated as long term capital gain. We would like to refer to the decision in the case of Ace Builders Pvt. Ltd., (Supra), more particularly, para 26 which reads as under : "26. It is true that section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In other words, where the long-term capital asset has availed depreciation, then the capital gain has to be computed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gain has arisen out of a short-term capital asset but if such capit....
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....ce of such long-term capital gains shall be computed at the rate of twenty per cent ; (b) in the case of a domestic company,- (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such longterm capital gains at the rate of twenty per cent : (c) in the case of a non-resident (not being a company) or a foreign company,- (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such longterm capital gains at the rate of twenty per cent ; (d)] in any other case of a resident,- (i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such longterm capital gains at the rate of twenty per cent. Explanation.- Provided that where the tax payable in respect of any income arisi....