TaxTMI 
TaxTMI 
2023 (7) TMI 1142
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....section 54EC and Section 50 of the Income Tax Act, 1961. The same be considered & additions be deleted. 3. The Ld. CIT(A) has erred in not considering the various judicial pronouncements in favour of the assessee for claiming the deduction for investment to be made u/s. 54EC. The same be considered & additions be deleted. 4.a. The Ld. CIT(A) has erred in upholding levy of tax @ 30% on Short Term Capital Gain computed u/s 111A of Income Tax Act, 1961 instead of levying 15% tax rate on the same. Kindly consider the same. b. The Ld. CIT(A) has erred in confirming that entire Short Term Capital Gain is from sale of premises and accordingly upheld tax rate of 30%. Kindly consider tax rate of 15% for Short Capital Gain computed u/s 111A of INR 5,86,046/- as reported in the ITR. 5. The Ld. CIT(A) has erred in levying interest u/s. 234B and 234C of the Income Tax Act, 1961 without considering the facts and circumstances of the case. 6. The Appellant craves leave to add, alter or delete to the ground of appeal at the time of or before hearing." 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the....
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....admissible to the assessee as the section does not make any distinction between depreciable assets and non depreciable assets and since the capital gain has arisen to the assessee arising out of long term capital assets the assessee is entitled for exemption under section 54EC of the Act and relied upon the decision rendered by the Hon'ble Gujarat High Court in case of Commissioner of Income Tax-I vs. Aditya Medisales Ltd. (2013) 38 taxmann.com 244 (Gujarat) and Hon'ble Bombay High Court in case of Commissioner of Income Tax vs. Ace Builders (P.) Ltd. (2005) 144 Taxman 855 (Bombay). 8. However, on the other hand, the Ld. D.R. for the Revenue contended that when the assessee has himself sold depreciable assets and offered STCG on the profit earned it is not entitled for deduction under section 54EC of the Act and relied upon the order passed by the Ld. CIT(A). 9. Before proceeding further we would extract the provisions contained under section 54EC, for ready perusal, as under: "(1) Where the capital gain arises from the transfer of a long-term capital asset, being land or building or both, (the capital asset so transferred being hereafter in this section referred to ....
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.... (a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006: (b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.] Explanation-For the purposes of this section,- (a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset: [(b) "long-term specified asset" for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, but on or before the 31st day of March, 2007,- (i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act 1988 (68 of 1988); or (ii) by the Rural Electrification Corporation Limited, a company formed ....
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.... denied to the assessee only on account of the fact that deeming fiction is created under section 50. In other words, legal fiction created under section 50 is though restricted to computation of capital gains, such deeming fiction cannot restrict application of section 54EC which allows exemption of capital gains, if assessee makes investment in the specified asset. Thus the assessee cannot be charged to Capital Gain when Short Term gains of long term capital assets get invested in the areas specified under the law." 12. We have also perused the decision rendered by the Hon'ble Bombay High Court in case of Ace Builders (P.) Ltd. (supra) and relevant part thereof is extracted for ready perusal as under: "The assessee fulfilled all the conditions set out in section 54E to avail exemption, but the exemption was sought to be denied in view of fiction created under section 30. The assessee could not be denied exemption under section 54E, because, firstly, there is nothing in the section to suggest that the fiction created in section 50 is not only restricted to sections 48 and 49 but also applies to other provisions. On the contrary, section 50 makes it explicitly clear tha....
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.... of the capital gains arising on the transfer of a capital asset on which depreciation had been allowed." 13. Hon'ble High Court of Bombay has also in case of CIT vs. United Paper Industries (2014) 42 taxmann.com 79 (Bombay) held that deeming fiction of a long term capital gain to be treated as short-term capital gain is restricted only to section 50 and it would have no application to other provisions such as section 54EC. 14. When we examine aforesaid undisputed facts narrated in the preceding para in the light of the decision rendered by the Hon'ble Gujarat High Court in case of Aditya Medisales Ltd. (supra) and Hon'ble Bombay High Court in case of Ace Builders (P.) Ltd. (supra) we are of the considered view that section 54EC of the Act does not make any distinction between depreciable assets and non depreciable assets and as such exemption otherwise available to the assessee under section 54EC of the Act cannot be denied by resorting to the fiction created under section 50 of the Act. Because legal fiction created by the statute under section 50 of the Act is only to deal with capital gain as STCG and not to deem the assets as short term capital assets. Section 50 cannot ....