Itxa/1010/2013 Of Commissioner Of Income Tax -16 v. M/S Haribhai B. Desai

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (LOD) NO.414 OF 2013 The Commissioner of Income Tax-16, Mumbai ..Appellant. V/s. M/s. Haribhai B. Desai ..Respondent. Mr. A.R. Malhotra with Padma Divakar for the appellant. None for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ.DATED : 15TH MARCH, 2013 P.C. :- 1.In this appeal by the revenue for the assessment year 2007-08, following questions of law are raised for our consideration :- (i)Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the assessee is entitled for deduction u/s.54EC of the I.T. Act, 1961, ignoring the fact that the capital gains arising from sale of depreciable asset is short term capital gain and the exemption u/s.54EC is only available for long term capital gain ?law, the Tribunal was justified in holding that the assessee is entitled for deduction u/s.54EC of the I.T. Act, 1961, ignoring the fact that the capital gains arising from sale of depreciable asset is short term capital gain and the exemption u/s.54EC is only available for long term capital gain ? (ii)Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in upholding the CIT(A)'s decision which is relying on the decision of the Bombay High Court in the case of CIT V/s. ACE Builders Pvt. Ltd. (supra), 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 the provision of Section 54EC of the I.T. Act, 1961 without considering the fact that the decision of the Bombay High Court was not accepted by the department but due to low tax effect SLP was not proposed ? 2.The respondent-assessee had sold its godown on which depreciation had been claimed. Therefore, in terms of Section 50 of the Income Tax Act, 1961 (the Act), the profit on sale of the godown had to be computed as short term capital gains. The respondent-assessee had invested the entire sale proceeds in bonds under Section 54EC of the Act and claimed exemption. The Assessing Officer disallowed the exemption in view of Section 50 of the Act. 3.The Tribunal by the impugned order allowed the claim of the respondent-assessee by following the decision of this Court in the matter of CIT V/s. ACE Builders P. Ltd. reported in [2006] 281 ITR 210 (Bom). This Court in the matter of ACE Builders (supra) has held that Section 50 of the Income Tax Act is a deeming provision and was for the purpose of computation of capital gains and would have no application while construing Section 54E of the Act. Applying the same itxal-414-13 principles, the Tribunal has held that the benefit of exemption under Section 54EC of the Act would be available in respect of the lo ng term gains earned on depreciable assets. In this view of the matter, we see no reason to entertain the proposed questions of law. 4. Accordingly, the appeal is dismissed with no oder as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)