The Commissioner Of Income Tax – 24, Mumbai v. M/S.united Paper Industries, Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO.324 OF 2013 The Commissioner of Income Tax – 24, Mumbai..Appellant. Versus M/s.United Paper Industries, Mumbai..Respondent. Mr.Suresh Kumar for the appellant.Ms.Natasha Mangat for the respondent. CORAM : J.P. Devadhar &M.S. Sanklecha, JJ. DATE : 13[th] March 2013 P.C. : Office objections waived. 2.In this appeal by the Revenue for assessment year 2008-09, following questions of law have been proposed for our consideration. “Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in ignoring the language used in Section 50 which deems the depreciable asset as a short term asset for the purposes of Section 50 and which begins with non-obtante clause “Not withstanding anything contained in Section 2(42A) ?” long term capital gain of Rs.1.31 crores. However, as the asset sold was a depreciable asset, the gains were computed in terms of Section 50 of the Income Tax Act, 1961 ('Act' for short). The respondent – assessee invested the capital gains arising from the transfer of a long term asset as specified under Section 54EC of the Act to claim deduction from tax. The assessing officer disallowed the claim on the ground that the gain is a short-term gain in view of Section 50 of the Act. On appeal, the Commissioner of Income Tax (A) upheld the order of the assessing officer. 4.On further appeal, the Tribunal by the impugned order has allowed the claim of the respondent – assessee for exemption under Section 54EC of the Act by following the decision of this Court in the matter of Commissioner of Income Tax V/s. Ace Builders (P) Limited reported in (2006) 281 ITR 210 (Bom). Since the Tribunal has followed the decision of this Court and applied the principles laid down therein in respect of Section 54E of the Act to Section 54EC of the Act, we see no reason to entertain the proposed question of law. This Court in the matter of Ace Builders (P) Limited (supra) has held that the deeming fiction of a long term capital gain to be treated as a short term capital gain is restricted only to Section 50 of the Act and would have no application to other provisions such as Section 54E of the Act. The above rationale would be equally applicable to the claim of deduction under Section 54EC of the Act. (M.S. Sanklecha, J.)(J.P. Devadhar, J.)