DCIT Vs Reliance Power Limited (ITAT Mumbai)
ITAT Mumbai held that section 50 does not convert a long-term capital asset to a short-term capital asset, then the rate of tax is applicable for the transfer of a long-term capital asset has to be in accordance with section 112. The deeming fiction of section 50 cannot be imported under section 112.
Facts- The assessee is engaged in the business of generation of power, power project under development which includes coal, gas, hydro and solar based energy projects. The case of the assessee was selected for scrutiny. AO invoked the provisions of Rule 8D and worked out the disallowance. The assessing officer worked out disallowance of Rs. 50.48 crores and after allowing set off of suo mote disallowance made addition of Rs. 49.93 crores and also added such book profit under section 115JB. Further, AO also treated long term capital gain on sale of helicopter as short term capital gain.
CIT(A) restricted the disallowance of section 14A to the extent of exempt income i.e. Rs. 2.17 crores. However, CIT(A) upheld the action of AO by holding that excess earned on sale of part of block of asset on which depreciation is allowed shall be deemed to be capital gain arising from transfer of short term capital asset. Being aggrieved, both the parties have preferred the present appeal.
