Case Law Details
Exemption U/s. 54EC available on STCG calculated u/s. 50 on sale of depreciable assets held for more than 36 months
Section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under Section 54E can not be denied by referring to the fiction created u/s.50. Section54E specifically provides that where capital gain arising on transfer of a long term capital asset is invested or deposited (whole or any part of the net consideration) in the specified asset, the assessee shall not be charged to capital gains therefore, the exemption under Section 54E of the income tax Act can not be denied to the assessee on account of the fiction created in Section 50.
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 the other words, where the long term capital assets has availed of depreciation, then the capital gain has to be competed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gains has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. The contention of the revenue that by amendment to Section 50 the long term capital assets has been converted into a short-term capital assets is also without any merits. As stated hereinabove, the legal fiction created by the statute is to deem the capital gain as a short-term capital gain and not to deem the asset as short-term capital asset. Therefore, it cannot be said that Section 50 converts a long term capital assets into a short-term capital asset.
HIGH COURT OF GUJARAT
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