Case Law Details
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 other words, where the longterm capital asset has availed of depreciation, then the capital gain has to be computed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gain 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 under sections 48 and 49 or under section 50. The contention of the Revenue that by amendment to section 50 the long-term capital asset has been converted into a short-term capital asset is also without any merit. As stated hereinabove, the legal fiction created by the statute is to deem the capital gain as 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 asset into a short-term capital asset.
In the light of the accepted factual position that the “short-term capital gain” was computed u/s.50 of IT Act in respect of the assets which were held by the assessee for more than 10 years and on sale of those assets the resultant gain was invested in Rural Electrification Bonds which qualifies for exemption u/s.54EC of IT Act and the which was a legally sustainable exemption in the eyes of law. In the result, we find no force in the grounds of the Revenue, hence dismissed.
ITAT “D” BENCH, AHMEDABAD
I.T.A. No. 2544/Ahd/2012
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