Tata Communications Limited Vs PCIT (ITAT Mumbai)
Section 50 is Only for Computation: ITAT Mumbai Rules LTCG Rate of 20% u/s 112 Applies on Depreciable Asset Gains -PCIT’s 263 Order Quashed Deeming Fiction Limited: Tribunal Holds Section 50 Cannot Deny LTCG Rate Benefit
Tata Communications Ltd. filed appeal against revisionary order u/s 263 passed by PCIT for AY 2018-19. The company had filed return declaring income of ₹9016.65 Cr. AO referred international transactions to TPO & completed assessment u/s 143(3) r.w.s. 144C(13) based on DRP directions.
PCIT, on examination of records, observed that Assessee sold depreciable assets resulting in capital gains. According to him, as per section 50, such gains are to be treated as Short Term Capital Gains (STCG) taxable at normal rates, whereas Assessee computed tax u/s 112 at 20% treating them as Long Term Capital Gains (LTCG). Holding assessment order as erroneous & prejudicial to revenue, PCIT revised it u/s 263 & directed AO to apply STCG rate.
Before Tribunal, Assessee contended that issue was squarely covered by Special Bench ruling in SKF India Ltd. Vs DCIT [2024] 168 taxmann.com 328 (Mum-Trib)(SB), along with several Mumbai ITAT & Bombay HC decisions including CIT Vs Ace Builders Pvt. Ltd., CIT Vs Parrys (Eastern) Pvt. Ltd., CIT Vs Manali Investment, CIT Vs United Paper Industries, & SC in CIT Vs Dempo Co. Ltd. 387 ITR 354 (SC). It was argued that section 50 creates only a deeming fiction for computation & does not convert a long term capital asset into a short term capital asset for rate purposes.
